In the Company of Giants

by Rama Dev Jager

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  wash, and how they came up with this word halitosis, and how the early campaigns dealt with convincing people they had a problem and that their mouthwash was the solution. That’s great.

  Most of the time though, the opportunity isn’t in something that customers have no idea about. There is an adage in marketing: you either convince the consumer that he has the disease and then give him the cure, or you sell him the cure because he knows he has the disease. I think you’re much better off focusing on businesses where customers know they have the problem, and you give them the cure.

  It’s less risk. Because, in the first case, you must really be sure that you can convince them they have the disease and you have the cure.

  In Silicon Valley many businesses have tried that approach, and have found out that people didn’t really have the disease and thus didn’t need the cure.

  One of our board members repeatedly says, “Make what you can sell, don’t sell what you can make.”

  Why did you decide to start out on your own? Was it just to create value for the customer? Why not just stay at Digital Research?

  Because Digital Research was going to fail. They had incompetent management that couldn’t fix the company. They didn’t have the will to win. But that’s another story. My whole background was in this area. I had started a company before. The opportunities were overwhelming for people with the ability to program and create a product.

  I said, “Why not?” It seemed like I was at the right place at the right time. There is a lot of luck involved. If people have the willingness and the drive to succeed, then there is a lot of opportunity out there today, especially in software.

  But you must have the personality for it. Some people want to be part of a team and don’t want to make the decisions. I like to make the decisions. I was watching this football game Monday night.

  Miami was playing, and they were on the goalline, and it was clear that the coach called in a play. The quarterback sent the other player back to the sidelines and the commentator said, “Well, obviously the quarterback wants to call his own play.” I didn’t even think they had that option in football, but I thought to myself, “Yeah! There’s someone who wants to be in charge.”

  Not everyone will do that. In order to start a company you have to be willing to take charge and like it. I like the uncertainty of not being able to look to someone else and say, “Gee, what do you think I

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  should do?” When you’re in a startup, that’s the way it is. You don’t have the whole momentum and infrastructure to guide you. You have to make decisions—what to do, who to approach, who to hire. Some people don’t feel comfortable doing that. It isn’t necessarily bad, it’s just different. Different people love different things. And to start a company, you must be able to work in very unclear situations. Take Scott Cook [founder and Chairman of Intuit], for example. Intuit almost failed a number of times. I knew Scott when he first started.

  He had a vision, and he stuck with that vision. Even in the midst of all that uncertainty, you have to be able to stick with it.

  With Symantec, there were many times when we didn’t know if we would make the payroll. I remember a time when we gave out stock instead of salary—I still have the certificates which we eventually converted. The point is that you have to be willing to do these types of things—that’s one aspect. The other aspect is that you must have an idea that adds value to the customer. And the third thing is you’ve got to get momentum. Software is a growth and market share business. Nothing else matters.

  Software is an 80 percent gross margin business. It’s difficult to put a software company out of business. You can’t kill it. It’s like the monsters in the movies. There aren’t enough stakes and garlic in the world to put a software company out of business because the embers keep going—their capital requirements are small. What matters in the software industry is momentum, which is translated into market share and revenue growth.

  What makes a company successful from a big-picture point of view is people, process, product, and passion. Concerning people and products: you must have great people and you must have great products. Everyone believes in passion. But as you begin to build a company, you have to balance passion with process or the company will implode.

  What do you mean by process?

  I mean the systems that enable a company to function as it gets bigger. It’s like building a house versus a five-story building—you need different foundations. If you’re trying to build a 100-story building, you don’t make the decision on how to build a foundation when you’re on the third floor. You have to be thinking early on as to what kind of foundation you want to build.

  Scale is another way to say this. Having systems that scale is

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  really important in building a company. The systems that scale a large company are its processes. And one of the important processes is hiring great people.

  Can you give us an example of process at Symantec?

  Early on, when there were only 15 people in this building, everyone was on e-mail. People asked, “Why are we doing this?” We just built e-mail into the culture of the company. Now e-mail is critical to us.

  We used e-mail long before it was “in.” Then, as the company grew, it scaled. The communications system scaled to accommodate more employees.

  If you only have passion, it destroys. Look at what happened with Apple. The passion was there, but there wasn’t enough process. No one at the time could figure out that the Apple II was pretty important and was paying all the bills. In retrospect, it was pretty obvious.

  Consider the internet. You can’t have a logical discussion about the internet nowadays. You just can’t. In a year or two, some of these companies will crash and burn, except for those that have the value-added to the customer. Everyone will say, “Oh yeah, it was obvious.”

  But right now you cannot have a rational discussion about it. Passion overwhelms in the short term.

