INC.: Have you made any big mistakes when setting up new ventures?
McGOVERN: Sure, but most of the mistakes we've made with new products have come from responding to what we saw as the competitive situation, rather than attending to the customers' needs. For example, we launched a PC Jr. magazine a few years ago primarily because our competitors were all trying to launch one. Everyone said, "We've got to get in there right away or we'll lose the market.'
Of course, there was no market. The product hadn't even been announced yet. But along with four other publishers we went ahead anyway, the product flopped, and we all lost millions of dollars. We should have stuck to our style, which is to find people with a need and create a product to fill that need.
INC.: But when you discern that need, don't you have to move impossibly fast?
McGOVERN: We can move very quickly. Computerworld was launched in three weeks. We launched one publication in Europe in three days. That's the great advantage of our decentralized entrepreneurial style: when the opportunity is there, we can move very fast. I keep chastising people for letting the competition set the rules. If you focus on discovering the needs of people who are going to buy your services, you can almost ignore the competition. It's clearly better to find a big new opportunity and be 100% of the market, even if, as inevitably happens, you end up having to give up some piece of it to the people who come in after you.
INC.: Why did you decide to grow your company overseas in the first place?
McGOVERN: Well, there was some idealism and some practicality in that decision. We believed, idealistically, that technology was going to improve the quality of life of people around the world, and we wanted to be a part of that. On the practical side, the fact was that in 1970 the United States had about 65% of the world market in information-handling technology. By the year 1990, however, our research showed that it would be down to 40%. By the year 2000, it would be only 20%. One of our driving forces is to keep growing in new countries so that we'll maintain at least 90% coverage of the world market.
INC.: Speaking more generally now, I wonder whether your policy of creating autonomous units of responsibility would work for a three-product business that does, say, $20 million a year?
McGOVERN: Sure. I think there's a lot of value in organizing any business in small units. We have 65 companies, which means that our 3,000 people work in companies of fewer than 50 people each. Any manager can easily know the names and distinctive performances of 50 people, and they can know him. That way everybody feels close to the business and its mission.
INC.: What do you do about empire builders?
McGOVERN: One of my jobs in the company is to keep my machete handy. When a company gets to 200 or 300 people, that's the time to break it up. I might get four definable business units out of it, and four company presidents where there were four department heads. All the energy and faster decision making of a small company are thus preserved, and all the psychic income.
There's also a far greater surface area exposed to the demands of the customer. I believe that this is the organizational style of the future: a network of small companies affiliated through shared goals and values, and a common sensitivity to the needs of the customer.
INC.: Do you have any evidence of this?
McGOVERN: I can't show you any quantitative surveys, if that's what you mean, but it stands to reason. The crucial thing in business is imagination and initiative, and in large bureaucratic organizations people always have a tendency to censor their own imaginations and to balk at taking the initiative. They're afraid they can't sell the idea to the boss, even though they know they can sell it to the customer. Our philosophy has always been, if the market wants it, you can do it.
INC.: What's the downside, if any, to this policy?
McGOVERN: You give up some economies of scale. People see the same opportunity and reach for it, so there is overlap in some products.
INC.: In other words, waste.
McGOVERN: Yes. But as I travel around the world I am constantly struck by the fact that the most free and most decentralized markets are also the most efficient at producing wealth. The vast wealth of Japanese corporations, for example, comes out of those neighborhoods in Tokyo where there are thousands of little shops, all selling computers, audiocassette players, and things like that. Then I go to the socialist countries. Here's a wonderfully organized, centralized economy, and it's dead. They're not creating new products. They're not even fulfilling basic consumer needs. Communism is wonderful in theory, as sharing is wonderful, but the organization required for it goes against human nature. You can't motivate people with the ideal of equal shares for everyone. Everyone wants to express and be recognized for his or her own individual capabilities and contributions.
