To grow spectacularly in an era when everything's up for grabs, this year's Inc. 500 companies have had to invent and master a distinctive skill: real-time retooling
Pity poor Sam T. Goodner. Only a year ago, he was still CEO of Catapult Systems Corp., a software business that ranked as the 77th fastest-growing private company in the United States. This year, even as Austin-based Catapult earns another coveted spot on the Inc. 500 list (#370), Goodner finds himself operating in what even he describes as "harsher, more spartan" surroundings. "Half of it is actually underground," he says, describing his new, less lofty digs. "So there's no view to speak of." And with just 20 colleagues, he's not seeing nearly as many faces as he would at Catapult, where employees now number 115.
But the 33-year-old Goodner isn't complaining about what transpired last April, when he was replaced as CEO of the company he'd founded in 1993. And, to be honest, he hasn't got much of a case -- after all, the switch was his idea. "I had none of my entrepreneurial creativity left," he explains. "I was falling back on what was easy. You know that's happening when you start just going through your E-mail all day long."
So he hired a new CEO, kicking himself downstairs but keeping the title of chairman. Goodner now serves as CEO of Inquisite Inc., the Catapult subsidiary that sells software for conducting surveys over the Internet. During the next 18 months, he's hoping to perfect a strategic one-two punch that he's never attempted before: after raising outside capital, he intends to take Inquisite public. Within roughly the same time frame, he wants to see Catapult make the same moves; the company is entering the final phases of an 18-month retooling that has shifted its focus from client/server computing to providing E-business services. "You have to make these decisions based on what's going to happen tomorrow," Goodner says. "You have to be looking farther than just a few feet in front of you."
Goodner's confidence in his ability to keep doing that stems not from the courage he's cultivated inside himself but from the challenges he's confronted outside, in the marketplace. After all, his company was born into a world where mainframes were just giving way to PCs; now Web-based projects dominate. "We're really committed to this transition," he says, "because we have no choice."
Surely, just about every company on this year's Inc. 500 can relate to that predicament.
To grow at a dizzying rate during a tumultuous era -- with entire industries disappearing and unpredictable competitors attacking from all directions -- Inc. 500 companies have learned to master the art of real-time retooling. In recent years, newborn dot-coms have typically operated at breakneck speed, hurrying from concept to capital to cash-out incredibly quickly. (Too quickly? See " Growth: How Fast Is Too Fast?") But the members of this Inc. 500 class remember a world in which execution still mattered. They haven't forsaken planning, but they've incorporated unpredictability into their strategic thinking. Paradoxical as it sounds, the CEOs of these fast-growing companies have worked to institutionalize the spirit of experimentation within their cultures. They're accustomed to adapting and proud to admit that they've made mistakes. (See " If Only....") Moreover, they now understand where they went wrong.
The unique shapes these companies have taken reflect a dramatic change in the environment that they've all had to confront -- the youngest among them having begun five years ago, just before the dawn of Internet time. In 1995 a brilliant computer scientist named Jeff Bezos racked up a comparatively puny $511,000 in first-year sales at his book-selling start-up. Since then he's built Amazon.com into the only kind of brand name that suits this era: one that derives its durability by conveying a sense of always looking ahead.
That's a sensibility shared by such successful brand builders as Gateway and E*Trade, among other Inc. 500 graduates. (For updates on those two companies, see " Bear Feat" and " Let's Get Physical.") For a growing company of any size these days, the most damaging fixed asset isn't high-priced machinery or snazzy surroundings but any allegiance to conventional management thinking. Indeed, the four founders of software maker IRIS (#192) don't seem to have been ultimately hobbled by their lack of exposure to any management experience at all. (See " The Long Good-bye.")
For some forward-thinking CEOs, it's actually a tribute to their talents that the businesses they founded don't appear on the Inc. 500 -- at least not in their original form. In 1995, Daniel Weinfurter launched Current Assets LLC, a Chicago-based provider of interim accounting help. And though it's true that Weinfurter's company had grown to just about $56 million in 1999 (a five-year growth rate of nearly 28,000%), Current Assets doesn't appear on this year's list. That's because in 1997, Weinfurter redefined the company, shifting its focus to high-level financial consulting. He also renamed the business. The result: the reshaped company, Parson Group LLC, now ranks as the fastest-growing private company in the United States. (See " Ready, Set, Grow.") Clearly, Weinfurter agrees with Sam Goodner's assessment of what it takes to maneuver a fast-growing company: creative thinking. "You've got to be out there, thinking strategically," Goodner says.
Parson Group is only one of nearly 30 companies that have undergone recent name changes on their way to our 19th annual Inc. 500 ranking. Such alterations wouldn't mean much if they didn't reflect deeper acts of transformation. Those businesses aren't dot-coms that trade in their fundamental business models until they find one that seems most likely to produce earnings or at least to stem ongoing losses. It's precisely because they know their customer base -- and want to expand it -- that they continually reinvent themselves. They recognize what business they really are in: applying their employees' collective brainpower toward staying as imaginative and resourceful as they were at birth. (See " Start-up Springboards.") And though they can't always be right, they're at least as passionate as they are serious. (It's hard to ignore the emotion on display at #344 after reading " Extreme Game.")
Not so very long ago, it was fashionable to believe that speed was the most valuable differentiating characteristic a company could claim; now sheer boldness counts for more. Repeatedly, Inc. 500 CEOs display a willingness to chuck whatever they deem outmoded, whether it's stacked in their computer centers or hanging in their closets. Doug Palley, founder and president of CyberRep.com (#408), signaled his redirection of the business that was formerly known as Unitel Corp. with a radical remodeling of his own personal house of style. (For makeover tips, check out " Wired Style: The Self-Remade CEO.")
Well, why not? It's not as if these Inc. 500 CEOs lose their propensity to act boldly in their personal lives. In fact, they maintain the boundary between work and home on their own terms. (See " The Power of Balance.") And should their companies go public, get acquired, or grow to dominance, the rewards will likely affect them in the same way that they have changed Bill O'Farrell. O'Farrell, 38, is the cofounder of SpeechWorks International (#44), a maker of automated speech-recognition systems that went public on August 1. That day, its shares rose 184%. "You'd reckon that this would be the one moment when I could sit down and enjoy it," says O'Farrell. "But things are really hard right now. We're at the stage where there's a lot of detailed work."
He's referring to the new company he cofounded in early 1999, just months after assuming the role of non-executive chairman of the board at SpeechWorks. "I think we have a good idea, but we'll find out," says O'Farrell, who is now CEO of OpenAir.com (formerly known as TimeBills.com), which provides online administrative tools.
"Either people will use us or they won't," he says. "But I do know this much: we don't want to be thought of as fashionable."
Please e-mail your comments to firstname.lastname@example.org.
To learn more about the Inc. 500, visit the Inc. 500 area.