Isola CEO Jeff Waters Shares Insights and Reflections


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It’s been eight months since Isola’s Jeff Waters was appointed CEO, marking his transition from the semiconductor space to the PCB industry. We met at PCB West recently, and in our conversation, Jeff reflected on his first impressions of the PCB industry and how Isola continues to adopt changes in its manufacturing strategy and new product development with a plan to become the recognized industry leader with a global, competitive presence.

 

Barry Matties: Jeff, you've been with Isola for more than eight months now. How has that experience been for you?

Jeff Waters: It's been great. Obviously, it's been very busy. As I think about it, I've been on the road probably a good 70–80% of the time. I've spent a fair amount of time over in Asia and throughout the U.S., even here in the hometown area of the Bay Area with all the customers on the OEM side and the PCB shop side, so a lot of time outside of our headquarters.

It's been fun getting to know the industry. As I've gone around, I've recognized that everybody knows everybody. Even yesterday, I was with a customer who was telling me how he worked with Matt LaRont back in the 1970s (laughs). I don't even think Matt was out of college then, but I didn't correct him—never want to correct a customer (laughs).

It is a fascinating industry. When I look at some of the dynamics that are happening in my old world of semiconductors, with the slowing of Moore’s Law, you're seeing a slowdown in progress on power reduction and  miniaturization, and that’s creating opportunities in the PCB space. Our customers are trying to get more innovative in terms of how they reduce dimensions and do things to help on the power side. It's been a lot of fun.

Matties: Your background in semiconductors was with Texas Instruments, right?

Waters: Yes. I was with National Semiconductor for about 20 years. We were acquired by TI. Then I was with Altera for four years, until we were acquired by Intel.

Matties: Coming to this industry from the semiconductor industry, what's your take on the comparison between the two?

Waters: You know, when you look at the semiconductor world, most people tend to look at companies like Intel and Qualcomm, where you've got mammoth, highly technical, highly dense chips that are being made on the latest process technology in the most cutting edge of factories. That said, the majority of chip companies are working in the analog space or in other areas where you've got factories that are 20 or 30 years old, running on older equipment that have a lot more to do with material science than they do with cutting-edge technology.

There's a little more witchcraft and voodoo around how you make some of the analog chips work. Especially with National Semiconductor and TI, that was where we were primarily focused. There are a lot of parallels between that industry and what I see on the PCB side. It's not so much about needing new equipment as it is about using a lot of longevity and know-how to innovate.

Matties: You're right. Here in Northern California, I have toured some local shops that are running 30-year old machines that are producing boards. Some companies are investing a lot in technology, but I don't think we see the investment in technology the way we see it in the semiconductor industry.

Waters: Yeah, I think that's fair but once again, if you bifurcate the semiconductor industry and set aside the Intels of the world, most chip companies share a lot of commonalities with the PCB shops and laminate suppliers.

Matties: What's the thing that's most surprised you in our first eight months?

Waters: The dynamics that are going on within North America and Europe as it relates to Asia. I don't know that it's so much surprising as it is just interesting to see how a lot of the PCB shops in the West are evolving their business models to be successful. Just take the Bay Area as an example. If you look at the OEM customer contact they have there, it has translated into business for them domestically. As more of their OEM customers are doing a shorter stop—or even no stop—in North America before they transfer the business overseas, the PCB shops are drawing more connections over to Asia, building partnerships over there or, in some cases, even acquiring assets over there so that they can follow that business better.

In terms of other surprises, a real pleasant one has been the reputation of Isola and the affinity that so much of the customer base has for us. Even with some of the challenges that we've encountered over the past few years, customers understand the value that we bring. They still see a lot of the good that we do and when we talk to them about where we're headed, as a company, there's a lot of excitement around that. For me, along with the spirit and culture that we have inside the company, it's one of the things that makes me so optimistic about our future.

Matties: So when you look ahead, what gets them so excited?

Waters: Well, if I look at where we're taking the company right now, it's centered on a vision that has been galvanizing for us—becoming the recognized industry leader. In a lot of ways, you can argue that we've got that, especially with a lot of customers that I visit. They do still view us as the industry leader, but when we talk about being a recognized industry leader, we talk about it more globally. Not just here in North America or Europe. but also in Asia.

With that as a vision, we’ve created a strategy focused on a handful of key things that lead back to the customer. One is around new product development, where it's really around us leveraging the R&D assets that we have here in North America, Europe and over in Asia. The goal is to help our customers go as quickly and reliably as possible from unmet need or new idea, to sampling and then volume production.

We have scores of teams within the company that are creating and changing processes, adding resources, and shifting the way we've done things historically to help get better at that. As we walk through the details of that with some of the lead OEMs, they're excited. They always knew we had the innovative and creative capability. What they want to see is more structure around how we're going to operationalize that and get it to market in a reliable way.

Matties: Are you taking this marketing message to the OEMs directly?

Waters: It's both the OEMs and the fabricators.

Matties: The service is down in the fabricator level, but it's really convincing the OEM to use your product now, isn't it?

Waters: On the new product side, absolutely you need the OEMs onboard.  But, you also need the PCB shops to be ready and willing to use your product technology so that when the OEM goes to them and wants them to use Tachyon 100G from Isola, they say, "Yes, we know the product. We understand it. We like Isola. We're ready to go." If there's a lot of pushback, that can create challenges for us. But more importantly, it creates challenges for the OEMs.