  Another important process early on is to get really good people who can last for a period of time. We have a really good CFO named Bob Dykes. He’s been with us for years. When we hired him, we weren’t looking for a great CFO of a $50 million company; we were looking for a CFO of a billion dollar company. And we wanted someone who was willing to see us through to that. That’s the difference.

  I often hear venture capitalists say that they want to find a really good startup company marketing person. I don’t know what that means. What you want is someone who will be a good senior manager of a billion dollar company. If that is not your vision, you don’t belong in the Valley. Building well—that is what it’s about. For that you need people who can manage growth along the way. The worst thing is to have a company where you continually bring in new people over the existing people, because the existing ones can’t grow, or the company is “expanding.” There are always nice ways of saying it.

  That’s what drives me crazy.

  It’s better to start with really good people and then build under them. Even with our relatively small size, promoting from within is almost iron-clad. We won’t hire anybody at a senior level from the

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  outside. Take college recruiting. Our policy is to hire people from school and promote from within. These are examples of processes that you must put in place in a nascent company.

  How do you find the right people?

  You must not only find really smart people but those who want to be part of a company that scales from five to a thousand employees. And you must find people who have seen it. Often these are tough people to manage. On paper, we shouldn’t have hired Bob Dykes because he is strong-willed and he can be tough to manage, but you must hire enough people who can envision how the company might be run.

  The typical startup story is of a couple of guys who create a computer company in their garage. But Apple, fo
r example, wouldn’t have gone anywhere without guys like Markkula [A. C. “Mike” Markkula, the former Chairman and President of Apple, and one of Apple’s ear-liest employees/investors], who had some idea of what a company looked like and knew about things like human resources and finance.

  In general, you can’t just wing it. Now, the founder doesn’t have to have that experience, but he better be willing to go out and get the experience.

  You mentioned the need for people who can make the business grow.

  How do you keep good ideas bubbling up within the company?

  We have product groups and teams that work together that have a lot of autonomy so long as their market share grows. Within those product groups, they can create products which lead us in new directions.

  Today, if you’re a general manager, you give me a plan and I’ll give you a compensation package that lets you triple your base salary if you can exceed your revenue plan by a specified amount. As long as you deliver 100 percent of the revenue and 100 percent of the operating profits you have wide latitude in how you go about doing it.

  One of the common refrains regarding starting one’s own business is, “I would start a business if I had the money...” In C & E’s case, you had already made your money from the sale of a previous company.

  If someone said something like that to me, my answer would be,

  “Yeah, if I gave you a lot of money to spend, you could spend the money.” Big deal. It doesn’t take great talent to spend money. If everything were free, I’d have a lot more. It’s like the Twilight Zone episode

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  where the guy dies and he goes to heaven and everything is perfect: he is playing pool and shoots the cue ball and all the colored balls go in and nothing ever goes wrong. He finally gets very frustrated and says to himself, “I’m in heaven and it’s driving me crazy.” The punchline, of course, is that he made the wrong assumption—he wasn’t in heaven at all!

  The money’s there if you have a good idea. It all goes back to your product. I think it’s sort of a cop-out to say, “I couldn’t get the money.” It’s hard to raise money, I admit. I knocked on a lot of doors and got turned down by almost everyone. It’s good though, because when I see them, I point out how much money I’ve made. But, the people who did invest made serious amounts of money. We were a real home run for people like Kleiner [Kleiner, Perkins, Caufield & Byers, a venture capital firm]. But we were a long shot—I guess they all are.

  You must recognize that the issue is getting and selling the idea.

  If you have the right idea and can sell it you will eventually get your opportunity. And software was the best business because capital requirements were so low.

  I was turned down by virtually everyone except the Masters Fund in Denver. Only one person funded C & E initially. And then Kleiner got involved because they wanted us to acquire Symantec because Symantec was going out of business. So we took it over basically and got more funding from Kleiner. I talked to everyone in the Valley. I literally bought a condo at Sand Hill Circle [Sand Hill Road in Menlo Park is the largest concentration of venture capital firms in the world]. In that regard, I had money. Maybe the difference was that I could afford to take the time; I didn’t need a job.

  But I still would have started my own company. And, I don’t know of too many people who would have been successful had they had the money when starting out. Some people just don’t want to be entrepreneurs. It’s a very unstructured, hazy process with a lot of uncertainty, and you’re the one making all the decisions. Every morning you decide whether to knock on Kleiner’s door or Mayfield’s.

  What’s the answer? You have to be turned down many times before you succeed.

  It’s hard to say that in the U.S. and Silicon Valley good ideas go in want for funding. Let’s get real. This is a society where entrepreneurs are welcomed, encouraged, and have every opportunity. There is a great group of proven people here willing to help entrepreneurs become successful.

