Raymond S. Stata ’57, SM ’58

INTERVIEWER: This is the 150th anniversary interview with Ray Stata. And I guess the first question I'll ask you is can you tell me a little bit about your family and growing up in Pennsylvania?

STATA: I was brought up in the farm country of Pennsylvania, and I had my share of work picking tomatoes and doing farm work and decided pretty early on that this was probably not what I wanted to do with my life. But nonetheless, it had an influence in the sense that farmers are entrepreneurs and their own bosses, and so I think that sort of settled into my psyche. And also my father was a self-employed electrical contractor, so I think the idea of entrepreneurship was sort of embedded in my thought process fairly early on from those early days.

INTERVIEWER: Any particular mentors or influential people from those earlier years?

STATA: There was one that was quite accidental when I was in high school. In a basketball game, I jammed my neck into the wall and ended up in the hospital in traction for several days. And it turned out next to me was an elderly gentleman who I struck up a relationship with who had spent his career as an engineer and knew a lot about the engineering world. So by that time, based upon, you know, digging around the library and reading about science and physics and chemistry and so forth, I had had an interest of pursuing this when I got out of high school. So I kicked up a conversation with him about where would you go to school if you wanted to learn about this, what does an engineer do anyway, and what do scientists do in their life. But the bottom line of that conversation as we talked about schools, he said look, if you want to be an engineer or a scientist, he says there's really only one place you should consider seriously and that's MIT. I said well, what's that? Massachusetts Institute of Technology. He said that's the place you should set your sights on and he went through the reasons why he thought that was true. So as a sophomore in high school I left the hospital, went back, started getting the brochures and reading and did set my heart on MIT as a result of that chance encounter.

But other than that, in terms of strong influence on my life and what I did later in the high school years or whatever, you know, not a lot.

INTERVIEWER: So, when you first got to MIT, what do you remember about your first impressions of the students, the faculty, the environment?

STATA: Well, for a country boy from a small town in Pennsylvania where you know, our high school was not like the Bronx High School of Science, it was intimidating -- there's no question about that. You know, most of the people had advanced placements in calculus and I hardly knew what calculus was. So for me it was a real catch-up to a field that I could stand abreast of the students here, and actually wondered whether I could actually make it or not.

A thing that reinforced that, which I'll never forget, in the physics department we had a very famous Dr. Buechner as I remember. He was quite a renowned physicist teaching a freshman class. The first examination we had, which I think made deliberately difficult, and I didn't do particularly well on it and neither did anybody else in the class. He came out and he says well, he says, you know probably a lot of you birds don't belong here. I would say what I can tell from these test scores, probably about 30 of you should drop out. Because I don't know that you're really cut out to do the kind of challenging work that we have here at MIT.

You know I'm not ever sure why he challenged us in that way, maybe just to wake us up, because he certainly woke me up and made me doubt even more about whether I could do it. But as the months and the time went by and other exams I did better on, I gained confidence, and by the end of the first year I felt that I was going to be able to do well enough to be a proud graduate of this place and stand up against some very bright people along the way.

INTERVIEWER: Can you talk a little bit about what it was like at MIT in the 50s, just what the school was like?

STATA: Yeah, well one thing was very clear, there weren't very many women around. There was five or six percent so they were sort of a rare sightings on the campus, and of course, that's one of the dramatic changes over the years. But probably not all that different, so it was a pretty grueling experience. I mean you had to work pretty hard.

In my case, so I came here from a family not of means and so I had to work to earn part of my keep. And so the work on top of the school work was a pretty grueling experience. So, from that point of view, it wasn't a fun place. I think maybe today -- I mean there's different kinds of fun, but a pretty serious experience. I think that part, the drinking from the fire hose, you know that probably hasn't changed a whole lot. But the other thing that had an impression on me was that the faculty and type of material that we were challenged to learn didn't pull any punches. I mean they threw at us the heavy-duty, non-edited versions of the tough stuff and they expected us to be able to grapple with it. And indeed that I think set up a self-confidence, you might say, that if somehow the other -- you could deal with the kind of material that you had to learn here, and you could do that in competition with the kind of students that they garner from around the world, that by the time you got out of here, at least for me, it developed a sense of self-confidence that I could go out in the world and do great things against some very smart people. Probably, obviously, the things I learned in my course materials, not just in engineering, but equally important in humanities has been very important in my life. But probably building the confidence from the farm boy in Pennsylvania to somebody who could go out and start a company and build it over the years, I attribute a lot of that to MIT and the experiences that I lived through here.

