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Enhancing Intel's business.


During a heated sales meeting last year for a new product from Intel's Personal Computer Enhancement Operation (PCEO) in Hillsboro, manufacturing manager Greg Hayes thought the sales projections were too high. As the argument became more confrontational and took on a "mine-is-bigger-than-yours" tone, Hayes fired a salvo that shook the company. "You hit that number," he shouted, "and you can shave me anywhere that you want."

Attention shifted quickly. Details were ironed out as to how long it should take to reach the number, and how Hayes would be shaved once it happened. This was no small-time bet or barroom wager. Disposable razors with "Shave the Hayes" embossed across the side were soon distributed throughout the company. This proceeded through the better part of 1988, but sales fell short of the limit. The bearded Hayes, whose wife has never seen him clean-shaven, escaped by a hair.

This behavior is typical for PCEO. As it has followed the mercurial growth path common to new high technology companies, the founders have sworn not to lose the small company zeal to which its first successes were attributed. In simpler terms, this means acting more than a little goofy.

(Although Intel will not release information on the exact size of PCEO, unofficial estimates place it at 200 employees.)

"PCEO is one of the best run organizations we've seen," said Tim Bajarin, executive vice president of Creative Strategies International, a high tech market research firm in Santa Clara, Calif. "They don't take ridiculous chances. They invent products around the holes in the market and have a relational management style that spurs people on to create." As for the inherent off-the-wall quality. Bajarin said, "The engineering community is full of people who are egoists and workaholics. It's important for the creative process to maintain a sense of humor."

Rich Bader, PCEO general manager, added, "Humor is a tremendous release. We want to keep employees' spirits up, and prevent the stress from turning into strain."

The Enhancement Business

The humor would be superfluous if PCEO didn't sell some serious products. Established in 1984, when the IBM personal computer (PC) was gaining ground in corporate America, the company's charter was twofold. First, it was to develop products that could be added to the PC to make it more effective. Next, it was to establish a direct sales channel for these products, addressing an audience that parent company Intel, known mostly for the microprocessors it makes, had never reached--the personal computer end user

Bader, with partner Jim Johnson, both employees of Intel's Systems Group, drew up a business plan and pitched it to management. Intel, which then had a virtual monopoly on the microprocessors that drove the PC, made most sales to manufacturers and was unknown outside of the engineering community. Building a retail base, Bader and Johnson felt, would be necessary for success in the PC market.

At the time, the semiconductor industry was in the midst of one of its periodic downturns, so new opportunities seemed like good ideas. PCEO had many of the problems common to start-ups, not the least of which was to be heard above the fray. But Intel's sponsorship and reputation gave it something of a head start.

By design, the IBM PC accommodates third-party improvements, and was a natural platform for electronic entrepreneurs like Bader and Johnson. The machine's main circuit board includes slots where expansion cards that change the nature of the machine can be added. But board companies, PCEO included, have faced compatibility problems. PCEO's advantage came from Intel's experience in designing and manufacturing boards in high volume.

Kirby Dyess, marketing manager, said, "Our charter has never been to put out products built from Intel parts. We want to approach the problems that frustrate users about PCs and solve a unique problem. We want to upgrade the machine they are already comfortable with."

Bader added, "It is the nature of the enhancement business that our most successful enhancements become standard over time."

About half the PCEO staff comes from the parent company. The Intel mindset--aggressive, dynamic and informal--is carried to an extreme at PCEO.

PCEO marketing communications manager Mary Browning said of her colleagues, "It's like talking to kindergarteners--where the effects of the world haven't yet touched their creative process."

Johnson, who shares the general manager title with Bader, concurred, "Intel is not a button-down culture. The tone is the same. The basic values and beliefs here are identical to values and beliefs of the corporation. You may see someone in shorts one day and a suit the next. We respect our customers and dress appropriately, but realize that we are in the great Northwest and that some people like to go fishing in the morning."

Bader said the Oregon location contributes to PCEO's success, if only because it makes people feel better about what they are doing. "When I came here 10 years ago, the lifestyle was viewed by many high tech people as a negative," Bader said. "Now the people in the industry see it as positive. This is due to the additional growth and congestion in other places, such as the Bay Area or Boston's 128 corridor."

A $7 Million Low Profile

More substantially, Browning estimated that PCEO pumps $5 million to $7 million in marketing communication costs per year into Oregon firms. Nevertheless, most of the public relations effort is centered out of state. The company has deliberately kept a low local profile.

The relationship between the PCEO and its parent is similar to Intel's other business units. PCEO must periodically account for its activities, but is essentially an independent operation. And it's not a one-way street. With its strong customer network, PCEO has a direct link to what users are thinking. This knowledge is fed directly back to Intel itself, and incorporated into future microprocessor development.

