Interview: Dr. Ichack Kalderon Adizes and Jim Morgan

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Dr. Ichak Kalderon Adizes

This blog post was featured in the Huffington Post on November 29, 2017.

Dr. Adizes: Jim, you have authored and published a book, Applied Wisdom, (2) in which you summarized your thirty years of leading Applied Material as its CEO and Chairman of the Board. Applied Material grew from a small company, with $17 million in revenues when you joined, into a company of $10 billion in revenues when you retired. You have put your thirty years of experience into that book. Why did you write it? It takes time and effort to write a book.

Jim Morgan: My first goal was to write something for my grandchildren, for them to know where I spent my adult life. But as I wrote the first draft, I realized there was enough “applied wisdom” from my experience leading the company that could be useful to people taking courses on leadership, people who do not have thirty years of experience. So, my goal in writing the book is for future leaders to gain from my experience and for it to be written so well that even my grandchildren can read and enjoy it.

Dr. Adizes: During your tenure, the company grew from $17 million to $10 billion in revenues. What were the causes for this successful growth? What do you attribute your success to?

Jim Morgan: We focused on innovating new products that would meet global customer needs and were early to new markets like Japan, Taiwan, Korea and China. We attracted very capable people, like Dan Maydan who eventually became the company president. Three major factors: great people, new markets, and new products.

Dr. Adizes: New products, new markets, and even the recruitment of excellent new people do not happen by themselves. Why did it happen at Applied Material?

Jim Morgan: It was the company culture of being close to the client. Very close. So, we always knew what their needs were and we worked hard to satisfy them. Thus, new markets. Thus, new products. And, that meant that we knew which people with which capabilities we needed.

Dr. Adizes: Having been your consultant for twenty years allows me to give you my insight into why you were able to attract good people and why you were close to the client and thus able to innovate what the market wanted. It might not be in your book because it is difficult to see the picture when you are in the picture.

Jim Morgan: Yes, tell me.

Dr. Adizes: It is your style, Jim. You allowed people to be free to think and to lead. You gave people space. The company was not top-down driven. On the contrary, it was bottom-up driven. Clients drove the sales people who drove the R&D which drove production. Dan Maydan was the same: very open-minded. And this climate of openness attracted people who were innovative and entrepreneurial. Furthermore, with my involvement, we almost annually restructured the company as it was growing so that decentralization could be implemented and sustainable. And it was. Thus, the good people came and stayed. Thus, the closeness to the client. Thus, the innovation. Thus, the success.

Jim Morgan: Yes. We insisted on decentralization, and the book I authored makes points on delegation and decentralization.

Dr. Adizes: What is the worst decision you have made?

Jim Morgan: Getting into the implant business.

Dr. Adizes: What was wrong?

Jim Morgan: The company had a good product when we bought it. But it did not succeed in its subsequent products, and it never became number one in its industry.

Dr. Adizes: Why did this division fail with new products?

Jim Morgan: They were not close to the market like the rest of the company. They were in England, and our culture did not get transmitted to them as well.

Dr. Adizes: Adizes was with you all the way, for twenty-some-odd years. What was it that Adizes did for you or for the company that made it worth holding on to?

Jim Morgan: Adizes was instrumental in leading the ongoing decentralization of the company by continuously working on restructuring. And, Adizes knew how to handle different cultures and teach the executives from different nation how to listen to each other and work as a team. Applied Material was like a United Nations in its top management: Indian, Iranian, Israeli, Argentinian, etc. You helped unite them and taught them how to work together in spite of their different cultural backgrounds.

Also, you taught us how to make the changes without losing alignment. To change a culture, you need to change structures and to change the process which will change the people and eventually the culture.

Dr. Adizes: Growing from $17 million to $10 billion through continuous reorganization and restructuring means a lot of change. How did you, as the CEO, handle those who were resisting change. You and I know who they were.

Jim Morgan: By never getting involved in the politics of the company. By always following what is strategically and functionally right for the company long-term and steering away from politics. We developed a culture that is included in Applied Wisdom: bad news is good news….. if you do something about it!! Dan and I could not remember a time bad news got to the Board, Wall Street, or the press that we did not know about.

Dr. Adizes: You had a very good Board of Directors. What are your guidelines for building the board and managing it?