INTERVIEWER: That's quite a gift.

STATA: It is. And I felt always a deep sense of gratitude to MIT, because without that experience, without having listened to the gentleman there in the bed beside me about this being the place to go and setting on my sights to do it, I mean I can't imagine I could have accomplished the things in life that I did.

INTERVIEWER: Were you part of the fraternity system?

STATA: I was not. I looked at that and, again, sort of bit of a loner in personality, I didn't see myself mixing into that. So initially I was in the dormitories on senior house on the east campus, and then later on actually got an apartment with a roommate and lived off campus.

INTERVIEWER: What made you choose electrical engineering?

STATA: Well, I think everybody who comes here sort of -- not everyone -- but many people would think do they want to be a physicist, do they want to study physics, because a lot of the early introduction excitement to science that you get in high school is in physics, chemistry, and engineering you don't know anything about. So from point of view, continuing to learn about the things that I found in the library in the high school about science was the thing that really attracted me, and so I toyed with the notion of physics as a major. But as I got into it, I come to think about the practical aspects of what was I going to do with my life, did I want to be an academic or whatever, and become clear that engineering would be a better course for me to fulfill my aspirations. And from that point of view, there was a bias toward electrical that came out of just the appeal of the subject matter, and maybe some of my early experience in working with my father as an electrical contractor. You know I know some, a little bit about electricity at least.

INTERVIEWER: Did you used to go out with him sometimes?

STATA: Oh yes. As a matter of fact, I worked quite extensively with him in doing the work -- weekends, evenings, summertime. So I did actually participate in -- it was sort of one-man business, it was a big business, but I was his helper.

INTERVIEWER: What made you decide to stay at MIT for graduate school?

STATA: It was really part of the 6A program, the cooperative program were sort of an automatic extension of your undergraduate education. So there really wasn't -- once I decided to go into co-op then the Master's degree is part of that program.

INTERVIEWER: Were there differences between being an undergraduate here and being a graduate student?

STATA: In that sense -- the 6A program and life as a graduate student in that program is more closely related I think to the undergraduate experience than the graduate experience. I never really felt I was part of the graduate school environment other than the extent to which you had to write a thesis and you had to develop a relationship with the faculty to do that. But otherwise, it was kind of an extension of my undergraduate experience. So I don't think I ever felt I was deeply part of the graduate school.

INTERVIEWER: Were there any professors who mentored you at the time?

STATA: I got to know a few, but for a variety of reasons not only were there challenges with respect to studies and work, but also on the home front, I had some challenges that made life for me a very, very busy time. So, the luxury of being able to really get to know faculty and develop deep relationships with them, I missed that. I missed out on that.

INTERVIEWER: Is that a regret?

STATA: Yes, it is, because I've talked to others who maybe they were just more aggressive and made the opportunities. I give myself the excuse of being too busy, maybe it was my own fault. But I didn't put the time and effort into developing those relationships, and those who did I think during their experience here and afterwards, I think they gained from that some things that I did not.

INTERVIEWER: What's kept you interested in electrical engineering for so many years? What is it about the field that keeps you engaged?

STATA: Well, once you get into any particular discipline or department of learning, there's a program that's been mapped out of what you need to know to be an electrical engineer, a very thoughtful program, and some very challenging and interesting subjects. So I think just the appetite to learn about all the different dimensions of what was engineering about, and particular electrical engineering was just a continuous challenge. I always very much enjoyed being exposed to new areas of learning and coming to grips with that and putting that into my portfolio. So, I think the curriculum sort of drove you along on that path with the expectation there was always more to learn. So I never tired of that experience. I've found it quite fascinating and rewarding.

INTERVIEWER: What did you think about doing when you finished your graduate degree?

