McGurl remembers his very first sale, to a garment manufacturer called Rosecrest Manufacturing, in Boston, in 1963. "The whole sale was understanding the cut-and-sold report and understanding the value of that information to management and then being able to show them how the computer could provide that information so they could make better use of their materials to produce better sportswear," he says.
That's precisely how he wants his salespeople to think today. "We are a solutions sell. Our application is check-disbursement technology. We are selling a better way to make payments and prevent check fraud," McGurl says. "Bottomline is successful because the application-selling idea is part of our sales team. That is how we train people to sell."
Bottomline drills into its sales force the story that the company's solution is "disbursement technology" -- hardware and software that make it easier and safer for companies to pay for people and things. The salespeople are given extensive product training so they can determine just what configuration would be appropriate to each customer -- as opposed to pushing the same product to everyone. "For each client we go out and figure out the requirements and then design a solution," McGurl says.
"I think IBM forgot that the users were most important. They thought they could dictate to people what they would use," says Dave Wenz, cofounder of Showcase Corp., in Rochester, Minn. Wenz is a former true Blue fellow who has thrived by building a company in a niche IBM defiantly neglected.
Wenz joined IBM in 1967, right out of college, and spent the next 21 and a half years with the company. Along the way he gained more patents and inventions than any previous programmer in company history. In his last IBM position, he worked on a new user interface for the AS/400 line. The interface would make the terminals more interactive, enabling the system to accommodate PCs and generally be more user-friendly. He thought it was a great idea, with one flaw. "IBM was determined to build the new user interface based on OS/2 [IBM's operating system]," says Wenz. But he took what amounted to a heretical position: "I said Microsoft Windows is going to win this war, and not OS/2."
Wenz encountered such opposition from company loyalists that he quit in January 1989 to build a company dedicated to opening up the AS/400 interface to other products. In 1991 Showcase released its first product, Showcase Vista, which permits the AS/400 line to accommodate computers using other operating systems. Its success was instantaneous. The company employs 95 now, did $10 million worth of business last year, and is growing by about 50% annually, says Wenz.
For Wenz and others, listening to customers means more than listening to the market; it means meeting with and responding to key customers -- another habit successful company builders have taken from IBM. Wenz, for instance, pays attention to a client advisory board comprising key customers who meet with the company every six months. And Coles of Timecorp and Bottomline's McGurl swear by similar processes.
Perhaps the most extreme example of customer-focused behavior is Steve Petracca, a 12-year IBM veteran who started Reply Corp. in 1989 to build clones of PS/2 (a popular IBM PC). Though in 1992 the company sold $37 million worth of computers, it lost $5 million. And when Compaq set off a vicious industry price war, Petracca realized he wouldn't be able to match the competition's price cuts. "We concluded we had to get out of the PC business," he says. In October 1992 the company laid off 40 of its 100 employees and set in place an entirely new strategy. Petracca went to his customers to ask how Reply should reinvent itself. After conducting an elaborate survey of the company's customer base, in January 1993 Reply successfully introduced motherboards and upgrades for the PS/2 installed base, and the company again closed the year with revenues of $37 million. But this time it earned a $3-million profit. Petracca projects that sales will reach $42 million this year and grow another 50% the next, and he plans to take his company public.
* * *
Petracca believes that utterly abandoning a product in favor of something customers were asking for was a tactic he took away from his years at IBM, and something, ironically, that IBM was unable to accomplish when it most needed to. "At IBM we were so intent that we knew the right architecture that we didn't listen to the customers," he says. The lessons about what to adopt and what to avoid in building a successful company were not lost on him.
Petracca sums up what his IBM experience taught him to eschew with one simple symbolic rule: "We don't do color charts at Reply." At IBM he came to oversee 10 employees, each earning $75,000 a year for creating rip-roaring full-color charts for executives to wield at their meetings. "We would get into meetings and spend more time arguing over whether to use pie charts or bar charts than over the content of the data," he says, still horrified. It's not merely the charts but the accompanying mentality that he has rejected. "IBM guys like to build big organizations," Petracca says. He designed Reply to be lean and flexible.
Tomima Edmark, CEO of TopsyTail Co., has taken that attitude to the limit. Since founding her company with her $25,000 severance package from IBM, in 1992, she has sold more than 5 million TopsyTails, the $20 plastic hair tools made famous through national infomercials. She credits eight and a half years of company politics at IBM with teaching her that "organizations need to be very lean -- very clean -- very easy to communicate with." Her company has but four employees, who work in a bull pen. All other work is outsourced. Employees' business cards list only name and company -- no title. "The environment should be designed to maximize the company's output and not to maximize everybody's egos," Edmark says.
Yet Edmark feels she learned more at IBM about how to run a company than how not to. And, like most entrepreneurial IBM refugees, she still harbors a secret wish that IBM would simply go back to its roots. As Dave Wenz says, "Nobody that's worked for IBM for 20 years bears a grudge. I really believe that for many years they were the best company in the world. Who knows? They could be again. Frankly, I hope so."