Despite some recent expansions, PCEO has built its product line with the belief that users will never have enough speed or memory. The company's first product was a math coprocessor board that allowed PCs to make faster calculations. The Above Board line, introduced in late 1985, allowed users to access more than 640 kilobytes of memory.

A year later, PCEO introduced the Inboard line, which grafted a faster 80386 processor onto older machines. When added to an original PC, an Inboard can more than double computational speed. The cost of adding an Inboard--around $1,000--is far less than replacing an entire system. The bad news is that the board is only guaranteed for use with the most popular machines, and does not work with many IBM-standard compatibles.

PCEO has seen the future of personal computing, and it is communications. With this in mind, it introduced the Connection CoProcessor last year. This board is positioned as a complete communications solution, with a modem, fax board, and separate microprocessor that allows these components to operate independently. For instance, a user can send and receive fax transmissions while recalculating a large spreadsheet, with no decrease in power.

(Just as Intel won't release personnel numbers at its PCEO division, neither will it release information on the number of product units PCEO has sold.)

None of these products is unique. Other companies offer memory cards, accelerator boards and fax/modem/ processor combinations, often for less money. The differences come in the software and service. PCEO, along with software giants Lotus and Microsoft, developed the memory management process. And the Connection CoProcessor's software system contains an electronic mail module, providing seamless communication to any user, anywhere--as long as each one has the board.

700 Calls Per Day

"Serving the user" is bandied about so much in the electronics industry that the idea means almost nothing. Furthermore, the customer as the most important part of the equation is another cliche, not exclusive to the computer business. Still, PCEO's policy of requiring each employee, from Bader and Johnson on down, to spend an hour a week working the customer support telephone lines is a unique way of keeping the company in touch with its customers' needs.

Marketing manager Dyess said, "You learn more during that hour than any other time during the week. It brings you back to reality. If you've been in the industry for a while, you get the perspective that users are sophisticated and they care about technology and hardware. When you talk to them, (however,) you find that isn't true. They just want to get their jobs done."

The PC is a tool, he continued, like a phone. "But when you work around people who talk nothing but PCs, your perspective is swayed."

The toll-free customer support lines operate from 7 a.m. to 5 p.m., fielding 700 to 1,000 calls per day. An estimated 40% are pre-purchase queries, while the majority of the remainder has to do with installation problems. Products are guaranteed for five years: If anything goes wrong, a new board is sent out with no questions asked.

Problems and solutions are resident in a database used by the phone staff. In many cases, for example, the phone support person will spend upwards of a half hour attempting to solve a customer's problem.

Customer support manager Glenda LaTour reports a success rate of over 90%, and said as products have become more sophisticated, they have also become easier to use. While PCEO's clientele was once predominantly made of a "power user fringe," less savvy users are now buying the products. Still, she said, the ability to solve problems over the phone has stayed consistent.

Bader and Johnson have learned to solve problems by complementing each other's abilities. The simple way to explain the partnership, both said, is that Bader comes up with the ideas while Johnson determines how they can be best executed. "Jim and I have a balance of yin and yang," Bader said. "Together we are one very competent and effective general manager."

Both are accessible to all employees, and are often found wandering the company's labyrinthian cubicles.

"We believe in people, letting them make decisions and giving them authority and accountability," said Johnson. "They don't have to ask for permission to do things. We encourage people to break rules for the customer, and reward people who take initiative and fail if it's for the right reasons."

To a cynic, these personnel practices sound like Happyspeak. Nebulous or not, however, it's a formula that has worked. "Senior managers have characterized PCEO as an organization that takes normal people and causes them to succeed," Johnson said. "This is opposed to other companies who always hire superstars and think this will turn them into a superstar company."

Few superstars, in fact, would last through their first teleconference at PCEO. Instead of a speaker phone, sound is channeled through a Teddy Ruxpin doll, whose jaws move in approximate rhythm to the person's voice.

"It helps a lot," Dyess said of the talking bear. "During intense meetings, you can get so involved that it's hard to be objective. This introduces humor, so you can't get too emotional."

PHOTO : CUDDLE UP: Rich Bader (I.) and Jim Johnson of Intel's Personal Computer Enhancement

PHOTO : Operation use humor, such as channeling a teleconference through a talking teddy bear, to

PHOTO : alleviate tension during meetings.
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Title Annotation:Intel Corp. Personal Computer Enhancement Operation
Author:Bermant, Charles
Publication:Oregon Business
Article Type:company profile
Date:Apr 1, 1989
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