Alex Davern
CFO, COO, and Executive Vice President
National Instruments
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View from the Top

Building Blocks that Inspire Innovation

Wed, 01/25/2012 - 11:39

Q: How does National Instruments’ innovation philosophy set the company apart from other companies operating in the same domain?

A: National Instruments was founded by two men: Dr. James Truchard, who is a physicist with a Ph.D in Electrical Engineering, and Jeff Kodosky, who is a computer scientist. It is the marriage between hardware and software that creates our unique position in the industry. Our vision is to provide tools to promote productivity for scientists and engineers. We do this by abstracting the application needs of our customers into common themes that we call application platforms. This allows us to capture application patterns where we can identify commonalities and try to build a higher level representation so that they can leverage it in a multitude of industries. The fundamental difference between National Instruments components and the box solutions is that we try to unleash the innovativeness of engineers.

National Instruments’ vision would not come to life without the very extensive leveraging of commercial technology across three areas: processor technology, FPGAs and ADCs. Our goal is to work early in the development cycle with companies like Intel, AMD, ARM, Altera, ADI, and TI to help them tune their very powerful products a little bit. In this way, we can capture the mountain of R&D investment of these companies and repurpose their innovations for other applications. The truth is that 99% of the R&D required to deliver our solutions is actually done by other people. We take those raw elements of commercial technology and try to take them the extra mile, which the general purpose industry does not do. The secret of what we do is our ability to enable our customers to leverage that technology.

Q: How does the “taking technology one step further” approach work for your customers?

A: In my experience, all engineers innately want to build things. This gives us a strong advantage, because we allow people to do what they want to do. You have the old “nobody ever got fired for buying IBM” rule. Similarly, nobody ever got fired for buying a box solution from some of our box competitors. So how do we outmanoeuvre them? The truth is that the life-in-market of most of these box instruments is seven or eight years, and they take a couple of years to design. Generally when you buy box instruments, you are buying a processor that is at least five years old. So people end up buying redundant, obsolete technology that is sold in a relatively low volume at a fairly high price, and they are stuck with a computing platform that is not designed for upgrades.

We offer solutions based on components that are both modern and upgradable. LabVIEW was designed from the very beginning as a multi-threaded application that executes with very high effciency on multi-core, so you can speed up your system and leverage the latest technology without having to scrap everything else; you just replace one element. Our real advantage is that we disaggregate the application and then iterate on the individual components, separately, not as a monolithic thing. That allows us to bring out an almost infinite number of combinations and allows engineers to build exactly what they want. The real differentiation for us in the end is the combination of leveraging commercial technology in modular pieces that you iterate on individually, and which are integrated by LabVIEW software.

Q: While engineers may be very excited about your tools, they are often not the ones making the purchasing decision. How do you overcome this hurdle?

A: That is a real evolution of National Instruments as a company. For the first 20 years of the company’s history we sold almost exclusively at the individual engineer level. We put a huge focus on education, which is the biggest market for National Instruments and represents 12% of revenue. Over time, kids become college graduates, then become engineers, then become managers, then become directors, and then become VPs. Without a shadow of a doubt, the demographics are moving in our favour, especially since we have been around for 35 years. Also, younger engineers are a lot more comfortable with software-centric systems that they interact with and programme as opposed to older engineers. They use LabVIEW as a tool to develop successful projects, and carry their enthusiasm for our products with them as they get promoted. Time is on our side.