Jim Morgan: I wanted competence on the board with a diversity of knowledge and of styles. We had equity fund managers, people from the industry, leaders from the accounting profession, etc. And I always worked to ensure that they would not be surprised but instead fully knowledgeable about the company’s problems and affairs. Board members should help think about solutions to problems, not be there to just cheer on the CEO.

Dr. Adizes: You retired…..

Jim Morgan: At 65, I stepped down as CEO after we hired Mike Splinter from Intel. He had a ten-year run until he retired. These were a tough ten years because the whole industry was in a downturn. But, he kept it going. Today, under the leadership of CEO Gary Dickerson, it is a $15 billion company setting new records and celebrating fifty years of global innovation.

Dr. Adizes: Thank you, Jim. It was a pleasure working with you, and it was a pleasure reading your book. I am sure future readers will find it fascinating.

Jim Morgan: Good talking to you, Ichak. Come see me when in the Silicon Valley.

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1) Applied Material (AMAT) is the leading company in the world in manufacturing wafer-producing equipment. Those wafers produce the chips that drive computers. AMAT byline: “The information highway starts here.” AMAT has been a client of Adizes Methodology for over twenty years, starting when the company was at $400 million in sales. The service was discontinued when a new CEO came aboard. At that time, the company was ten billion in sales.

2) Morgan, J. C., & Hamilton, J. O. (2016). Applied Wisdom: Bad News Is Good News and Other Insights That Can Help Anyone Be a Better Manager. Los Altos, CA: Chandler Jordan Publishing.

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Applied Materials Gives

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America has always been a country of givers. As waves of new immigrants came to this land, they built the schools, community centers, hospitals and vibrant arts organizations that now exist. Many people came to this country with very little, and yet they gave back.

I made charitable giving central to Applied Materials’ mission early in my career there.

The Applied board of directors authorized contributing a portion of our pretax profits to invest in local nonprofit organizations. We maintained the planned level of commitment in part by contributing to a company foundation in good times, setting aside funds that we could rely on during tough financial times when our communities were often under more stress.

I’m proud that Applied continues this commitment directly and through the Applied Materials Foundation. They’ve got a broad focus on giving in the areas of education, arts & culture, civic engagement and the environment. In 2016 the company and the Foundation made grants of over $9 million dollars to charities and nonprofit agencies in ten countries around the world. It’s one of the ten largest corporate philanthropists in Silicon Valley.

When I was at Applied last Friday I was reminded of all the good work that they do. Siobhan Kenney has worked in community affairs and with the Applied Materials Foundation for over fifteen years. “We’re a very engaged company,” she says. “We try to have a positive impact on the communities where our employees work and live.” She makes it clear that local is important, but that “local” also means all of the countries where Applied has a presence, including India and China.

The Foundation also runs Employee Matching Gift and Volunteer Time Grant Programs. “Generosity resonates with our employees,” Siobhan says. “Employees can choose their own charities and the countries where they wish to make donations.” More than 30 percent of U.S. employees participate in company giving programs – well above the 14 percent average for other corporations of the same size. In 2016, employees directed $4.1 million in donations and matching funds to charities and nonprofit agencies across the globe.

In addition, last year, among numerous other efforts, Applied employee volunteers and their families worked on conservation activities on Mt. Fuji in Japan, helped create a forest in the Tancheon Wetland in Korea, and replanted pine trees in fire-ravaged Bastrop State Park with the Nobelity Project in Austin, Texas.

As Siobhan says: “Giving is part of our identity.”

Since leaving Applied, I continue to be involved in the community and recognize the significant impact each of us can have on issues of personal importance. Environmental causes, education, and regional collaboration are in the mission of our family’s philanthropic efforts.

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How does your organization support local communities? How else do you give back?

Applied Materials at 50

Applied Materials will be celebrating its fiftieth anniversary on November 10. To be a 50-year-old company in Silicon Valley is quite an achievement. To be growing fast, setting new records and delivering cutting-edge innovation at 50 is almost unheard of. Few companies can make that claim.

When I joined Applied in October of 1976 the company had about $17 million in revenue. We were over-diversified, hemorrhaging cash and facing bankruptcy.

