Nvidia is now worth about three trillion US dollars, making it the second most valuable public company in the world. By establishing leadership in AI technology chips, Nvidia is in a unique industry position for growth and profitability.
This accomplishment, under the leadership of Jensen Huang, the firm’s CEO and co-founder, ranks him among the historic entrepreneurs who pioneered major new industrial sectors.
How this success was achieved is discussed in a new book by Tae Kim, a writer for Barron’s, entitled “The Nvidia Way.” As he tells it, the company’s extraordinary success is the result of brilliant technology execution, excellent timing in new product strategy and ultra-fast scaling to meet market needs.
Underlying Nvidia’s success is a unique, unconventional management method developed by Huang that involves practices generally deemed to be impractical.
“If Nvidia had not evolved from its early, more conventional form, it would not have survived even with Jensen in charge. But the organization dynamic he eventually created—one that represents the exact opposite of the ‘best practices’ in most of the rest of corporate America–has made it possible for the company to withstand and thrive amid the pressures of an externally unforgiving market.”
Huang’s organization addressed a big problem of technology companies: identifying important market developments early and responding rapidly with corporate developments to prevent becoming obsolete.
Bureaucracy grows along with company size. As companies grow organized in conventional hierarchies, senior leaders become increasingly isolated from day-to-day developments in their markets.
With layers of management required for strategic decisions grows an appetite for low-risk investments. Furthermore, overlapping internal committees slow the process of the timely decision-making needed to avoid ultimate failure. The technology world moves ever faster.
Early on, Nvidia went through a period of conventional management structure and nearly failed. Huang decided to streamline the company’s management and make it rapidly responsive to market needs. To that end, he needed to organize something radically different built around his personal skills.
Huang thus organized the company to avoid the lag between market needs and response by a flat management structure and his personal involvement in the daily corporate activities he deemed relevant to making timely decisions.
His intent was the most rapid response possible. He accomplished that by an established flow of daily interactive e-mails from as many as 60 key staff members that kept him updated as quickly as possible on competitive and product developments. In effect, he used these emails to communicate and manage a reporting group of many senior managers.
Huang strives to eliminate the delay in decision-making between himself and this team by in-person large group meetings that focus on problem-solving using whiteboards to present and discuss problems and solutions.
Significantly, PowerPoint materials are not used. The focus is on current problems and needed creative actions to solve them by the company’s leadership.
At the end of such meetings, Huang offers his conclusions regarding actions to be taken by the company. Such meetings set or reset strategic actions with key staff involved and briefed.
Having been personally involved in technology company management, it is clear that Huang’s organization is a personal structure. However, it does highlight the importance of ever more efficient strategic decision-making for success, which needs to be the goal of every company.
He has certainly shown one way to eliminate bureaucratic smothering of innovation.
Henry Kressel is a technologist, inventor and author with extensive experience in technology development and corporate management. He is also a long-term private equity investor in technology companies.
