The call of the wild.
Back in October 1996, Joe Nacchio, then 47, was avidly climbing the ladder to the top of AT&T. After 26 years with the telecommunications behemoth, he was running the company's consumer business and was widely considered to be no more than a step or two from the corner office. But then, his boss, Robert Allen, the company's CEO, picked John Walter, chairman and chief executive of publishing giant R.R. Donnelley, as his successor, effectively pushing Nacchio further from his own goal. Angrily, Nacchio spoke up, publicly criticizing Allen's choice. Walter struck back, muzzling Nacchio and banishing him to a hinterland position. By December, wags assumed Nacchio's days with AT&T were numbered. They were right. Three days after Walter announced Nacchio's reassignment, Nacchio resigned, heading west for a bigger - if smaller - opportunity.
As far as Nacchio is concerned, getting out of giant AT&T might have been the best thing that ever happened to him. Less than two years later, this Brooklyn-born Denver cowboy is not only back in the saddle, he's galloping through the telecommunications industry, taking Qwest, the Colorado-based fiberoptics provider, from being a $700 million construction company to a $3 billion network service provider, and discovering that, for him at least, smaller is better.
James E. Cannavino would clearly agree. Cannavino, 53, is currently chairman and chief executive of CyberSafe Corp., a tiny $10 million Seattle-based company engaged in electronic transaction security issues and technologies. But executive career watchers remember Cannavino's more than three decades at IBM where, among other positions, he served as senior vice president for strategy and development. And later, they remember his rise from chief operating officer to CEO of Perot Systems Corp.
And don't forget Alex Mandl, 53, who traded a direct shot (even closer than Nacchio's) at Bob Allen's AT&T job in 1996 to launch Teligent, a northern Virginia-based telecommunications company, whose ace in the hand is "fixed wireless" technology. Or Jack Scanlon, 56, who, just this spring, abandoned Motorola, where he was slated to run the company's $14 billion industrial division, to be chief executive of Global Crossing, a start-up specializing in undersea fiber-optic telecommunications systems. Or J.B. Holston III, 39, who left the presidency of Ziff-Davis's International Media Group to produce educational software for NetSage. Or Christos Cotsakos, 49, who switched off ACNielsen, where he was co-CEO, to run E*Trade, a $23 million on-line investing service. Or Judith Hamilton, 53, who left 600 employees and a co-CEO position at top research firm Dataquest to join FirstFloor Software, a 35-employee Web-based document delivery service. Or, not so very long ago, John Sculley, 58, who migrated from the rolling hills of Purchase, NY, to Silicon Valley, where, with Pepsi behind him, he took a bite out of Apple Computer.
Increasingly, these executives are not alone. More and more job-change columns seem to be filled with the names of large-corporation movers and shakers - CEOs and their heirs apparent - who are hearing, and heeding, the siren call of small computer and telecommunications companies, leaving the rewards and challenges of biggest business to seek the challenges and potential rewards of building something big out of something small.
A trend? Not yet, says James Copeland, managing partner of Deloitte & Touche and a longtime executive observer. "But it's definitely a blip on the radar."
It's not hard to see why. The media are filled with stories of vast fortunes made overnight when a technology company takes off. Of techno-wonders pouring from labs and programming desks, in need only of the right CEO to set them on the path to global greatness. The Internet, itself an all-but-overnight success story, is filled with corporate sites extolling their hosts as the next big thing.
For the executive who's risen high within a well-established corporation, the call of the small high-tech company can be quite alluring, and not just for the potential financial gain. Indeed, as Copeland points out, financial rewards should not rank high on the executive's dream list. Given that the small company's compensation potential can rarely - in the short run at least - compare to the guaranteed and sizable package provided by the large corporations, "there needs to be something more compelling," he says. And, many executives agree, there certainly is. If you're up to and ready for the challenge.
WILD DUCKS FLY FREE
If you can run a big company, some believe, you can have a lot of fun, without a lot of the headaches, running a smaller one. You've proven yourself in the intrapreneurial corporate arena; what's to stop you from succeeding in the more entrepreneurial world of high-tech start-ups and growth companies?
Possibly your own corporate background, and the all-but-invisible tics, prejudices, and predispositions you've acquired there.
Cannavino, who left Perot Systems for CyberSafe this past March, makes a persuasive case for its being the iconoclastic, rather than the gray-flannel, executive who is best prepared to step down in size and up in technology. "In running a small technology company," he says, "it helps if you were the wild duck at the big corporation, the one whose thinking was always 'out of the box.'" Be the one who breaks the mold, rather than fits it, he suggests. Otherwise, Cannavino implies, what you're prepared for is continued existence at the large corporation - its environment and politics have so shaped and structured your business thinking that you are unlikely to be able to adjust to the more chaotic, hands-on world of rapid-growth management.
