Shawn Flynn  01:29

So, John, you’ve been a part of the evolution of Silicon Valley. Could you take our listeners on a journey of your time here and what has changed from the beginning to now?

John McNulty  01:38

First time I saw Silicon Valley, it was in 1970. And that was on a visit as part of the merger of Honeywell Information Systems and General Electric Information Systems. And probably most of the people who are listening to this never knew that those two companies were in the computer business. Honeywell was the number two company in the computer business and 1970, behind IBM. When I came to Silicon Valley, it was probably one-100th of the size now relative to office space, or maybe one-500th of the space. It’s mostly fruit orchards, from Gilroy to almost Palo Alto. Amazing, amazing change over the last 40 years, if you will. I moved to the Bay Area in 1975— VP, Sales Manager for Honeywell Information Systems in Northern California. I started to really see the change. I wasn’t smart enough to take advantage of it and buy property. Some of those orchards in Sunnyvale and San Jose, and the like. It was starting to accelerate at that point. And the changes between then and now have been truly staggering— the infrastructure that has been in place really since the late 70s and 80s, to support and foster the startup community in innovation and great ideas, spring up. And looking back, it all happened very, very quickly and continued to evolve.

John McNulty  03:08

I think back, it was a progression that was impacted also by the technology changes that we saw from monstrous mainframes in the 70s to mini computers, and then the personal computer, mobile devices, and what we have today. Everybody’s walking around with a smartphone in their pocket that has, in orders of magnitude, more computing power than the computers, or the biggest computers of the 70s. When you think about that, it’s fascinating to project because Moore’s Law has held pretty constant, since Gordon Moore first postulated it until today.

 

John McNulty  03:47

There was a saying at Intel about computing and where it was going, that bits, bytes and, boards would be free. And if you think about what you might want to do, if you think about that aspect being effectively free. So millions of instructions per second, and transmission speeds that we have today, and storage being effectively free.

Shawn Flynn  04:12

What were some of the companies that you either worked for or ran? Talk about kind of your journey.

John McNulty  04:18

My first job was 13 years and nine months spent at Honeywell Information Systems, starting on the East Coast, and ending up after my stint in San Francisco and Northern California, in Phoenix, where I was responsible for large systems marketing worldwide. I went from Honeywell to Intel and with no disrespect to Honeywell, I learned more about running a business and my view of how a business should be run and driven to move forward at any one year I spent at Intel, than the entire time I spent at Honeywell. And it was you know, the difference between an East Coast, Midwest company in mainframes and a startup in Silicon Valley, which Intel was in the 70s. I went to work for Intel in 1979. And that was a four-year stint. I left Intel for 10 years, and then went back in 1993 for another four years. The thing that I learned from Intel, in both sense, was not only the way to run a business, but a culture and a process that scaled.

John McNulty  05:23

When I first went to Intel in 79, as I recall, it was about a $200-$250 million company. When I left four years later, it was $800 million. When I went back in 1993, it was a billion. And in 1997, when I left, it was $20 billion a year. The incredible thing about that time span was the culture that I walked into in day one in 1979 was the same culture that the company was using, and to not only manage the business, but manage their people and drive the business, unchanged from 79 to 97. I think it was a key to success. It’s the only culture that I’ve ever seen in the industry that scaled. A lot of companies run into trouble as they grow. The management challenge of running a company at $50 million is very different from running it at $250 million, which is very different than running it at a billion. But Intel was able to scale from a couple hundred million to $20 billion in the same processes, culture, disciplines, etc. And that, to me, really stuck. So that it was an incredibly valuable lesson of the, in my opinion, the importance of developing process and culture that is consistent and scalable.

Shawn Flynn  06:52

Now with this process still applied to today’s tech companies and the rapid growth that some of them are seeing, or is this more of a time dated lesson?

John McNulty  07:04

I personally believe that it absolutely applies. Now, culture is really I think about the value system of a company⁠— how it’s going to be measured, how goals will be set and measured, and how people will be evaluated. And that’s what boiled down to its base content was what Intel’s culture was. It was a way to manage the business, manage the people, and establish expectations. We use the MBO process, Management by Objective, measurements being key results on each of the objectives. And it just was easy to say you either accomplish something or you didn’t. You were successful or you weren’t.

Shawn Flynn  07:47

Can you go into even more detail about this culture that was at Intel?

