Derek Lidow '73 always two steps ahead of the pack


Distinguished Alumni a continuing series

Being first is nothing new for Derek Lidow '73. He entered Princeton to study electrical engineering as a member of the Class of '74, but he accelerated his program and graduated summa cum laude with the Class of '73.

"We never focused on pricing mechanisms or anything like that. We've always been a little bit of a maverick in that regard." -- Derek Lidow, president and chief executive officer, iSuppli

Mr. Lidow then went to Stanford University, where he was a Hertz Foundation Fellow. He graduated in only 10 quarters with his Ph.D. in applied physics at the age of 22.

"I knew what I wanted and what I was interested in," Mr. Lidow said. "I loved the work so much that it was just easy, and I took loads of courses. I took six courses a semester and still had loads of time for my research and my friends. I was also very anxious to get to graduate school and do my own research."

Today, Mr. Lidow is president and chief executive officer of iSuppli, a company he founded in 1999. Based in El Segundo, Calif., founding iSuppli was another first for Mr. Lidow.

He formed iSuppli partly out of frustration with the tremendous waste that characterizes the semiconductor industry, which is subject to huge boom or bust cycles determined by consumer demand. Before founding iSuppli, Mr. Lidow was chief executive officer of International Rectifier, a worldwide supplier of power semiconductors, where he had climbed through the ranks over his 22 years at the company.

"There were some important things missing in the semiconductor industry that I, as a CEO of a major semiconductor company, would love to have, but nobody was offering," he said.

So he left the security of International Rectifier and founded iSuppli to provide those management services to other CEOs in the semiconductor industry.

In his offices, located just minutes from Los Angeles International Airport, Mr. Lidow explained that the semiconductor industry ran on management and business paradigms that were created 40 or 50 years ago and were drastically deficient for a trillion-dollar industry where demand frequently changes overnight. The outdated supply chain model was inefficient, ineffective, and costly.

"In this industry, you don't want to build it until the morning you have to ship it," he said. But, following the outdated management and business paradigms meant that products were actually manufactured up to nine months prior to being purchased by the consumer.

That method of doing business resulted in tremendous waste in the semiconductor industry, which is the second-largest manufacturing industry in the world. During the boom cycles manufacturers had to build new, expensive factories to meet an insatiable demand, only to find that by the time the products were through the manufacturing process, consumers were no longer interested. By the time demand increased again, the technology was out-of-date.

"Tremendous waste is caused by this management system," Mr. Lidow said. "We are talking about 10s and 10s of billions of dollars of components. Semiconductors that were made wind up getting thrown out during these lulls. They will never be used. Literally, they become landfill."

How can a manufacturer that works in an industry as rapidly changing as semiconductors anticipate demand nine months in advance? The challenge is not the pricing of the components; rather it's doing a better job of buying the components you need when you need them and reducing that nine-month production cycle. That's where iSuppli comes in.

"We focus on the supply chain aspect of linking two companies," Mr. Lidow said. "We don't worry about price setting. We focus on how to save millions and millions of dollars by planning and forecasting differently. We help our clients reliably get components at the very last possible moment. iSuppli addresses the issues of waste that are inherent in how we do business in the electronics industry."

iSuppli helps manufacturers figure out what parts are needed on the assembly line tomorrow--and how to get them there.

"Manufacturers spend millions and millions of dollars a month just trying to keep up with the changing demand," Mr. Lidow said. "That's where mistakes are made that result in billions and billions of dollars going to the landfill."

Although iSuppli's strategic philosophy was a first in the semiconductor industry, it is now the industry standard.

Leading-edge companies such as Dell, Gateway, Apple, and others now follow that model and manufacture computers on demand. No longer are they built, shipped, and stocked for months before purchase.

The current downturn in the high-tech industry has meant good business for iSuppli.

"In 1999 it was boom times and we were cautioning people that costly mistakes could be made that would have to be written off when things turned down," he recalled. "We helped our early clients make sure they didn't make those mistakes, so when the market turned down and our clients had great performance, there was a swell of interest in what we do."

Industry watchers are taking note of iSuppli. The company was named to Forbes.com's "First Annual Best of the Web: B2B Guide" in 2000 and one of the top 25 companies to watch by Cahners Supply Chain/OEM Group in 2002.

Mr. Lidow credits his Princeton engineering education with teaching him to think independently; to identify problems, and to analyze issues beyond the obvious solutions.

"Princeton has a philosophical tradition of challenging its students," he said. "That generates independent thinkers. And these independent thinkers are able to apply their common sense and knowledge to almost any situation."

His Princeton engineering education also played a significant role in his personal life by being indirectly responsible for his meeting Diana, his future wife.

He recalled that he was in Princeton for an electrical engineering advisory council meeting that ran long. His plans included visiting friends in New York City, but the lengthy meeting caused him to miss the train. He had to take the bus instead.

"While I was waiting for the bus, a very, very beautiful young lady came up and asked me when the bus was expected to arrive," he said. "I told her and she left. She came back just before the bus arrived."

Mr. Lidow seized the moment and sat next to Diana on the bus. She was a student at Douglass College, Rutgers University and had been in Princeton doing research for one of her professors who lived in Princeton.

"As she was getting off the bus in New Brunswick, I stood up and yelled over the entire bus to meet me at the Plaza Hotel Sunday at noon," Mr. Lidow remembered with a laugh. "She said no. Let's meet at the Guggenheim Museum. So we met and had a wonderful time."

They have been married 21 years and have two sons. The oldest, Arel, is a member of the Class of '05 in the Department of Electrical Engineering, and Teel is a member of the Class of '07.

Mr. Lidow advises today's engineering students to get as broad an understanding of engineering's theoretical underpinnings as possible. Technology will constantly change, but the theoretical underpinnings are constant.

"I also believe that engineering students need to learn how to manage the entire engineering process," he said. "The issues and designs today are far more complicated than in the past. They span groups of people, almost always different departments, or groups within a company. In the future I think it will more and more span across different companies. So it is increasingly important to understand the people, processes, and organizational sides of engineering."

He incorporates that philosophy of spanning in iSuppli's corporate headquarters. Mr. Lidow's own office is a circular space with windows the entire length of one wall. There are no doors; not even to his office. There are no walls to segregate employees from each other. The entire exterior wall is windows.

"We want everybody to see and hear what's going on everywhere else in the company because of the complexity of the electronics industry," Mr. Lidow said. "That cross-understanding can come from just hearing a distant conversation down the hall. This philosophy has a great deal to do with how effective we can be to help the industry hold itself together."