How the events of the past decade have changed the way we think about business
Steve Mariotti -- most of you have never heard of him. Unlike John Sculley, Fred Smith, Bill Gates, David Halberstam, Don Burr, and many of the dozens of other people we've interviewed over the past few months, Mariotti is not famous. It's not likely he'll ever be. But we asked him the question our anniversary issue is built around -- the same question we asked everyone else: "How have the events of the past 10 years changed the way that you personally think about business?" We loved what he said.
Mariotti's decade doesn't look much like the one you read about in The Wall Street Journal. He doesn't discuss the globalization of competition, the fragmentation of markets, the revolution in technology, or the wilting of the Fortune 500. He does deal with the entrepreneurial boom, but in terms of the South Bronx, and 17-year-old kids, and companies that clean houses, sell T-shirts, and produce rap music. For Mariotti the past 10 years have meant a trip from grade-7 financial analyst at Ford Motor Co. to launcher of new businesses at urban public schools. Mariotti's decade doesn't look a lot like Sculley's or Smith's or Burr's.
But that's all right. Because in the end what Mariotti talked about was at the center of everything we heard. He told us how business feels -- how the experience of doing business has a radical effect on what we think of ourselves and the world. He talked about business as a tool, an agent of change in that world. And most of all, he talked about what doing business means -- how today business seems more widely defined than before, is more all-encompassing, harder to segregate from our family lives, community lives, inner lives. How we look to our work for self-esteem and reasons to be hopeful. How we demand that business matter.
In the pages that follow, you'll find a selection of the company builders, policymakers, and professional observers we interviewed. They've wrestled with these themes and others. You'll also find, in our attempt to reprise those 10 years of change: In Search of Excellence coauthor Tom Peters telling how he himself has changed, trading one set of role models for another ("Doubting Thomas," April 1989, [Article link]); a collection of answers to the question INC. staffers are most often asked ("My Favorite Company," [Article link]); the executive lineup we'd put together if we could create our fantasy start-up ("Dream Team," [Article link]); an interview with our pick for Entrepreneur of the Decade ([Article link]); and the story of a real start-up that shows how completely the entrepreneurial world has been transformed ("With a Little Help from His Friends," [Article link]).
We hope you'll find in reading these pieces what we found in doing them: an explicit reminder of the energy, diversity, and imaginative power of the people we write about. -- The Editors
38, cofounder, Ben & Jerry's Homemade Inc.
I'm a lot more aware of the power of business to act as a force for social change now.
When we first started Ben & Jerry's, we had no intention of going into "business" -- we saw it as pretty much a lark. Then there came a time about five years ago when Jerry and I noticed that we were no longer scooping ice-cream cones behind a counter and working in the ice-cream shop, that we were bosses and administrators who were spending a lot of time on the phone and doing paperwork. When we were introduced to people and they asked, what do you do? there came a point when the answer was not, "I'm a homemade ice-cream shop owner," but "I'm a businessman." And I had a hard time mouthing those words.
Jerry and I were businessmen. It was a disheartening realization. Growing up in the 1960s, we felt business was something that tended to exploit the community and its employees in order to achieve maximized financial returns. So when we came to that realization, we came very close to selling the business and getting out of that racket. We had no intention of being businessmen; we wanted to be ice-cream men.
"Ten years ago my business consisted of my partner and me. I was trying to work in a way that fit with how I saw the world and wanted to live. It seemed that a business based on as much personal involvement and lack of hype as ours would never reach a level of national notice. But that didn't matter to me then. And anyway, I was wrong."
-- ANNE ROBINSON, 40, cofounder/president/CEO, Windham Hill Productions Inc.
