broadcom's playbook

•3 min read

Organisation Structure

Broadcom's main business functions are divided into 2 distinct groups - Technical and Non-Technical. This is technically a misnomer, and I would classify them as "Growth" and "Support":

  • Growth: These functions expand the company. These include R&D and Marketing. Their main purpose is to increase business, such as by developing new products or increasing market share.
  • Support: These functions help to keep the company running. These include Sales, Production, and also non-crucial functions like Legal, HR, Finance and IT.

Support functions are kept intentionally lean. There is no need for a world-class HR, Finance or Legal team; hence they only need to be good enough.

Any bigger, these departments will turn competitive, which cannibalises on the company and creates several problems:

  1. They begin to justify their existence and growing size, instead of simply enabling the business to continue printing money.
  2. Trying to increase headcount or adding top talent only increases costs.
  3. They begin creating problems by deciding how other teams should be run, such as in hiring, procurement, strategy, etc.

Technical teams must hold procurement and hiring power. They know what materials/resources they need, they know what kind of people to hire to fill the gaps in their teams. There is no need to rely on an external function to do so. Hence, support teams must be kept very lean and unimportant.

Talent

Zero-based budgeting is used for headcount justification. At the end of the year, to ensure low corporate overhead, each team must explain each headcount, their function and performance.

People are kept for knowledge and experience, with their greatest value in making the right decisions quickly due to the accumulated knowledge in knowing what has been tried and failed.

Hardware has a lot of trial and error. Semiconductor design is iterated through failed attempts. People are retained to remember what did and didn't work to remember design rationale, and retrieve the information wherever relevant. Once these members leave, there will be gaps in information.

Software doesn't need that as the code either works or doesn't - the outcome of the code is the most important. The code can be understood simply from reading, and often you can just hire competent software teams to come in and understand the code to fix it.

For welfare: Instead of spending on "culture" or excursions, welfare is paid out as bonuses and options.

Acquisitions

Buy market leaders after dominance is established. These operators target niche/category leaders with sticky customers and high switching costs, often already dominant for years.

Mature enterprise/vertical software is expected to run ~90% gross margins. For hardware, teams are expected to hit at least 60% margins.

First, understand the software company cycle:

  • Initial high R&D expenditure efforts with a small founding team
  • Headcount increases, for maintaining software and troubleshooting issues
  • Company scales to market dominance
  • Broadcom acquires the market leader

Post-integration, the original team isn't needed to continue expansion efforts. They are properly compensated and removed. The remaining members belong to non-technical production teams, left to run the newly integrated businesses.