Back in 1984, when local-area networking was still new, customers asked for recommendations about whom they should have install it. As a test, Levine told telemarketers to ask customers ordering cable if they were interested in having Cabletron do the job. If they said yes, Cabletron sent a project engineer out to meet with them. That particular project engineer also happened to be the chairman of the company, though he didn't advertise it. Benson explored the opportunity incognito, even printing up separate business cards. Some important details were learned along the way: there were few qualified electricians who knew, for instance, that the cable had to be guided away from fluorescent lights, which caused distorting static, and looped carefully so as not to impair the signal. In fiscal 1986 installations made up roughly 10% of sales, which totaled about $4 million. Cable installations now account for 4% of sales.
More important, perhaps, is how Cabletron followed that initial opportunity to its next leap: network-testing devices. When customers called with problems, the only available equipment required shutting down the computer network -- testing customers' patience and often costing them money. If only, Levine thought, Cabletron could find a way to test live networks.
Benson hired a few engineers he knew. Six months later they had developed two products: one tested the cable, the other tested other network equipment. The two devices, which cost roughly $200,000 to produce, represented Cabletron's first foray into manufacturing. Cabletron started by making 5 a month; by 1986 it was up to as many as 50, and testing constituted 15% of revenues. But, insists Levine, "it was because of our next move that we really took off."
Indeed, the company's most dramatic -- and costly -- diversification began with what by now has become a standard pattern: spot a consumer need, get ideas on how to improve on what exists, and then put together enough money and people to do it quickly.
Transceivers, as Benson likes to explain, are the traffic cops of networks, transmitting and receiving signals. Prior to mid-1986 Cabletron worked with a worthy supplier. But then a series of disputes led Levine to conclude that the supplier had become "nonreactive and bureaucratic." "We were getting a lot of friction from our customer base," says Oliver, who designed the company's own transceiver in the spring of 1986.
The best transceivers at that time had power-indication lamps enabling customers to tell whether their network problem could be blamed on the system's power source. Beyond that, though, they were helpless. Why, Oliver wondered, couldn't we incorporate several light-emitting diodes so that users could do more of their own troubleshooting? They could tell at a glance, for instance, whether data packets were colliding. Such a feature would also allow Cabletron to do more problem solving by phone -- a relief to Oliver, who was, until 1987, half of the technical support team. When he came back to them with a prototype, Levine and Benson responded appropriately. "Their eyes lit up," Oliver recalls.
With their go-ahead, Oliver handed out 100 transceivers for testing. "People said, 'This is exactly what we need," recalls Oliver. Between 1987 and 1988, sales shot up more than 160%, from about $9.5 million to almost $25 million. In 1988 the company earned the #7 spot on the Inc. 500, our ranking of the fastest-growing small private companies.
To keep its product line expanding in the right direction, Cabletron exploits the advantages of having a direct-sales force. It has even instituted a special program whereby salespeople hand out forms to customers, who are invited to fax in their product suggestions. They are guaranteed a response within five working days.
Cabletron doesn't waste any time deciding whether to make the products its customers suggest. Some, like a special wall plate that allows customers to plug phone wire in one end and coaxial cable in the other, have gone from consumer suggestion to prototype in just six weeks. "We don't research the hell out of something before we do it," Levine says. "It can happen within 24 hours."
Add a few hours, and the same could be said for new markets. In 1987 Levine was dissatisfied with a consultant Cabletron had hired to beef up business abroad. "Let's go over there and do it until it gets done," Benson suggested. "It can't take longer than a week." Levine and Benson identified a couple of good candidates to run foreign operations and, in June, traveled to the United Kingdom. They hired a person, leased space, and came up with a strategic plan -- all in six days. "Their enthusiasm was a breath of fresh air," says John Casson, head of international operations.
Last spring, Casson approached Levine and Benson about opening a subsidiary in Australia. In the morning he made his case that the market was growing fast enough to support it; that afternoon he got a $1-million commitment.
That makes seven offices that Casson has opened abroad. "I don't stop," says the 34-year-old. "To tell you the truth, I can't stand not doing this."
* * *
It would be wrong to present Bob Levine's need for speed as simply a strategic imperative. As a teenager, he "exercised the engine" of his mother's white Cordoba by zooming along at 101 miles per hour -- or at least that's what the police claimed when they caught up with him.
Levine, it seems, can't get enough. His toughness arises from a need to prove something. There's nothing wrong with that, of course; every founder stamps his or her quirks on the business. It's fair to ask, though, whether Levine might grow increasingly militant as the company becomes harder and harder to push around.