DAVID L. BIRCH
51, president, Cognetics Inc.; director, MIT's Program on Corporate Change and Job Creation
I think my answers are going to be radically different from everyone else's. Most things that other people would say in starting up a company -- "You never told me that X would be true" -- I knew would be true. I mean, I was starting in 1983, and I'd studied histories of 12 million companies. I knew it would take me 8 or 10 years to build the kind of business I wanted to build. I knew it wouldn't happen fast, that I wasn't going to get rich in a couple of years. I also knew that I wouldn't be able to grow in a straight line. I knew there'd be plateaus, dips, and bobs -- that it would be erratic -- and I was prepared for it. I knew I'd have to work 12 to 14 hours a day. I'd talked to a whole bunch of people, and I knew what they went through. So all the shocks of entrepreneurship that other people aren't prepared for, I was completely prepared for. I told my entire crew when we started that we were off on a 7- to 10-year adventure, that it would take at least that long, and there'd be ups and downs.
And, in fact, everything that I anticipated has happened.
What I had no idea of was, why does all that happen? Why are there these ups and downs? Why is there this erraticism? What do you spend all this time doing? I knew what the outcome would be without knowing the process I would go through to get there. That's what I was totally uninformed about. And knowing that other people had been there didn't let me sleep any better. It's kind of like seeing a bunch of people staggering out of a building all disheveled and having no idea what happened inside.
Despite all my research, I wasn't really prepared for a random assortment of things. My view of selling, for instance, has changed a lot.
I now make very sharp distinctions between marketing and selling, which were totally lost on me when I started. I have developed enormous respect for selling. If anyone comes to me today and says, "Gee, I'd like to help you do strategic thinking and marketing," I say, "See you later." I would have talked seriously to him five years ago. What's the difference? Strategic thinking and marketing mean you don't want to get your hands dirty and sell. Sellers are invaluable. Strategic thinkers are a dime a dozen. I went through a couple of them until I realized how the selling function worked.
That raises the whole question of holding onto people. I guess I've learned the lesson in that Kenny Rogers song, "You've got to know when to hold 'em, know when to fold 'em, know when to walk away, know when to run." That's a very, very useful piece of advice, and I never fully appreciated it. I guess I was much more inclined in the beginning to hold onto people with some notion that somehow, eventually, they would work out. I'm much more inclined now to say, "Let's look at it for six months and if it works, it works, and if it doesn't, let's quit." I think I should've come more quickly to judgments about people than I did.
Another thing I discovered is that profitability is not really a problem -- cash is always the problem. They're very different. In my kind of company, profitability goes all over the place and is really quite manipulatable. If you want to grow, you expense every dollar you've got and keep it working in the company. Cash flow is a constant issue if you don't go for large outside financing, which we've chosen not to do. You've got a fixed payroll. Everything on the expense side is fixed, and everything on the revenue side is variable. Somebody gets sick and doesn't pay up on his receivable, or a salesperson gets lazy and doesn't sell for a couple months. All of a sudden your cash flow goes to hell. You find yourself constantly managing cash flow. It's a major issue.
My personal experience with the company has been more rewarding and more aggravating than I thought it would be. People have grown enormously, and that's been satisfying. Then there's the whole process of building an organization to do something that I, as an individual, cannot do. It's been very rewarding. The frustrations and aggravations are extraordinary as well: all the things you don't know that you've got to figure out. The constant cash-flow struggle that you deal with all the time. The constant worrying about the selling process and how that will work. All of the personal concerns that come with any family or community.
The one thing I hadn't banked on at all is the extent to which a company becomes a community. I thought people would come to work, do their jobs, and go home. I didn't think they'd have babies and get married and get all wrapped up in each other's lives the way they have. I spend a significant amount of my time trying to make the members of the community cooperate with each other. It can be a positive force because it brings a cohesiveness to the firm. But I hadn't thought about how much time I'd have to spend adjudicating the frictions in that system so it remains a positive force -- balancing all the interests. A small company is like a huge extended family, with all its intricacies. One way or another, I spend probably a quarter of my time on this. I hadn't planned on spending one percent. It's way out of proportion relative to my expectations going in. Tom Peters could have told me that a long time ago, right? I just didn't understand exactly what he meant, and now I do.
"Back when I started my company, I really didn't see myself as an entrepreneur. I mean, that word wasn't even popular yet. I don't remember what the language was back then. . . . I was too busy running a company to worry about what to call myself."