John McNulty  07:53

The thing when I left the first time in 1983, I went into a situation where it was going to be a very rapid growth of information processing, business word processing, and the like in 1983 to 1945. We were hiring a huge amount of people. Well, huge, relatively speaking, in the company, because we went from basically almost zero revenue to over 100 million a year, in two years. And it was labor-intensive. So we were hiring salespeople, running a class, a two week class once a month for salespeople, hiring maybe 16 to 20 sales people. In each class, we were hiring, obviously a lot of software engineers and the support for them.

John McNulty  08:36

And we established what I called the CONCEPT of culture. CONCEPT was the acronym we used to explain at a top level what our value system was to people coming into the company. And obviously, I started explaining it beforehand to the team, before we got good enough at it to then start this process. CONCEPT was an acronym. And I always said, you know, CONCEPT. It starts with the P and the T. “People” is what the P stands for, and “teamwork,” or “team,” is what the T stands for. The first C is “commitment,” the O is “ownership.” So we would talk to people and this is something direct out of the Intel Bible, if you will. And Dr. Andy Grove would say, John, you own this. That means you’re the owner, you’re going to be held accountable. And everybody else understood you are the owner. So when you ask for something for that project, they knew that you were the guy whose feet was being held to the fire and they had to support you. 

So ownership. The N was… I had the letters on a sheet of paper, and I can’t even remember who… It was all but the N. And I was staring at it. And somebody walked into my office and was trying to develop this. And this guy says, “You know, if you add an N, you could spell concept.” And I said, “Concept, the concept of culture.” He said, “Well, what would the N stand for?” And I had a do-it-now cube by my paper holder on my desk. IBM had a lot of trash and trinkets on the desktop. I can’t remember who put the do-it-now cube there. But I had invented it, if you will, that little cube at Intel. Now, N stands for “Now.” So CON is “Now.” The second C is commitment. You know, commitment means if you’re the owner, if you’re part of the team, you’re going to get it done. You’re not going to make commitments you can’t, to a reasonable degree of certainty, deliver on and you’re going to do everything in your power to deliver the results that are expected. So we got CONC, and E is “excellence.” And I think that’s something that winners compete with themselves. You keep getting better, you strive for excellence. And that was something that I thought was really important.

Shawn Flynn  10:50

After Intel, could you talk about your next new venture?

John McNulty  10:55

When I left Intel the first time in 83, I went to a company. The company is called CCI. It was based in Rochester, New York. They had about 95% of the 911 business worldwide. It wasn’t 911 in other countries, you know, but for your information, but they had that business around the world. It was an amazingly successful company. They saw that AT&T was likely going to suffer or be broken up. The Baby Bells were the result of that vision, not CCI caused that to happen. But they were planning for it and they thought they needed some other business that could grow. And that business was word processing. Wang was the leader in word processing. CCI started and had bought a small company. I was offered the opportunity to take that small company as a project. And let’s see how fast we could grow it. We grew it from zero to $100 million dollar plus run rate a year. It was quite successful, a great word processing product. Sadly, we wanted to pull off a merger, the merger never happened. And some changes caused me to go to another job.

John McNulty  12:06

And I became the President and CEO of ISI Integrated Solutions, Inc. here in San Jose. Integrated Solutions built very high performance workstations. That company we sold and it was on 85. We went in and we sold it in 87 to a competitor. I then went to not a pure raw startup but close to a raw startup to be the CEO and tried to grow that into something big. And we did a pretty good job. We were a little bit before our time, that was Rose Communication Systems. We were using the unlicensed spectrum, to build a wireless PBX for offices. 

While at work, there was a great lesson learned. And the lesson learned was phone systems were installed in offices at cost almost, in those days. The phone companies that installed the office systems made their money from what moves, adds, and changes, which were very expensive, and very profitable. With a wireless system, you will eliminate moves, adds, and changes. So it was great for the customer, but not very great for the people that had all the connections, the distribution channel, if you will, that we need to rely on. They weren’t too interested in eliminating moves, adds and changes. We sold that company to Allen Telecom and some of the product is still in use. It wound up being utilized for communication systems, more than anything, else on islands in the Philippines. That was used to connect islands to the main network by Allen Telecom who did point-to-point high transmission systems. So suddenly, the villages had a phone system. And it was all connected to the rest of the world.