When I was first offered the position to lead Applied, I talked about the opportunity with some friends and colleagues. No one thought my joining Applied was a good idea. I wish I could say that I knew this was the job I would have for the rest of my career. The truth is, my initial ambitions were short-term. Little did I know that I would lead the company for over a quarter century.

Early on we decided that our goal was to be the “Leading Semiconductor Equipment and Services Company Worldwide.” It was a very ambitious statement for a small company that was way down the list in its industry, but when I looked around at the competition, I felt we could become number one. It was true we were up against some very large companies, but they were not focused exclusively on semiconductor equipment. I didn’t see anyone else who had the right to be the clear leader; nobody had a lock on this segment.

Today Applied’s mission is broader but solidly established: “to lead the world with materials engineering solutions that enable customers to transform possibilities into reality.” This uses the knowledge, technologies, equipment designs, and patents built up over the years to expand semiconductor and display markets and enter new areas. The company is on its way past $14 billion in revenue. Under CEO Gary Dickerson and the outstanding global team, Applied just delivered the best quarter in the company’s history.

Last Friday I took part in an event at Applied’s Santa Clara office. It was billed as a conversation, and Joe Pon, who is VP of communications and public affairs at Applied, had set up a stage where we could chat. I was honored to find a full house, standing room only. I’ve known Joe for a long time and the interview was relaxed and fun. He asked what it was that made me successful as Applied’s CEO and I said that it has always been the people: their commitment, persistence, and collaboration. They succeed with a strong focus on the customer and a connection with the community.

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What is your organization’s most important recent milestone? How did you celebrate?

Patience and Persistence for Results

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Sometimes impatient business people get involved with non-profits. The non-profit’s goals may seem remote, the results unachievable. But I’ve learned that patience and persistence can produce powerful results.

In 1997 I traveled with Applied’s diverse Asia-Pacific team down the Yangtze River to China’s Three Gorges Dam. Construction on the dam had begun in 1994. It is now the world’s largest power station, designed in part to help control the floods that had killed many people along the path of the Yangtze River through the centuries.

Unfortunately, as I learned, the consequences of the dam on the health of the river ecosystem had been substantial. The dam itself created a reservoir for sediment and organic and industrial waste that no longer continued downstream, destroying water quality. Also, the project displaced over a million people and flooded dozens of cities, towns and villages where no efforts to remove toxins from foundries and other activities were conducted prior to the flooding.

As I looked at the murky river, the deforested slopes, and the many villages black from decades of burning coal and wood, the problems China faced seemed insurmountable. I became convinced that I had to do my part to help the world begin to repair damage from large-scale projects and haphazard development. This wouldn’t be easy; I would have to be patient and persistent.

In 2003 Hank Paulson, the CEO of Goldman Sachs, asked me to join The Nature Conservancy (TNC) Asia Pacific Council of business leaders. He and Lee Kuan Yew, the Prime Minister of Singapore, had created the council to advise TNC management in Asia. The council made a trip to Hong Kong and we discussed how TNC had the opportunity to work with the Chinese on a plan to protect large wilderness areas and improve the environment. Our work had begun.

TNC would continue to work with China to help it improve water management and dam-building strategies. This is very important since the Chinese will build most of the dams worldwide in the coming decades. A “Great Rivers Partnership” was formed around the Yangtze, the Mississippi, and the Pantanal in South America. This has led to improvements in dam building and freshwater river strategies in China, the U.S. and in Brazil and Colombia.

The conservation news from China these days is promising. I read recently that Stanford University ecologist Gretchen Daily says that China’s environmental conservation efforts are making a positive impact. “In the face of a deepening environmental crisis,” she says, “China has become very ambitious and innovative in its conservation science and policies and has implemented them on a breathtaking scale.”

While perhaps not as significant as the broader environmental programs, China’s conservation efforts have pulled the Giant panda off the endangered species list.

The Nature Conservancy remains extremely active in China, working to find solutions that allow China to develop and protect the full spectrum of its biodiversity, from pandas to people.

My experiences on TNC’s Asia Pacific Council gave me an entirely new and important perspective on conservation and environmental issues in Asia, and it allowed me to stay engaged in the rising importance of the region. It proved the value of patience and persistence.


In 1997, I traveled with Applied’s diverse Asia-Pacific team down the Yangtze River to China’s Three Gorges Dam.

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How have you learned to be more patient and persistent in achieving your goals?

