INC.: Obviously, not so great.
KAHN: As a matter of fact, the summer quarter was definitely slow, to the point where I decided we'd have to restructure the company to run more efficiently. So there was some importance to having read that article, because it put in mind the worry that maybe something should be done quickly. I realized after talking to the office that as soon as I got to Honolulu, I, too, was going to have to fly back.
INC.: And terminate 13% of your work force.
KAHN: That was when it hit me -- hey, this is not a game, this is real serious. Numbers don't care about human problems. Numbers mean whether you're going to be able to meet payroll or you're going to be able to launch a product or even if you're going to be able to stay in business. What happened was we went from $31 million to $82 million in revenues in a single year, with basically the same structure. But we weren't paying attention to structure, we were just meeting demand. We kept hiring more people and buying more computers for those people. Then July, August, September were slow, and we realized we had to do something.
INC.: Why a whole reorganization, while others in the industry simply cut back personnel?
KAHN: Hey, everybody had hiccups in that period. We were the only ones who called it what it was -- a reorganization. You can't merely lay off people. In a growing company, fewer people doing the same jobs doesn't work. We had to consider ways to restructure dramatically -- whether to farm out production, for example, or advertising, which had always been in-house. It was like driving without seat belts and passing an accident on the side of the road, and seeing people put into an ambulance. Suddenly you clip your seat belt on and you drive more carefully. One thing I decided was I would like marketing, sales, and product management to report to a single person, because I didn't want to be the guy to run all three things. So we began recruiting.
INC.: Why was it apparently so hard for you to delegate responsibility?
KAHN: Actually, I am a pretty good delegator. Some of those problems arose because I delegated too much too early, and trusted a team of management that didn't perform its job well. Delegation has to do more -- in my case, anyway -- with the people I delegate to, rather than what it is I delegate. Keeping the balance between taking risks and running the day-to-day operations of the company is not easy. You rapidly find out that "trained, seasoned professionals" make OK decisions, but they can be dangerous, because OK decisions end up turning the company into an OK -- an average -- company.
INC.: Part of the pleasure of working at Borland is its giant-killing attitude, as it were. As we've just seen, that's also what makes it hazardous.
KAHN: A company that doesn't take risks is not going to lose many battles, but it's not going to win many, either. Sometimes you have to spend money you don't have. The introduction of Quattro was a huge risk. We bet a lot of the company on it, and if it hadn't sold we would have been in trouble. But if you think too carefully about building a business, you make decisions that are too rational. In the beginning of a company, something out of the ordinary has to happen. I cannot think of many venture-backed companies that have succeeded in which there wasn't something crazy at some early point, something not normal in a business sense. We're not a venture-backed company, but we've acquired two of them, and can see all this. Take Analytica: more than $8 million in venture capital, and everything was done right from a business standpoint. The ratios were there, accounting was clean, the offices were neat, the furniture was beautiful. The only thing that wasn't there was something that professional managers would no doubt radically have disapproved of -- the spark that would have made it explode.
INC.: Speaking of which, you've described the software business as thermonuclear war. Isn't that putting it rather melodramatically?
KAHN: What I was saying is that if business is war, then high-tech business is global thermonuclear war. Nobody dies, but that's what it is -- a nasty struggle for territory. There are only so many customers who are going to buy products, and you're fighting to get them on your side, and you'd better have something powerful to fight with, especially if the guys up ahead are 10 times bigger.
INC.: And could easily crush you by, say, a price squeeze.
KAHN: Well, they can't, because any dollar they try to squeeze us out with comes off their bottom line. They don't have the margins. If Lotus went down 30% in price, say, they'd probably lose money.
INC.: Oh? Why?
KAHN: It boils down to different corporate philosophies. We know how to do things simply. Where we have 12 people working in R&D on spreadsheets, they have more than a hundred. When I take a plane, I travel coach.
INC.: It's no secret that ever since your own spreadsheet product came out, you've relished goading Lotus -- especially Jim Manzi, its CEO. The recent verbal exchange covered by The Wall Street Journal is a good example.
KAHN: In that case, he really stuck his foot in his mouth. I was just pointing out the repeated delay of their new spreadsheet -- how else would you talk about a competitor to a reporter? His answer was, "Oh, yeah, well, Lotus's bill for toilet paper will be bigger than all of Borland's sales," or something like that. You know what the most popular brand of toilet paper is in France? Lotus! When I read the article, I was in Paris, and Paris was covered with billboards showing a roll of Lotus toilet paper coming down from the sky. I had the laugh of my life.
INC.: So you admit that you're a tease at heart?
KAHN: Yes, a tease of the establishment.
INC.: But you're done with that?
KAHN: I'd love to still do it, only I realize now I'm part of the establishment. How can you be developing products with IBM and claim that you're not part of the establishment?
