It was a classic EDS operation, organized like a commando raid and executed with speed and precision. Arriving home, Perot went to his office and started working the phones, pulling key employees from projects around the country. "Pack your bags," they were told, "we're going to war." Within days, the team was assembled and the strategy set. They'd fight in the Austin statehouse, organizing a massive lobbying campaign to reopen the competition. They'd fight in the newspapers; Perot had connections there, too. They would dig into the motives and methods of every state official who might have had a hand in the contract award, looking for flaws in performance, ethical lapses, or personal peccadilloes. Then they'd work backward, digging into every contract their competitor had won, anywhere in the country, ever.
For the next four months, the EDS team searched for the smoking gun. "I don't like conflict," Perot told the press, but this was a question of principle. "Good guys don't necessarily finish first, and the world is not a fair place." Private detectives were hired and wired for sound; would-be confidential sources were secretly videotaped, then convinced to step forward on the basis of what they'd revealed. Shortly before the reopened contract was to be awarded, television viewers in Texas sat spellbound by an investigation of "Medicaid: The Finagle Factor." Much of the special report contrasted EDS's sophisticated mainframe operation, satisfied clients, and low costs with the competitor's operation -- a jumble of paper, dismaying honest doctors and enriching the Medicaid mills. The report probed the contract-award process, too, exposing the methods of state officials in Austin as slipshod at best. But the bombshell came near the end. In videotaped interviews, former officials in New York and California alleged they'd been offered high-paying jobs to swing contracts in the competitor's favor, a clear violation of conflict-of-interest laws.
"It was Perot as classic SOB," one source says. "He came screaming out of the sky, talons bared, and ripped their eyes out."
Vindicated, he sent his smoking gun to law-enforcement officers and government officials as well as the press. "It was real hardball," recalls Steve McClellan, the Merrill Lynch analyst who may be the most widely quoted Perot watcher in America. "The competitor disappeared with a whimper."
From such battles, the EDS legend was born. "EDS was like a tank," says one veteran. "Put it in low gear, and it could run over anything."
"Our gunner's command was simple," another agrees. "Ready, aim, fire, fire, fire, fire, fire, fire."
But in the sound and fury of the Texas Medicaid battle, it was easy to overlook a more subtle, though equally important, message. Beyond Perot's fierce competitiveness, the operation demonstrated the power of his organization -- flexible enough to restructure in a few days; deep enough to know that each lieutenant called to headquarters could be replaced, instantly, with no noticeable effect on the customer or the troops in the field. The company had been built as a shifting collection of loose teams, assembled and dismantled as challenges were overcome. Their strength came from their ability to focus, and their loyalty to a shared cause.
And therein lies the irony of the Perot legend. From the Texas Medicaid battle to the Iran rescue mission, its glitter was constantly obscuring the one element that made it possible: the organization.
When you ask Perot how he did it -- where his ideas about company building came from -- he talks about his childhood in Texarkana, Tex., during the Great Depression, and the values he learned from his parents. He may also mention the business education he received at the age of 12, selling newspapers in poor neighborhoods where no one else was willing to go. Leadership, he says, was something he learned at the Naval Academy. As for his technical-training programs and philosophies, he credits those to IBM, where he went to work after his four years at sea.
Then he says, "So where does it come from? It's just a blend of all that, I guess. You see, I don't know where it comes from, but everybody asks me, so I try to create a story."
There was, indeed, no management blueprint or grand strategy for EDS. It began like most great companies: as an idea that sounded ridiculous to almost everyone who heard it. "People ask me how I made so much money," Perot says. "I was stuck with it." A star salesman for IBM, he had come up with the concept of selling customers computer services along with their hardware. "Everybody thought this was a really terrible idea. IBM heard me all the way to corporate headquarters and didn't think it was any good. I would have welcomed venture capital investors. Nobody would put in a penny. I was literally stuck with it."
The company was officially launched on Perot's 32d birthday, June 27, 1962. It got going with the help of Herman Lay, who not only became its first customer but agreed to pay in advance. What really fueled its growth, however, was the passage of national Medicare legislation in 1965, which opened up a whole new business of administering claims. Over the next 19 years, EDS grew to $947 million in revenues and 14,000 employees. Perot stayed with it, building the organization as he went.
Like any successful entrepreneur, he operated on instinct, by trial and error, figuring it out along the way. In recalling his experiences, he refers constantly to his mistakes. "When I started EDS, I didn't know anything about stock. I owned the whole company. As we went along, I just kept issuing stock to people who did a great job. I didn't realize how complicated that would get after we went public, because then the reward was controlled by the market price of the stock. So it became much more difficult to recognize and reward these bright, talented, able young people who were just coming up, and I didn't foresee that. That's probably the most serious mistake I ever made in the area of recognizing people.
