Q: Over the past two years Asus released a new product with high brand recognition virtually every six months. How did you accomplish that?

A: Change happens very fast in this industry. If your products aren't "heroic" enough, they won't be strong enough. We all need to change our thinking to figure out how a product can be boosted to a heroic level right from the beginning. That's why Asus pours so much energy into pushing "design thinking."

During the past three decades Taiwan's high-tech industry saw a division of labor under the Wintel framework in a very horizontal and open manner. But we all forgot that in the end when we look at things from the consumer's perspective it's always vertical integration. You need to put many things together to provide the consumer with the best experience and enjoyment.

Therefore, we now speak of "Happiness 2.0." On top of visual and audio, we add the sense of touch, such as texture and so forth.

For example, the Padfone is actually made of plastic, but the point is how to make the plastic look not cheap and instead bring out the material's advantages so that the device has a warm feel to it.

Q: But how do you go about realizing the heroic products that you have in mind?

A: That means spending a lot of time. In our early days we were very engineering oriented. Since the motherboard era, Intel held us in high esteem. We were the only manufacturer who was invited into their labs to discuss (processor) architecture. Back then the engineers were in command.

With the EeePC we tried for the first time to surpass the Wintel thinking of the past thirty years by looking at the cloud computing of the future. Of course, huge contributions were made over the past three decades because everyone enjoyed very inexpensive software and hardware. But we were still tied to the desktop computer.

Now, however, we have ubiquitous computing. When we made the EeePc we already had an inkling, but at the time this was more top down.

Design, Technology and Management Prowess

Design is becoming more and more important. In management and design circles "design prowess" is on everyone's lips. But of course, technological prowess is also very important. Without technological prowess you won't be able to complete a heroic product. And then there is "management prowess," because in the end it all comes down to commercial operations.

For example, when this thing is priced at US$199 (Shih picks up a Nexus 7 tablet from the table), it becomes highly attractive. You need to incorporate the idea of design thinking from the beginning.

I often remind my staff, "Don't think that all innovations depend on the engineers." Contrary to what one would expect, they often don't have time to extensively use our products. We need to experience from the consumer's perspective what difficulties they have and the many things that aren't okay or satisfying.

Therefore, design thinking starts with people. It means thinking from the user's perspective.

In the past, engineers tended to focus on specifications. It was about how much more memory, how much more capacity. But our competitors were also very fast. So in the stores you saw everyone compare digital specifications. But by competing on specifications it won't be easy to create a perfect, heroic product.

Often everyone thought in the end that they had come up with a quite good thing. But it was all a competition of left brain against left brain, engineer against engineer, logic against logic.

Sometimes the right brain is like a needle, poking in. This can be really helpful to the engineers.

Q: Are you the right brain that's poking like a needle?

A: (laughs) Now what makes me happy is that everyone is joining in.

For instance, this is what happened with the "Taichi" (dual screen notebook). Initially, the PM (product manager) told me that in comparison to the engineers, he sometimes feels like a laborer, like a poor man, not like a product manager. But I told him that's not how it is.

The PM actually has the strongest weapon, which is design thinking. That's because the engineers don't spend that much time at all thinking from the user's perspective.

Now that these ideas have slowly been brought home to everyone, it's the engineers who instead come to ask me, "Will we drag down the value if we do it this way?" I will tell them, "No, we won't." There are new creative ideas out there. When you plan to improve or advance them, you need to come up with a thinner, more reliable, more beautiful version, and you need to achieve that under limiting conditions.

(Taiwanese architect) Han Pao-teh once said that design involves more restrictive conditions than art. Beauty itself can only take shape in the presence of many restrictions. In fact, it is through the pursuit of simplicity that a sense of beauty may emerge.

But what that involves can prove to be very difficult. The antenna might be in an invisible place, and the heat dissipater is hidden where you can't see it, so from the outside everything looks very neat. But in fact there are great challenges behind this neat appearance.

Q: Asus is growing ever bigger. How do you ensure that these ideas are implemented within the organization?

A: Recently, we have been strengthening our management prowess too.