Systems Thinking

This month I want to talk about systems thinking in the context of American relations with China and my experience working with China beginning the early 1980s.

International trade is very much in the headlines these days. After a period of expanded trade agreements over the last several decades, the new administration in Washington is leaning towards protectionism. A review of NAFTA (North American Free Trade Agreement), involving U.S. trade with both Canada and Mexico, is currently underway in Washington, Mexico City and Ottawa. Meanwhile, as noted in Business Insider, President Donald Trump keeps threatening trade spats with China, and then retreating. However in August, in the first direct trade measure against Beijing, President Trumpauthorized an inquiry into China’s alleged theft of intellectual property from the U.S.

When I was CEO of Applied Materials we invested in understanding and then cracking the technology markets in Asia, first in Japan and later in China.

China was a tough challenge. In the 1980s the Chinese semiconductor industry was at a much different stage than in the rest of Asia. Restrictions on the kind of technology that could be exported meant that we could not even sell most of our products to China. The Cultural Revolution had eliminated a decade of engineers that could be trained in this newly emerging electronic world. There was little money to purchase anything.

It might seem from all these factors that there was not much opportunity. We felt that there was.

In 1983, China was still mostly a mystery and a complicated place to do business. But some members of our team had contacts within the Chinese Consulate in San Francisco. The Vice Minister of Electronic Industries, Jiang Zemin, visited the United States, mainly to stop at a few companies on the East Coast and Texas.* When our team learned that he was stopping in San Francisco on his way back to China, they invited him to visit us. While he was on site taking a tour and meeting with me, we received word that he had been promoted to Minister of Electronic Industries. On the spot we invited him to a celebration and we took the delegation of about twelve to Ming’s Restaurant in Palo Alto for a Chinese banquet.

It was a memorable dinner in many ways. Jiang and I sat together and talked for about three hours. We discussed the outlook for Asia, the semiconductor industry, and the difficulties facing China. I was truly impressed with his experience. He had been educated in electrical engineering using English textbooks, he had gained experience in industry, and also worked for a time in the Russian auto industry. He spoke not only English, but Russian. In the three hours of discussion I perceived that despite our very different political orientations, our views about the future of technology were closely aligned.

The Chinese are tough competitors. They’re getting ahead of us in certain technologies, for example solar panels and drones. They’re bypassing computers and focusing on mobile.

The U.S. and China have to work closely together. We don’t want to make it too complicated. We need to have ways to address the differences between us. We need systems thinking— thinking about the whole system for long-term success. To thrive and succeed in a complex world, you can’t just slog forward every day checking off boxes in a linear fashion. You have to anticipate problems, process new variables, and adjust your strategy.

By operating with an open mind and with respect for others, we repeatedly disproved the popular wisdom that U.S. companies couldn’t succeed in Asia. It reinforced for me that diversity is an exciting and enriching dynamic in life and I saw that play out every day in the many cultures that pulled together at Applied Materials.

* Footnote: Yes, this is the same Jiang Zemin who became General Secretary of the Communist Party and President of The People’s Republic of China.

With China’s President Jiang Zemin, Shanghai, 2001

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How do you move beyond the day-to-day slog to embrace the larger picture?

Interview with Dan Hutcheson

Earlier this year I was interviewed by G. Dan Hutcheson for his well-known weVISION video series. The edited video, 30 minutes long, is available for free online, along with a transcript of our chat.

Dan is an old friend, not just of mine, but of the whole semiconductor industry. He is chairman of VLSIresearch, a provider of market research and analysis on the technical and business aspects of the semiconductor supply chain. The industry respects Dan as one of its top experts and marketing voices.

In the interview Dan very generously compared Applied Wisdom to Andy Grove’s Only the Paranoid Survive, noting he would put my book up beside Andy’s “especially if you are in the semiconductor equipment industry.” That’s a real honor.

In the interview, Dan asked me how a CEO can create an ethical organization.

I replied that a company will never be better than its leaders. At Applied Materials we tried to encourage everyone in a leadership position within the whole company, worldwide, that one of their first priorities was to walk the talk and provide leadership in ethical behavior. You need that as part of the trust you require with your customers. You really have to develop trust between your customers and your company. We worked very hard on that and it paid off: we got more business, with good products, and good service and they could trust us to work with them in an honest and ethical way.

