W:
Gordon Bell visited and said, “We at DEC have probably spent ten to fifteen million dollars on projects trying to drive laser printers and nothing has worked. It’s been a total bust. You know how to do this. You really should license your technology to corporations.”
G: And we said, “Sure, but no thanks. We want to build computers.”
Everybody was building computers at the time.
W:
Then we got the call from Steve who said, “We could put your technology into a printer and drive it from the Macintosh.” This got our attention. We realized that if we had a business licensing PostScript we wouldn’t have to do manufacturing or build a big sales force, and would essentially get paid a pure royalty for our software.
Our head of sales said, “Guys, this is obvious! You are getting two of the three legs of a business out of the way. You’ve got a pure technology play!”
G: It meant less money, but higher quality money—90 percent-plus margins.
W:
And no cost of sales. This happened within the first four months of the company.
You turned down Jobs’ million-dollar offer to hire you.
W:
It was actually a five-million-dollar offer. He wanted to buy the company.
G: And he would call about once a month during the contract negotiations and say, “Doing this contract is a lot of nuisance. How about if I just buy you?”
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Tell us about working with Jobs. There’s this legendary “charisma” that is often referred to.
W: It’s very real. Absolutely. He is one of the great natural leaders.
He can motivate people like no one I’ve ever seen.
G: If it weren’t for Steve, we wouldn’t be having this conversation.
He did more for us than just doing the deal and getting the development resources inside of Apple.
At one point some people at Apple realized that they were trying to sell a printer that cost twice as much as their Macintosh computer. I remember a gut-wrenching meeting with the head of marketing at the time, Mike Murray, and Bob Belleville, head of development.
They basically told us that our project wouldn’t see the light of day.
When they left I called Steve and told him that we heard that Apple had decided not to do the product. And he said, “Hell no. We’re going to do it.” It was his drive that brought the product to market even though most of Apple’s senior management thought it was madness.
W: This is a great story. I got this call one day. [ In a high-pitched voice]: “Hi, this is Steve Jobs. I hear you’re really doing some great stuff over there. We’d like to come see you.”
So we said, “Ohhh-kay.”
Steve came and said, “We’ve tried to do this for a couple of years and we can’t do crap. What we ought to do is figure out how to take your technology to our machine.”
G: So we had a breakfast at the local Good Earth restaurant, which is where he negotiated all of his initial deals.
W: We talked about getting acquired, about working together, and I think we all just formed a friendship. They gave us two-and-a-half-million dollars for about 20 percent of the company and gave us a one-million-dollar advance against royalties.
I remember the contract meeting with Apple CEO John Sculley, board member Al Eisenstadt, and Jobs. Eisenstadt said, “Let me get this straight. We’re giving this no-name company—they haven’t even been in business a year—a million-dollar advance plus two-and-a-half-million dollars in cash. We have no guarantee that they can deliver and we’re doing this just on pure faith?” And Steve said, “Yup.
That’s right.” So they invested in us in preparation for a 1985 product launch.
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Let’s talk about Adobe’s growth. Much of it has been by acquisition. To what extent did you pay attention to cultural issues while integrating Aldus?
G: A lot.
W: Actually Aldus’ culture wasn’t that similar to Adobe’s.
G: —At the senior management level.
W: It really wasn’t. It’s a difficult problem. It doesn’t work to decide that you can operate two companies separately and get synergies from them. You must take dramatic steps to acculturate the acquired company.
G: We took a couple of our most capable, young managers and moved them to Seattle in order to personally introduce the Adobe culture.
How exactly were the two companies’ cultures different?
W: Aldus’ CEO, Paul Brainerd, acquired companies but left them as different units, with different marketing departments and different sales departments. They were self-contained little businesses. They lived and died on their own.
I think that when you buy little companies like that, they generally fail. In Aldus, we inherited all of those little companies.
Wasn’t it almost a merger of equals in terms of company size?
W: Yes. In terms of number of employees. Not at all in terms of profitability.
If your senior management teams didn’t get along, how did you keep them on board?
We didn’t. John Young, the former Hewlett-Packard CEO, said that if you acquire a company, take the first layer of management out.
Was that difficult?
W: No. They had great severance packages. We kept one, a very valuable employee who ran their European business.
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G: We selectively kept people. There’s almost no other way to do it and still achieve the needed integration. It’s not because people are not bright enough or capable enough. It’s just that they’ve been accustomed to being senior management and all of a sudden they’ve become a relatively smaller piece of the puzzle. It just doesn’t work.
You can do it in a humane way. John sounds like a tough guy but he’s not. He’s a pussycat.
