EB: In these days of frequent economic turbulences, NI has a 100-year plan! What’s this plan about?
Right from the start in the 70s, we always looked at other companies, their culture and how they operated, to pick up good ideas. It was not until we were to go public that I realised that putting our philosophy down on paper would be helpful when talking to shareholders. So in 1995, I came out with the 100-year plan, which was aimed at framing how we would make decisions.
At the 100-year level, we set the frame for our role in society. We talk about our philosophy of operations and how it is designed to benefit all the stakeholders.
Then if you look at the next (decade) level, you have the vision of what you are trying to do as a company. When we started, we had a pretty simple vision for creating jobs that we would enjoy and to self-finance the company. It was also the concept of automation of instrumentation that we started; then we went into the vision of what we wanted to do for virtual instrumentation. ‘Vision’ for us is really a decade timeline.
The next level is the five year time-line, which gets topical, like alternative energy—which is important. This term is where we start looking at how fast we can grow in the next five years and so forth.
Then at the one-year level, we look at our goals for the current year, our budgets and so on.
The overall idea is that we should always look at the long term when we make decisions, and look at the timeline to know when these decisions need to be made and executed.
EB: Typically, entrepreneurs find it difficult to change their roles as the organisation evolves. How did you manage this transition?
That’s an important aspect, and a very tough thing to do. Your style has to change. As a start-up entrepreneur you have to be aware of all the elements and perhaps the partners who are helping you in that process—whether finance, technical or sales. As the company grows, you have to start delegating. For every challenge, my style has been to figure out one of the officers from the company and then delegate the role. I started with delegating the simplest things and gradually delegated the more complex roles. The hardest of all to delegate is the core strategy and vision.
A basic thumb rule could be that when you get about 70 people, you have to start working on delegation. When you get to 300 you have to have a more formal structure in place, and when you get to 1000, you really have to have a very well formed management structure for each of the functions, in place.
I, for one, delegated things after having figured out how to get things done in those departments or functions. So some of the things I delegated quickly included manufacturing, accounts, and sales and marketing.
I still, from time-to-time, look at the specific elements of products but, more and more, I am now building a team that really understands the vision and key architectures at the top. We actually have a routine meeting of the architects and the visionaries of the company to see whether we are building the products in keeping with the vision that we have.
EB: What is the secret behind maintaining continued growth over the years?
NI has a strong track record of sustainable growth and profitability because we are managed for the long term. We believe the fundamental drivers of our long-term sustained growth have been new product R&D and a strong sales force. Over the last few years, we invested aggressively in innovation through research and development, with the output being new products that build on our highly differentiated platform. Similarly, with our strategic investments in developing a strong sales force, we are positioned to help our customers find ways to lower their costs, improve their productivity, and help them bring their own innovative products to the market quickly.
EB: How important is India for you, as a market?
NI IndRA (India, Russia and Arabia) represents one of the company’s fastest growing regions, and we are excited about the significant outcome of NI’s strategic and long-term R&D investment in India. As India’s influence on the global marketplace grows, NI India team collaborates with hundreds of customers in universities, SMEs and multinational corporations to nurture local innovation and accelerate productivity.
EB: NI has been a debt-free company throughout your tenure. So, what has your fiscal management policy been?
A. Well, my background, coming off the farm, helped me a lot in this area. I’m fairly conservative, financially. When you experience success in terms of growth, you tend to do stuff like hiring too many people to do a job. You need to clearly understand the role of ‘profit’ for a growing organisation. If you are not clear about that, you can make a lot of wrong decisions. Also, it’s about understanding how not to over-commit, which is a very, very easy thing to do.
EB: Did you ever set a benchmark as to what the profits should be?
In 1987, based on our prior years, we started with what we wanted to grow into in terms of profit and it was basically 20 per cent growth and 18 per cent profit before taxes. The 18 per cent was what we needed to earn so that we wouldn’t have to take money from someone else. Because, when you take money from someone else, they start telling you what to do and when someone else is telling you what to do, you are not really autonomous. The 20 per cent was based on the fact that we wanted to create a career path for people and if you grow less than 20 per cent, especially in India where market factors dominate, you do not create a career path for the people who you want to be joining your company.
EB: Do you also define what percentage of the profits should get reinvested into the organisation’s future expansion and R&D? If yes, can you share the formula?
We target 16 per cent of our revenue to be invested into R&D—8 per cent to maintain our existing products and 8 per cent for new product development. We also target 36 per cent of our revenue for sales and marketing, and 6 per cent of revenue for general and administrative functions.