-- SANDRA KURTZIG, 42, founder, ASK Computer Systems Inc.
"When I was starting out with VisiCalc, my goal wasn't to grow a business. I just wanted to get the product out and perhaps use it to launch a company. I hadn't given much thought to the future or where it would lead.
What I found out -- and I had no idea of it then -- was how much one individual and his company can do. We've learned in the past decade that small companies can change the world. We've seen them do it."
-- DAN BRICKLIN, 37, cofounder, Software Arts Inc.; developer, VisiCalc, first personal-computer spreadsheet; founder, Software Garden Inc.
48, Emmy Award-winning filmmaker, whose work includes In Search of Excellence and Entrepreneurs
For a long time, I had contempt for business. I was a Harvard Ph.D. in literature, teaching at Princeton, so I thought business was bullshit, and I said so. I now consider business to be a fascinating science, something that's worthy of attention.
I've been in the presence of some powerful and original business thinkers, and I've been very impressed. I have "management" problems with the few people who work for me. Yet these guys run companies with 80,000 people. It's an amazing feat.
From what I have seen, guys like that -- Jobs and Kapor, for instance -- are insulated to a remarkable degree against self-doubt, which is the source of power in many men who are able to control their worlds. Steve Jobs doesn't sit around short-circuiting his effectiveness by wondering if he's on the right course. None of them do. I've longed for that insulation from self-doubt a number of times myself.
They seem to have a highly articulated vision of the world they inhabit and of how they want it to be. I can be thrown deciding what color to paint my house. But this allows them to proceed without any stumbling. I've been in the living quarters of Jobs and Doug Tompkins. These guys always tear down and build right up again; they have the energy to put into realization the smallest detail. It's an important empowerer; it allows you to communicate your vision to everyone around you with maximum efficiency and persuasiveness. There's a lot of power and energy in there.
I'm fascinated by these capacities. I'd probably have directed a feature film by now if I had this kind of indefatigable energy and certain conviction.
62, vice-president, corporate planning, Westinghouse Electric Corp., through December 1987
My whole concept of what strategic management is all about has changed. Ten years ago I believed the key to strategy was tightly reasoned analysis of markets and competitors. My thinking has really been turned on its head. I have come to believe that the entrepreneurial vision, the visionary part of the process, is what's most important.
It's a painful realization. My father spent about 45 years with General Electric, and I was at Westinghouse for 38 years. But my daughter works for Apple Computer. I've been there a couple of times, and I talk with her a great deal. Clearly there was -- and still is -- a strong animating vision at Apple Computer; the people at Apple are trying to change the way people work. You can feel that when you walk through there.
In 1979 we [Westinghouse] became quite active in running a venture capital fund. I also became very heavily involved with a program of beginning new businesses within the corporation, intrapreneuring. I rubbed shoulders with some entrepreneurs, and it dawned on me that what had been missing at Westinghouse was a coherent and workable vision. At a small company, you very seldom saw anything like a comprehensive market analysis -- or any of the things that big companies like to do -- but there was a feeling that this ought to work. People moved on that gut feel. The founder just believed that this was the way the world worked, and he couldn't really understand why the rest of the world didn't see things his way. You could see the way that type of vision, particularly if it was used as the rallying point, affected the decisions, performance, and motivation of the entire organization. You saw people making day-to-day decisions guided by that vision.
I could detect a distinct correlation between this notion of vision and the performance of the 20 or so Westinghouse business units. The good ones had a vision. As for the bad ones, it was hard to tell why the people had come to work in the morning.
This is a radical change in thought, and it's not easy to sell. Just looking at these small companies, there's a fair amount of evidence in front of our eyes. But people don't necessarily believe data. Thirty-five percent of the population believes in astrology, after all. But vision is the linchpin of strategic management; there's no other conclusion you can reach after a while.
I think the benefits of size have been proven overrated, nonexistent, or in many cases, even counterproductive. One of the big challenges for the 1990s will be either to find a rationale for the very large, diversified corporation or abandon it entirely. If my father were alive, I think he would agree with me completely. And if I had it to do all over again, knowing what I know now, I would have gone into business for myself.
