Illumina, Inc. (ILMN) Earnings Call Transcript & Summary

Next up in our closing executive interview, Steve Phillpott, CIO of Illumina and President of the San Diego SIM Chapter. I've had the privilege of working with Steve and the San Diego chapter now going on a decade, I think. Steve, you there?

Hey, Hunter. How are you doing? Yes. It's hard to believe 1 -- we're almost at the end of this crazy year. And you're right, it's hard to look back and think that we've been working together for a decade plus. Been great.

A decade plus. And I think I'm right in saying that you were a cofounder of the San Diego SIM chapter, correct?

I was. I was one of the cofounders of the SIM San Diego chapter. And that was -- I think we might have been one of the first SIM chapters to start partnering with HMG to kind of build out our network. That last session was great, really getting into that discussion about how powerful the network is. We can't do everything ourselves. And it's great to have that network out there where we can reach out and have that type of discussion.

Yes. Let's talk about that more a little bit later. But let's go back to why did -- what was it about the SIM -- SIM's mission that you were so passionate with? I think it was Yasmin and the others, Barb and you...

Barb and...

Yes, the San Diego chapter. What was it about the mission of SIM that you wanted to bring to San Diego?

It was a couple of things. One, it was about the networking. And a couple of people have talked about it, but that was one of the things I also learned early in my career, was how powerful the network is to help us kind of move forward. Two is one of the things that I liked about the mission of our chapter in SIM was about giving back to the community, helping to mentor that next generation of technology executives. And since our founding of the SIM San Diego chapter, we've given money to new college grads that are specializing in the technology field to kind of help them on their career. And again, whether it's the creation of our Women in Technology group, whether it's the mentorship programs, whether it's the scholarship we give, there's something about that satisfaction of being able to kind of help that next generation that I just love.

Very cool stuff. And I agree with you 100%. And yes, you have some news in the middle of this craziness that's going on this year and the pandemic. You made a move over to Illumina.

Okay. Is that the craziest thing you've heard of, Hunter? You've got all the craziness going on in 2020, and what do I do? I decide to add another level of craziness on it and change jobs. So yes, I'm currently the SVP/CIO for Illumina, kind of working on next-generation genomic sequencing. And funny, I got -- I had a couple of people joke with me about kind of moving over there especially after Illumina announced kind of a partnership where they're working on storage to where we might be able to actually store data on DNA coming from Western Digital, which specialized in storage and said, "Oh, you just went there just because of that." And I said, "No, no, I went there because of the mission." The mission and what they're doing, the impact on people's lives was just really, really exciting.

So a little more context for those of us that might not know the mission of Illumina. What is it all about?

It's all about kind of unleashing the power of our DNA. And you take a look -- I mean just look at the current crisis that's going on right now with COVID and the race to find cures. Well, our technology allows companies to process and sequence that DNA. All of that is part of the development of these next-generation drugs. All of that is what's allowing us to accelerate these discoveries. So being part of that particular pipeline and the impact it has on people is just really exciting.

Very cool. There's been a theme today, Steve, about storytelling and executive presence and executive style. And again, I've had the pleasure to work with you and your team in San Diego for a decade. And you really have a great way about you in terms of your style and your leadership. Can we just -- I mean sometimes it's hard to talk about ourselves. But how would describe your style and your leadership and where you get your passion and courage? And I do believe you have a bit of a military background in there, too, right?

Yes, I do. I come from a military background, as you were saying. And that gives -- it's interesting, you spend time in the military, and they teach you a lot about leadership and management. But if I kind of take it up a little bit, there's a couple, maybe core foundational things to think about. And a lot of it ties back to what many of us have read over the years. Now you might have read it in some of Stephen Covey's books. You might have read it as part of the Table Group, but it's kind of that concept around organizational health and the foundation being around building trust. Now in the Table Group, they call it the kind of the smart organization and the healthy organization, the smart organization being kind of what you get done and the healthy organization being how you get it done. And that's really where the trust aspect -- and I had the luxury of, within Western Digital, we focused on organizational health as part of the Table Group kind of philosophy. But the company I was with before that, we had something very similar. It was just called ways of doing and ways of being. But it really focused the organization around the concept of trust. And what's happening right now is our move to go from kind of on-premise in-person meetings to remote, that puts a lot of pressure on kind of trust and the ability to have trust with the peers, with those that you're working with. And so from a personal kind of leadership style, you've got to build in those things that allow us to build up that trust. And it's a combination of trust and engagement. But we've had our friend, Tony Leng, and others talk about kind of leadership skills, having empathy, being transparent, listening and asking. One of the things that -- the difference kind of going from on-premise to remote from a leadership standpoint is you can't assume that silence is people agreeing. So you've got to have that ability to be active listening and active managing. And it's really -- the next part is around making sure you have that engagement. How do you keep employees -- how do you keep the team engaged when you're not in the same building, when you can't walk by their office and knock on their door and say, "Hey, how did things go?" or talk about your favorite sports team there.

