Face to Face with Dave Hitz

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US Edition | March 2009 | March 2009 www.execdigital.com

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Dave Hitz:

Castrating Bulls and Unexpected Life Lessons

Exec Digital’s Exclusive interview with Dave Hitz, founder of NetApp®, named Fortune Magazine’s 2009 Best Company to Work For Written by Dean Tsouvalas

I

n today’s nose-diving economy it’s rare to find a beacon of hope. But such is the case with Dave Hitz. Dave is a Web visionary who scratched out his business plan on a napkin then proceeded to grow that company, NetApp®, to over $2.8 billion in revenue. I was so filled with hope by his new book, How To Castrate a Bull: Unexpected Lessons on Risk, Growth and Success in Business and our hour long interview, that I found myself sharing his story with friends over drinks, at a kid’s birthday party, and with my colleagues at Exec Digital.

By sharing his book with you - which is part autobiography, part corporate history, part guidebook for entrepreneurs, and part business management manual - I hope to ignite a little spark of optimism in you as well.

Although, Dave Hitz didn’t set out to become a Silicon Valley icon, a business visionary or even a billionaire, but he became all three, co-founding March 2009 | www.execdigital.com

NetApp® in 1992 with James Lau, Michael Malcolm and a plan to “simplify data storage the way Cisco simplified networking.”

High school dropout

It began when Dave, a precocious 14-year-old, built his first computer from a little build-it-yourself mail-order kit, “At that time you couldn’t even buy a finished computer.” According to Dave his mom wasn’t so sure about his activities. “She thought that it was the dweebiest thing you could imagine and that it didn’t make any sense as a career.” And so he absorbed his first business lesson - which was not to listen to his mother - and persisted in his endeavors.

He began taking high school classes in the morning and college classes in the afternoon at nearby George Washington University. This mix of college and high school worked perfectly until his high school principal told him that he needed

Face to face with... | 3

Dave Hitz

Web visionary, Dave Hitz, sketched out his business plan on a cocktail napkin, and has successfully grown his vision to $2.8 billion in revenue another year of high school math to graduate.

Despite Dave’s three semesters of college calculus, the principal suggested pre-calculus, the most advanced math class available at the high school.

So, despite being told by the principal that he’d never be successful without a high school diploma, Dave dropped out of high school to attend college full time. Eventually he transferred to Deep Springs College, a two-year liberal arts school located on a cattle ranch and alfalfa farm in California’s high desert. The school had three hundred head of cattle and twenty-six students who worked the ranch when not studying.

Bulls’ balls & Silicon Valley

Following his time at Deep Springs, Dave took a break from college and spent the next two summers as a paid cowboy, where he had to castrate a bull. “Castrating a bull is a metaphor for taking risks that you wouldn’t have imagined were possible.

Here’s a life hint for you. If you are ever in a situation where some guy points over the fence and says there’s a bull over there, weighs about 600 pounds, jump over the fence and cut off its balls, I’d recommend you get some lessons first.”

Years later, these lessons assumed a new relevance for him in Silicon Valley. While working at several start-up companies, Dave was struck by the attitude of certain successful people who displayed the same kind of roll-up-your-sleevesfind-someone-who-can-provide-some- hints-and –do-the-best –you-can entrepreneurial spirit that he found on the ranch. “I think that Corporate America could learn a lot from being in the middle of nowhere on a cattle ranch where you just have to get stuff done.”

After the summers on the cattle ranch (and selling his blood for cash to get by, much to the horror of his folks), Dave went to Princeton to study computer science. www.execdigital.com | March 2009

Dave Hitz’s After graduating Founder of from Princeton, Dave NetApp® Hitz moved to Silicon Valley and eventually co-founded NetApp® with the intention to create a new product category, dominate its market, and double revenue every year for five years to hit $1 billion in sales. And, for the most part, he accomplished those goals.

Then the dot com bust of 2000 hit

and NetApp®’s stock fell from $150 to less than $6. “We had designed NetApp® for growth, and when the growth stopped, everything broke.” He says the company survived the crash because it had diversified its customer base, adding banks, telcos and other enterprises, including the federal government, to the dotcom and tech companies that had provided the bulk of the company’s early revenues.

Best in America

On the way to its spectacular growth, NetApp® built an extraordinary corporate culture so cutting edge that it was named the “Number One Best Company to Work For” by Fortune Magazine this year, based on a survey of more than 81,000 employees

Jeff Bezos, the founder of Amazon.com was Dave Hitz’ roommate for a year at Princeton.

The president of Princeton told Hitz that they were examining the room they shared for the “secret to entrepreneurial success.”

Photo source: The Wall Street Journal

March 2009 | www.execdigital.com

Face to face with... | 5

Dave Hitz from 353 companies - a culture that includes paid days off for employee volunteer work in the community.

