Second Thoughts on Growth

Analysis of a new generation of business owners, and growing a company in light of the last decade.

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Second Thoughtson GrowthA new generation of owners are building better, more durable companies bychallenging everything the last decade taught us about fast growth

If you were to name an opening day for the last decade's economy, a moment that seemed to crystallize the business world's dreams and ambitions for the years to follow, you might choose December 12, 1980. It was the day Apple Computer went public.

Not that the offering itself was so dramatic. The shares rose only 33% in the course of trading, a far cry from the crazy first-day doubling of Genentech's stock, a couple of months earlier. But who cared? The drama this time lay in the company, not in the market. Wall Street was putting its imprimatur on the two kids from California and, in the process, was making them not just multimillionaires but symbols of hope, of opportunity, of a new and rosier future.

Back then, you may remember, optimism was hard to come by. Inflation was well into double digits. The ayatollah had just overthrown the shah of Iran, and the resulting turmoil in the oil fields had sent energy prices soaring for the second time in six years. Interest rates were skyrocketing, too; the prime peaked in 1980 at about 20%. Jimmy Carter knew there was something wrong -- "The erosion of our confidence in the future is threatening to destroy the social and political fabric of America," he had told us -- but evidently didn't know what to do about it. Ronald Reagan, elected in November, was an unknown quantity, inspiring to some but frightening to others. And now -- here was this company, founded only a few years earlier, arousing the markets from their 1970s torpor. Unlike Genentech, Apple was more than a technological prayer and a promise; it was a company already topping $100 million in sales and making money besides. Maybe more important, it seemed a harbinger of things to come. Wall Street graybeards had seen plenty of hot new issues (though this one, they told one another knowingly, was the biggest since the Communications Satellite Corp.'s IPO, back in '64). But how many times had they sniffed a whole new industry in the making -- an industry with seemingly revolutionary technology, with opportunities not just for manufacturers like Apple but for parts makers, distributors, retailers, programmers, repair people, and so on? Optimism, hell. This had all the earmarks of a gold rush. Climb aboard or be left in the dust. Twenty-five-year-old Steve Jobs, after the initial public offering, was suddenly worth $165 million. There had to be more where that came from.

Wall Street was right, of course. Then again, Wall Street didn't know the half of what the ensuing decade would bring.

It was on target about the birth of a new industry. New industries, really. Personal computers and everything related to them, sure. But also video games, automated teller machines, engineering workstations, credit-card readers, smart telephones, electronic appliance controls, and a thousand other applications of the incredible shrinking microprocessor. Technology ventures proliferated. "The number of new companies being formed is unprecedented," wrote an incredulous Business Week in 1982. "The computer rookies are turning the industry upside down." And oh, how they grew. Apple reached $1 billion in sales in seven years. Compaq Computer, founded in 1982, took only five. Conner Peripherals, started in 1985, also did it in five.

Yet there was more -- much more -- to this particular entrepreneurial revolution. Technology companies might be making the biggest waves, both in the press and on Wall Street. But innovation and entrepreneurship were suddenly flourishing all over the economic landscape. A host of specialty retailers began carving up markets once dominated by the likes of Sears. A new generation of small manufacturers capitalized on corporate demands for high-quality parts delivered just in time. Astute company builders invented new services -- asbestos removal, telecommunications management -- and revitalized old ones, such as temporary personnel. These companies multiplied and grew as rapidly as their high-tech counterparts. Inc. began its annual listing of the nation's 500 fastest-growing private companies in 1982. Typically, only 20% to 25% of each year's list was in computer-related businesses.

The public, for much of the decade, was hypnotized by the megadeals of Wall Street -- the hostile takeovers and big-buck buyouts. Businesspeople, more and more, were mesmerized by the new companies. Look at that woman Debbi Fields, starting up a national company to sell nothing but freshly baked cookies! Look at airline entrepreneur Edward Beauvais, schoolboy software genius Bill Gates, manufacturing wizard Jack Stack. Where was the limit? People were making money -- fortunes -- in soft drinks as well as software, telemarketing as well as telecommunications. They even were having a good time doing it. Silicon Valley companies may have pioneered the new "workstyle," a rubric subsuming everything from Friday beer blasts to employee stock ownership plans, but the best new businesses all over the country seemed to be picking up on the valley's we're-all-in-this-together approach to management. They were reshaping the corporation while they reshaped the marketplace.

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