Sales, Marketing, & Entrepreneurship

The Making of a Billion Dollar Business: Low-Power Schottky

May 2008 Corporate

Mark Shepherd, Texas Instruments Chairman from “76 to ’88, described Low Power Schottky as “the single most profitable product line in the history of Texas Instruments.”  Yet the introduction of Low Power Schottky was never assured, nor was its future within the TI business.  The drive behind Low Power Schottky was Tim B. Smith.  Recently, he shared some of the keys elements that would yield a billion dollar line of business.

Developing Human Capital for Intrepreneurship

In the 1960′s, Smith was recruited by Texas Instruments while still an electrical engineering undergraduate student at Southern Methodist University.  Early in his career, he was identified as a Comer, someone that senior management thought had a lot potential and deserved grooming for senior roles.

Similar to GE’s executive development program, TI gave Comers the opportunity to rotate through different roles as a means to educate them on the many facets of the business.  In these rotations, Smith would successfully design chips for the Apollo missions, Poseidon and Minute Man missiles, and other aerospace efforts.  These early success would give Smith the confidence in his ability to deliver world class solutions that meet customer demand.

Similar to Google, TI also practiced intrepreneurship with Comers.  While the rest of the organization would be held to tight rules and regulations, the Comers could propose a project and have a budget allocated for executing their own creative projects.  It was with one of those intreprenurial projects that Mr. Smith would go on to develop Low Power Schottky.

Factors Favoring Intrepreneruship over Entrepreneurship

With the information technology revolutions, intrepreneurship has taken the back stage to entrepreneurship in most industries.  Yet there are key industries that still rely on internal development of new products at larger corporations.  Semiconductors is one of these industries, and there are others.

A key success factor for Comers at TI is their ability to draw on the intellectual resources of the larger organization.  Electrical engineers could draw upon a pool of material scientist in chemistry and physics to develop the exact processes required to realize a circuit design.  Organizing these resources is an overwhelming burden for an independent entrepreneur, but a competitive advantage for a larger organization that can combine these material scientists with product focused electrical engineers.

The challenges in converting material science into customer products may also be the driving factor behind Corning’s financial success.  Like semiconductor companies, Corning taps the abilities of material scientists to develop sheets of glass 0.7 mm thick and six feet wide for the LCD industry, where it holds greater than 60% market share in an industry ultimately shipping 100 million television units in 2008.

Similarly, pharmaceutical industries are driven by a few large corporations rather than upstart entrepreneurs.  Like semiconductors and engineered glass, success in pharmaceuticals requires combining multiple disciplines with biology and chemistry to develop the next successful formulary.

As these examples indicate, industries that require taking developments in the hard sciences and converting them into marketable products favor intrepreneurship over entrepreneurship.  The success of Low Power Schottky relied heavily upon the combination of product engineering and material scientists as we will see.

Schottky Enters Space

At the age of 29, Smith hatched the idea to develop Low Power Schottky circuits for logic applications.  He presented his plan to senior executives, but they turned him down as Low Power Schottky went against their strategic plan.  One senior manager went as far as to say “Smith, if you do that I’ll have your ass fired.”

Having met challenges before through the Comer program but found routes to success, Smith pressed forward in the face of serious opposition.

Smith decided to shop the Low Power Schottky idea around to different executives charged with specific customers.  His first target was Ed O’Neil, TI’s aerospace executive.  It took O’Neil two minutes to say go for it.

O’Neil immediate attraction to Low Power Schottky circuits was due to its unique features of being both low-power and high-speed.  For the aerospace customers O’Neil served, these features were highly beneficial due to the overall power limitations of space modules that relied on batteries, and the need to execute complex calculations for communication.  Prior to the product development of Low Power Schottky, logic circuits were limited to 100 logic elements due to power constraints and over heating.  With Low Power Schottky, they were able to put 1000 logic elements on a single chip, thus enabling far more computing in the communications systems.

O’Neil bootlegged a $20,000 budget under a code name to hide it from other executives.  Smith seized the opportunity, assembled a team of material scientist and engineers, and completed the development of the initial Low Power Schottky circuits in just 8 weeks.

When the product was unrolled to NASA and Sandia National Laboratories, it was an immediate success with the aerospace customers.  Smith went on to apply Low Power Schottky to other industries, but continued to face opposition.  Eventually, executives who opposed the plan did an about face as they saw their customers asking for more circuits based on the technology, and they unrolled the product to the rest of their customers.

Over the coming years, Low Power Schottky circuits would reach $1 billion a year in revenue for TI and $3 billion a year for the semiconductor industry overall.  In 1985, fourteen years after the introduction of Low Power Schottky, Smith received the Patrick E. Haggerty award for his efforts.  Today, Low Power Schottky has passed the mature phase of the product lifecycle and is being replaced by a new technology: CMOS.  But the commercialization of CMOS is a different story.  In 1971, Low Power Schottky was a revolution in logic circuits, and it was led by Tim B. Smith.



About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

Tim J. Smith, PhD
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