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The Growth Ethic
Growth of 18,000%, whether nightmare or dream, transforms how your business works
What's it like? That's the question we can't shake when, at the end of each yearlong Inc. 500 project, we're faced again with company after company that has pumped head count from 4 to 400 and sales from tens of thousands to tens of millions. We try to imagine life in a business that has grown 18,000% -- and can't. What's it like? This year, we sent four writers to investgate one company with that question in mind.
Here is Adept Technology Inc., in San Jose, Calif., on September 6, 1988. -- The Editors
It was a typical late-summer day in the Valley. Blue skies, seasonable temperatures, the usual tie-ups on U.S. 101. In parking lots from San Jose to Cupertino, people were talking about the Oakland As.
Inside Adept Technology Inc., America's foremost robotics company, it was business as usual. Customer-service support engineer Bob Swanson was talking with customers -- and hoping to continue his Ludlum novel at lunch. COO Fred Zucker was planning the afternoon management meeting -- and worrying about inventory. Subassembly leader Maria Viramontes was assigning work to her 13 people -- and wondering about her six-year-old daughter's first day at school.
It is easy to forget, looking at a list like the Inc. 500, how many lives and days are tied up in the statistics. Adept's entry will tell you that its sales have grown from $170,000 to $30.6 million, that the payroll has expanded from 25 employees to 230, and that a 1983 loss became a modest 1987 profit. But it won't tell you about Swanson or Zucker or Viramontes -- or those who work beside them.
They -- not the technology, the capital, or the market strategy -- are the ones that keep Adept Technology growing. And they do it one day at a time. . . .
PRESIDENT AND CHIEF OPERATING OFFICER
Fredric E. Zucker
Ten a.m. The problem was inventory. There was too much of it.
So thought Fredric E. Zucker, the newly appointed president and chief operating officer of Adept.
Zucker, 48, ancient by Silicon Valley standards, still hasn't unpacked all the boxes he brought with him from Convergent Technologies Inc., just a mile and a half down the street. But he has already learned two things in his wandering around Adept's narrow halls. First, the men's room is around the corner from his office. Second, Adept has let its inventory get out of hand.
At Convergent, where Zucker was in charge of producing UNIX-based computers -- including the PCs that Convergent manufactured for AT&T -- Zucker turned inventory a remarkable 14 times a year. At Adept, inventory turns fewer than twice annually. As far as Zucker is concerned, that means Adept has millions of dollars needlessly tied up in component parts.
So at 10:00 a.m. he sits down with Joe Avery, the vice-president of operations, to find out how plans are going to free up those dollars. It is one of several meetings on the subject Zucker will have today -- and one of dozens he has had since he was brought into the company five weeks and three days ago.
The inventory problem serves as a wonderful metaphor for Adept, perhaps the only consistently profitable robotics company in the country. While growing rapidly, Adept has been attempting to deal with two problems at once. It has to convince industrial America that robots -- which for the past 20 years have been expected to jump-start America's manufacturing heart -- are here, reliable, and ready to save the day. And once it has convinced manufacturers that this is so, it must persuade the Fortune 500 to buy the robots from Adept.
All this takes time and resources -- time and resources stolen from some basic business issues that have piled up in the corners of the company's low-slung office building just off North First Street in San Jose, Calif. Some of Adept's suppliers have had problems delivering quality goods. In addition, potential for bad debt has upon occasion been frighteningly high. And then, of course, there is the inventory problem.
None of this is unusual. When you are blazing a trail toward nothing less than the "reindustrialization of America," a phrase that Adept's middle managers often use to describe their work, you don't always have time to count the paper clips.
And counting paper clips -- or "making sure the trains run on time," as one of his subordinates puts it -- is to be Zucker's job. He has been given a simple mission: introduce big-company systems into a small company that plans to be big soon.
It's not going to be easy. Zucker has wonderful people skills, is great at spotting potential problems (and outlining solutions), and perhaps most important, owns a sense of humor, but all that may not be enough. Adept, barely five years old, has already gone through one COO and spent two years deciding -- with some gentle prodding by its venture capitalists -- that it needed another. And for all the talk by Brian Carlisle, chairman and chief executive officer, that Zucker is joining the company as a partner, there are signs that he will not be an equal one. His office may be adjacent to Carlisle's, and they may share the same secretary, but he has not, after all, been there from the start.