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  Another piece of advice for raising money is to go with the best

  [venture capitalists], and give them more equity. I’ll take a worse deal from Kleiner any day of the week. They have people like John Doerr.

  You can’t put into words what that makes. I’ve heard people say to me, “I’m looking at these three companies as potential partners and I’m going to go with this one because I give up less.” This is totally brain-dead thinking. You’re looking at linear differences when victory is exponential returns. What you want to do is to turn linear growth into exponential growth. I always say having John Doerr and the best people are best for good reason: their track record in making average opportunities successful ones is infinitely higher than the second-tier venture capitalists.

  Money is available in Silicon Valley. I have no sympathy for people whining that they can’t get money. When you do get money, go to the best.

  You’ve talked a lot about great people and great employees. How does your acquisition strategy fit with your need to have great people? How do you find out if the acquired company has good people?

  We look for great products in markets where the company is winning and we assume that they wouldn’t be there if they weren’t somehow very talented. Within every company there are really great people. If you identify them and give them a chance to succeed it really helps build the company.

  There isn’t really one Symantec—it’s a bunch of people from a bunch of different companies. It’s like a melting pot. This is a ridiculous comparison, but Symantec’s strength is similar to America’s.

  From many highly motivated people from many different places and different viewpoints came a great country. When we acquire we take the core product team and keep them together.

  One of the criticisms of your company is that its product line is just too broad. This keeps you from taking advantage of product synergies.

  Should you trim your product line?

  Most companies, when they get to the half-billion-dollar size, have a pretty broad product line. We do software for desktop computers and the networks they are attached to. That’s all we do. It’s very synergistic.

  We’ve really had a hard time shaking the image of being a con-glomerate. And we’ve been guilty of some of this. We started out with Q&A, then decided to acquire. At some point, it became clear to me

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  that suites and Microsoft in particular would dominate productivity software. They may not have competed with us head-to-head, but we decided to transition to utilities. We made the transition successfully but it turns out that the software utility business is cyclic with operating systems and networks. Then we really looked at utilities, networks, and communications. These are really the three things we are in. There are many synergies and shared technologies in our product line. We don’t do lots of other things we could do. We’re pretty focused.

  Unfortunately, this hurts us on Wall Street. Wall Street rewards pure plays more than anything else because Wall Street understands pure plays. They want to know what’s hot, who the pure plays are, and buy. They want to know what’s out, who are the pure plays in this segment, and sell.

  So will we ever see a Norton game?

  Probably not. We certainly wouldn’t put the Norton brand name on it. We’ve done a lot of brand name research. With Norton, the brand is deep but narrow. A lot of people have said, “Just put the Norton name on everything instead of Symantec.” This would be a big mistake. I want to be sure to protect the Norton brand name and be very careful with brand extensions of the Norton line. Here you have a real human being, Peter Norton. It’s almost better than Betty Crocker.

  I wanted to talk about your relationship with Microsoft. Why doesn’t Microsoft just put more of your product’s functionality into its own products?

  They already have.

  So, aren’t you afraid that you’ll be pushed out of the mark
et?

  No. Not really. Our business adds value to operating systems. It’s the most proven software business in existence. We add value to knowledge users. We have a tremendous infrastructure that works closely with Microsoft. This is a tremendous barrier to competition. In the spreadsheet market there’s not much of a barrier, because they all use the same APIs [Application Programming Interfaces] and they’re all public. Utilities, however, work deep in the innards of the operating system. It’s very complicated stuff and requires tremendous per-

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  sonal relationships between their development teams and ours. This isn’t stuff that is legislated by Mike Maples [a senior executive at Microsoft], it happens at the lower levels of the company. They can’t have relationships with many different companies. That’s the kind of stuff that is a huge barrier to our competition.

  Yes, but that doesn’t keep Microsoft from incorporating your software’s functionality into their own?

  No. But, they’re not motivated to do this. There’s no return on investment for them because they would have to support it for the whole market. We focus on a reasonable piece of the market. Take anti-virus functionality as an example: Microsoft put it in DOS 6 but pulled it out of Windows 95. The anti-virus market has taken off now and everyone has benefited.

  Doesn’t this arrangement give Microsoft a lot of power over Symantec?

  They could always collaborate with some other company.

  I guess in theory, but it’s hard to see the motivation for it. And it’s hard to cultivate these relationships overnight. The problem with these business cases, that you fellows study in business school when you sit and talk in a circular room, is that a business is not like a machine where all the connections are firm and when you toggle one switch the other one toggles just as you would predict.

  Organizations actually are very different—when you toggle one thing, something entirely different may happen from what you predicted. Microsoft can’t just tell their people, “Forget all these relationships, we’re going to screw Symantec.” Many people would think it very unfair, and we’d know about it before most of their management knew.