"When 17 of us walked out of Intel in 1983 to start Sequent, it was a much different world for entrepreneurs. We made a big splash in the press, which is testimony to how unusual it was then for a company to get started with such a broad and deep team of managers. A smart-team approach isn't so unusual today. The days of the entrepreneur doing it all alone are gone. The business of being an entrepreneur has become very sophisticated."
-- CASEY POWELL, 45, chairman/CEO, Sequent Computer Systems Inc.
41, president, Subway Sandwiches & Salads, a franchised sandwich-shop chain with more than 2,900 units in the United States and Canada; founded company in 1965
I've watched the upstart companies, all very slick and simple, and that has led me to try and decentralize as much as possible. When you manage a lot of retail outlets, the tendency is to go in and tell people what to do. I used that style, and it didn't work very well. There was a lot of tension in the organization. I was giving the franchisees a lot of instructions; "Do these 15 things," I'd say. I would be lucky if 2 of them got done. We couldn't really move the organization.
About six years ago I was in Scotland on a trip with my family, staying at bed-and-breakfasts. At one of them, the people who ran the bed-and-breakfast also ran a farm. One night the husband -- we had hit it off pretty well -- asked if he could show me around the farm. The next morning we went out there and he started explaining all this stuff -- "I grow the grain here and the sheep are there" -- and I'm looking around and I don't see anybody working. So I said, "Who does all this?" He answered, "My brother and I." I thought about it. This guy has a lot of decisions to make: how do you know when you are supposed to take the wheat in? How do you know when it's time to shear the sheep?
So I asked him some questions. Basically, he reads, gets some information from government agents, and makes his own decisions. I realized that if this farmer were part of my franchise system, and he saw a storm coming and wanted to cut the wheat, he'd have to call headquarters and ask permission. We'd probably say, "Listen, we'll have to bring that up at the committee meeting Wednesday. We'll put it on the agenda and let you know." By then, the whole crop would be ruined.
Although I still find a lot to appreciate in focus, I no longer believe that every single Subway outlet has to be absolutely identical. There are differences in markets, and it's perfectly OK for franchisees to reflect those differences. They have to be able to make decisions. Every store has the same core menu, but the franchisees can offer local sandwiches of their own choosing, like pastrami or a peanut-butter-and-jelly sub.
It was a real internal struggle for me to give people this kind of flexibility. A franchisee would call up and say he wanted to offer turkey sandwiches. That led to a lot of discussion in committee meetings, over and over again. Finally, I sat down and said, "What the hell is so sacred about every single store having the same menu? Is it going to ruin the system because a guy slips a turkey sandwich onto the menu in Pittsburgh?"
I watched these very successful companies, and I saw that they did experimentation coupled with decentralization. Companies that kept the "headquarters knows best" mentality weren't moving anywhere. And I wanted to move very, very fast.
45, author, Corporate Cultures; founder/CEO, Selkirk Associates Inc.
A couple of years before I started writing Corporate Cultures, if I'd had any idea I was going to contribute to spawning this huge industry of people who think you can manage culture and therefore affect the world, I'd probably have tried to suppress the book!
People working on culture -- the informal side of a company, the behavior of people in organizations -- well intentioned as they are, see it as an end in itself, rather than as a by-product of productive economic activity. It makes me shudder. I mean, I've had people say, "You can't fire so-and-so. He's important culturally in the place." And I say, "But the guy's a dodo, and he's threatening the livelihood of 5,000 people. He's got to go." It's as if you're doing something sacrilegious when you say that.
The cultural side of organizations is only one aspect you have to be aware of. When push comes to shove, you have a productive economic entity only if -- when you add up the expenses and you add up the revenue -- you end up with a positive total.
That was very much reinforced for me when I started my own company in 1983. In many ways, running that company has been a seminal experience. It has pointed up the glory of making a buck, and my admiration for people who manage to pull that off, however improbably, is greater than ever before. Not so much because of how hard it is to do -- I always knew that -- but because they create jobs, they move society forward. It's so important for the long haul.