After a brief overview of the inventory problem, in which Avery assures Zucker he will hear a plan for cutting inventories by 25% at the 1:00 p.m. staff meeting, they move on to daily administrative matters.
Avery has found a director of materials he really likes. Can Zucker meet the two of them for breakfast at 7:30 tomorrow?
As requested, Avery has developed a formal system for measuring manufacturing performance and efficiency.
"Your plan is good. Let's go with it," Zucker says.
After Avery leaves, Zucker meets briefly with Charlie Knowles, Adept's director of customer services. One of the things Adept had noticed was that companies were reluctant to buy robots because they were not sure their employees would be able to figure out how to keep them running. To boost sales, Adept now offers free training to employees of any company that buys their product. "I really like it," says Zucker.
At the weekly operating committee meeting, called to order at 1:10, you get the clearest sense of what Zucker is up against.
These meetings, designed to let all department heads know what is going on, were created by Carlisle, and he has always run them. But that is supposed to change.
In a talk with a visitor earlier in the day, Carlisle, 37, explains that Zucker has been hired to assume a huge part of the administrative load. "In fact," Carlisle says, "I have a lot of things to get done this afternoon, so I may let Fred run the meeting.'
Indeed, when the three-hour meeting gets underway, Zucker is at the head of the table. At his right? Brian Carlisle. Everybody who speaks directs his comments to Carlisle, and it is Carlisle who asks the most questions during the 45 minutes he is there.
This is not surprising. Adept is very much Carlisle's company.
Carlisle headed the West Coast division of another robotics company, Unimation Inc., until Westinghouse Electric Corp. acquired it in 1983. Westinghouse thought Unimation should concentrate on supplying robots to the auto industry -- still the market's largest customer. Carlisle thought the market was broader, and so they parted company -- with Carlisle and Bruce Shimano, who worked for Carlisle at Unimation and is now Adept's vice-president of research and development, buying the department.
Buying the company because you disagree with the boss is a nervy thing to do, but then no one who has ever started a company has been accused of a shortage of ego. Carlisle tends to describe his post-Stanford job hunting by saying things like, "I interviewed large companies such as Hewlett-Packard." And he has acquired the Valley's attitude toward money. Carlisle was a Unimation shareholder when it was acquired by Westinghouse.
"How much did you get?" a visitor asked tactlessly.
When pressed, Carlisle puts the figure at less than $100,000. This was an unexpected check coming to someone who was just 32 at the time, and it is dismissed as "not much." The real money is to be made by going public. Adept was working on its prospectus when the market crashed in October '87. The company, says Carlisle, who owns a minority share of the stock, will probably go public in the next year and a half.
The reason all this is important is simple. In rapidly growing companies, delegating is never easy. Conflicts between the founder and his new COO over everything from line responsibilities to new-product development are inevitable. New COOs tend to be put off by the chaos at founder-run companies -- an excessively high level of inventory, say -- while entrepreneurs tend to resent the imposition of systems by an "outsider," even an outsider they hired. How well Carlisle and Zucker work out those problems will go a long way toward determining the company's future. It is hard to grow when your two top officers don't get along.
So far they seem compatible, although it is clear to even the casual observer that Zucker is much more relaxed when Carlisle is not in the room. But perhaps a more legitimate question to ask in trying to determine if Zucker will work out is: have things improved since he got there?
At the staff meeting, a detailed plan -- which calls for more robots to be built from supplies on hand and a cutback on ordering new parts -- is presented and approved. Within 12 months, inventory should be down at least 25%, maybe 40%.
By those standards, Zucker is doing fine. We will let you know if those standards matter.
-- Paul B. Brown
CUSTOMER-SERVICE SUPPORT ENGINEER
Darkness still shrouds Silicon Valley at 4:35 a.m. when customer-service support engineer Bob Swanson parks his Ford Festiva in the deserted lot, unlocks the employees-only side door, and heads to his cozy first-floor office. A few minutes later, coffee and cigarette in hand, the 32-year-old technician has turned his computer on and is studying his first report of the day.