John McNulty  13:50

So interesting, the way things evolve. ISI and Rose, almost 10 years away. And I went back to Intel and had another great four year run. The job there was to, in 1993, if you go back and look at the history of the microprocessor world, if you will, the electronic news and computer world had headlines like the PowerPC Consortium, about to put the toy on the desktop. The toy on the desktop was Intel in its place. Because the PowerPC consortium was Motorola, making the chip. Apple having the desktop computing, and IBM utilizing that same component in servers. So this was a real threat to Intel. At the time in 1993, Intel had probably 80% or more of file and print servers in the enterprise computing world and about three to 4% of application servers. My job that I was charged with, along with you know a bunch of other people, what we wanted to happen was to have an enterprise server market share, like we had file and print servers, and not allowed the PowerPC Consortium to dominate. And I can tell you four years later, we had reached 75% of enterprise servers. It was a great success and a very profitable success for Intel.

Shawn Flynn  15:22

With all these different jobs and roles, did you experience any difference or have any tips about the right people to manage a company, their backgrounds?

John McNulty  15:33

You know, that’s a great question, Shawn. And I’m not sure that there’s any one particular answer. I mean, great techies have been very successful in managing businesses. I witnessed Andy Grove. Andy was you know, a PhD, and I guess it was chemistry, if I remember right. He certainly wasn’t a marketing and sales guy but he did an incredible job. I think it depends. People that have been wonderful salespeople have done great jobs managing companies. So I think, you know, there are two extremes there. CFOs have done great jobs managing companies and lawyers have too, but there’s not a lot of consistency, perhaps. I think it depends on the individual, you know, the skill set that the company needs. oYu know, the one thing that I believe is that TEAM is an acronym to me, and it’s “together, everyone achieves more.” You got to get people pulling in the same direction. And they got to care about the result, they got to have skin in the game. I love the Silicon Valley, I grew up with a culture of just about everybody having stock in the company. Some have more than others, you know, stock options. I think that gets everybody united around, “Hey, we’re all quote, shareholders.” You know, we need to really care about that. You got to have somebody that I think can make people understand that we’re in this together, we depend on each other, and we got to be pulling in the same direction, or else we’re not nearly as effective as we can be.

Shawn Flynn  17:00

Tell me more about this evolution of the startups in Silicon Valley. And what you’ve seen over this time.

John McNulty  17:07

I think it’s changed a little bit. In the sense, the speed at which things happen. With CCI to create a word processing… There had been, before CCI bought the first piece of software that started the company, and they had been working on that software for two or three years. And then CCI started to put a lot of energy, effort, and money into it.

Today, with the development environments for both hardware and software and networking that exist, things happen so much faster. And frankly, so much easier. We can do things, as a result that would have taken a decade, can be done in a year, maybe less. That’s been a huge change. I think the people involved in the venture side of things, initially, were very experienced people who had been there and done that, successful. And now they were going to use some of their riches and the riches of people that believed them, to invest in others. And they could provide, I think, some very valuable leadership, if you will, and guidance. I think the venture community has not as nearly as many of those guys that have been there and done that today, as they had in the 70s and 80s, and maybe even the early 90s… Today, I think there’s a lot more MBAs, smart folks, that really haven’t managed a company, met a payroll, been the leader of an organization. And I think that has been a major change. And it’s not to say that that’s wrong. It’s just different. You know, there was always mergers and acquisitions, and the like. I think today that occurs much faster, much quicker. And then sometimes with not nearly as much diligence as should be done, because some companies have so much money to deploy in, they can take risks that might have been unacceptable in prior times.

Shawn Flynn  19:06

So with that, are you saying there might be too much venture capitalist money now in the Valley?

John McNulty  19:11

You know, I don’t think there’s too much. But I think that there’s some of the corporate investments… I think that some of those are, “Let’s cover all the bases just in case,” rather than “This has got to work. And we’re going to invest because this is going to be a great success.”

Shawn Flynn  19:27

And then throughout your time, other than maybe the lack of experience, has the mindset changed at all?

John McNulty  19:34

I don’t think so. I think that everybody was and still is looking for success. They’ve always had in Silicon Valley a huge infrastructure of support that is unique to Silicon Valley: the universities, the venture community, the sheer numbers of startup companies, and people with startup experience, companies who are organized to do prototypes, design work, and lay out boards. So that’s made it a very special place. It’s also a place that has its challenges today, you know, with the cost of living builds an interesting challenge, I think, for people running companies. In May of 99, I took the job of a CEO, President-CEO of Secure Computing. It was a public company, it had gone public in 95, held the record for single most largest percentage of increase in day one of trading. You know, it was an internet darling in 1995. And in 99, it reached a point where it was in trouble with board members, Bob Flansburg. He was a very successful gentleman ran Novell as Chairman and CEO, was an executive VP at HP. He was on the board of Secure and he and I had known each other. And he reached out and I wound up the new CEO at Secure Computing.