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Are you building trust with your customers and within your organization?

THE UBER LESSON

At some point in almost every fast-growing company’s life there is a moment when a manager realizes business as usual is not going to cut it. As a leader you have to face facts: Change or fail.

I was reminded of this recently from stories about the ride-sharing service Uber. Among other criticisms, a former employee alleged in a blog post that she experienced sexual harassment from a superior and reported it. She says she was told it was the first that human resources had heard of the issue and that the offending manager was a good performer and would only be warned. She chose to transfer to another work group. After the transfer, though, she met other women who’d had the same experience with the same manager and other managers, and who said they’d reported it.

As word of this employee’s experience spread, other employees and former employees started reporting additional claims about a toxic workplace culture. Uber launched an investigation. I know nothing beyond what I read in the papers about the details of this situation. But from a distance I recognize a familiar scenario, one I’ve seen repeated in company after company in Silicon Valley, where I’ve worked for over 40 years. Energized with a mission and intensely focused on meeting milestones, executives adopt the posture of the three wise monkeys on the archway at the Tōshō-gū shrine in Nikkō, Japan who suggest, “See no evil, hear no evil, speak no evil.”

In my book Applied Wisdom: Bad News Is Good News If You Do Something About It, I talk about the management principles that helped me build the semiconductor equipment company Applied Materials from a small, near-bankrupt player in a crowded field into a multi-billion dollar global corporation with 15,000 employees. I served as CEO for almost 30 years, and we built a corporate culture we were proud of and that delivered bottom-line results.

It’s easy to get caught up in the mythology of changing the world or reinventing a category of technology or business. But the secret of managing success is paying attention to a handful of basic principles that apply in any kind of organization, whether a start-up or an established business, whether of mundane consumer commodities or sophisticated web-based services. In fact, I learned many of these lessons as a kid growing up in Indiana and working in my family’s vegetable canning business.

In a canning plant, you sometimes hear a problem before you see or experience it some other way. You’re suddenly aware of a funny sound in a canning machine, or maybe a clicking along a conveyor belt. But you’re on deadline; the line is working full-speed. What do you do? You stop and fix a small problem before it becomes a big problem. My dad managed the plant that way every day, even when it was tempting to cross his fingers and hope that the problem would fix itself or go away.

At Applied Materials we refined the basics of this idea into a kind of management mantra: “Good news is no news; no news is bad news; bad news is good news—if you do something about it.” Let me deconstruct that in the context of a CEO and a public company’s board.

At many board meetings the bulk of time is spent in CEO-orchestrated cheerleading. The CEO marches out all the accomplishments, the regional sales upticks, the promising advances in the lab, the great new executive team hire, the news that the company’s won some community award. Since the board sets the CEO’s pay, it’s not surprising she or he wants to make sure accomplishments are noted – but generally speaking, what a waste of a board’s time! Beyond agreeing it’s all great, what is there to do or say about what’s going well? The board’s collective time and experience are wasted.

No news, on the other hand, is ominous. A board exists to help and coach and support a CEO in the difficult decisions of growth and management. If you are not hearing anything from the CEO about difficult challenges, something is wrong. There are always challenges, always competitive threats developing, always less than happy customers, always personnel issues to be resolved. The silence is as loud as the unfamiliar knocking in a canning line motor. If a manager is repeatedly acting inappropriately, you have a problem. Seek counsel. Act. You need to investigate when the problem is still small and keep it from growing.

Bad news can be your best friend. Bad news is what should take up the bulk of a board’s time even when the bottom line is looking strong and the company appears to be thriving. Teaching your organization to take reports or even rumors of trouble seriously the first time, and then investigating and fixing the underlying problem, is how you ultimately build a successful organization that avoids the kind of eruptions and revelations of toxic culture that can chase customers and partners away. Build a culture where reporting a problem is rewarded, not punished.

There’s not a company in Silicon Valley, or anywhere else, whose success represents just a steady path forward and upward. Everyone hits challenges that demand change. The secret is to take your hands away from your ears, eyes, and mouth. Be alert to the bad news, report it, investigate it, and fix the problem.

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Have you found occasions where your organization wouldn’t confront bad news, failing to recognize that bad news can be their best friend?