For the next three hours, Swanson will be the most senior employee Adept Technology has to offer the manufacturers, systems integrators, and universities running 1,500 Adept robots on three continents. If an Australian manufacturer needs new software, Swanson will requisition it. If a Rochester, N.Y., company is having a problem with a power source, Swanson will fax the appropriate programming sheets. If the manager of Adept's European office phones to complain that a Norwegian customer has had malfunctions in two of three robot arms, it is up to Swanson to explain what the problem is, how it was diagnosed, and when Adept will be able to correct it.
"Hardware and software failures, design reviews, customer service and engineering, international service calls -- I do it all," Swanson says. "The number of people who need information from me is phenomenal." Adept has $150 million worth of product out there: robots, controllers, and vision systems. And for the moment Bob Swanson, a lanky, bespectacled ex-basketball player from Grinnell, Iowa, is responsible for all of it. He is the company.
It is five minutes past 5 o'clock when the first call comes, five minutes past 8 o'clock back East. "Good morning, Adept Technology. This is Bob. . . . '
Adept's East Coast field engineer -- since January, the company has set up field offices in Rochester, Cincinnati, Baltimore, and Nashville -- is on the line, asking Swanson's opinion on the proper operation of a joint. "There shouldn't be any play," Swanson cautions him.
A few minutes later, another call. "You want Maria Chavez, our training coordinator," Swanson explains. "She's not in yet. It's 20 minutes past 5:00, sir. That's quite all right. Is there a number she can reach you at?'
Until the rest of the customer-service department arrives around 7:00, Swanson will handle the toll-free line himself. Some 250 to 300 inquiries requiring service come into San Jose every month, and field-service manager Ron Meritt has tried to cut the average response time from eight hours to 30 minutes. Swanson's early-morning shift is part of that efficiency effort; through 1987, Adept ran on an 8:00-to-5:00 basis, Pacific time. "Even now Europe has five hours each workday of virtually no technical support," Swanson worries. "And Australia's even more difficult. If I start at 5:00, there's only a three-hour overlap with their day.'
A call comes in from a customer whose assembly line has gone down, complaining that the Adept robot's video camera is seeing the product parts on the assembly line, but that the robot arm itself can't seem to find the part when it gets to the pickup point. Swanson explains that the vision system will need to be retaught, then gently turns down a request for some new software, gratis, that would allow the Rochester company to upgrade its robotics system. "You'll have to talk to sales and operations about that," he explains.
As the sun dawns over the Valley, Swanson finally gets the opportunity to call Germany. "David Brown, bitte," he says. Brown, the field-service lead engineer of Adept's European office, describes a problem that a Swedish customer is having coupling its video system with its robot. "We don't want to leave a bad taste in their mouth," Swanson agrees. "They're a hot customer. But the problem's with the disk-drive manufacturer, and it's been a problem for a year. I'm surprised you haven't seen it until now.'
So it goes, 5 a.m. to 8 a.m., caffeine and nicotine and a constantly ringing phone. "Good morning, Adept Technology. This is Bob. . . . '
While Swanson takes a break, his boss, Charlie Knowles, the 29-year-old head of customer service, is reviewing a list of new products in research and development, a list whose progress he'll ask Swanson to monitor. "When I joined the company three and a half years ago, customer service consisted of just 6 people," Knowles marvels. Today, it's a 42-employee emerging profit center for Adept, five separate divisions costing $3 million annually to run, but generating -- over the past year -- $3.4 million in revenues. Besides in-house technical support, Knowles's department provides field support, training for customers and employees, applications support, system upgrades, and spare parts.
For Adept to be competitive as a company, it has to be cooperative as a team, so at 9:00 a.m. Swanson meets with manufacturing engineer Jill Reed, looking at sketches of plans to add ground wires to the robot controllers. Adept's system of checks and balances requires this meeting, Swanson explains. If such a change -- a "deviation" in Adept terminology -- were to be brought to the assembly line without proper sign-offs, the assemblers would refuse to construct it. The ground-wire addition is deviation number 584 since Adept began building its machines. An exhaustive collection of design changes is recorded on 600 pages.
Swanson shakes his head over a note on the deviations list, a year-old failure that's already affected 150 systems. "We'll sell systems that we're still learning about. That's the tension between salesmen and engineers. It forces us in customer service to be correct. In the past 8 or 10 months, we've gotten much better on our product knowledge.'