Nacchio agrees. "The large corporate world insulates its executives from the realities of the competitive marketplace," he says. "Executives at large corporations are terribly pampered and sheltered." He makes it clear he is speaking not simply of corporate perks and compensation. "Even your access to information such as economic data, technological marketplace information, regulation, and social change - all of it is so filtered and managed by the time you see it that you receive a highly distorted view of reality," he says.
"Running a large corporation is great for someone who aspires to run for Congress," Nacchio adds. "You're used to internal deals, whisperings, peers who went to the right schools. Large corporations are the last vestige of the class system." And this privileged world creates a false sense of security on the executive's part. "Your world is so secure," Nacchio says, without a trace of wistfulness, "you can't conceive of your company going out of business. Look at Pan Am; it took 20 years for it to go out of business. There's no sense of urgency."
Nacchio gives that last comment a moment's thought before continuing. "In large corporations, urgency often occurs for the wrong reason," he says. "Within the organization, so much effort is expended on internal political competitiveness rather than marketplace competitiveness that the urgency becomes internal rather than directed toward business goals."
THE CHARISMATIC EDGE
And even business urgency is tempered by the pre-screening of information before it reaches the executive's desk. "Data is so carefully managed before you see it," Nacchio says, "that your sense of appropriate urgency is usually two orders of magnitude less than it should be. Everyone runs as fast as the slowest runner - a terribly dangerous position to be in."
Cannavino points out that large corporation executives devote a great deal of energy to managing the management of the managerial architecture. "Executives at large corporations spend 80 percent of their time managing the structure of the corporation, and only 20 percent on the business review process," he says. And even that business review process becomes a structural dance. "Just putting together a review in a large global organization takes immense amounts of time and coordination," he says. "Everything moves on a grand scale and has to be consistent across the world. That takes time. It's like trying to heat the ocean with a single warming probe. At IBM, I was lucky if I could accomplish two or three effective business reviews a year."
Additionally, bureaucracy often obscures the executive's vision of the big picture. "There is a tendency to functionalize the company," Cannavino says. "A tendency to focus on the functional part of the company rather than the whole view: the customers, the products, the marketplace."
Limitation of vision is a liability - or, for the overly secure and complacent executive, a luxury - unacceptable at small technology companies. "At CyberSafe I have three meetings a week whose very purpose," Cannavino says, "is to keep me in touch with the whole company - and keep the company in touch with me. There are few large companies where that could be done."
And there are next to no small technology companies where such an approach would work for more than an instant. "At a growing technology company such as Qwest," Nacchio says, "the CEO clearly has to have a vision - you can't just show up and put in the hours. You're building something, and that requires clear sight, charismatic leadership, and the ability to rally and focus your people around a central thesis for how value gets created. "The challenge is almost the opposite of that at a large corporation. "At a big company," Nacchio recalls, "much of the effort is focused on protecting the brand, and little on building something."
"If you're successful at a large corporation, you'll get lots of offers from other large corporations," Cannavino says. "Certainly I had plenty. But it dawned on me that I had done all of that. CyberSafe offered me a chance to run a company on the cutting edge of the most dynamic technology on earth and to work with a ferociously talented group of people committed to their customers and their products. That attracted me."
You measure yourself differently when you're in charge of a small, but explosively growing, technology company, Nacchio points out. "When it came time for me to be CEO of Qwest, I realized that it was time to see what I was made of. To run a great company at a time of historic transformation of an industry was a challenge that excited me in ways I hadn't felt in years." That exhilaration, D&T's Copeland says, is one of the key reasons to consider moving from a large corporation to a smaller technology company. "The executive has got to love the challenge," Copeland says. "That has to be the key motivator."
And the executive has to be in shape - in every sense of the word. "Running a growing technology company is a high-energy job," Nacchio says. "All the time. You have to build and maintain a level of excitement among employees, customers, the financial community. You have to be right a higher percentage of the time than at a large, well-established company. A .270 hitter won't make it in the technology sector. There's no margin of error."
That extends to every area of the small corporation - and the executive must be prepared to deal with every area, often every day. "You look at all of it when you're running a small company," Cannavino says. "You get the dirt under your fingernails. Every dollar is on the bottom line, and you have to buy carefully, spend carefully, make even quick decisions carefully." And at a small company quick, correct decisions are a constant executive demand. "Mistakes that are less than fatal at a large corporation are deadly at a small one."