And while the turbulent economy has forced NetApp® to pare back on some employee perks, Dave says the things he believes his employees’ really care about have not changed.

“People want to be proud of their work,” he says. “It’s important to be in a work environment where you like the folks you work with. It’s important to be in a place where you trust the leadership.” An indication of this attitude of two-way trust can be seen in NetApp®’s official travel policy which reads, simply, “Use your common sense.”

By the way, the Fortune ranking is not a one-year fluke, because NetApp® has been on the bestcompany-to-work-for list for six years running, and in the top 15 for three consecutive years. (Before NetApp® seized the top ranking, Google had held first place for the past two years).

When I asked him how NetApp® came to have such a great culture, he pointed to Dan Warmenhoven who first joined the company as CEO 15 years ago. “Dan made [imbuing a great culture] his mission. I think he not only felt that building a company that is a good place for its employees was the morally right thing to do, but it would also be good for business.”

“If you have employees who are proud of the work they do, and enjoy it, and customers and partners who

trust and rely on you as a company, [then you have] an excellent foundation for success.” He added that the company had $40 million per year in revenue when Dan joined, and now has well over $3 billion, “so I think that Dan was onto something.”

While building NetApp®, he and the other members of the leadership team often had to do things for which they had no experience and, as a result, often did them in an unusual fashion (witness the official travel policy). He says he got a “street MBA” just from surviving at the top of a fastgrowing tech company.

Good enough, considering

Dave Hitz’s new bestseller How To Castrate a Bull: Unexpected Lessons on Risk, Growth and Success in Business.

It was this experience that has formed his view on the current economic downturn—a view that can be summed up with the phrase: “Good enough, considering.”

“A downturn creates opportunity. You shouldn’t just hunker down and not think about strategy or change. People spend money when they have pain. Of course they also have to have money, but if you just think about customers - customers in general, especially business customers - they don’t spend money just for fun, they spend money because they have some problem.

When you think about economic downturns, everybody’s got way more problems than they used to.”

He adds that in a downturn it’s good to ask if there is a cheaper way of doing things that previously, without the economic pressures, didn’t feel good enough. In other words, is it time to reevaluate requirements? To illustrate his point he says, “If you look at the Christmas spending, who was the vendor whose [sales] went up during Christmas? Walmart! [Guys say] ‘I’m gonna go buy a great gift for my wife, where will I start?’

Very few people three years ago would have said, ‘You know, www.execdigital.com | March 2009

Walmart’s the place I’m gonna get her that special were important. “When I was on a cattle ranch, I gift.’ [But this past year] that’s where they went.” was there, taking care of meat, food, something you could eat. There was no confusion in my mind about Connecting with the intangible how I [was] useful in the world. It was very concrete, But for all his success, Dave felt confused about his and that experience has caused me to ask [about] personal satisfaction and connection to people and the work that I am doing now: How do I get to any the product. He asked himself, “What am I doing kind of linkage to something that matters?” for anybody?” He felt removed from things that “We store enormous amounts of data for big

“ If you have employees who are proud of the work they do, and enjoy it, and customers and partners who trust and rely on you as a company, [then you have] an excellent foundation for success” - Dave Hitz, Founder of NetApp®, Author

March 2009 | www.execdigital.com

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Dave Hitz

Dave’s most recent decadent purchase was a Tesla the all-electric roadster that can go 0-60 mph in under 4 seconds. photo source: Tesla Motors, Inc. companies. All of Yahoo!’s E-mails are stored on NetApp®. All of the special effects for ‘Lord of the Rings’ were stored on NetApp®. So we sell boxes of disk drives to companies that need lots of storage. But when you start to ask, ‘What’s the data stored on these things?’ it could be pictures of people’s baby photos or it could be the love letter someone wrote to a spouse. And how would they feel if that stuff got lost?”

Dave doesn’t pretend that this rises to the level of saving the world, but he strongly believes that leaders should ask themselves why their employees show up at work.

“They need money, they need to feed their kids, but if you can’t get them to a higher place than that, then I think you are losing an opportunity to be more engaged with a motivated group of people who are literally trying to have a better time with their lives. If you can pull that off, I think that’s a really good thing.”

Power of email

We also discussed the way email can enable a CEO to stay connected with employees. “I think e-mail is an especially valuable tool.” He feels it helps him connect on a personal level with the 8,000 people in his company. “If I send a message to all 8,000 people, I might get 50 responses, but I can reply to those folks [directly and personally]. It’s a way to reach them closer.”

At the conclusion of our interview, Dave paraphrased Tom Georgens, the COO of NetApp®: ‘‘If you want to be good at something, you have to measure yourself, and compare yourself against the very best. This is how you improve.”

To Dave, that constant effort to improve and to stay healthy as a company and a culture is more important than garnering, in any one year, the designation of number-one-best-company-to-work-for. www.execdigital.com | March 2009

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