STATA: I had in the back of my mind fairly early on that entrepreneurship was my destiny, and primarily I think because of a personality trait, but also perhaps in ways that I'm not aware of -- my experience of living in farm country amongst people who were self-employed, and my dad being a self-employed person. But for me, I was always rebellious against authority, and the notion of having a boss was so repugnant that somehow I couldn't imagine myself working for somebody as my career. So that kind of planted the seed in my mind, well, if you're not going to do that, you gotta work for yourself or create an environment where you can be your own boss. So that notion was in my mind very early on, certainly by the time I got to MIT. And so I had the vision of how am I going to get to there, and the MIT educational experience and the grounding, and electrical engineering provided a lot of the background and tools. Also, it turns out that my -- you know, what I learned in the humanities program for me was a very important thing which maybe I can come back to. But when I graduated I already had in mind that even now in my work experience, how do I learn about business in preparation for some day starting a business.

INTERVIEWER: So why don't you tell me more about the value of the humanities at MIT.

STATA: Yeah, that was sort of an unexpected bonus of my MIT education. I didn't really -- in reading the books and materials and so forth as a school of science and engineering and that's what I anticipated. But then when I got here, back when I went, they had a course material that as a freshman everybody took the same thing and humanities, and then in the second year you had two options, so they had a very well thought-out program of what they thought an educated person should know about things other than science and engineering. And so that introduced me to the great thinkers -- I mean that was the program -- to the ancient philosophers and more modern philosophers and opened up just a giant vista of learning opportunities that was begun here but continued after life at MIT through reading and studying throughout my life. And it turns out as I've ended up, okay, as a corporate leader of a company that got of some size, the human side of the equation of life, particularly in the business context, I think a lot of the beginnings of learning that I had in the humanities and followed up on subsequently became just as important to me and perhaps in some respects more important in terms of my success as an entrepreneur.

INTERVIEWER: Are you talking about the handling human resources?

STATA: Yeah, but I think more abstractly than that in terms of thinking hey, what's life all about, if you have a corporation what's it's purpose, why are we doing this, why am I doing this. So the whole idea of thinking more deeply about what life's all about, and I think those questions were raised in the humanities program and got me thinking about a lot of different dimensions of learning that proved useful later. And then as I went through establishing culture for our company, I drew upon a lot of that learning to create an environment that worked, that had as part of that environment an understanding of human beings and their aspirations and what a work environment should do to address that. Partly it also came back to my own personality and my aversion to authority and my desire to do my own thing, and guess what, I think most really bright people who are well educated have those same instincts, maybe mine are a little stronger than most, but certainly I found that throughout my career, and so how do you create an environment where they like me, okay, didn't have to have a boss -- maybe they did in some respect, but small b rather than a big B. So I think an important part of the success of our company is my understanding of the need for that, and I think those kinds of understandings and so forth had their roots in the learning that we had in the humanities program.

INTERVIEWER: And I have a lot of questions about the culture of Analog Devices, and I'll get that in a minute. But how would you describe the characteristics that you think make a good entrepreneur a successful one? What does it take?

STATA: Well, there's several factors to being a good entrepreneur. First of all, you gotta be prepared for hard work. You know some people are workaholics and some people aren't, and I think to be successful as an entrepreneur in a start-up company is it's a grueling and challenging experience which requires a lot of effort. And amongst other things, therefore, requires good health and stamina. But beyond that I think an instinct of wanting to change the world in some way, maybe big or small, but a dissatisfaction with the way it is and always looking for ways to make it better, and using the instrument of a company through products and technologies and services to change the world in some way. And I think entrepreneurs have to have those instincts, then they have to think kind of holistically about how all the pieces come together in order to be successful in business in developing strategy.

And so there's a certain amount of I guess creative thought in the sense of business strategy, of trying to figure out where does the world need to be changed and how can you really be successful doing that against other people who are also trying to change the world. So I think having ideas, therefore, about the business. And an ability to engage others and align others in the company to share that vision, because that's where he gets to be all about -- to have a bunch of people who are independent-minded souls and want to do their own thing, but nonetheless buy into the vision of opportunity that the company represents, not only in terms of what it does in the product space, but also in terms of the values that it represents.

