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A close look at the Inc. 100 not only paints a picture of today's economy but also provides lessons for any company that would prosper within it. The companies on the list span the gamut, covering everything from the bioengineering of chicken eggs to the selling of roasted chickens, but if you talk to enough Inc. 100 CEOs, some rules of thumb emerge:
How counts more than wow. Though most of the 100 companies sell high-tech products, virtually every CEO would argue that his or her company's strategy -- and not the technology itself -- gives that company the competitive edge. "We are not so much technologically superior as technologically targeted," says BitWise Designs (#96) CEO John Botti, who describes "market intersections" as the source of his company's growth.
Naturally, the winning players do several things well. Avid Technology CEO Curt Rawley attributes the company's growth to "how well we balance all the different functions. We take a world-class technology and put it in the hands of people who know how to sell it."
Take what they give you. Many of the companies on the list are capitalizing on markets that have been created by the Big Boys -- be they IBM or the federal government or in some cases past members of the Inc. 100 list. They sell things that augment existing technology, that fill in the holes of the last great new market.
Wellfleet, last year's champion, survives by networking networks -- filling the needs that the networking market (which thrived on markets created by the last great surge) created. PairGain Technologies thrives because the new fiber-optic phone lines cannot be brought into all homes. The company capitalizes on that deficiency by providing the equipment that makes the final link.
Regulatory changes create as much opportunity as technological ones do. As states across the country legalize gambling, players like International Gaming Management (#15) and Sodak Gaming (#18) are booming by providing hardware and managerial skills to casinos and the like. In fact, Video Lottery Technologies (#97) combines high-tech know-how with a killer application: it builds the electronic slot machines dotting the new casinos.
Finally, the great coming regulatory change in health care is sure to propel many more companies onto the list. This year 16 serve the health-care industry; many are basing their strategy on resolving regulatory obstacles for others.
Manage for growth from day one. "Anybody who starts a company has some area of expertise -- whether it's management or technical expertise," says Jerry Fiddler, CEO of Wind River Systems (#58), who started as an engineer who knew how to write code, "and as you grow the business, you find it isn't enough. As a company grows, it needs to become balanced."
Some learned that more quickly than others. At age 23, Wall Data founder John Wall had the concept and the technology for a huge company; he just didn't have the skills. So he turned over the reins the day he started the company, in 1982, to someone else. But Wall Data really took off when Jim Simpson -- who had more than 20 years' experience and had been through growth mode before -- became CEO, in 1988. "Jim was the third CEO -- but in many ways he was the first," says Wall, who's now in charge of product development as part of a rotating set of responsibilities designed to one day give him enough managerial know-how to hold the top position.
On the other hand, long before Lone Star Steakhouse began growing at a five-year, 20,495% clip, CEO Jamie Coulter created the shell of a successful company by assembling a crack management team and bankrolling cash flow from the 100-plus Pizza Hut franchises he owned. "Most companies have a team, the systems, and a concept -- but no capital," Coulter says. "We had a team, systems and procedures, and the capital -- but no executable concept." The team analyzed 50 or 60 companies as possibilities that might be plugged into its pipeline but, Coulter says, "kept its powder dry until it found Lone Star." He attributes the company's sizzle -- and steak -- to its first-class managerial team, which is ready to manage hypergrowth.
How do you make a million dollars? Well, first you take a million dollars. . . For many of these companies, venture capital helped. Fifty-six percent were backed by it. Many, such as PictureTel and Vtel, still have venture capitalists on their board of directors. Monterey Pasta, in fact, took venture-capital backing a step further. Lance Mortensen discovered the company as a venture capitalist and stayed, as it were, for dinner: he helped expand the fresh-pasta mom-and-pop store into a chain of gourmet-pasta outlets by taking over first the chief financial officer's and then the CEO's roles. For such companies, the idea of value-adding venture capitalists is not an oxymoron. Xircom CEO Dirk Gates cites Roger Evans, a venture capitalist who has continued with the company as a board member, as his most important mentor. Vtel CEO Dick Moeller says his venture-capitalist board members help track down and deliver promising sales leads.
