Mission Improbable

How Mary Ann Byrnes taught her employees -- longtime government-contract engineers -- to compete as entrepreneurs

One Wednesday afternoon in December 1994, Mary Ann Byrnes stood before a roomful of engineers. Most of them had spent the largest part of their professional lives working for the huge California-based defense contractor that had just jettisoned them and the project they had been working on. Suddenly, they had to become civilian engineers, building and selling a product for the commercial market. The small blond woman facing them had just been introduced as the person who would lead the change, and a lot of them were skeptical. Byrnes herself was nervous.

Today amid the sleek new black furniture in Byrnes's corner office stands an old vinyl-covered chair with a rip in its pea green seat. It's there to remind the CEO of Corsair Communications Inc. of the difference between the Palo Alto company as it is now and as it was that Wednesday afternoon. For all the changes that time and Byrnes have wrought at Corsair over the past 20 months, the single most significant is the change in the organization's culture -- the work environment that is Corsair's most potent competitive weapon.

The symbolic chair used to belong to ESL, a top-secret division of defense contractor TRW, located in Sunnyvale, Calif. Like defense contractors everywhere, TRW had to find commercial applications for some of its military products. One likely prospect was the technology ESL engineers had developed for identifying the source of electronic transmissions, which could pinpoint, for instance, the particular Soviet submarine they came from. That technology also had significant commercial potential for inhibiting fraudulent cellular-telephone use. Just as no two military devices emit precisely the same electronic fingerprint, neither do any two cellular phones -- not even identical models from the same manufacturer. A device that could distinguish the cell phones of real subscribers from those programmed with pirated codes -- and then quickly cut off the fraudulent calls -- would be worth a lot to cellular-service providers, which were losing more than $1 billion a year to code piracy.

TRW's managers knew the commercial business opportunity was there. They also knew that ESL, which operated well in the world of defense contracting, was not the organization to pursue it. So TRW began to shop the technology around, and venture capitalist Kevin Compton, a partner at Kleiner Perkins Caufield & Byers, in Menlo Park, Calif., quickly bought into the right to spin off a piece of ESL as a stand-alone company, which he named Corsair. Corsair would be owned 20% by TRW, 60% by Kleiner Perkins and other investors, and -- significantly -- 20% by its employees. Compton recruited Byrnes, then 38, to build the new business. After more than a decade of working in strategy, operations, sales, and marketing for companies like PacTel and Cellular One, Byrnes had regained her hunger for the excitement she'd tasted while launching and briefly running her own company when she was in her twenties, before she got her Harvard M.B.A.

A typical start-up? Not at all, not even by Silicon Valley standards. Corsair was a spin-off, so some of the challenges that confronted Byrnes and Compton were different from those confronting start-up entrepreneurs. But instructive? You bet, because Byrnes's experience at Corsair shines a bright light on a crucial aspect of every company builder's task: creating the organizational culture.

In a sense, creating Corsair's culture has been Byrnes's only job for the past 20 months. The raw ingredients for building the business were already in place. For instance, Corsair had plenty of money to get itself rolling; Kleiner Perkins, TRW, and the other investors had stoked its treasury with about $10 million. Corsair already had a product, even if it was still a large boxy contraption that performed only about half as well as it would eventually have to. The company already had a customer, too; in fact, it had a multimillion-dollar contract with a cellular carrier. And the company had the talent it needed to refine and improve its product -- a pool of about 60 ESL engineers among whom Byrnes could choose. In other words, everything Byrnes needed to build a company was in place when she joined the organization -- everything, that is, but the glue that would hold it together. What kind of place was Corsair going to be? That's really all she had to figure out. "We had some of the smartest scientists in the world," says Byrnes. "My job was to make them productive, to help them perfect in a short time what they had not been able to deliver before."

Company culture used to be a squishy concept more written about than understood. When the first mentions of company culture appeared in Inc., back in the early 1980s, they were more about workstyle than work substance: jeans in the office, Friday beer blasts, meetings at which folks sat cross-legged on the floor. Big companies talked about changing their cultures, too. They tried quality circles. Men at IBM switched to blue and then patterned shirts. So? So what?

Back then it was easy to mistake that kind of change as superficial -- a fad or a gimmick. But did it mean anything in the context of business? It turns out that it meant quite a lot. Beer blasts, blue shirts, and other workstyle innovations were early signs that as the nature of work was changing under the influence of information technology, so, too, was the environment in which the work was done. That environment is a company's culture -- the water its workers and managers swim in, the conditions that determine who does what and how well. ESL engineers had been swimming in a small, translucent fish tank, each schooling with his own kind.

ESL wasn't a bad place to work, the TRW veterans at Corsair say; it was comfortable. Mike McKinley says his was a "10%-of-the-day kind of job. I'd go to meetings, and they'd decide I should change this to four watts instead of three, and I'd write it down, and that was that. Then I'd do a little analysis here and there, and my boss was just ecstatic." People worked on assigned tasks following established procedures to meet specifications prescribed in a contract that typically stretched over two or three years. Most ESL employees never talked to a customer. Who, after all, in the amorphous world of Pentagon procurement, would that be? Engineers at TRW got paid for showing up and doing their jobs. They got kudos for doing their jobs well. But it was no one's job to get a working product developed, built, and out the door. Competition wasn't even an issue, since they didn't go to work until a contract was signed, after any competition was over.

Like many of his other TRW colleagues, McKinley expected to stay with the company until he retired. At meetings with ESL personnel before the spin-off, Kevin Compton recalls, most of the questions he got concerned benefits packages and accrued vacation days. "The thing that scared me the most," says Compton, now the chairman and self-proclaimed chief agitator of the Corsair board, "was whether that group of people could make the culture shift that was ahead."

The culture had to change, because the new company had a different job. ESL had been fulfilling government contracts; Corsair would have to deliver real products to real customers ahead of real competitors. According to Compton, the new culture would have to communicate a sense of community among employees in place of the functional isolation people experienced at ESL. It would have to encourage a customer focus. It would have to induce a sense of urgency. And it would have to endow employees with a feeling of ownership of the enterprise.