Yes. MBWA kind of goes out the window, right?

Right, yes.

Right, totally.

That was your -- yes, definitely.

And it's the communication style and the engagement style and getting individuals to be better communicators, right? In general, our tech professionals don't tend to be great communicators, and they are not really on the extrovert extreme.

Right. And again, from an engagement standpoint, so if we take a look, IT, we've actually been in a remote -- at least I was at Western Digital, I had a lot of my team working remote. And when I look at asking the question, what jobs work effectively remotely? Now this is pre-pandemic. I was looking for 3 factors. One is, is it the right type of work? Not all work can be done remotely. But the second 2 are around it takes the right manager to manage a remote employee, and then third, it takes the right employee to work remotely. And what those mean is the right manager and the right employee, one of the key jobs is, how do we teach them how to be engaged? Because if people go remote and you lose engagement, then we start losing some of that trust. And I think that's one of the skills. And this is, I think, partly where you were going, Hunter. This is one of the skills that kind of we as leaders in IT need to make sure we teach to our direct reports and cascade down, is how our managers can manage remote employees to ensure that they have that level of engagement. And I think we were kind of forced into that position here 8 or 9 months ago, and it's been a work in progress. But I think it's actually working well in many, many areas.

Well, you've been living this and thinking about this for a long time. And Western Digital, it was a global enterprise, a global footprint, right? How many countries?

Yes. Well, we are all over the world. I lost track of how many countries. But literally, over 70% of my team was global outside the U.S. I had 2 of my direct reports that worked out of their house away from the headquarters' office. I had my head of architecture work out of his house. I had my head of networking work out of his house. But again, if people -- if the managers know how to manage a remote employee, keep engagement and if the employee knows how to work remotely and keep engaged, then the process can actually be fairly productive.

Hey, Steve, I think more and more, the role of the tech leader is going to be one of the sort of meeting, enabling and leading innovation. At our Summit of America back in March 24 this year, some 9 months ago, just 12 days into the lockdown, and it went physical to digital.

Right.

You made a profound statement saying, "This will be a time of innovation." How do you know that?

Well, a couple of things. One is, by default, we've always kind of got to be looking at innovation. But if you take a look at a couple of things, and we've talked about some of these over the last 8 or 9 months. But one, for some companies, the pandemic was this perfect swelling of the high tide that just accelerated their innovation. So think of companies like Zoom and Peloton. They innovated in a space, but what does the pandemic do? It like just put them in hyperdrive going forward. So definitely being in the right place at the right time. But in a time of crisis, I mean say, you've got distractions. You've got all these unexpected things coming. I mean the pandemic, we talked about this before, was like the ultimate business continuity plan where normally, you test one little part, and now it's testing everything. Well, in a time of crisis, many companies do probably one of 2 things, is, one, they either grind to a halt, and they're -- everything is focused on cost. They're kind of losing some of their creative focus. But the second opportunity is, while it's important to focus on cost, this is the time where there's probably an opportunity to double down on some investments kind of going forward. And I'm going to plagiarize some analogies. I don't take credit for these. But throughout the course of this year, we've heard a couple of analogies around kind of Formula 1 racing where the discussion was around a Formula 1 racecar on a sunny dry day. It's really hard to pass somebody else. But what happens when it's raining? What happens when the circumstances change and get unexpected? That's the things that create opportunity. And that's part of what the pandemic did for some folks. It kind of created a little bit of a pit stop to allow them to figure out, "Hey, where might we be able to double down and kind of invest in the future going forward?"