John McNulty  20:52

The point about Secure Computing, Shawn, was that the company was pretty broken in 1999. It was doing about $20 million a year in product revenue, another eight to 10 in services. That was to a very specific market, the intelligence community and Department of Defense. I was taken right away by the quality of the technology team. It was incredibly competent and capable technology people. At that time, the company had moved its headquarters to San Jose, but 90% of the company was in Minneapolis, St. Paul, Minnesota. And that’s where all the talent was. To this day, I believe, I think I did a good job, but really good job of writing the chip, if you will, at Secure Computing, and taking broken $20 million company with $300 million run rate, nine years later, when we were acquired in 2008. But to this day, I believe 90% of those people had been in Silicon Valley instead of Minneapolis, St. Paul, nobody could have saved that. They would have been poached. 

Headhunters were camping out in the parking lots to poach people in 99 and 2000. And, you know, we had a whole lot of good people in Silicon Valley. We would have been under financial pressure, or even then, they would have succumbed to the siren song of a much bigger salary. The Midwest work ethic saved Secure Computing as much as I did. And I’m concerned that Silicon Valley is going to suffer. Now, the Googles, Facebooks, and LinkedIns of the world can afford to pay whatever they want for talent, but the smaller companies can’t. And I think that’s the biggest challenge that Silicon Valley faces today. The goose that laid the golden egg can’t get enough great people, because there’s too much pressure.

Shawn Flynn  22:46

So you’d mentioned that a lot of resources that are here in Silicon Valley, would you say that that’s kind of the main reason for all the success of the companies coming from Silicon Valley? Or possibly that there could be other things such as a community with classless judgment-free zone? That is pretty typical here, I’d say, versus many other places in the world where there’s so many immigrants, so many people from other cultures, and everyone seems relatively accepted here. How important is this? Or what are your thoughts on this?

John McNulty  23:19

I think it’s incredibly important. I mean, we’ve attracted talent to Silicon Valley, from all over the world. And it is classless I think, inside of the technical community. If somebody is a great whatever at their job, they’re respected. And we don’t have, at least I’m not aware of issues where tensions build up. That makes a difference. People are focused more on the prize in Silicon Valley than anything else. The prize being, you know, my stock options are going to be worth a lot of money and the guy that’s running the company, it’s going, hopefully, successfully, get everybody focused on the prize. And if we have got to deliver, and good things will happen. Don’t worry about the exactly what you’re going to make. Worry about delivering a great product, and good things will happen.

Shawn Flynn  24:06

How is being a CEO of a tech company now different than when you were in that role?

John McNulty  24:10

My last job ended in 2015 so it’s not that long ago, I don’t think it’s very different. It’s different today than it was when I first became a CEO. And my first CEO job was ISI. I think the biggest change is things happen faster. You have to perhaps be more aware of the issues in today’s world, so that you don’t fall into the trap of doing something that maybe in the 60s was considered just fine, and today is a no-no.

Shawn Flynn  24:45

And with all these roles, as well, many of the companies that you’re a part of were acquired, many people at home will never go through that. What is that like?

John McNulty  24:52

It’s bittersweet. The two most recent were Secure Computing and Interact Public Safety. Secure Computing was nine years. I knew everybody in that company by first name, and we had maybe 700 people. It’s bittersweet, because it is something that’s family, a feeling. That’s what I try and establish as part of that culture, teamwork, that people are first, respect for the individuals and helping them achieve what they want to achieve on an individual basis, and what we want to achieve collectively. So when it’s acquired and you’re no longer in charge, it’s like giving up your baby. That’s part of life to have your kids grow up, go to school, and move out, get married, and have their own kids. And I think it’s a little bit like the kids are no longer here. Empty nesters. So it’s a little bit of that for sure. When Interact Public safety was acquired, it was okay, well, we got this done. Finally, and, frankly, nobody made any money, including me. But we found a home for some very good technology and some very good people. And I felt good about that. Everyone’s a little bit different, I think.

Shawn Flynn  25:59

Were most of these mergers or acquisitions more pushed by the investors, or did you see that as the right path for the company?