W: When Computer Associates acquires a company, they are fairly brutal. They just go in and take the employees out. They say, “OK
folks, you guys will be staying and you guys will be leaving.”
Aldus just thought about things differently from us. They said that we would never make PageMaker a 25 percent pretax (profit) business—that it couldn’t be done. We had it running that way in the first couple of quarters.
G: It’s just a different way to focus the business.
W: Focus the business, focus the resources, and leverage things. I would say the Aldus merger is done. There are still residuals where the culture is different, but it’s diminishing.
Let’s talk a bit about the challenges you face today as a large corporation.
G: You mean our high-flying stock.
We all hear about a total paradigm shift to the internet. Do you see a paradigm shift?
G: Yes. I think we’re better positioned to take advantage of that paradigm shift than anyone else in the business. I know that Business Week spends a lot of time telling you how Microsoft has sorted it all out. But we’ve been sorting it out for the last three years. We invested in Acrobat in expectation that the world would shift toward moving information electronically. Like everybody else, we had no magic knowledge about the internet and the speed at which it was going to grow. But implicitly, not just by dumb luck, we were investing in the technology that can leverage the internet.
W: I totally agree with Chuck. It’s all about moving information.
The internet is about the exchange and movement of information.
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Your co-management approach to the company is unique. Aside from the David Packard-Bill Hewlett partnership, you two are the only consistently well-working team of any of the giants. What’s your secret?
W: I don’t know if either of us could verbalize it.
G: As I said, John was my best hiring decision ever. From the day I first met him, we’ve respected one another’s intellectual capability, inherent h
onesty, ethical behavior and principles by which we lead our personal and business lives. You can’t recruit for that. Our partnership happened by accident. The result is that we’ve known each other for almost twenty years now and have never really had a serious argument. It doesn’t mean we always agree. I’m sure once in a while we’ll bruise each other’s ego, but the value of our friendship is so much more important—we get our egos out of the way.
W: If I’m out of town, there isn’t a company decision that I wouldn’t trust Chuck to make.
G: As a result, we’ve been able to lead reasonably rational lives outside of work as well. We’ve both had trophy wives for over 30 years.
To me that means so much more than anything else. But our friendship is unusual.
W: When we started the company we made the fundamental decision to always be compensated identically.
G:
Actually I get a little more than John because I’m a year older and have a higher insurance cost.... I think I make $100 more a year.
W: We really are complementary. We’ve never had a major disagreement about the philosophy of running the company.
Ever?
Ever.
Not once?
W:
Not once. In terms of important values we simply track together.
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So your secret might be in not turning every small decision into a big disagreement?
G: If one of us makes a decision that the other would have done differently, you must decide if it’s important enough to cause a scrap.
W: I won’t make a major decision without asking my buddy.
G: If the decision doesn’t sound OK we make a slightly different decision. That’s key: you don’t make random decisions and then expect the other person to endorse them.
Can you give us an example of how you split your duties?
W: We both do what we like.
That arrangement doesn’t create excessive overlap?
G: There is overlap.
W: It overlaps, but as I say, I won’t make a decision without asking Chuck and Chuck does the same. If we do overlap we get consensus beforehand. If we’ve had disagreements they’ve probably been over individual personnel issues. I might like someone more than Chuck will or Chuck will like someone more than I do.
G: People really want to find a difference in what we do. So they say John’s the technologist and I’m the businessman. And it’s bullshit, just bullshit. But if it makes them feel good, fine.
John tends to focus much more on product design. I have a longer attention span than John. The joke at Adobe was that if you wanted to get John’s attention, you had to bring a hammer and nails and nail his shoes to the floor, or he would go away. Sure, we have different personalities. We’re not the same person. But we both do well in front of customers and spend a lot of time on the road visiting our remote offices. I visit our office in Japan three or four times a year—a bit more than John. John spends more time dealing with the engineering people on new technology.
So yes, there are complements. But when push comes to shove, if necessary, we can pretty much completely replace each other.
W: Employees who have tried to divide and conquer us politically have always failed.
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You guys don’t look like typical entrepreneurs. You are Ph.D.s, Xerox PARC researchers, you are older than most entrepreneurs...
G: I can take my beard off.
Physical appearances aside, do you consider yourselves entrepreneurs?
G: People call us entrepreneurs. I don’t think of myself that way. I don’t think of myself as a businessman even though I know I must be one. I don’t compartmentalize myself that way.
What keeps you coming to work at Adobe?
G: The reason I come to work every day is that I work with a group of people in an organization that can impact and change the world.
That’s what motivates me. If being President of the United States motivated me, maybe I would have done that instead, although I could never get elected. The fact that I’m an entrepreneur is just an accident of my situation.