Throughout the morning, Swanson immerses himself in a whirlwind series of meetings, spreading the knowledge he's gotten from the customer calls. A factory in Norway has had two of its AdeptTwo robots shut down, he warns product manager Paul Estrada, and could well have problems with the third. All are the same model, Swanson points out, all with the potential for the same troublesome defect.
After lunch -- Swanson grabs the sandwich and banana his wife has packed and escapes to his car to read Robert Ludlum for 30 minutes -- Swanson is beginning to wind down his day. It's 12:45, and he's been on the job for eight hours and 10 minutes. The next call, however, dashes any hope of a timely departure. An engineer from a major computer manufacturer is on the line, complaining of a system that doesn't work.
For a moment, Swanson loses his calm demeanor. He tested the system himself, before it was shipped, spending six hours in the lab to make sure everything worked perfectly. His system, the engineer is saying, doesn't work.
"Don't tell me this, Ted," Swanson says, groaning. "Are you sure your monitors are good? If you do 'enable vision' after booting, does it do anything? It doesn't even sound like it's loading up.'
Swanson patiently talks Ted through the starting-up procedure. After 20 minutes -- already Swanson's longest call of the day, and no end in sight -- Swanson brings in applications engineer Greg Orelind, a software expert, on a conference line. But Orelind can't fathom Ted's dilemma either. So after another 20 minutes of frustration, Swanson hangs up and heads for the field-services laboratory.
The lab is a small rectangular room with three robot arms set up in varying stages of readiness, two controllers to run their software, and a miniature video camera attached to a monitor. Deftly, Swanson loads the operating disks, points the camera at a cardboard sheet covered with random, part-sized shapes, and inserts a new circuit board in the controller.
Everything works. Perfectly.
When the lab phone rings -- Ted again -- Swanson tells him he's hooked up another system, it's working fine, and he'll ship the software and the circuit board before he leaves. "The only way I can get the blank screen you're seeing is by not bothering to check the exposure on the camera lens," Swanson says. "But of course, that's the first thing you would have looked at. Isn't it?'
Finally, at 3:20, after 11 hours, four meetings, and 19 calls, Swanson's day is done. The second pack of Merits is crumpled and tossed into the trash. The tenth cup of coffee is drained. All of a sudden, he slaps his forehead.
"Germany! I forgot to send David Brown his software!" Hurriedly, he pastes Adept labels on four disks and gets them ready to ship. Then, after picking up his portable cellular phone and turning on his Pagenet beeper, he closes the door and locks his office, heading home.
"Actually, I have the best job at the company," he insists. "I get to work with the past, the present, and the future.'
Behind him, a glossy sticker on his door catches the afternoon sun. "This place was built from chaos," it reads, "into a shining example of disorder."
-- E.J. Kahn III
VICE-PRESIDENT OF OPERATIONS
Back ramrod straight. Eyes that seem to see 360 degrees. Just the hint of a smile. When 46-year-old Joe Avery walks across the Adept factory floor for his 9:15 daily tour, you can see the Air Force sergeant he used to be, 20 years and 20 pounds ago.
On this morning he begins at the shipping department -- speaking, by name, to everyone he meets, starting with John Leatutufu, the 26-year-old Samoan in charge of shipping and receiving at the loading dock. A jovial giant who shares Avery's aversion to slow pacing and shipping schedules, Leatutufu is riding high today. On an average month Leatutufu's department packs and ships some 80 units, most in the last week of the month -- and last month, once again, his department broke its own efficiency record.
"We like the action -- and the technology does no good till we get it out the door," Leatutufu explains. But he won't take the credit for himself, or even for his department, insisting instead that it's the way everyone in the company works together that enables him to keep breaking records. "I've worked for lots of companies where you don't know what's going on. But we're set up so we know where everything is. Everybody shares the same information, and we all know what it takes for each of us to get the job done.'
Just as important, they all share responsibility for doing the job better.
These are Avery's people. In Silicon Valley companies, like in the military, it is the stars who grab the glory: the hard-charging CEO, the iconoclastic engineer, the venture capitalist in his Italian suit and mirrored sunglasses. But the foot soldiers win the battles, men and women working on the line to turn designs and specifications into product.