We used to spend an awful lot of time at McKinsey talking about how elegant a particular strategy was. Almost to the point where we would denigrate people who were in a dumb industry that just happened to make a lot of money. If it wasn't elegant, something was wrong with it. I don't feel that way now.
At McKinsey, we also gloried in the competitive game, in people who did something really clever to beat out the competition -- not in the end result of the game, which was making money. Now, I have an entirely different viewpoint. Only a damn fool would try to beat out competition -- the purpose of business is to avoid it altogether. Supply a real need that nobody else is supplying. God forbid you should have competition; it only makes it that much harder.
Once I started running Selkirk, my concerns went from a bunch of theoretical concepts to being very practical: what do you have to do this week to make sure that you have positive cash flow at the other end of the week? Before, I would have been more impressed by perceived barriers to change. When people said, "Oh, we can't do that," I would have said, "You're right. Turning this whole business on its ear is unthinkable because of the amount of disruption." Now, I'll say to clients quite routinely, "Look, you've got it wrong. You have to tear this place apart and start all over again, because you're not focused on how to make money in this situation."
Brings it right down to basics, doesn't it?
"I remember I'd been in California some number of months, and I returned to the East Coast and saw some of my old friends, and they said, 'Well, how is it out there?' And I said, 'It's great. They've got this idea that work ought to be fun.' And they all looked at me like I'd lost my mind. And they said, 'How can it be fun? Work's supposed to be productive, not fun. You must have been in the California hot tub too long.'
"What I learned is that when the world takes a tilt from being left brain to right brain, which is what's happening in business today -- where you have to really focus on the creative side of the job if you want to gain productivity -- people are going to be most creative and most productive when they'redoing something that they're really interested in. I mean really interested in. So having fun in not an outrageous idea at all. It's a very sensible one."
-- JOHN SCULLEY, 50, chairman/CEO, Apple Computer Inc.; former president, PepsiCo Foods
36, lecturer, business administration, Harvard Business School; former executive vice-president, Au Bon Pain Co.
Ten years ago I swore there were no absolutes. I used to tell people that any manager who saw the world in blacks and whites was deluding himself; you needed to understand the complexities of why things did or didn't get done, which meant you had to see the shades of gray. But when I went into business, I saw that I was wrong.
In the restaurant business, we had a lot of service problems. Employees would input orders incorrectly and customers would end up with the wrong sandwich. They would be absolutely furious, and if I happened to be there, I'd try to intervene. I'd apologize and explain how the problem occurred. I'd say, "You have to understand, there's a labor shortage. We can't get personnel." But I discovered that customers didn't care how it happened. They wanted things right or they wouldn't be back.
When you permit people to see shades of gray, you provide a whole series of opportunities for excuses as to why something doesn't get done. Our customers didn't want to hear my rationalizations. If I had to come up with a universal law of business, I'd say that every organization needs to have a few critical areas of focus that are not subject to compromise.
ROBERT B. REICH
42, professor, political economy and management, Harvard University; formerly director of policy planning for the Federal Trade Commission
I guess my views have changed less than U.S. business has changed, although there is an irony when I look at the stages of my life.
Thirty-five years ago my first impression of business was of powerful big businesses and of struggling small ones. My father owned a women's clothing shop in the Hudson Valley of New York, and my memories in the 1940s and early '50s were of him coming home late at night, exhausted by how difficult it was to make a go of it. I now understand he was being squeezed on the one hand by the big retailers and on the other by the big clothing manufacturers.
Twenty-five years ago I was a student trying to contain what I considered to be the nonfeasance or malfeasance of U.S. corporations, confronting their insensitivity to civil rights, for instance. Then 15 years ago it was Bob Reich as a regulator, mired in federal red tape and trying to prevent monopolization and fraud by America's larger businesses.
The irony is that for the past 10 years I've spent a large part of my time working with U.S. corporations, trying to help them in the global competitive race. The more significant change is that as I do so, I'm witnessing their gradual demise. As I advise large corporations about how to become more competitive, I sometimes feel as if I'm talking to dinosaurs at the end of their prehistoric evolution -- huge bureaucracies with small brains incapable of adapting.