INTERVIEWER: Do you think successful entrepreneurs are born or can they be created?

STATA: I think that there's certain characteristics without which it would be very difficult, and I think part of those is in some matter or the other to be able to communicate with others in an effective way and being able to sell your ideas and to get other people to join you in the journey. And some people just are not skilled at that and, therefore, that's a real problem. I didn't mention, and it's an obviously very important factor, is you have to have the capacity to take risk. You have to be comfortable with walking out on the plank and facing the prospects of failure, and having a certain amount of courage and being able to go out on that plank and face the possibility of failure. So that's a personality trait -- that is something I think you're, if you're not born with it, somehow it develops pretty early in your life. And it's very hard to be an entrepreneur without a high capacity for risk.

INTERVIEWER: So let's step back a second, and how did you wind up at HP after you left MIT?

STATA: Well, HP was the premiere instrumentation company. A lot of the things I did in my thesis in my graduate program in gyroscopic instrumentation was, you know, I used their instruments, I was more into instrumentation than any other aspect of engineering. So from that point of view, I knew a lot about the company and I was interested in instrumentation per se. But beyond that, in the back of my mind, I had this thought some day I'd like to start a company, and so I want to go to work for a company that I can really learn something from, a company that I respect and that I could sort of copy, you know, that I would learn from them and not reinvent the wheel. And from that point of view at that point in history, you know, I think HP had to be if not number one, close to number one for any survey you'd want to take, and certainly for me as a company that shimmered with success and vitality that was an engineering driven company that's had very high values and morals and had leaders through Packard and Hewlett who were quite extraordinary. So, in going to work for that company, it was like a mini MBA. You learned the HP way, you learned how they think, you learned why they did what they did, and for me that was a tremendous grounding about hey, what's this business all about anyway and how do you do it and how does it all fit together. I didn't go to business school, but that experience at HP brought me a long ways to understanding that.

INTERVIEWER: What is it you think you learned there that you then took forward?

STATA: I would say the thing that was the more transportable, enduring learning was the culture of the company and their management process and their values. They published a document, which was largely created by Bill and Dave called the Corporate Objective -- what is the purpose of a corporation. And later on when I started a company, I copied that kind of word-for-word because it was so beautifully done in terms of making it clear, you know, what was the purpose, how do the pieces fit together, what was profit all about and so forth and so on.

So, from the point of view of philosophy of business, from the point of view of the values of creating an environment where bright people would want to come and work and a culture that made that possible, I learned a tremendous amount from HP. And certainly copied a lot of that in what I've done in my life.

And in joining HP, I had a kind of a two-step process in mind. I wanted to get in the second step of that process into the sales world, because I wanted to encounter customers, and you really learn about business through the experience of engaging with customers. But step one was to work at the company and learn what goes on inside the company. And in stage two was to learn about the outside world, and by that point, I figured I didn't know it all, but I knew enough that would be a basis of being able to start a company. As it turns out in retrospect I was wrong about that, but at least at the time I thought I knew enough.

INTERVIEWER: What is it you think you, in retrospect, that you think you missed by not staying there longer?

STATA: I think that a lot of the -- a lot more in-depth understanding of things that I only understood superficially, I could have developed that more deeply in terms of marketing and the product development process and other aspects that I only got just a very thin layer of insight into. So the extent to which I would have stayed there for a few more years, I think I would have continued to learn, and therefore, later would not have had to reinvent some of the wheels that I had to reinvent. But, you know, when history was written, it was enough to get started. It was probably a more grueling learning experience than it would have had to been had I been better prepared, but it all worked out.

INTERVIEWER: So why don't you tell me about that entrepreneurial beginning.

