Unexpected Lessons from Dave Hitz
by Debra Black
Dave Hitz concedes that NetApp is not a household name, although some of its clients certainly are: Southwest Airlines, Yahoo, Oracle.
"We sell enormous boxes of storage to giant companies for databases, employee records, customer transactions, product schematics. All of the special effects for Avatar are stored on our equipment. You have to imagine this room times 10, full of boxes the size of a refrigerator," says Hitz, co-founder and executive vice president of NetApp.
On October 27, Hitz spoke to members of the Retail Consortium for Management Education on "How to Castrate a Bull: Unexpected Lessons on Risk, Growth, and Success in Business." His book by the same name tells the story of NetApp and how the company went from a small startup to a multibillion dollar company selling to other multibillion dollar companies.
NetApp was ranked No. 1 on Fortune magazine's "Best Companies to Work For" list in 2009. "How does that happen? I don't think it's an accident," says Hitz. For RCME members, he focused on organizational culture, surviving the economic downturn, and his personal transformation becoming an executive.
The first time Hitz heard about company values, he was skeptical. "We had just hired a new CEO. We were going to figure out how to make this company survive. He announced that one of his top goals was to make a list of company values. I wasn't sure what it meant for a company to have values. I thought it was personal; something I should choose for myself. How does a company choose my values for me?"
Then he learned that the CEO meant values in the sense of how people should act at work. "Once I figured out what he was talking about, it made sense for a company to say, here's some ways we wish people would behave at work. It was completely fair."
The first lesson he learned about company values was candor, meaning that what you say in a meeting is what you say out of a meeting. Another of NetApps' values is teamwork. "The idea of synergy and teams working together is very much a choice. You see different industries will make different choices. We have a saying: No prima donnas," he says.
The NetApp value to "go beyond" means it's better to work very hard and set a high bar that you can't quite hit all that often, than to set a low bar that you almost always get.
"And that's a real cultural choice. We want to set very high, very audacious goals. We'll stretch. We'll do more than we would have with that safe, conservative goal. But you better build into your culture a certain amount of forgiveness. For someone who went out on a crazy, audacious mission and didn't achieve it, you can't fire them!"
Values are not always easy to uphold. Hitz related a story where NetApp told the truth to a customer about how long it would take to develop a new feature, and lost the business. It turned out the overpromising competitor failed to deliver. Values are often about long-term success instead of short-term success, and riding that balance.
"We asked ourselves, is our goal to develop cool technology, sell some of it, and then get bought? Or are we trying to build a company? We did want to build a company. So then we had to decide, what are some ways we need to operate in order to make this more likely?" says Hitz.
"Culture is enormously valuable. The culture of a company, the common beliefs, the ways that people have a habit of behaving, the ways that they interact both with each other inside the company and with people outside—customers and partners—those are an enormously important part of what drives the long-term success of a company."
Surviving the Downturn
NetApp was a high-growth, Silicon Valley company in the middle of the dot-com boom when its stock crashed from $150 to $6. Nearly all of its customers during that period were Internet or high-tech companies, and most of them went out of business. How did NetApp survive?
"The dot-com crash was narrow and very sharp. It was like falling off a cliff. Most people on the outside didn't care about it. Whereas the recession we're in now, the economists hadn't even called it until we were in it for nine months. It was more like the air seeping out of the tires everywhere," says Hitz.
NetApp survived by using the first downturn as an opportunity to fundamentally change the kind of company it was.
"Our goal was to branch out. As we started the transformation from selling high-tech stuff to high-tech people to selling in the enterprise space, we had a big cultural transition to go through as a company. Trying to sell refrigerators full of disk drives to these enterprise guys—banks, airlines—was a completely different style of interaction. We had to change the way we interacted with customers. We had to hire people out of their own industry in order to help them solve their problems," says Hitz.
NetApp fundamentally transformed itself from 70 percent high-tech and Internet/30 percent enterprise to 70 percent enterprise/30 percent high-tech and Internet.
"Economic downturns are very painful….and they certainly kill companies. If you're in the right situation, it can be an opportunity to do some fundamental change. Especially if it's something that you already sense you need to do, it can be an opportunity to accelerate. If there's some little silver lining, maybe this is it."
Starting in 1999, Hitz rocketed from being a programmer who developed storage appliances to an evangelist going on sales calls to being the vice president of engineering at NetApp. He had never managed anyone, and then suddenly he had a staff of 250 people reporting to him.
Hitz had three out of four requirements for the job: he understood the technology because he had invented it, he understood the market and the types of problems customers were trying to solve, and he fit the culture. What he didn't have was management experience. His CEO told him, "You've got three out of four, and I don't figure I can find anyone externally whose got three out of four, so your odds are as good as anybody else. If you can't pull off the management part, I might have to fire you, but that's a risk I'm willing to take."
Hitz says his first lesson was to whine as accurately as possible to get things done. "As I was honing this technique of accurate whining, I had an epiphany one day: whining is the evil twin of vision. When you are whining, you are describing as accurately as you can what you don't like that you wish would change. With vision, you're describing as accurately as you can how you wish the world would be if it were changed. In a sense, they're mirror images of each other, but the perspective is different. One is a positive, hopeful, future-will-be-better kind of thing and the other is everything-is-broken-and-I-hate-it-all.
"The lesson is, anytime I'm in a whiny mood, I try and use that as an opportunity to ask myself, "Is there a flip side vision that could capture the same thing I'm whining about, but in a more motivational way?"
Hitz left RCME participants with one last piece of advice, saying there are many similarities in business to being on a ranch, in terms of the experiences one is faced with.
"I worked for a couple of years on a cattle ranch. There you are, in the middle of nowhere, and the truck stops working. You have no clue how to fix it and there's nobody there who does. You open it up and you start poking around.
"And I think that's an amazingly invaluable lesson in business. Anybody in a management role regularly encounters things they don't know how to do. If you look at a downturn period like this, nobody knows how to deal with this. So how do you deal with it? I think the answer is you just roll up your sleeves and you do it.
"But there is a subtlety to it. There are certain things that are especially more dangerous than others. If you can't get the person who's an expert to do it for you, at least maybe you can get tips from them. So on page 169 I actually do give instructions on how to castrate a bull."