When I was at the Federal Trade Commission regulating U.S. business, the Fortune 500's share of the U.S. GNP was 55%. Now, it's a hair over 40%. In the mid-'70s, when I directed the policy-planning staff at the FTC, the Fortune 500's share of the civilian labor force was 17% or 18%. Now, it's less than 11%. No new jobs are being created by large U.S. corporations.
So, over these 35 years the tables have turned. The power and dynamism now are found in small business.
The biggest surprise for me on a personal level was to realize one day a few years ago that I myself am a small business: writing, teaching, lecturing, and on the one day a week that Harvard gives me, consulting. What I'm doing now, I think, is representative of another big change, a consequence of the changing nature of U.S. business. Today there are no longer such things as career paths.
Remember the movie The Graduate? Who was that fellow who leaned over and whispered in Dustin Hoffman's ear, "Plastics"? It was possible 20 years ago to envision a career with a particular company, a particular industry, moving step by step up a corporate ladder. It was possible to envision an academic career, staying put for 40 or 50 years. But today most people gain expertise through their working lives by doing a variety of things, sometimes simultaneously. I teach, write, lecture, consult, and pontificate on TV. Some days I do all five. And some days I stay home with my kids. I have ceased thinking of myself as pursuing any specific hierarchical career with a clear path and obviously ascending steps. And I'm not alone. An entire generation of people under age 45 also do a wide variety of things, sometimes changing what they do completely.
And the same is true with regard to the structure of the economy. High-volume, standardized products, the large industries of the past that were clearly delineated -- autos, steel, textiles, chemicals -- aren't coming back. Industries in the future won't have clear borders, just like jobs won't have clear pathways. In fact, the whole notion of an industry is itself anachronistic.
In 10 years' time, I expect I'll be doing a combination of things, as I do now. The modern career is a sequence of puzzles or of problems that one puzzles over. It's just hard to forecast what those puzzles will be 10 years from now.
"From time to time I see a bit of small-business revisionism on Capitol Hill. We run into two types of responses. One is, we've already done something for you. Why do you need this? The other is, you really don't deserve this. You're asking too much. I don't think very many representatives would openly say that, but priorities do ebb and flow. The small-business community has to make its arguments a bit more creatively than it did 10 years ago. It has to show that it's got political muscle, that it can focus political attention on various issues. Up until now you could just wave the small-business flag, and people would salute."
-- FRANK S. SWAIN, 38, chief counsel for advocacy, U.S. Small Business Administratio
JAMES J. BLANCHARD
46, Democratic governor of Michiga
My lifelong goal was to be a U.S. congressman, a position I was elected to at age 32. That was just when we had the shaking out, the downsizing, the incredibly difficult times for the U.S. auto industry, and I ended up being the author of the Chrysler rescue. It was an uphill battle. When it was over -- after I had worked with the big companies, the banks, the dealership network, Congress, the White House, the Treasury, and of course the United Auto Workers -- I said, I hope we don't have any more of these. If I had wanted to work for the auto companies, I would have gone to work for the auto companies.
After the Chrysler rescue, I was selected chairman of the Economic Stabilization Committee in Congress. I decided to launch a yearlong set of hearings -- no bills, just hearings -- on the dynamics of the U.S. economy. At that time everybody was debating industrial policy and wondering how many more companies we would have to bail out. But I quickly found that the whole clamor for industrial policy was almost irrelevant to the growing sectors of the economy. As David Birch and others were saying, what we had to look at was the rate of business growth. You don't want to be developing policies designed for the Fortune 500 when the rest of the world is providing most of the jobs.
I was lucky to have had that experience as I moved into the governor's office in Michigan, a state that wasn't particularly conscious of these trends. It allowed me to see the forest through the trees here: to realize that while the Dow Chemicals, Upjohns, Kelloggs, Fords, and K marts were extremely important to Michigan, it would be a big mistake to ignore the other segments. So I've been working with smaller companies for six years. And I can tell you that entrepreneurship is