Day of the Entrepreneur 2008 Tuesday, June 03, 2008

1. Creating Value in
Technology
Companies -
Lessons Learned…
Avi Cohen, COO, ECI Telecom,
Formerly, Group VP, KLA-Tencor
June 2008
Legal Disclaimer: This presentation is
privileged and confidential. It is intended to be
read only. Any other use or distribution of this
material, in any form, is strictly prohibited.

2. Lessons Learned
1985 - 1994 1994 - 2006 2006 -
ALLEGRO KLA Instruments
Accelerating Yield
• • Founded ALLEGRO in
Founded ALLEGRO in • • President of KLA
President of KLA • • COO and Deputy to the
COO and Deputy to the
early 1985 Instruments Israel
Instruments Israel CEO
early 1985 CEO
• • Acquired by Octel • • GM OMD and President
GM OMD and President • • 9-2006 ECIL(NASDAQ)
Acquired by Octel 9-2006 ECIL(NASDAQ)
Communication in 1991 KLA-Tencor Israel 5-97
KLA-Tencor Israel 5-97
Communication in 1991 to 3-03 • • 10-2007 LBO
10-2007 LBO
• • Stayed with the to 3-03
Stayed with the • • Sr. VP 1-02
company till late 1994
company till late 1994 Sr. VP 1-02
• • Octel was acquired by • • Group VP, Officer and
Group VP, Officer and
Octel was acquired by member of Executive
Lucent in July 1997
Lucent in July 1997 member of Executive
Staff 8-03
Staff 8-03
for $1.8B
for $1.8B
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3. 1. Strategy before tactics
Strategy is about choosing your direction and
implementing it relentlessly
Strategy provides a mechanism for an organization to
see what is essential and to stay focused
Strategies must be built on a deep, rigorous and
iterative cycles of understanding that consist of:
Reviewing the facts
Asking all the right questions
Engaging in strong debate
Learning
Making decisions
A well articulated strategy translates that
understanding into a simple, crystallized concepts
that guide all efforts
Provides an internal platform for decision making,
consistent prioritization, trade-offs and execution
Resource allocation
Making choices about how to compete
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4. Confusing strategy and tactics
An “annual budget process” is NOT a way to create
the company’s strategy…
Budget is not about how much to allocate to each
activity or to manage costs
Budget is about determining which activities best
support the company’s strategy and should be fully
strengthened and which should be eliminated entirely
As a result, the “budget” process is a tactical tool that
can only follow a set strategy
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5. 2. Differentiation drives returns
Customer preference is driven by differentiation
Differentiation is about decommoditizing and
therefore provides pricing power
Sustainable differentiation creates competitive barrier
and is the basis for economic success
Differentiation must become a culture and a way to
manage the business
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6. Connecting strategy and differentiation
“When you think about strategy, think about
innovation, technology, internal processes and
service add-ons – whatever works to be unique”
(Jack Welch)
“Everything that gets done in a company is either
core or context” (Geoffrey A. Moore)
Core = any process that contributes directly to
differentiation creating sustainable competitive
advantage
Context = all other processes required to fulfill company’s
commitments
Context delivers diminishing returns
Organizations that focus on context become
uncompetitive
“Strategy determines what is core to a company’s
competitive advantage” (Geoffrey A. Moore)
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7. 3. Evolve your company’s core competence
In today’s global economy, technology advantage is
often a temporary state
Today’s core become tomorrow’s context… (Geoffrey A.
Moore)
Companies MUST evolve their core competence or
risk seeing their business being marginalized
When current core competence cease to
differentiate, resources MUST be shifted to “new
core”
Context Core
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8. 4. Culture of constant innovation
Globalization
Deregulation Pressure to Innovate
Commoditization
Protect against the forces of inertia… force extraction
of resources from context to core
Do not accept a culture of “comfort” or “cruising
along”… keep the organization agile not allowing to
settle for a “small improvements” mentality
“Even if you’re on the right track, you’ll get run over if
you just sit there.” Will Rogers (1879-1935)
Create a roadmap for differentiation and
discontinuities (“changing the rules”)
Separate effort
Innovation
Protected budget Inertia
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9. 5. Technology as a growth engine
Technology is an accelerator for the strategy (vs.
being a strategy on its own)
Do not allow new ideas/ technologies to run your
business
Figure out how to apply technology to a rational
concept that reflects the company’s strategy
Your technology group motivation must not be the
fear to be behind but rather the desire to turn
unrealized potential into results
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10. 6. A culture of discipline
Discipline ≠ Bureaucracy
Bureaucracy compensates for lack of discipline and it
decreases creativity and entrepreneurship
A culture of discipline is built around the coexistence
of clear constraints with giving people freedom,
responsibility and authority within the framework
Business process ≠ Rigidity
High Process ≠ No innovation
Hierarchical Great Process ≠ Slowness
Organization Organization
Culture of
Discipline
Bureaucratic Start-up
Organization Organization
Low
Low Culture of High
Entrepreneurship
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11. 7. Simple organization
Construct clear roles and responsibilities (R&R) for
the organization minimizing vagueness
Organization should reflect the best structure for
implementing the defined R&R
It should be crystal clear who is responsible for what
results…
Organization charts should be as flat as possible.
Layers add unnecessary complexity and cost
Managers should have 6-7 direct reports and 8-10
once they are experienced
You get the most out of your organization when
reporting relationships and R&R are very clear
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12. 8. Culture of team work
Team work is a MUST for talented teams to realize
their full potential
Teamwork remains a competitive
advantage, both because it is powerful
and so rare
>2
Building a strong team is possible but it is painfully
difficult to put into practice day after day
Keeping the collective results and the “best of the
company” as THE only compass
Organizations must overcome the behaviors that
corrupt teams and produce dysfunctional politics
within them
Protecting “bad apples” always backfires, cause
resentment and undermines trust an environment
that does not help a company win
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13. The Five Dysfunctions of a Team
Absence of trust leads to fear of conflict, lack of team
commitment and avoidance of joint accountability.
The outcome is inattention to collective results.
Status & Ego
Results
Low Standards
Accountability
Ambiguity
Commitment
Conflict Artificial Harmony
Trust Invulnerability
Source: The Five Dysfunctions of a Team by Patrick Lencioni
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14. 9. Leadership does not mean being the
smartest or knowing everything…
"Good business leaders create a vision, articulate
the vision, passionately own the vision, and
relentlessly drive it to completion.”
“A leader's role is to impart vision and a healthy
corporate culture, build great people and great
teams, and show them how to lead. A leader's
job, is not to be ‘the smartest person in town’,
but to hire and inspire the smartest people in
town.”
Jack Welch (1935- )
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15. Thank You!
avic.cohen@ecitele.com