Avery's formal title may be vice-president of operations, but his work is in the trenches, 10 hours a day, six days a week. It's his job to communicate the corporate goals to the factory floor and the problems of the floor back up to the executive suite, and to make sure Adept's 106 manufacturing employees have what they need to do their jobs.
"People need to feel that the work they do is really important," he insists. "They need to know their ideas and suggestions can have an effect, and that they will be rewarded for that.'
Not everything runs as smoothly as Leatutufu's department, however. Moving over to the test area, Avery's face turns grave as he watches the company's newest robot -- the AdeptThree -- run through its paces under the watchful eye of Les Browne, the main engineer behind the product.
It is not a satisfying sight. The mechanical arms keep shutting down, bedeviled by excessive friction in the slider stop. Perhaps a new, reconfigured part will make the difference, Browne and Avery agree.
Through most of the Valley "engineers look down at operations folks like so much excess baggage," Avery says later. But not at Adept: Browne will work under Avery as the new robot goes into production. "The engineering people here are very different from what you usually see," Avery explains. "They like to interface with operations -- everyone's interested not just in designing the neatest product, but in getting that product out the door and into the customers' hands.'
Getting the product out the door isn't a process he can completely control, at least not yet. Walking over to the kitchen-table-clean assembly and test area he talks about how he hopes to turn Adept into "a world-class manufacturer" someday -- complete with its own Adept robots on the line. But for today it is still a low-volume assembly facility, and therefore at the mercy of its vendors, particularly the manufacturer of the printed circuit boards -- the "electronic guts' -- that run the robots.
For 42-year-old George Vara, busy putting together a robot arm, such glitches are an inevitable part of any assembly operation. What makes the difference is how Adept's managers react.
"Joe is great," Vara says. "If you have a problem he's right on it; he'll get you answers, and he'll get you answers that day. And Brian [CEO Brian Carlisle] is a real down-to-earth guy; he'll take our word for things, too.'
One of those "things" was the organization of Adept's factory floor, Vara explains. "When I started two years ago, we all did specialized jobs, but Brian asked us what we should change to make things run smoother." The workers suggested cross-training, then setting up each employee at an individual station, with responsibility for the assembly of an individual robot: "It makes people really put forth an effort. When you've got your own workstation, it's yours, it's up to you to keep it up -- and you can take pride in that.
"But what I like most about Adept is that they tell us everything -- what we're making, how we're doing. I've worked for a lot of companies where that's none of your business.'
"At most places they treat you like an object; I've worked at places where I didn't even know what we were building," Maria Viramontes, the lead in production control, agrees. "It's different here. We all feel responsible together.'
Viramontes can see the payoff firsthand on her inspection table. "Quality is one of our main objectives; we all fight for that," she says. "When we purchase anything we want good quality; our customers have a right to quality, too. "But we don't have to inspect anymore; the quality is there. Everybody concentrates. Everybody cares. I know it's unusual, but it's the way things should be.'
That's the kind of talk that makes an old Air Force sergeant smile.
-- Curtis Hartman
DISTRICT SALES MANAGER
Jim Mattis strides under the "Assembly Technology Expo" banner and into a cavernous hall resonant with the chunk, hiss, and whoosh of machines. It is mid-morning; Mattis's step is still lively after flying in at first light from his base in Detroit. But he has eight hours of standing to come; by mid-afternoon he will feel the fatigue rising from his shins toward his shoulders.
Mattis, a genial 33-year-old, is Adept Technology's Midwest district sales manager, and the company's current "salesman of the year." Most of the time he works the road, selling his $50,000 robots to the heartland, but two or three times a year he comes to shows like this one in Chicago. He is here to pursue new leads, press the flesh with old customers, and eye the competition. Most of all, he has come to "cement relationships with the systems houses" that integrate Adept robots into the automated manufacturing processes they sell to end users. He is here to see to their care and feeding.
They have already seen to his. There is no Adept corporate display in the hall. But there are six Adept booths -- six systems houses, or integrators, that have displays featuring Adept robots.
The first familiar face that Mattis sees belongs to R. Michael Farrell, proposal engineer for one of those integrators. "Should I tell you the good news now?" Farrell asks him.
"Firestone," Farrell tells him. "Five of them.'