I have just looked at Fredmund Malik's books again. (One of his tenets is that) like design, management should be simple.

Five Skills for Stronger Management

There are five skills needed for good management. How do you manage your goals? How do you get organized – regardless of whether you organize people or processes? Then there are decision-making, and supervision. And finally talent cultivation. It all comes back to talent cultivation, or else the company won't be able to develop to its highest potential.

Lately, we have acknowledged internally that we were a bit late doing the management part. We now all use these five skills as our common language when discussing projects.

Q: What is the decisive feature of the Nexus 7?

A: It's definitely not just (screen) size.

Q: Is it industrial design?

A: Design must be backed up by reason. Our past R&D design process was linear, followed the Wintel model and was fast. But in linear processes you never look back. And if you never look back, your product sometimes becomes unsold inventory (laughs heartily).

Now we change direction whenever we understand that we've made a mistake. That's better than realizing your mistakes in the very end only after unsold inventory has accumulated. What we want is to create an experience that touches the consumer. For a price tag of US$199, will he be willing to put up the money? It's better knowing that earlier rather than later.

Strategizing Business Like a Game of Chess

Q: You are said to love playing chess and that you also play against yourself.

A: When I was little my father had a book with classic games of Chinese chess. As a child I helped him replay the games in the book. After doing that for a while you are influenced (by these games). Playing chess compares well with business strategy. The two have some subtle points in common. When you have managed to play an ingenious game, it makes you feel great.

Usually not every single move is a good one. If you play against a top player you have probably lost after two or three moves, so every single move must be good enough.

Sometimes you make a move and can't put the finger on it why it is not right – you only know that the tables are turning against you.

When we talk about strategic business expansion, there are actually many similarities, which means many things must be done right. When they are done in an "ingenious" manner, then innovations, for example, will happen just like that.

Q: Could 2012 be called the year of Asus' ingenious game of chess? Everyone does vertical integration now, like Apple and Samsung, even Nvidia wants to integrate vertically. How do you view these efforts?

A: To be honest, I don't entirely agree with complete vertical integration. Everyone just follows the crowd saying this, even Nvidia wants to embark on vertical integration. But in the end you need to make good use of the advantages of both, horizontal and vertical integration. Why? Because of Taiwan's distinct character, you can't really completely follow Steve Jobs' example. You need to have your own special character.

My analysis is that Taiwan somewhat more tends toward "individuality and flexibility." Japan favors "caution and discipline," South Korea "group consciousness, flexibility and discipline." But strict discipline plus individuality – that's Germany.

Germany has Mercedes-Benz and BMW, but it also has many formidable small and medium-sized companies. The Germans are so disciplined. Just look at how they shovel snow in winter. They do it in a very orderly way, piling it in two rows. But everyone shovels their own part. I feel that the Germans have strong personalities.

We can't change a nation's basic personality. Taiwan's unique personality resulted in a very good development of the computer industry. We should continue to exploit the advantage of such a horizontal division of labor. The only problem is that in the past we handed vertical integration to Apple. As a result no one was willing to make an effort to provide customers with true happiness.

Q: How do you see the industry developing in the coming three years?

A: It's only now that the last heroes are lining up for battle. It's an era of openness plus vertical integration.

Q: Asus has hardware innovation capabilities. Generally, you are able to lead global innovation, but it also lacks patents, so others can easily copy (your products). What's your view on that?

A: As for patents, when we began to make handsets we were among the top ten with regard to number of handset patents. Even HTC did not achieve that. Apple also greatly feared these patents. So in that area we invested very early on. But now smart phones have become very important, and we need to get into that business very quickly. We're using the Padfone to gain entry into the market. Because we are already late.

Still we can consider ourselves lucky because in the current wave of IT transition we still hold at least a core position. Because we are still in the age of digital convergence. Be it technology, telecoms or imaging, all is perfected through computing, which means that the digital basis that Taiwan built in the past is not wasted.

Therefore, I feel there is no reason for such a lack of self-confidence when it comes to facing the trend toward vertical integration. On the contrary, we need to exploit our advantages when carrying out vertical integration.

Translated from the Chinese by Susanne Ganz