A new era Featured

8:00pm EDT April 25, 2009

When Dave Hitz co-founded NetApp Inc. in 1992, he went through the typical growing pains of a start-up. But when he grew to about 50 employees in size, things started getting really crazy. Revenue and head count were doubling each year, and he found himself buying a Polaroid camera and running around taking photos of every employee, writing their names on them and hanging them on the board because nobody knew each other.

These new challenges clued him in that a new era was emerging at his storage and data management solutions company.

“You start to see you’re doing things like that, and it should raise alarm bells in your head of, ‘Is this the early sign of a new era, and if it is, what might that mean?’” Hitz says.

Just like with a country’s history, companies have eras, as well.

“I would define an era as when the strategic issues are completely different from the things you focus on during the period before or after,” Hitz says.

Sometimes those eras are very clearly defined, and sometimes they tend to blur together, but Hitz says you have to recognize when eras are changing.

“If you can predict a future era, that would be awesome,” he says. “I’m not even sure it’s possible in general to predict future eras, but the next best thing to predicting one is to get an early hint that your era might be changing.”

Hitz has been through a few eras at NetApp — start-up, crazy growth, tech crash, building back up to pre-tech-crash numbers and, most recently, the recession. Similarly, your company may be facing a new era right now. Hitz has survived it all, and last fiscal year, NetApp did $3.3 billion, but it’s taken tenacity and adaptability to weather the ups and downs of all the eras he has encountered. No matter the era, you have to always be looking for new opportunities and creating a new vision to ensure that your business will be around 10 years from now.

Look for new opportunities

When NetApp hit the tech crash, obviously people freaked out across the industry and went into safe mode.

“A lot of people look at a downturn and they say, ‘That’s the time to dig in. Whatever you’re doing, hunker down, and do it a little more efficiently,’” Hitz says. “I think that can be a big mistake. A downturn of the magnitude that we’re seeing now and certainly for tech companies, the dot-com crash, it’s almost certainly a new era. Whatever the key strategic stuff you were doing before, that has to be different.”

NetApp’s vice chairman, Tom Mendoza, always told Hitz that customers only open their wallets when they’re in pain, so while you may look out at the market and say people aren’t going to spend money right now, also remember that they’re in pain, so you have to find their pain and then show them how you can ease it.

“Downturns create a lot of new pain,” Hitz says. “A whole bunch of customers who whatever they were doing before, it’s not working anymore, and all of that pain they have is now opportunity.”

You need to talk to both your current customers and people you’d like to see as customers in the future.

“Hang out with them,” he says. “They’ll tell you. The interesting thing about customers is customers often will tell you what they wish you would do, and when they do that, I think they’re often wrong.”

He acknowledges that you’re supposed to say that the customer is never wrong, but sometimes customers aren’t quite sure what they need.

“They’re not necessarily the expert on how your product works or how your service should work, but dig behind the thing they tell you to do, and say, ‘I’d like to understand more. What’s the problem you’re trying to solve when you ask me to do X, Y, Z?’”

For example, when meeting with one customer who wanted NetApp to create a new feature for them, Hitz’s team dug deeper and discovered that the solution to the customer’s problem could be found in another product they already made. Had they not pushed, they would have wasted time and development efforts creating a whole new product.

On top of actively listening and probing deeper, you also have to learn to be persistent.

During the dot-com boom, about 70 percent of NetApp’s customers were Internet and technology companies, which made NetApp’s senior leadership very nervous. They wanted to find customers in other industries, so they kept calling up companies on Wall Street and explaining the cool features they offered and how they could do things less expensively than their current providers. They got laughed at. Things were good, and they had money, so they didn’t care about cool features or cheap costs. Enter the tech crash, and then things changed.

“After the crash, everybody we talked to said, ‘Oh my God! You can solve the problem for cheaper? Oh my God! You have features that let me do it a different way!’” Hitz says. “Suddenly a zone of customers that we had locked out of ended up being our key target.”

Now clients may not be willing to spend as much money as they were before, but they still have to run their businesses, so look for ways you can help them do that more efficiently and cost effectively.

“If you can help them do that in a different way, that can be a great opportunity,” he says.

