Learning To Live With Micros
In the winter of 1979, Henry Lee was forced to referee a dispute between his vice-presidents for finance and operations. As he listened to them argue the pros and cons of buying a new computer, the president of Lee Pharmaceuticals realized that he knew too little about the whole world of computers. The thought had nagged him for some time, but the discussion that day made him realize, he says, that "I was a complete ignoramus. It was like trying to run a company where all the accounting and financial people spoke a foreign language."
It is a feeling shared by many chief executive officers. The technology seems promising, but its complexity leaves them confused and on the sidelines. For a variety of reasons -- time pressure, fear of keyboards, and a reluctance to appear "unboss-like" -- few CEOs or other top managers have even begun to comprehend the benefits of microcomputers for themselves, as managers, or for their companies. And fewer have begun to master them. Lee decided to do something about his problem.
Since founding Lee Pharmaceuticals, in South El Monte, Calif., eight years earlier, he had been able to devote most of his time to research and marketing for new dental products. But as sales climbed and the $12 million company moved into such areas as pesticides and health and beauty aids, Lee was forced to spend more time administering increasingly diverse operations. And he was uneasy. "I knew I wasn't getting the right kind of information," he ways. "The chief programmer knew little about business. He was doing things the way he felt they should be done, but I didn't like the style, frequency, or even the data in his reports."
Lee purchased a microcomputer in March, brought it home, and set it up on the dining room table. Over the next few months, he spent several hours a night working through the exercise manuals. "To see the way it would crunch the numbers on tables of data had me giggling hysterically," says Lee. "And I soon began to grasp what it could do on real problems."
Within nine months, he had bought 20 identical microcomputers for the company. He learned to' use his micro as a word processor and asked his technical people to do the same for all their written reports. Gradually, the personal computers also were integrated into such critical business functions as budgeting, market analysis, and planning, which Lee says has helped upgrade the quality of data and permitted more informed, timelier decisions.
With three years' experience -- including nights and weekends -- under his belt, Lee now says he had no alternative to becoming computer literate if he wanted to remain the boss: "The CEO has to know something about computers -- you can't separate administration from them."
Lee, at age 55, seems like someone who would lead the way for other CEOs as a charter member in the club of managerial computer literates. He received his bachelor's degree in chemical engineering from the Massachusetts Institute of Technology and later earned a doctorate in physical chemistry. Working for a division of Rockwell International Corp., moreover, Lee wrote technical instruction manuals for assembly and disassembly of turbomachinery for rocket engines.
In spite of this background, though, he had never trusted computers or computer reople. His negative feelings had been shaped during the 1960s. After leaving Rockwell he was executive vice-president and research director of Epoxylite Corp., from which Lee Pharmaceuticals was spun off in 1971. "I was always having run-ins with the data processing people," he recalls. "The headings on the reports they gave me didn't make sense. The office systems didn't make sense. And it was almost impossible to track down a new customer." Nor had Lee's low opinion of computers improved much by the time he hired a financial vice-president for Lee Pharmaceuticals in 1973. He remembers giving the new man special instructions: "I know you may need a computer, but be sure you don't make it too pervasive."
Lee was uneasy as he began to investigate microcomputers for himself. One day he stopped in at a Radio Shack outlet in a shopping mall. Although he was shopping for a videocassette recorder, the store's TRS-80s caught his attention. "I was very self-conscious about sitting at the terminal," he remembers. But he had the bug. Over the next three weeks he visited three more computer stores in the Pasadena area and quizzed salesmen at each. "I didn't want to wear out my welcome," he says with a grin.
When he finally decided to buy a TRS-80 one evening on his way home from work, Lee still proceeded with caution.The thought of taking his new computer home that night, unpacking the boxes, and relying solely on the manuals to tell him how to set it up made him anxious. "I asked the salesman to take me through a complete dry run," he recalls. "It's so much easier to be shown."
Lee had already made up his mind that the new computer would stay at home until he had mastered it. "You don't want to show off your ignorance if you can help it," he says. So he worked with his new machine -- a keyboard, a central processing unit, a screen, and a cassette tape storage unit -- at the dining room table.
The learning process took some time. "At first," he recalls, "I just wanted to get a feel for what modern computing was all about." Aside from working through the exercises in his instruction manual and learning some standard BASIC computer language commands, Lee did what hobbyists had done for years.He played a lot of chess with the computer.
Occasionally he would hit a tough spot. "In the early months so much of the language and the techniques didn't make sense," he says. Since Lee couldn't make the time available to take a course covering all the material, he relied on two Radio Shack salesmen who gave him their home phone numbers. "I called them maybe once a week," Lee says. "I had determined that it was worthwhile."
