A profile of the Inc. 500's number one company featuring how it achieved the title by working with larger companies.
Object Design was far from alone in its new market niche. To pull ahead of the pack, it focused single-mindedly on capturing the attention of some of America's best-known corporations
Part of the allure of the Inc. 500 comes from the vicarious pleasure of trying to deconstruct, after the fact, just what made these premier growing companies break out so fast. While there may be just tidal shifts in the overall list from year to year, it's a fact that each new number one company manages to wend its way to the top spot by an entirely different strategy from those of its predecessors.
For instance, last year's number one company, Drypers Corp., found growth in being a cheaper alternative in the diaper industry, putting up its dukes, and delivering Procter & Gamble a poke in the knee in the process.
Kingston Technology Corp., a manufacturer of gadgets that boost computer memory and processing power, sprinted not just to the lead position of 1992's Inc. 500 list but to the top of its industry sector as well by being faster to market with new products (and faster with customers' orders) than its rivals.
Gateway 2000, a designer and distributor of IBM-compatible computers and 1991's winner, was one of the shrewder number one companies. It owed its growth spurt in the crowded but expanding personal-computer industry to an amalgam of clever product design, competitive pricing, and from-the-gut advertising that played on the company's South Dakota Podunk persona.
And Cogentrix Inc., the top company in both 1990 and 1989, carved out its unprecedented consecutive number one spots by taking a perennial demand (electricity) and an oft-disregarded source (coal) and combining the two with new production and delivery plans (operate cogen-eration plants and sell power directly to utilities and manufacturers).
This year's winner, Object Design Inc., most closely resembles Kingston Technology in its climb to the top. Like Kingston, it's in a field of computer technology that can make you weep with bafflement if you're not part of the industry: Object Design builds software for object-database management. But the concept is easy to grasp: imagine computer screens full of photos and diagrams that a user can scroll through. Object Design sells the software that lets program designers build databases for those nontext images. In fact, Object Design's entire growth, its complete raison d'être for all six of its years, has rested on one product, a program called ObjectStore.
The young company's stature as a powerhouse in its field comes in part from the raw dominance of its technology over others, and in part from the creativity the company has shown in getting that technology into the hands of customers. As important, Object Design and its $3,500-and-up software program are in a niche of the market that is currently being touted as one of the hottest in computing.
"We haven't seen a small market so overcrowded since the early 1980s, when an excess of venture-capital enthusiasm created some 300 personal computer and workstation companies," effused the industry newsletter ComputerLetter this past spring. Venture firms have invested some $100 million in object-database software companies, which are vying for both legitimacy and market share in the industry. And according to the high-tech market-research group International Data Corp., all that money is going to a market that is only on the verge of blossoming: total industry sales in 1992 were just $36 million but more than doubled, to $76 million, in 1993. Many people are estimating that the market will reach $1.5 billion by 1998.
Object Design, with 1993 revenues of $24.5 million, is the market-revenue leader of the moment. With 253 employees (170 of them at the main office, in Burlington, Mass., and the rest at 18 offices around the country and the world, including Japan, Germany, the United Kingdom, France, and Australia), this year's number one Inc. 500 company is determined to stay at the head of the pack.
"This has not been an entirely friendly battle," says Ken Marshall, Object Design's 41-year-old president and CEO, who joined the start-up in January 1990, a year and a half after its founding. He knows from battles: he came from Oracle, a major database developer (and a member of the Inc. 500 Classes of '83, '84, and '85), where he'd been group vice-president for sales and operations for the eastern half of the United States, helping usher in Oracle's own growth in the late 1980s from $25 million to $1 billion.
Marshall walked into another intense situation. "Object Design pulled out to a very early lead in the marketplace," he says, "probably earlier than has happened in a lot of markets where you've got five or six new companies trying to position themselves at the top. We've become the enemy for every other company in the market because we're approaching 40%-plus market share, and they would very much like to see a more level playing field. As a result, everyone's got their guns pointed at us."
If Marshall's perceptions of animosity and envy seem extreme, think about it this way: Texas Instruments ($7.4 billion) has teamed up with Microsoft ($3.8 billion) to develop object-database technology. In the head-to-head battle IBM ($64.5 billion) two years ago picked little Object Design (then $0.0106 billion) to be its partner in the same task. For a competitor, what's not to hate?