Love it. Love it, Steve. Great job.

Hey, Hunter. Hunter, we shouldn't -- I know we're kind of coming up on the time here, but nobody asked you questions during these interviews. I think we should turn the tables around a little bit. What do you think?

Love it. Yes, go for it. Okay.

So we're speaking about change. And one of the big changes that I know you've been working on with Mark from SIM is the whole partnership between HMG and SIM National that you've been working on. And several -- we've already talked about it. Several of us SIM groups have been working with HMG for a while. Maybe you can kind of comment on some of your thoughts on kind of the synergies between the 2 organizations and maybe we can get Mark to pop back on, and he has a comment or 2.

Yes, go ahead, Mark, sailing on right there.

All right.

Great point. It's -- I really think for many reasons, the reason why between HMG and why the relationship works with SIM chapters is we complement SIM chapters in terms of our investments and where we place our bets and how we've architected our model over -- really, it's an idea I had 30 years ago, so creating a CIO group. And I actually gave the idea to Gideon Gartner, the Founder of Gartner, back in 1988 and '89, and he didn't want the idea. He was down a level, one writer, report once and sell it a thousand times. So I gave it to his competitor 2 days later -- 2 years later. And about 8 years later, he finally launched it [ with Sky Group ]. That was 1998. But anyway, fast forward, unfortunately, as an update, over the weekend, he passed away. But he had a great run and a big impact on our industry, a real big positive impact on our industry. But what I love doing, I think, maybe like you, Steve, I love up-leveling people's game. I love being a coach. I love facilitating growth and leadership and learning. And I wanted to do it not as a practitioner one-on-one, but I wanted to do it on scale. So when we had enough contacts and money to launch the network in '08, '09, 2010, we just cobbled a patch quilt around the country. And largely in the first few years, it was SIM chapters that we break into. We win the Silicon Valley just on our own. I said we got to be #1 in Silicon Valley. People -- Tony Leng said, "We don't need you out here, Hunter. Go away." I can proudly say it's the #1 platform in Silicon Valley, a pretty tough market. But I think there's an amazing synergy and a complementary energy in kind of values, principles, beliefs and values that SIM possesses and that we have at HMG. So that would be my take. You want it, Mark?

Yes. Thanks, Hunter. And thank you, Steve, for all that you've done for SIM and planting the flag there in San Diego with Barb and the rest of the team. I will say that there's some great overlap. The persistent presence of our SIM chapters in every market really provides a place for every local group of leaders to connect and stay connected locally. Steve, I know you guys have a great group of leaders that you established in the San Diego market. And you guys are really interactive from what I've seen. And I think that's consistent across the country in our chapters. And I think what Hunter's team brings in the complement -- and just like we've experienced today, what a great group of leaders. I mean -- and from all over the country across all the dimensions of industry and the sincerity and the character of these leaders. So there's just such a great complement, quite frankly, with what Hunter has developed and how it helps feed and strengthen each of the local chapters. And his national level, Hunter and I have been working together and continuing to find ways to amplify that and to make -- to bring greater value to each member of these networks. So more to come, frankly, Steve, as we look further down the road. But it's been a really good and productive year. I mean even in the midst of this craziness, honestly, it's -- there's been a year of growth in the midst of this as well. Hunter, you and your team flipped so quick to the digital platform, you spun our heads, quite candidly. And I think you've got a market advantage as a result of it. And it's been a real -- just a great complement each week when you guys go into the neighborhoods where our chapters live and breathe every day. You're shining a bright light on this community. And you've shared that with us, with me personally as the kind of the -- unfortunately the face of SIM National. But it's just -- it's a generosity of giving, I think, Steve, is what I see from Hunter, and he's always just such a friend to the SIM community. And I think more to come.

Well, I think yes. I think the 2 of you have left us with that great parting question. How can we leverage the HMG-SIM synergy to up-level our game? I think we're starting 2021 on a good footing.

Yes.

Awesome.

Yes, yes. Thanks, Steve. Agreed, agreed. And thank you for taking the time. I mean I really appreciate it.

Okay. Thank you, folks.

Steve, great to see you. Happy holidays.

Happy holidays to you guys.

Thank you, man.