Lee had told no one at the company about his purchase for the first month. After the second month, he brought the machine to work and quickly began to preach its virtues. Then he brought in a second TRS-80 for his key employees to begin testing at home or in the office.
In July, Lee borrowed Electric Pencil -- the first word-processing program for microcomputers -- and began using it to write technical reports and letters. The benefits were obvious and immediate. Under his old system Lee would draft his documents by hand -- often letters as long as 15 pages and full of technical detail -- have his secretary type a draft, correct the draft, and have the final version retyped. "Sometimes it took a week to get a long letter off," he says.
His word-processing program changed all that. "I could usually sit down first thing in the morning and have it done by noon." Lee says. "And it was a finished product."
Within a few months, Lee began to push people at Lee Pharmaceuticals to begin using word processing as well. First he sent around a memo asking employees about their typing and computer skills, and for moral support he included photocopies of articles illustrating how other professionals, including newspaper reporters, have mastered the necessary skills. With the 20 TRS-80s on hand in December, Lee taught two employees how to use word processing, and they in turn ran classes for others.
As the employees became proficient, Lee Pharmaceuticals's paperwork bottlenecks began to vanish. Each Wednesday, for instance, the company holds research meetings to review some of the approximately 100 experiments under way on its existing or proposed products. Reports on the experiments are examined internally and are frequently filed with the Food and Drug Administration or the American Dental Association. The traditional written draft-type-retype system to prepare these reports took so long that they had to hold meetings without the current report. But with everyone from Lee on down preparing his own report on word processors, preparation time shortened to two days. Moreover, Lee says, it became easier to spearhead joint efforts within the company. "I could ask for three or four paragraphs from other specialists, borrow their disks, and pull the information off onto my disk," he says.
Even before word processing became more or less a norm within the company, Lee had become curious about extending his computing capability to other applications. He knew that corporate planning was an area that had never been approached with enough rigor. "We tried to do it, but we couldn't always get to it," says Lee. And even though he was the boss, Lee says he held back from asking his financial vice-president for better reports from the company's more powerful minicomputer -- the machine that stores all the accounting and sales data and generates all the company's work orders relating to production and shipping. "I hated to bug him all the time," Lee explains. "He was so bogged down with forms and deadlines for income taxes, 10-Ks, and 10-Qs, I didn't want to saddle him with questions about business."
Even when planning sessions were held, things were a bit informal. "We really just eyeballed the numbers and made our best guesses," he says.
Help was on the way. Late in 1980, a new software program called VisiCalc (see INC., January, p. 71) became widely available, and Lee began to use it immediately. "Instead of having a blackboard session with everyone sitting atound guessing what the numbers would be," he says, "we could run three different sets of assumptions through the computer almost instantly."
For example, it became simpler for Lee to demonstrate the effect of changing the mix of the company's dental products to a higher percentage of the more-profitable chemicals used for fillings and a lower percentage of the less-profitable diamond drilling bits."Before," Lee recalls, "you had to sit there with a calculator and add up all the columns." By running the VisiCalc program and printing out a series of possibilities, it was easy to examine the probable costs of pursuing the richer sales mix -- the level of sales discounts and advertising support needed to reach the target. "We could see if the campaign was worth the effort," says Lee. "These computers can bang out tabular information in no time at all." Today, before Lee holds a budget meeting, the top scenarios are run and printed so everyone can examine them. However, he says, VisiCalc has become a sort of internal company language on which many reports are now based. This consistency brings problems into sharper focus. "We can all better comprehend what the report is saying," he contends.
This ability to see and react quickly was particularly important in March 1981, when the company was bracing itself for possible effects of the recession. In the preceding months, some of the trends influencing the company's $4 million dental products area had been camouflaged by wild fluctuations in the price of a silver alloy used in some of the dental fillings.
However, once silver prices fell, Lee says, VisiCalc helped him identify a disturbing overall increase in selling expenses on dental products -- to 55% from around 40% -- before it became too serious. The result: Lee decided to farm out the dental marketing operation to a new independent sales group headed by his former financial vice-president. The outside marketing unit could reduce selling costs by marketing product lines in addition to Lee's.
Before VisiCalc, Lee typically waited as long as six weeks after the close of a financial period before analyzing areas such as selling expenses. The finance and data-processing people needed that time to make the final sales and inventory entries and to complete the necessary tax and shareholder reports. Using his micro enabled Lee to do budgeting with preliminary data within about 10 days of a period's close. "It was like bootlegging our own data," notes Lee.
