Truly wired companies are made, not born. Here are the key ingredients

People often assume that virtual companies -- companies that use communications and information-technology tools to amplify their impact on the market -- are born that way. Certainly, VeriFone, the credit card-verification company I helped found in 1982, was a virtual company from the beginning. But as we've grown the company from 5 employees to more than 2,500, we've faced the same basic problem that existing businesses face when they try to introduce innovations: the difficulty of changing deeply entrenched workplace habits.

Almost none of the more than 4,000 people we've hired at VeriFone in the past 13 years have come to us with a clear understanding of what it means to work in a virtual company, nor have they come with the tools required to get the job done virtually. Moreover, the tools have changed over time. So, yes, maybe we did get an early start. But there's absolutely no reason why a decidedly nonvirtual business can't do exactly what we've done: introduce the necessary tools, and give people the motivation and guidance they need to make the best possible use of them.

Here are eight steps you can take to create a virtual company:

Use E-mail. Have all people in your company use E-mail, almost all the time, wherever they are. Enough said.

Automate tasks that waste people's time.
At VeriFone we use more than 60 different computer-based applications. All aspects of corporate life -- from placing a customer's order to requesting a travel voucher to buying pencils -- mean interaction with an on-line system. We didn't start with all systems on-line. We started by automating those processes that seemed most time-consuming or prone to error. For example, one of our first on-line systems was our travel system. We place a premium on meeting with customers face to face, and we had noticed that many of our employees were spending hours each day working out itineraries with travel agents. We added other systems as we needed them. You don't have to have a complete corporate system on day one. It is important, though, to be sure that the software "hooks" are in place so that you can add systems later.

Create a companywide electronic filing cabinet. When a company's reports and forms, as well as its E-mail correspondence, are filed on-line, the on-line system becomes a global electronic filing cabinet. All that you need to access contracts, approvals, and old correspondence is a computer and a telephone line. An electronic filing cabinet turns almost any space into a productive office, any time of day. That means that you don't have to wait until someone gets into an office in a different time zone to get the information you want. If I'm in a motel room in one part of the world and it's two in the morning at my corporate headquarters, I can still pull up a contract and make changes so that the people at headquarters have the revision when they get to work the next morning. It's astounding how much time is wasted at most companies simply because employees can't put their hands on the right document when they need it.

Be fanatic about monitoring and reporting performance. In the late 1980s VeriFone was growing very rapidly, but at any given time we had no clear picture of where we were in relation to our revenues and our profit goals. We spent lots of time preparing ad-hoc reports of bookings, shipments, and projected gross margins. When numbers from one group didn't jibe with those from another -- a common occurrence -- we would dig through invoices and orders to try to reconcile the differences. None of that management time was truly productive because it distracted us from the primary job, meeting our customers' needs.

To solve the problem, we prototyped a very simple computer program that went through our computerized order-entry and accounting database, allocating each line item of every order to a particular sales and product group, and then establishing a roll-up hierarchy for reporting purposes. Our first menu had only a handful of key reports, but as time passed, we added new reports to meet the needs of different staffers. We set security levels appropriate for each person and assigned different reports to those security levels. We ended up with an integrated information system -- not an executive information system -- used by all levels of staff, from assembly-line supervisors to the CEO. Without this sort of real-time feedback, employees simply don't know where to focus their efforts.

Build an infrastructure for creating teams on an as-needed basis. Because of our communications flexibility, we can assemble -- and disband -- informal teams as easily as we can set up or abolish E-mail group aliases. We recently formed a task team, for example, to reduce the time required to fill customers' orders. The group was made up of people -- at many locations and different staff levels -- from sales to manufacturing to distribution. E-mail, along with audioconferencing and videoconferencing, facilitated the work of the cross-functional task team and enabled it to have a major impact on the speed with which we serve our customers. As soon as the team turned in its recommendations, it was dissolved, freeing up members to join other teams that needed their particular skills. In this way every project gets a team that is precisely tuned to its unique demands, and everyone is constantly contributing a specific expertise.

Motivate people to go on-line. You can't just make the technology available and wait for your company to convert itself into a virtual one. You've got to give everyone a reason to use the tools. You can begin by abolishing written memos, especially those that are positive (news about promotions and bonuses, for example), and insisting that those messages be sent on-line. (There's nothing like knowing that there's good news on-line to motivate people to learn how to get there.) Put news items that are relevant to your business and your customers on-line. If your employees know they can get information that will help them meet their objectives, they'll go on-line to find it. Eventually, you have to create a "use the net or die" environment. The best way to do that is to take away all the alternatives -- ban secretaries and paper memos, for example, as we've done at VeriFone. The vast majority of our business is on-line. To succeed in our company, you have to connect.

Make all systems easy to use. Many very smart people become almost paralyzed when they're faced with computer screens full of nonintuitive commands. The more information and processes you put on-line, the more careful you have to be about making them accessible and nonthreatening. One of the ways VeriFone has simplified the task of navigating its information systems is by making every report or information template accessible from a single command: MENU. With that one word, new employees can navigate through simple hierarchical option lists to get where they want to go. More experienced managers can use advanced commands to go straight to the information they need.

Help people understand when they shouldn't use the tools. You can't just throw powerful communications tools at people and expect them to use those tools wisely. If a company doesn't train its people in responsible communication, that communication can do more harm than good. Responsible communication means considering how a recipient is likely to react to a message and what the implications are for the recipient's workload. Confrontation is a lot easier via E-mail than face to face, but the resentment it is likely to create can wreak tremendous damage on the fabric of a company.

Of course, building a virtual company isn't just a matter of following a series of steps. Every company has to take a different path, based on its industry, competition, corporate culture, and style of management. But there's no reason that any company can't add virtuality to its repertoire. Like any bad habit, business traditions can be overcome.

William R. Pape ( is senior vice-president and chief information officer of VeriFone Inc., which has its headquarters in Redwood City, Calif.