Remember that the most frustrating thing at Xerox PARC was not getting that great technology out into the world. That drove most of us out.
Sheer frustration?
G: We had built beautiful products that nobody used.
W: It’s sort of like a poet writing something that no one reads. Most programmers are driven by the prospect of impacting the market:
“Hot damn. A million people use my code.”
G: The first time someone extends their hand and says, “I want to shake your hand because the product you’ve made has changed my life,” is the biggest sense of satisfaction you get. I don’t know if that feeling is inherent in the entrepreneurial spirit, it motivates me more than anything else, by far.
W: The money and all of that stuff is nice, but it’s not why we started Adobe. It just isn’t the equation. The money is more a measure of how well you’ve run your business and the impact you’ve had on the market.
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But if your reason for starting a business was changing the world, you could have accepted Steve Jobs’ offer to hire you and avoided all the risk of starting your own firm.
G: My perception was that a universally useful technology couldn’t be captive to a single organization. We had to publish what we were doing and had to get broad industry adoption. The printing and publishing world is 10–15 percent of most countries, GDP. I thought it was unrealistic that one company could spread the technology so widely.
W: We’d also just come out of Xerox, which totally botched the world’s greatest technology. There was no guarantee that Apple wouldn’t botch things. At that time we just wanted to take a shot at making a difference.
You’ve accomplished that much. What advice would you give to entrepreneurs today?
W: The same piece of advice we got from our early chairman of the board. He said, “If your company grows, it will hit multiple plateaus of growth. Your primary objective is to grow and to get yourself fired.”
In other words, stop doing the job you’re doing and grow to the next level so that others can perform the work you were doing. Another way to say it is consciously recognize when you’ve hit a plateau and delegate effectively to let other people take over. I think 99 percent of company founders hit the wall because they don’t make that transition and instead try to stay in control of their company.
G: The other piece of advice is to hire people smarter than you.
W: There’s a management philosophy—the job of the managers we hire is not to be boss. A manager’s job is to be an expediter, to amplify the power of his or her people and to bring out the best in them by getting them to communicate and solve problems without necessarily telling them what to do. Adobe’s culture is not an authoritative, autocratic, high-structure kind of thing where I tell you what to do. It’s just not that kind of place. Much of our success in a dynamic marketplace comes from having managers who know how to leverage people.
G: The other bit of advice I’d give to an entrepreneur is to hire people who are finishers. It’s extremely important to envision what you
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want to accomplish and to reward people who actually ship the product. A lot of startup companies flounder because they are always working on an idea over the horizon.
It’s always more enticing to chase rainbows.
G: Of course. That may be rewarded in some cultures.
Is there any way you can tell who’s a finisher and who isn’t?
Mostly by experience. At first, we tended to hire people we already knew. We didn’t hire young people just so that we could pay them a lower salary. We hired the people we thought were the best.
W: Old graybeards. Seasoned professionals.
G: The early p
eople were from Xerox or ARPA [Advanced Research Projects Agency]. Particularly the engineering people.
How large a part did luck play in your success?
W: A huge amount.
G: When we started this company we didn’t know about Steve Jobs.
We didn’t know about the Macintosh. We didn’t know Canon was going to bring out a cheap laser printer. We didn’t know that computer memory prices were going to come down. We hadn’t met Paul Brainerd. We didn’t know any of that stuff. We had an idea and we were fortunate enough to bring it together at the right time.
W: It’s not only really important at the beginning to be in the right place at the right time, it’s incredibly important to develop not for what the market is today but what the market will be in two years’
time. If you happen to be in a startup, you’re lucky the first time you hit it and have a successful product. After that it’s a matter of building the infrastructure to anticipate the future. For that, you must have talented individuals with insight and vision about how markets interact. So many companies are one-product companies. They have a hit, they grow, and they die.
G: Being smart and working hard are required for success, but they’re not sufficient.
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8
MICHAEL DELL
Dell Computer
GROWING TEXAS REIGN
At age 19, Michael Dell decided to drop out of the University of Texas to found his own computer company.
Instead of becoming a doctor, lawyer, or engineer, the young freshman dropped out of college so that he could “compete with IBM.” Was this a misguided, rash decision that only a teenager could make?
Perhaps Dell decided to drop out of school so that he could do what he loved: being an entrepreneur. Entrepreneurial spirit was a part of Michael Dell since his childhood.
When Dell was 12, he devised a stamp auction that made him $1,000. And, during his senior year in high school, Dell earned $18,000 selling newspapers and bought a BMW—cash down. And, in retrospect, most people would certainly agree that Dell made the right decision. In Michael Dell’s first year of business, his company’s sales topped $6 million. All from selling computers.
In the Company of Giants Page 13
