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What do ADTRAN salespeople do when they find out their company is one of 9 breakthrough companies? Give a rebel yell.

I snapped this picture from the stage yesterday as I finished a speech at the National Sales Conference of Huntsville-based ADTRAN.

ADTRAN is one amazing company. Started in 1986 by the quiet and unassuming Mark Smith, Lonnie McMillian and some partners, it has grown into powerful force in the telecom equipment manufacturing business -- constantly nipping at the heels of giants like Lucent, Alcatel, and Cisco. Time after time, ADTRAN has entered a new segment and then gone on to dominate it.

Its latest success is in making broadband routers for large telecoms wanting to deliver high-speech connections for their customers. ADTRAN's revenues in this space are up 90 percent and appear poised to grow well in the future.

How does ADTRAN do it? It has figured out a way to keep the best "small company" qualities and values while at the same developing the discipline and sophistication of a major player.

Three things caught my attention about this company:

(1) No Rigid Roadmap: Too many tech companies worship their three-year product roadmap as if it were the holy grail. Instead, ADTRAN pushes the responsibility for product development -- even for determining the product release schedules -- to engineers in the trenches responsible for delivering the product. ADTRAN CEO Tom Stanton thinks this dramatically speeds the product development cycle. "If product milestones are set from on high," said Stanton, "and engineers are punished for missing deadlines -- you'll see your product development timelines lengthen as engineers build in padding to protect themselves." Stanton says he wants his engineers to give him optimistic timelines -- and then try hard to deliver on them. The system seems to working. Nobody in the business releases products faster than ADTRAN.

(2) Put Designers in Direct Contact With Customers: If you are not in the tech world, this might seem pretty intuitive, but in many tech companies, customers are never allowed to talk directly to design engineers. There is often a whole matrix organization designed to carefully control all communication with the customer. Not at ADTRAN. If a customer has a problem with a piece of equipment, chances are the customer will end up talking to someone who helped build it. This kind of detailed understanding of how the customers actually use the product, and where and when it fails, gives ADTRAN a real edge.

(3) Make the same people responsible for several generations of product. A lot of tech firms have "genius teams" who work to develop cutting edge products and then hand those products over to other groups to maintain while they move on to work on the "next big thing." All of the sudden several man-years of knowledge walk out the door -- and the original product doesn't get improved much over its life. Engineering teams at ADTRAN will often stay together for two, four, even six generations of a product, constantly tweaking it, driving out costs, and addressing new and more specific customer needs.

A note about the companies featured in my book: I do not invest in the companies featured in The Breakthrough Company -- nor do I closely follow the stock performance of those that are public. My interest and research is focused on what enables companies to succeed over the long term (decades), and I could not be less interested in short term swings in stock price. Any readers attempting to make investment decisions based on my writings do so at their own peril.

Last updated: Feb 1, 2008




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