STATA: When I was just in the graduate school, I met Matt Lorber who also worked at the instrumentation lab where I did my thesis. And when I went off to California, and in return just by sheer accident in Harvard Square I bumped into him. At that point he was desperately looking for a roommate to share the rental cost of his apartment, so I joined him. And there upon began a discussion, because he, in a similar way, had entrepreneurial instincts and a desire to some point in time to start a company. So we began to plot and scheme and strategize about how would we do that. We later solicited another partner who also had worked at the instrumentation lab, and three of us began to the plot and scheme. At the end of the day, that company that we started, Solid State Instruments, was a failure by almost any measure you want to pick, except the fact that we sold it later and got the nest egg to start Analog Devices. But I would say it was a failure because the primary motivation to start that company was the entrepreneurial instinct, the urge to just do it. And so we had a fairly feeble strategy, it was not very well thought out. We didn't have any funding -- it was one of these boot strap things that we didn't take any salaries and my wife supported me. So, in many ways it's not the ideal way that you would want your company.

But nonetheless, we were fortunate enough to zero in on after the fact a product strategy and the development of a product, which we found a company that wanted to buy, you know, basically us as the engineers and creators of the product, and therefore, the company. So from that point of view I guess it was it's time to start a company and let's find some excuse to do it and any excuse would work. And I've often reflected on that because a lot of times would-be entrepreneurs go on and on and on about trying to find what's the perfect place to jump into the water to the point where they never jump in the water. That this idea is not good enough, that idea is not good enough.

And I think a lot of times just by being in business, by being exposed to customers, by being exposed to opportunities more often than not, you know what you end up doing as a company is quite a bit different then you thought it would be when you went into business. So just doing it is an important part of entrepreneurship, and particularly if you do it when you're young. So what's the penalty of failing? You're going through an experience, you've learned, and that's the way I thought about that first company. I thought what have I got to lose? The worst thing that can happen is it fails, and it turns out it sort of almost did, except we did get the nest egg to start Analog. And more important than that in that company, we got the idea of what our next company should be. We got the strategy and the product idea, and in this case, much better formulated, much better thought out from our experience of working in that company.

INTERVIEWER: So can you tell a little bit more about how that happened?

STATA: Yes. We were an instrumentation company, and one of the fundamental building blocks of instruments, particularly back in those days where there were mostly analog-based technology, were operational amplifiers, devices that took in the signals from the outside world and conditioned them -- that took out the signals in the outside world and conditioned them for measurement and other things. So, back in those days, as an instrument manufacturer, you had a design and manufacture your own op- amps, your own everything. I mean there was no place to go to subcontract any of the manufacturing. So we made -- we designed and manufactured our own op- amps.

About that time, a company here in the Boston area, Philbrick Researchers, and another one, Nexus, started companies to provide off-the-shelf operational amplifiers. So rather than design and make your own, you could buy these and just plug them in. So we went through the assessment of well should we continue to make our own or should we buy them? And the economics and the virtues of specialization drove us to the realization that hey, we should not be -- we should buy what -- we should not make what we can buy, and we should focus more on the end result objective of the instrument. And we came to the conclusion, well, if we came to that conclusion, wouldn't a lot of other companies come to that conclusion over time? And so that kind of launched the notion of starting an op amp company. Of course, because we had researched these companies as suppliers, we were sort of expert in our understanding of who are competition would be.

INTERVIEWER: So what would you say was the motivation -- if the motivation for the first company was to be your own boss, what was the motivation for the second company?

STATA: It was also to be my own boss. It turned out with a partner, but nonetheless as close as you could get to your own boss. But in this case, I think with a bit longer horizon, again, back to the change the world theme, we saw an opportunity, relatively confined small opportunity, but to do something better and different than was being done by those competitors and in a way that customers would benefit and appreciate. In saying that, I must admit that we didn't have any grand visions about Analog becoming a billion dollar company. The total available market at that time maybe was $10, $20 million. And our objective was to be the leader -- whatever we did, we had the mantra say, whatever we do, can we envision that we can be the best in what we do. And in terms of now providing off-the-shelf op amp modules that people could buy rather than make, and so that really meant beating the competition and being the leader in that field. So that was clearly what we set out to do, and in a relatively short number of years we did that.

INTERVIEWER: So let's talk some more in-depth about setting up this company so that you could attract good people and make it a good place and retain good people. Tell me a little bit about the philosophy that went into founding Analog Devices.

STATA: I think the value part and the cultural/environmental part didn't come till later. I think in the early days it's just scrapping every day to do what needs to be done right now. And, then of course, you know recruiting and training talented people is a part of that. But the emphasis was much more on we gotta get these products designed and get them out and we're going to be the best in the market, and we can take pride in the being the best part. I think the more subtle parts of the culture didn't come until probably five years into the game.

