Commitment to change

April 22, 1996

In the '90s, engineers and their companies must be willing to cope with
abrupt change. Take Semtech, a California-based manufacturer of semiconductor
products. Three years ago, 75% of the company's sales came from products for
aerospace and defense. By the fourth quarter of 1995, that percentage had
dropped to just 14%.

Recalls President Jack Poe: "The defining moment for us was when the Berlin Wall came down. We realized that if we didn't change fast, we would be finished as a company."

Thus, the company, which had built a reputation for solid quality in defense products for 30 years, very quickly in 1990 began to look at the kinds of technology previously used for the military that it could direct to the commercial marketplace. For Semtech, it was power electronics, such as voltage regulators, converters, and transient voltage suppressors. And in the years since, it has developed a flurry of products for such applications as personal computers, cellular phones, and high-speed modems.

To sustain this strong new-product thrust, Semtech had to commit 90% of its development resources to trends it felt were the wave of the future, such as lower voltage power. In the early '90s, it also took $1 million that would have gone to profits and plowed it back into R&D.

Yet, the commitment to change has paid off handsomely. In the 1995 fiscal year, Semtech sales hit $61.7 million, which included sales from ECI, a semiconductor company purchased in 1995. That compares to sales of $34.6 million for the same companies in 1994. Profits soared to $7.5 million from $1.5 million.

So what lessons has Jack Poe learned from this turnaround?

Make changes sooner--rather than later--and do it while your company is still strong.

  • Pick a specific technology niche and do it better than anyone else.

  • Try foreign markets. If your technology is successful in the U.S., it is very likely to be welcomed abroad.

Lastly, Poe believes that companies must be constantly willing to take risks and to realize that their strategic plan is a "living, breathing" document. The only constant, as the cliche goes, is change.

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