If we go back to that mantra that we want to help them go to production as fast as possible, if we don't have our act together on the PCB fab side, that creates a challenge as well.

Matties: Can you define what it means when you say you want to be recognized as the leader?

Waters: It's to be the first call, and not just the first call for that unmet new product need of "We need to do some new kind of performance level or capability for a high-speed back-plane."  It's also on the volume side when they say, "We want to ramp this thing up to volume production over in China. We need competitive costs. We need good service. We need good technical support." We want to be the ones that they call and not just the North American or European guys, but also the Asian players as well. It's really getting that first call. Getting the first call means a lot of things, but I would say most importantly it means that they've called you before and they liked the response that they got so they want to call you back again.

The other critical piece is around manufacturing strategy, and I think there’s a big play for us there, too. We've got a network where we've got factories on the West and East Coasts of the U.S. We've got a factory over in Germany. We've got factories in China and Taiwan. We've got one in Singapore. If we can optimize that manufacturing strategy, there's a lot that we can do. Really, the galvanizing vision there is that we want to make it so that any one of our customers can get product where they want it, when they want it, and get the full breadth of what we do as quickly as possible.

If you're a North American customer and you need full access for every permutation of 370HR, we can get it to you in 4 to 96 hours. If you're more cost-driven and can forecast your business and are fine with Asian material, we're going to ship our product over in containers just like a lot of our Asian competitors do, so we can get you lower cost. We can meet your needs that way, and are positioned to do that from a service model perspective.

When it gets over to Asia, going back to the earlier point, we don't want to lose the business when the PCB shop or the OEM needs to ramp to high volume. "Well, no, we can't use Isola any longer. They're not cost competitive." There's a lot that we're doing there to make ourselves more cost competitive. We're taking a lot of cost out of our production systems. We're taking a lot of cost out of our supply chain. We're getting more cost competitive so even when it comes to pricing we can work with our Asian suppliers.

Matties: You probably had to do that—you had no choice.

Waters: No choice at all.

Matties: How has that transition been? Have you reduced the manufacturing cost levels as anticipated when you first set out?

Waters: It's a work in progress. It's a promising start. We've always had cost reductions. I don't want to make it seem like we were sitting on our hands historically.

Matties: Companies tend to improve but then there are pricing pressures they have to deal with.

Waters: Yes, so I'd say we're getting there. We are pricing ourselves now more toward the market, which is creating a good impetus for change, because we're now potentially getting into some business that's not as high of a margin as it used to be. We're going back to our operations guys and saying, "Okay, you need to make this more profitable." Necessity is a great driver of invention.

We've definitely got the right team in place to get there. Matt LaRont, who we talked about earlier, is a guy who's been around the block a couple of hundred times in the laminate world. We're also bringing in people from the PCB shop world like Steve Lach, who was with Via for many years. He's now running our plant down in Chandler, Arizona. He's approaching it more from the customer perspective and that's also helping us both from a cost and service model.

Matties: What's your typical day like? Are you focused on operations? Marketing?

Waters: To be honest, it pretty much runs the whole gamut. I would say there are days where's it's all about getting out into the customer base. There are days where it's much more internally focused, things around execution. A lot of what we're doing in execution is driving across multiple different tracks at the same time. We've got activities going on in product development, activities going on in manufacturing, a lot of activities on the sales side, so there's a lot there that I need to be working on with the team to make sure it all hangs together.

I would say another big chunk of my time is really spent on the culture of the company—spending time talking with the employees, learning from our employees on what things are working and aren't working, but also helping to reinforce to them the vision of where we're taking the company and what we need from them to help us get there.

Matties: We talked about the culture when you first started eight months ago. Has that shifted the way you thought it would? Are people responding the way you had hoped?

Waters: I would say no to the first question and yes to the second question. I had my concerns. We’re a company that's been around for a long time. We had a pretty established culture and a lot of employees with a lot of tenure. The expectation typically is that it's going to be hard to move the aircraft carrier. I've been very enthused by how receptive and how embracing people are of change. It's true in North America. It's true over in Asia. It's true over in Europe.

We brought roughly the top 100 people in the company together in Taiwan a couple of months ago. It was really around helping to better refine the vision that we had, to better refine the strategy that we had, and to really roll out a lot of these execution plans. The level of engagement that we saw was profound, and we were there long enough so you could tell if people were just putting on a good show because the CEO was walking around (laughs). People are very, very committed to the change. They were ready.

Matties: The emotional content gets so high that they're just ready for something different. It seems like you guys were probably right in that area.

Waters: Yeah, and I'd be lying if I said it wasn't putting some stress on the organization because we're asking for a lot of change. We're not doing it in serial because we can't. If we fix new product development but we don't get our cost in order or we don't get our sales picked up, we're going to be sucking wind on revenue between now and when the new products come into revenue. If we maximize our sales effort but we don't get our cost in line, we're not going to be competitive in the marketplace.

Matties: It’s a lot of parallel paths and they don't all move at the same speed, either. From a leadership point of view, that's probably the most frustrating, right?

Waters: It is, which gets back to why I spend a fair amount of time focused on these. Obviously, my staff is playing a key role in this but it's keeping track of all these things and seeing how they're interplaying, seeing where we need to put more juice into certain vectors to help speed them up. There may be certain areas where it's not as important as we thought it was when we started, so maybe scaling back a little bit there and just trying to keep things in balance.

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