INTERVIEWER: What changed at five years that that suddenly became important?

STATA: Well, it wasn't exactly so much the five years as it was the growing complexity of the organization. In the early days when there was only a few employees, you could essentially transmit your values and your culture in your day-by-day interface with the people. So it was there implicit in what you did and how you did it. So you didn't have to talk about it, you just did it. But as the company, the number of employees grew, then your ability to personally engage and influence through one-on-one was becoming more difficult. So therefore, one had to find a way of documenting and in a sense, publishing and then articulating what really are the values here, or why do we think the way we do, and what are we trying to achieve. So then the idea of creating a culture where you don't have to know every employee for them to know what is expected in terms of what we want to be as a company, how we want to behave as individuals in the company, what we think's important -- that could be kind of embedded in the culture of the company.

INTERVIEWER: So, what were some of the main values that you thought were important to embed?

STATA: So, the most important value comes down to making it clear to employees that you care and are concerned about their welfare. So this comes back again to the purpose, and we said the purpose of Analog Devices is to meet the needs of people who have a long-term association and interdependence on. And that's our employees, our customers, our stockholders, but I always said, with not everybody agreeing, that employees were the first amongst equals. And if we could understand and meet their needs, then they would take care of the rest. But if you didn't get that part right, you will always have difficulty with the rest of it.

So the focus was creating a culture that was genuine about the fact that we were committed to helping people meet their needs and that we care about their welfare in our policies, and also the work environment and the degree of latitude we give people, and the extent that we didn't have a lot of controls and other things that made it the kind of place where smart engineers would want to come and stay and work.

INTERVIEWER: Do you have a couple of examples of specific policies that you put into place that sent that message to employees?

STATA: Yeah, well, a lot of it is how you handle the hiring and firing process. When you find yourself at a point where you feel compelled to separate, to do that in a way where everybody knows how painful that is and it's not something you take lightly, and even having done it, you're looking to help the person in what they're going to do next. And that becomes known. I mean it isn't just Friday afternoon, come and clear out your desk. The fact that we struggle, we struggle and struggle to try not to have to separate with people, and really work at it and then we communicated that not just us as leaders, we expect it of all of you. So, we said it's not just us, it's you as well -- you have to accept this responsibility when you hire somebody, that's a serious obligation. And you have to work hard at helping people reach their full potential, and if somehow they don't, that you have a responsibility in how you deal with that.

That was one very fundamental thing that's important in companies, because security is -- do people feel that they're working in an environment where they can feel secure, where management was not necessarily capricious about what they do with their lives is a very important thing. To build fundamentally on the culture of trust, that is you work with the organization, with people in a very open way, there's no hidden agendas, everybody kind of knows what's going on -- the good, the bad, the evil -- and through your behavior and how you do things and don't do things, you build up a sense of trust where people can -- they trust the fact that they know that you care about them or are concerned about their welfare. And you do that through all kinds of ways, but it's a principle -- build trust in relationships.

Another thing that we took on fairly early in the company is our motto was leadership through innovation. We wanted to find those opportunities in the marketplace where innovation was important and where that would be the driving point of success. And that was our strategy.

So, if you want to be an innovative company you gotta have innovators -- very simple. So, the success of Analog, particularly in the early days and even up to today, really comes down to the fact that we have great engineers. We've been able to attract and retain the best and the brightest people in our field, so that they are the leaders, we are the leaders.

And as you grow larger there's a propensity as you put into place organizational structures, and you make people responsible in a management sense for what goes on, for the managers to become the centers of power and for the engineers to somehow become the hired hands, and the larger you become and the less disciplined you are the more that can get out of hand. So we tried to early on make it real clear, okay, to the managers, that the reason we're successful here -- sure, you contribute and we appreciate that, but at the same time it's our engineering talent. And some of these really smart guys are a little quirky, okay, and it's up to you to learn how to deal with very creative people. If you can't do it maybe you're not as good a manager as you thought. So that's one part.