Mattis brightens. By selling Firestone Industrial Products Co. an automated assembly line anchored by five Adept robots, Farrell has demonstrated, once again, the elegance of Adept's two-part marketing strategy.
Adept has tried something different from its competitors' approach. While most makers targeted the automotive industry with robots that could do little more than muscle iron around the factory floor, Adept went after manufacturing tasks that required a defter touch -- then provided the most powerful software in the industry, plus the ability to inspect a part to make sure it is up to spec and in the right place. While most of the competition chose to design turnkey manufacturing systems around its robots, Adept chose to stay focused on the robot itself. It thus approached integrators, wooing them with the technology, and it convinced them they'd sell more systems if they included Adept robots in the solutions they pitched to end users -- a "pull-through" marketing strategy.
Having created a surrogate sales force, Adept's own sales force approached end users with applications examples, plus the names of integrators who could make the applications work. Suddenly the systems integrators were hearing from end users: design us a system, just make sure it has an Adept robot in it. To further seal the compact, Adept promised and delivered strong technical support to systems houses and end users alike.
Wandering through the aisles, Mattis pauses next at a booth featuring the robot of a competitor, Intelledex Inc. Mattis is surprised. Intelledex has been stalled of late, he says, but this machine looks pretty good -- at least what he can see.
"Can I help you?" There are two sales reps at the booth: one steals a glance at Mattis's Adept badge; the other moves to block his view.
Mattis moves on, amused. At past shows Adept has had to kick camera-carrying competitors out of its booth two or three times. One forward fellow even took the back panel off an Adept controller, got down on the floor, and started drawing diagrams of the circuitry inside.
At the end of the aisle Mattis encounters a happier surprise. PS Group, a systems integrator, has an Adept robot in its booth -- a seventh, unexpected display of his product. Even better, PS's robotics engineers, Paul Tourish and Victor Criswell, are gushing to passersby about Adept Technology.
"The software language is easy to use," says Criswell.
When PS had some problems with the robot, Tourish adds, Adept sent over an engineer. "He worked through the night and took one 10-minute break. I couldn't believe it.'
Mattis has only one complaint: PS's display features an Adept robot and a Hitachi robot cooperatively stuffing a printed circuit board. But when he gently chides them for including "that Japanese thing," the Hitachi robot knocks into the board, crunching it -- proving Mattis's point.
It is early afternoon; over in one corner of the convention hall an Adept robot has been working all day without even time off for a smoke and a cup of java. The display belongs to Automation Tooling Systems Inc. (ATS), an integrator based in Kitchener, Ontario, Canada -- "my lifeblood," Mattis calls the company, "the first to take the risk and totally embrace us.'
Klaus Woerner, president and founder of ATS, is an energetic man who once worked as a toolmaker for a watch manufacturer. He used to deal with IBM and Seiko, where robotics is a fraction of the business, and where bureaucracy is endemic. But he switched to Adept. "With Adept, if I have a problem I call the president," he explains.
Woerner believes that Adept makes the best robot around -- but that, he says, is only half the story. Adept's software is so versatile and extensive that it is now integrated into the manufacturing processes of such major companies as Ford, Digital Equipment, Eastman Kodak, and General Motors. "If Adept ever got into trouble, we wouldn't hesitate to put together a rescue plan. Companies like GM and Ford would have no choice. If Adept doesn't make it, no one does.'
Mattis hangs around the ATS booth through mid-afternoon, helping to work the passing crowd. When a Motorola engineer stops by, Mattis closes in. "I know you use Seiko," he says, "but when you see our product, the advantages are evident. . . . What I'd like to do is have our guy come out and give a presentation. . . . '
The Motorola man is noncommittal.
Mattis takes another tack: guilt. "By the way, we use Motorola chips.'
"We use Motorola's product. Can't we get you to use ours?" Mattis persists, but the engineer moves on.
Motorola is one of his toughest sells; he has beaten on it before, speaking to the same deaf ears. Finding applications for Adept robots is not the problem; the problem is the attitude of the manufacturers. Big companies don't want to change their ways, while smaller companies fear that understanding and servicing the robots will overwhelm their limited in-house technical talent. So changing minds has become Mattis's mission, curing labor of its fear of robots and awakeni