Lee also began using his micro to study areas of the company where existing data didn't offer adequate explanations. One weekend he set out to discover why the company's pesticide plant, which the plant manager reported was operating at a chemical efficiency in the 85% to 90% range, was turning in such poor financial results. The plant's statement and the accounting department's version didn't jibe.Lee wrote a program demonstrating that the operating efficiency actually ranged from 65% to 70%, which explained why the plant was losing money. Lee spent many hours writing the relatively primitive program. With a calculator, he admits, the same problem could have been examined in half an hour.But he would have had to do the same calculations every month, while the program, once developed, could be used repeatedly to monitor changing data. After analyzing several months' data "I ended up firing the manager," Lee says.
Throughout the company, meanwhile, the microcomputers were having an increasing effect on the way business was conducted. Late in 1980, for example, the company began using microcomputers as "smart" terminals in the laboratory to place orders with two of its large supply houses. Staff chemists, sometimes aided by a company purchasing specialist, would dial up the supplier's computer using a "modem" (a device that enables computers to "talk" to each other over telephone lines), punch in the company's account number, and choose products from an electronic catalogue.
Around the same time, the company also started using two external data bases to enhance research and marketing activities. The chemical abstract services permit those involved with research to reduce the time for conducting complete literature reviews while preparing patent applications, for example. "Before," says Lee, "you basically sat at a desk and plowed through volumes." With the electronic service, he notes, researchers can make an inquiry through the computer using either a chemical name or a subject heading. "Sometimes," he claims, "for a $20 fee, you can save a week of work."
Another remote data base is just now being used for finding new markets. In its pesticide operation, located about 50 miles away in Fillmore, Calif., the company produces more than it needs of an aromatic chemical known as anisole. Through a chemical information service reached via Lockheed Corp.'s Dialog Service, Lee's marketing people have been examining patents that use anisole to compile a list of potential customers. "You can look at the patent numbers, the authors, and the assignees [of the patent] right on the screen," Lee says. "Unlike most everyone else in the country, we no longer have to use outdated information."
With the microcomputers well on their way to becoming a standard office tool, Lee thinks the company can now mobilize its technical resources for big projects -- without throwing everything else totally out of whack. He first noticed the change back in late 1980, when he assigned about 15 of his researchers -- half the technical staff then -- to prepare a feasibility study in two weeks to determine whether the company should enter the market for home pregnancy diagnostic kits. Breaking the assignments into well-defined pieces, Lee instructed each team member to bring his word-processed findings to a product-review meeting on the deadline day.
Such a large project would usually take three months. But when the team's notes were written, the work was all done, says Lee. "We were able to get in and out of the meeting, and be done with it," he says. They evaluated the 200 pages of material at the meeting, decided the market was already well covered and would require heavy advertising for any new entry, and decided not to go ahead.
During the three years since Lee bought his first microcomputer, there have been a number of changes within the company. In addition to last year's decision to spin off the dental product marketing department to a newly formed outside sales organization, the company also sold off its sales unit in Germany. But the biggest change has centered around the way things get done inside the company. While there were some notable holdouts to change -- Lee says the vice-president for sales, who is on the road a lot, is still perimitted to dictate letters -- transformations have occurred almost everywhere else.
For example, the company now has only five secretaries -- less than half the former staff. And with secretarial work so greatly reduced, some of these positions include such functions as assisting part-time in the collections or sales areas.
Lee also feels that his research reports and technical correspondence not only move faster but have improved in quality. "On a five-page document, I can quickly list all that we know about a subject, and by the time I'm at the fourth page I know what the conclusion's going to be," Lee says. "It takes maybe half the time." Perhaps nothing brought his new powers into focus more clearly than when his secretary announced she was quitting. "She told me she had to admit my reports were looking awfully nice, but she couldn't put up with it much longer. She told me I could hire a clerk to do the xeroxing," he says. "I now use about an hour a day of a secretary's time, and I share her with about five others."
Typing himself, without a secretary's help, Lee says he can finish projects when he wants to -- even on nights or weekends at home if he is in the mood. "I can also do financial graphs when I'm ready to do them, rather than typing up requests for my data-processing department." Lee says his growing familiarity with his microcomputer also allows him to squeeze more out of the programmers who work with the company's minicomputer. "When they used to tell me they couldn't do something, I took it at face value," says Lee. "I'm getting better at expressing my needs so that I can get what I want."
Before embarking on his microcomputer odyssey, Lee says, his worst fear was that the company's growth and diversification would draw him more and more into being an administrator, leaving a shrinking amount of time for his research and marketing activities. "I figured," he says, "that if I was going to continue managing my company as it grew, I was going to have to adopt some new management teachniques and maybe become a little less entrepreneurial."
But the fears haven't materialized, much to Lee's delight. Instead, he is convinced that his computer helped him do more than before. "In a small company, you always have to wear lots of hats," Lee comments."But I'm wearing all mine more comfortably."