 

John McNulty  26:07

In the case of Secure Computing, we were a public company, it was, if I remember the dates correctly, it was September of 2008, Bear Stearns just went under everybody. Stock got hit, we got that small tech companies got hit very badly. We lost more than half of our market cap between Lehman and Bear Stearns. And that downward slope in 2008, the whole economy was tattered. The company’s stock price was one hell of a bargain. And McAfee came in and said, “We want to offer you a 40% premium, all cash for the company.” Myself and no one else on the board wanted to sell the company. We felt like we had a company that was far, far, far more valuable than that. But we’d still be in court being sued, if we didn’t take the 40% premium, all-cash offer. There’s a whole lot of bitter and that sweet.

John McNulty  27:10

Rose Communications, we’d gotten to a point where enough had been invested. And we now clearly understood the problem that none of us understood when we started, the distribution channel. We didn’t want to distribute our product. So we had an incentive to sell it, because we didn’t have investors that wanted to put more money. Interact was a turnaround situation, we turned around and stabilized. But can learn about a market, and public safety market is very interesting, to my way of thinking, a very unique market because it is controlled by politics. Interact had more than a third of the counties in the US as customers. And there’s if I remember right, 3,165 counties in the US at that time. But we had, I think 1,300 and change counties as customers along with a number of large city-state contracts, the police contracts, and a number of states and all the rest. 

But that was a classic example of… I went into it saying, “Wow, this marketplace is so fragmented, and so much money is being spent on trying the service— the emergency management 911 system. It’s incredible.” And after I was in it a while and asked a lot of questions… From a technical standpoint, I had a presentation that I gave to a number of trade shows in that industry and said, “Look at the Cloud is, you know, the way we should be doing this, we could have three or four Cloud data centers in the country. We capture incredible amounts of information that’s being lost now, from a statistical standpoint, and what’s truly happening in the country. And it would cost three to 5% of what we’re spending today in all those counties.” It doesn’t make sense from a political standpoint because those counties, to use that as an example… Typically, the 911 center reports to a county sheriff. 98% of the sheriffs in this country are elected officials. And so the 911 centers have a whole lot of political appointees and people that knew the right people get a job. You don’t want to close, if I remember, right, there was almost 6,600 dispatch centers in the US. As soon as we started to understand the dynamics, we did put up some Clouds. We’ve very successfully put up a Cloud in the state of Maryland and another in the state of Indiana, which was quite successful for the Indiana State Police and other Indiana state organizations, and some counties. But trying to get states to cooperate was a challenge. Backed off of have three data centers or three Cloud centers in the country, to maybe we can get three or four states to cooperate in region. That’s a tall order. It isn’t going to get accomplished any time soon.

Shawn Flynn  30:05

John, you sit on several boards, what is it like to be on the board of a tech company?

John McNulty  30:11

I enjoy it. But it has its challenges. I think when you’re on the board, you have to respect the CEO, because he’s the captain of the ship, and you can’t tell him how to do his job unless he’s really screwing up. And we can offer suggestions, and be there as a sounding board. And I think that’s very important. The type of CEO who I think is most successful, is one that uses his board. And I believe this when I was a CEO, and I believe that today. If you use your board, you keep them informed, ask them for their buts and considerations of some of the problems you have to wrestle with, I think you’re going to be a whole lot more successful. A lot of CEOs listen and a lot don’t. And some will give, you know, pure lip service. But I think they’re lost when they’re not using their board. And if they don’t have a board that can contribute to them. That’s another problem that the board and the investors need to deal with.

Shawn Flynn  31:06

John, are there any organizations or groups that you are involved with? Or have a passion for that you’d like to mention a little bit to our audience?

John McNulty  31:19

Thanks for the question, Shawn, I have a tremendous respect, admiration, and love for our military organizations in the US. Things like Wounded Warriors, Gary Sinise’s, his effort to build housing for them, the USO. Those are things that, you know, I just get a thrill being able to be supportive of. And there’s lots and lots of great charities out there. I just think these people that protect us, and allow us to live the life we live, that allow Silicon Valley to exist, if you will, in relative peace and security, give so much, and they deserve our support and respect.

Shawn Flynn  31:58

John, thank you for taking the time today to be on Silicon Valley. And I’d also want to thank James Cape for making the introduction. And we look forward to having you in the future and continue the conversation about cyber security and what’s going on there that people around the world would love to know.

John McNulty  32:13

It’s been a pleasure. Thank you, Shawn. I appreciate it.

Outro  32:16

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