As NetApp started to grow by capitalizing on new industries, the face of the company changed. When it reached the $1 billion mark the second time, only 30 percent of its business was in the technology and Internet fields, and it had expanded into all of those areas it previously wanted to be in. Instead of being a tech-heavy company, now it sells primarily to Fortune 1,000 companies.

“It’s tough in the downturn, because you don’t necessarily have the opportunity to do as much new investment as you want,” Hitz says. “You’re probably cutting it back, but what do you have in your portfolio of business that allows you to solve all the new problems that have just emerged out there?”

He says to spend time brainstorming and focusing efforts around that question in order to move forward during this hard time.

“It doesn’t feel like that’s the right thing to be doing, but at least spend some time saying, ‘Is there a group of people that suddenly have some pain that’s just what we know how to solve that never would have considered us before?’” he says. “It could be an opportunity for transformation.”

Create a new vision

After Hitz grew NetApp back up to $1 billion in revenue after it dropped during the tech crash, he was suddenly faced with a new challenge. When the company was doubling, he obviously just doubled the previous year’s numbers to create the new goal. When he was coming out of the tech crash, his goal was simply to get back to where he was before. This was uncharted water since he had never been above this mark.

“For the first time, I was very confused because for the first time, I didn’t have a good idea what our mission was,” he says.

He was so confused that he drew inspiration from literature to create a vision for NetApp. At the time, Hitz was reading Robert Heinlein’s “Future History” series, a story about what 500 years from now looks like and what happened in between to get there.

While Hitz didn’t go that far forward, he looked out a few years and saw NetApp at $3 billion in revenue, so he took a past-tense approach to determine how he would have gotten there in order to develop a new vision.

“Vision is describing as well as you can what the future should look like, but doing it in the, ‘How did we get there? What steps happened?’” Hitz says. “Talk to people from all different departments about what would have needed to work.”

Hitz did internal interviews and talked to every person in the CEO’s suite because a chief financial officer will have a different view than the chief operating officer. He walked people through his era concept and asked them to think about past eras. In defining an era, don’t be shortsighted.

“Think back as far as your company goes and just ask, ‘What are these big eras?’ — not six-month things, but typically two, three, five years kind of things,” Hitz says. “That gets your head a little bit in a better space, and you get more of the right time scale. Thinking of long periods in the past can help your head explore longer periods in the future.”

He also asked them to think about key drivers in past eras and key drivers for future eras.

“Our CEO once gave me advice on strategic planning,” Hitz says. “He says the goal of every strategy should be to gain market share, and therefore, every strategy should begin with a market analysis. Who else are you competing with? What other products are there? That’s the starting point.”

He also asked them to picture who their customers were and what they needed. What products and services do we know how to develop or what do we need to do different? How will they reach those customers, and how do they like to buy? Do we need offices in India or do we need better HR systems here to support who we hire?

He used all of this input to help develop steps to reach that $3 billion mark, but there was another element to creating a vision that is important to him, and that’s to take a positive approach, despite any problems you face. Although he founded the company, Hitz stayed a programmer evangelist until it hit about 1,000 people and was asked to run all of engineering, which was about 250 people. Upon doing so, he realized that when he complained, people ran around trying to fix the things he complained about.

“My first lesson from that is if I’m going to whine, I should whine as accurately as possible because if I don’t whine accurately, they’re likely to fix the wrong thing,” he says. “So I’m trying to do management by whining accurately, which perhaps isn’t the most inspiring way a boss could be.”

Through this management strategy he had an epiphany though.

“Whining is the evil twin of vision,” Hitz says. “When you’re trying to whine accurately, you’re describing as carefully as you can how you wish the world was not. The whole point of vision is to describe as accurately as you can how you wish the world would become. If only you can flip it around from a whine of all the things that you don’t like into a vision of the way things would be different. It’s almost the same stuff, but I can tell you that the vision version is a lot more inspiring than the whining version.”

For example, take the proverbial glass half-full versus half-empty concept. Most would say you’re either positive or negative when looking at that glass, but Hitz takes a different approach. He sees the glass and says it’s twice as large as it needs to be to hold the contents, so how can he better make the glass.

“You flip it from, ‘Jeez, that glass is too big — who designed it too big’ to, ‘Wow, we could save some glass if we made it smaller,’” he says. “It’s just expressing yourself a different way.”

How to reach: NetApp Inc., (408) 822-6000 or www.netapp.com