This has been a hard quarter for almost every tech vendor, but NVIDIA hit so far out of the park with its financial results that many of us who watch the company are still stunned. Saying that NVIDIA’s last quarter was successful would be a massive understatement. But why is NVIDIA able to do so well when much of the rest of the tech market seems to be in trouble?
There are three reasons for this success: consistent management, strategic thinking, and solid execution.
Let’s talk about the reasons behind NVIDIA’s success this month.
Most tech companies have undergone multiple leadership changes in the past couple of decades. When a new leader comes in, they will make the company their own by changing priorities, focusing on the areas that are unique to their backgrounds, and often changing company direction sharply.
Jensen Huang founded NVIDIA back in 1993 and has led it ever since. This consistency in leadership means NVIDIA hasn’t been caught up reinventing the wheel due to leadership changes. This is a huge advantage in terms of waste in that, when a company changes direction, it must toss away much of what was done previously.
NVIDIA hasn’t really had to do that because there has been no catastrophic leadership change, and thankfully, unlike some other CEOs, Huang hasn’t abused his power and been removed from his position for cause. This consistency allows NVIDIA to execute over a period of decades where most of NVIDIA’s peers struggle to execute over a period of years.
In the past, I’ve lamented that most technology companies couldn’t even spell strategy because they largely operate tactically. This means that most tech firms are so focused on quarterly results, they lose track of the big picture and seem unable to anticipate market changes that seem obvious to the rest of us. Part of this is due to the influx of hedge fund managers onto boards who force this kind of behavior. Part of this is just the rapid cycling of leaders which makes it nearly impossible to successfully implement any long-term strategic plans.
We all saw the AI wave coming decades ago. Heck, it was all over science fiction going back to the 1920s, but it required someone in power with this vision who remained in place long enough to execute on it. Jensen Huang had the vision, remained in leadership during the execution and, as a result, NVIDIA is exactly where it needed to be when that vision and reality converged.
With AI, NVIDIA didn’t just bypass Intel, it eclipsed Intel and did so not just by remaining focused on the goal but in really thinking through all the elements, like the need for simulation in what we now call the metaverse to both reduce the cost and improve the quality of training.
In any market, the finish line is constantly moving. There is safety in numbers, but if a company can focus on that finish line irrespective of its competitors, it will get there first, which is showcased by NVIDIA’s recent performance.
You can have the best idea on the planet, but it won’t do you any good if you can’t execute. NVIDIA has been an execution machine when it comes to all aspects of AI. Early on, it got how autonomous technology, which was initially just focused on cars, would expand to other forms of transportation, robots, and drones. This avoided the common mistake of defining a market too narrowly.
For instance, the old example of the failed buggy company not realizing it wasn’t in the buggy business, it was in the personal transportation business. NVIDIA realized it was in the computer intelligence business early on, enabling it to see opportunities other tech companies clearly missed.
NVIDIA’s solid execution made it ready and able when the generative AI wave hit, and it’s clearly reaping the greatest benefits as a result. It is incredibly impressive work.
Wrapping up: The three legs
There are three legs to a successful company: solid leadership (which includes the ability to select, retain and motivate its employees), long-term vision (its ability to think strategically and benefit from change), and the ability to execute that strategic vision. NVIDIA saw the potential for AI decades ago, its leadership focused on the goal and not its peers, and, as a result, when the AI opportunity went vertical, NVIDIA was able to ride the wave while others clearly fell short.
This was impressively solid work and showcases how companies should be run, but most aren’t. Hopefully, others will learn from NVIDA’s success. Sadly, I’ll bet most don’t.