Virtual Realities

The ultimate 'virtual corporation': one employee, a network of suppliers and retailers, and real growth potential.

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Paul Farrow wanted more than his own company. He wanted to be the company, all by himself. With Walden Paddlers he has laid the groundwork for the ultimate 'virtual corporation': one employee, a network of suppliers and retailers, and -- best of all -- real growth potential

Walden Paddlers' workshop occupies space in the rear of a building in an office park in Acton, Mass. Against one wall half a dozen kayaks in various stages of prototypical development lie beached on the concrete floor, while on the other side of the room stands a workbench, sparsely appointed with an assortment of clamps, glue, and cutting tools. The company's founder, Paul Farrow, sits in an adjoining cubicle, with little more around him than the requisite start-up gear of an undersize metal desk, a fax, and a phone, leaving the impression that he opened the doors last week and still is waiting for the electrician to arrive and turn on the juice.

Actually, Farrow started up 10 months ago, and in that time Walden Paddlers has designed, produced, and marketed a technically sophisticated kayak fashioned from recycled plastic, one that significantly undercuts its competition on price and outmaneuvers it in performance. Moreover, Farrow has done all that with just one employee -- himself. He deliberately set out to weave a web of strategic partnerships around Walden to avoid building a costly, cumbersome, slow-footed organization. Farrow sought, instead, to leverage as much as possible the skills of creative outsiders and dedicated specialists like himself to share risk, reduce development time, and save money, while hitting a broad slice of the market as fast as he could.

Walden Paddlers, for all its low-tech aura, is what is known in today's fast-paced economy as a "virtual corporation," a company that outsources just about everything in the pursuit of eternal flexibility, low overhead, and the leading edge. Actually, virtual corporations have been around since time immemorial in spirit, if not in name, because they define, in part, the bootstrapping ethos behind many entrepreneurial endeavors. Still, virtual corporations are now more relevant than ever.

Bill Bygrave, director of the entrepreneurial-studies department at Babson College, in Wellesley, Mass., believes there's growing awareness of the virtual-corporation model for fundamental reasons relating to today's economy. "Big companies increasingly realize that smaller companies have been doing this all along -- and getting higher productivity from it," says Bygrave. He cites Apple and Compaq as two aggressive outsourcers from the world of high technology that have prospered at the expense of larger, more integrated rivals.

The phenomenon, adds Bygrave, reflects an imperative that companies must increasingly specialize in a more complex and competitive economy. That creates a self-reinforcing dynamic, as the needs of one specialist spawn demand for the skills of others. "Your success is based on keeping tight control over your area of expertise -- and then subcontracting everything else out," says Bygrave. "The key is to keep overhead low, own as few resources as possible, and keep productivity high."

Though Walden Paddlers is what might be called the ultimate virtual corporation, with just one employee, Paul Farrow's impetus for launching it was more emotional than macroeconomic. It was triggered when, at 43, he found out one day that his well-cushioned, six-figure job as executive vice-president of manufacturing and finance at Groundwater Technology, an environmental-services company in Norwood, Mass., had been restructured right out of existence. That presented him with a stark choice. "I could return to the corporate world and go through all the rituals, or I could start my own business," he says. On the one hand, Farrow, who oozes caution, was given to the neatly secure life of the American corporation. But on the other hand, once burned was enough for an incisive thinker like Farrow. "Working in corporate America is no longer a loyalty game," he says. "That has made it harder for me to go back and do it again, because I'm one of these people who gets so invested in what I do. There has been a real change in the economic landscape. I don't say that out of bitterness. That's a reality."

And yet Farrow was pretty much clueless about precisely what sort of a business to start in order to paint himself back into the workaday landscape. To be sure, he had a carefully crafted set of criteria, which he could articulate in his typically earnest fashion. "I wanted a business that would be healthful and related to outdoor exercise. I wanted it to be environmentally responsible and get people out into the environment and make them more sensitive to it. And I wanted it to have a manufacturing aspect -- I wanted to make something -- as opposed to just being a service." Farrow notes that despite his having such a well-defined template, "lightning had never struck before."

Until last August.

That's when Farrow took his family on vacation to Maine, during which his sons, Luke, now 10, and Adam, now 14, rented a small kayak in which to paddle around the lake they were staying at. Farrow took more than a passing interest in the boat, and two things about it struck him. It was an "entry-level" kayak and performed as such, moving through the water with all the grace of a dinghy. Second, Farrow knew enough about manufacturing, materials, and money to know that what his son was sitting in amounted to 35 pounds of plastic costing 40¢ a pound. And yet the boat retailed for $400.

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