The other part was to put in place a parallel ladder where technical people can see an opportunity to continue their career doing technical work, not switching to the dark side and becoming managers, because the opportunities and rewards and the respect and appreciation that they have in the company is commensurate. So, a lot of companies have parallel ladders, but most of them don't work, because somehow the rungs toward the top get broken. So we try to make the concept of an Analog Device's fellow, which was the high end of that achievement, being the kind of a position that the really good engineers would aspire to reach and not necessarily divert into the management side to achieve their career goals.

So I think we've done that very well and we've created an environment where once you're a fellow, you know one of the privileges, you can't be shut up, you can't be quieted down by the management ranks. And so they can be the sponsors for others in the organization to make sure that the voice of engineers is taken into account, not just in the products and the technology, but in the policies, the compensation policies of the company, a lot of the cultural aspects in the company -- that they have a voice in that as well as the other part. So I used to think about that as you know management with a big M and a management with a little m, and in that sense the technical organization is part of the management, in my view, with the big M, and the rest of it is the small m.

INTERVIEWER: Do you think that establishing that parallel track and incorporating those values, is that the reason Analog Devices has sort of had this reputation of being on the leading edge of technology?

STATA: Well, it starts with -- that's our strategy, right. We measure our success of whether we're not -- we can find opportunities to push the envelope. And, of course, if you don't have that as a goal, then you're not likely to push the envelope. So a certain part of it is the strategy and the aggressiveness of with which we would go for leadership. But then, of course, you have to back that up with the talent to be able to, in fact, lead the parade in terms of what you're doing. So it's a combination, and I've talked, just to make the point about management in kind of bizarre way, but let's be clear that you have to have executive talent, management talent, and the opportunities for innovation in that aspect of the business is every bit as great as on the technical side. So, you know, you have to have great creative managers and marketers and salesman -- everybody has to be terrific in order to be leaders in what you set out to do.

INTERVIEWER: I'm sort of interested in how Analog Devices grew. So you acquired a number of companies as time passed. Tell me a little about the decision-making process in terms of acquiring a company and getting larger. How did that happen?

STATA: Yeah. We never acquired companies for the purpose of size. We acquired them mostly for the addition of technology, and participated in a market niche that we weren't in but wanted to be in. So it was very much strategically driven by our sense of how broad do we have to be, how far do we have to go in order to exercise leadership, not just in op- amps where we started, but later not just in converters, but in what we started to call real world signal processing as a market segment. And so what kind of technologies and products will we need to be the leaders in that segment.

So to the extent to which we could develop that internally, of course we did and most of it came from that source. But the extent to which we saw, particularly small companies that had pioneered some area that they were ahead of us, then we would seek to bring them into the fold. So we never were acquisitive from the point of view of adding size, with one exception. We made one acquisition when -- you know, 1990, pretty far along in the company's development, which was a company of about 20 percent of our size. And that was very much a strategic decision that was as much defensive as offensive. This was a company that was pretty confident in the areas where they competed with us, and our concern was that that company would get acquired by somebody and develop that as more a significant threat to us than they were on their own. So we -- number one, and number two, it was a privately owned company where we knew that the owners were getting along in years. So, I went to the owners, even when they did not have in mind to sell it, and convinced them to sell it to us before somebody else did.

INTERVIEWER: That was shrewd.

STATA: It turned out to be very, very successful acquisition.

INTERVIEWER: Can you articulate what it is you think is the sort of key to the success of Analog Devices?

STATA: It's many things which we talked about. I think when it starts with a strategy in terms of leadership and particular market segment, so a vision of what you want to achieve. Then an ability to hire and retain and develop and motivate the very best people in that field, particularly in the technical sense. To create an environment where, in fact, those very talented people could do their thing, who also felt that they could take risks and fail and it would not injure them. Then in some respects, almost, we're very conscious about acknowledging that people who don't fail ever at something they try to do means that maybe they haven't been as ambitious as they should have been. So we encourage that balance between being very aggressive and ambitious and pushing the envelope against the possibility of failure.

