FYI: From the editor

In April we held our second annual Inner City 100 dinner, and a memorable one it was. The event, which celebrated the publication of this year's Inner City 100 list (Inc., May 2000), was a star-studded affair designed both to honor the companies on the list and to generate support for the cutting-edge research and mentoring work being done by our partner in the project, Harvard professor Michael Porter's Initiative for a Competitive Inner City (ICIC).

Among those in attendance was basketball legend Earvin "Magic" Johnson, who for the past 13 years has been building his own substantial inner-city business, Magic Johnson Enterprises, and using his fame and fortune to encourage others to do the same. For that, he was presented with ICIC's first National Inner-City Leadership Award, which will be given each year to someone who has made an extraordinary contribution to fostering entrepreneurship and enterprise in America's inner cities.

I had the pleasure of sitting with Johnson at dinner. The talk naturally turned to basketball and business. I commented on the remarkable turnaround of the Los Angeles Lakers this season under the leadership of head coach Phil Jackson, former coach of the Chicago Bulls.

"Jackson is one of the few coaches left in the league who can actually manage the players," Johnson said. "This isn't a new thought, but today's players are uncoachable. All they care about is the money.

"Don't get me wrong. The money was important to the players in the past. But there were other things, too. There was the love of the game. For a lot of players, they really cared about doing well in front of their fans, the hometown people. I'm talking about pride. When the only thing that a young player cares about is the money, everything changes. It makes them uncoachable.

"I see the same thing happening in business," Johnson went on, "and I'm not just talking about people at the top. I see lots of young people who care only about making a lot of money and making it real fast. That focus on money makes people unmanageable -- unless you're a Phil Jackson-type manager. I think it's crazy to count on that.

"If you ask me, you should try to figure out who those people are in advance, and then make sure you don't bring them into your business in the first place."

Johnson sounded like a man who was speaking from experience -- both on and off the court.

The spin-off trap
We followed up the dinner this year with a daylong conference at Harvard Business School for the CEOs and top managers of the Inner City 100 companies.

One of the keynote speakers was Jeff Taylor, the chief executive of Monster.com, the leading online network for matching up job seekers with companies that are searching for talent. Among other things, Taylor talked about the most common, and lethal, mistake that established companies make in formulating an online strategy.

"Whatever you do," he urged the Inner City 100 executives, "don't go out and spin off a dot-com company. It's a strategy that's destined to fail. Think about the message you're sending to the people who built the brand. They're going to feel they're being left behind. The best of them will leave. So you'll end up hollowing out the company whose brand you think you're leveraging.

"Meanwhile, on the dot-com side, you'll recruit a lot of young people who may have energy and talent but who understand nothing about your brand or markets. So the new company will contain none of the DNA that made you successful to begin with. Instead of one thriving company, you'll end up with two ineffective ones," he said.

A member of the audience noted that people on Wall Street were giving the opposite advice to established companies.

"You're absolutely correct," Taylor replied. "The question is, are you willing to let Wall Street run your company? Look at it this way. Everyone agrees that the traditional economy and the digital economy are converging faster than any of us dreamed possible. So the challenge for every company is to learn how to become a dot-com, not how to spin one off."

Passing it on
Later in the day, the Inner City 100 leaders heard a second keynote speech from Jeffrey B. Swartz, president and CEO of the Timberland Company, an early Inc. 500 company. Swartz shared his insight into the challenges and opportunities that a business faces as it is passed from generation to generation.

"My grandfather started the company, making boots by hand, and everything about it was personal. When he sold you a pair of boots and promised that the boots would last a lifetime, it wasn't a customer-service program. It was my grandfather looking you in the eye and making a personal promise that if anything went wrong, you could bring the boots back and he himself would make you another pair.

"When my father took over, the challenge for him -- as for so many second-generation CEOs -- was to professionalize the business. Timberland wouldn't be here today, and I wouldn't be up here speaking to you, if my father hadn't succeeded.

"So what's the challenge for me, the third-generation CEO? I think it's to make the business personal all over again. Customers demand it. In many ways 'making the business personal' defines what a brand is today. The Internet is a wonderful platform for doing it, but it has to be about something more than a transaction. These days, when people buy something from you, they want to know who you are, what you believe in. My challenge is to marry the boots and the brand with a set of beliefs that has fueled my family's mission for three generations."

I found Swartz's remarks very timely, given the current mania for ramping up and cashing out as quickly as possible. I was also reminded how few companies are able to make the transition from first to second generation, let alone from second to third. So far Timberland is defying the odds.


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