So I think that that culture of taking risks and pushing toward the frontier boundaries, and in the culture that we've talked to people feeling proud to work at Analog Devices, because, in fact, we were the leaders in our field and are the leaders in our field. We have a situation for even the people who leave us for whatever the reason is, you know it's amazing the kind of positive feedback that comes from those people and the fact that they feel good about having been there and worked there for whatever period of time it was, and a lot of it came down to the fact of how much they enjoyed the people that they worked with. So, that over time we accumulated this workforce of people who were like-minded in their beliefs and their values and their ambitions, and they were nice people to be friends with and to work with, and so people like to come to work to be in that environment with those kind of people.

So, somehow or the other we got that going, and so that culture and perpetuating that culture, being able to acquire very bright people, keep them 25, 30 years, and to have selected an area which has a lot to do with dumb luck, okay. I didn't have any idea at the time that the life cycle of op- amps and converters, some of the fundamental products that we went in to, would be 40 years, because a lot of times people start a company in a particular area and five years later, you know, that whole area is no longer an opportunity, so they have to go off into some other business. So we were fortunate enough to have picked some basic fundamental products -- as I say, I didn't appreciate it at the time, only in retrospect -- that had an enduring value over many decades.

Now true enough, the technology has continued to change. And one of the important things that we did -- which was a very, very high risk decision but had we not done it Analog would not have become the company it became -- is we started life as a module company, and then we transitioned to become a semiconductor company only five years into the mission. At a time when we had quite meager resources, and at a time which we were very successful in the modules -- they were growing and doing very well, thank you.

But I, probably more than anybody else, anticipated the fact that everything has an S curve, and that while the product category didn't have an S curve, the technology by which you made it did. And so we went through a major, major transition to become a semiconductor company.

And in doing that, one of the objections that everybody had against doing it, that if our mantra was to be the leader in whatever we undertook, how could we possibly be the leader against Fairchild, National Semiconductor -- companies who were making integrated circuit op -amps, they were already established semiconductor suppliers? How could we, as a nobody in semiconductors, establish leadership in semiconductors, in the categories that interest us? And the fact that we cracked that nut with intentionality -- we said we don't want to just make op- amps that are jelly beans that anybody can make -- which is what the competitors were doing at the time -- we wanted to meet the needs of our customers in instrumentation. Which were very demanding well beyond what I see op- amps at that time could achieve. And so we had to sit back and think, how can we innovate here in terms of the process, to come up with a way of making precision linear IC circuits?

And we did that through depositing thin film resistors on top of jelly bean type of analog circuits and then laser trimming these resistors, to take the manufacturing tolerance out of the manufacturing process, and therefore, we were able to make ICs that were as accurate and precise as the ones we made as modules, and that our customers would buy these to do their most demanding functions. So we sort of broke through that barrier, and were the first who figured out how to do that.

INTERVIEWER: You made a better widget.

STATA: We made a much better widget. And it turned out once we got on that curve, we kept improving it, improving it, improving it. By the time the other people figured out that there was something going on here, we were way out front. So I think that the establishment of leadership in the semiconductor precision analog circuits from the technology point of view is the thing that has sustained us.

Another factor in terms of sustained long-term success is you have to be able to adapt in response to change. For example, I mentioned we made the transition from modules to ICs, and in that sense, everything has a life cycle. So, in order to be able to continue to learn, you have to have a weakness orientation, and here, Andy Grove said it in his book, you know, only the paranoid survive. At the pinnacle of your success, you're always going to be looking over your shoulder and saying where could this thing go wrong and be consciously looking for opportunities to change and improve.

And in that sense, there's one remarkable learning experience for me that came late in life but turned out to be very important, is I always had a philosophy that the way you optimize performance was to optimize the performance of the parts. And that started with employees, you know, having the greatest individual innovators, and having a division to make op- amps and be the best division in the world making op- amps. So, the way to do optimize performance of the company was to optimize the performance of the parts. And then as we got along, I discovered Russ Ackoff who was a great systems thinker, and he made the point that the performance of an organization depends much more on how the parts work together than how they work separately. That was completely antithetical to what I believed of how to build a successful company. And yet we were beginning to encounter problems because we were into the optimization of the parts thing, and I didn't have the concept of thinking about the optimization of the whole, where we beginning to run into some troubles.