This, Nacchio finds, is where his large-business background becomes most important. Originally trained as an engineer, Nacchio also holds two MBAs. "And I find that white I used maybe 20 percent of my MBA experience in my previous life, I use 90 percent of it as CEO," he says. "You have to be comfortable with finance, from macroeconomics to microeconomics, and everything in between."
All of it aimed at preparing the company for growth which, in the technology sector, can often be as challenging as stagnation or failure - as Nacchio has surely found. "Nothing prepares you for that," he says, "and yet everything you've ever done prepares you for it. To succeed in technology you have to be prepared constantly to learn, to be inquisitive, to keep yourself open to every possible bit of information, and never to allow, yourself to be blinded or misled by your past accomplishments." Making the move from large to small means focusing entirely on today and tomorrow. "You have to be sure you never try to drive the car by looking in the rearview mirror," Nacchio says.
Cannavino finds himself employing aspects of his large corporation background as tools for preparing CyberSafe for its growth spurt. In network security issues, growth is steady, but will likely explode as the number and severity of system intrusions by cyber-terrorists and criminals increases. Part of the job Cannavino has set for himself is making sure that CyberSafe is the name companies think of when network security concerns arise.
"This is where your experience becomes an asset," Cannavino says. "You're a known entity; you have contacts, a network, and customers. Your managerial experience prepares you to focus your new team on the challenges ahead. You also have the experience to know when to say no, to manage the growth in the manner that best suits your company rather than simply to accept everything that comes along. Too many large corporations bite off more than they can chew, returning to the customer with a solution that may suit the corporation, but doesn't suit the customer. That's a mistake you can avoid at a small corporation, where your job is to keep the focus on the customer and the products that suit the customer's needs."
THE KIDS ARE ALRIGHT
Ironically, D&T's Copeland points out, success, particularly dramatic success, is one thing chief executives of small technology companies are often unprepared for. "Too many of them suboptimize their goals," he says, "and are unprepared for great success when it arrives."
Leadership becomes key in building the smaller company into a larger one. And here, the advantages of deep background in large corporate management bear fruit, "Obviously," says Nacchio, "to reach to the top levels of a huge company you have to develop a terrific set of organization skills."
Nor can those skills be limited to one or two areas. "At an AT&T," Nacchio says, "you're called on to understand and manage large groups of very diverse executives. It's not unlike leading an orchestra - you're surrounded by people who are all talented, but who possess different skills, and all of whom have high levels of self-esteem." And the manager has to see to it that they all make music simultaneously, in tune, and at the rhythm he sets. The executive who can coordinate the activities of that sort of group in a large organization, without becoming lost in internal politics and jockeying, Nacchio points out, has at least one of the skills needed before taking over as maestro of a smaller company.
Talent and ego are equally large factors at smaller technology companies - with the frequently added ingredient of youth - -particularly in software and Internet companies, where the key personnel are likely to be twenty-something. That means the years spent climbing corporate mountains may well lend the migrating executive additional and unexpected advantages: age and experience. "There's a joke around here," Cannavino says of CyberSafe, "that my job title should be 'adult supervisor.'"
It's not entirely a joke. Silicon Valley, Silicon Alley, and dozens of high-tech regions in between rest on the skills of talented programmers, designers, and developers, many of whom are barely out of college - if they finished college at all. And because those companies' futures rest on intellectual talent, Copeland advises executives thinking of joining a high-tech firm to look closely at the talent pool involved. "Look at the personnel resources the company has," Copeland says. "How many key personnel are there, and how closely are they linked to the company's products?" Because that talent is key, the migrating executive should ensure that the talent pool is deep enough to sustain the company should some of its members depart.
ARE WE HAVING FUN?
Above all, the executive seeking success in a smaller but more technologically appealing arena must be prepared to work. At a huge corporation, an executive can go home at night, perhaps concerned about internal wings and struggles, but confident that the corporation will be there in the morning, that its maintenance will have been seen to overnight by its bureaucracy. "At a smaller company, you have to remember to turn out the light when you leave," Cannavino says. Copeland tells a similar story: "I have a friend who moved from a big company to a smaller one. At the big company, he could push a button on his phone and reach any number of corporate resources. At the smaller company, he pushes the button and his own phone rings."
And he picks it up: the call of small technology companies is one we're likely to see more and more executives answering. Having answered it, they tend to stay on the line. Would Cannavino or Nacchio return to the huge corporate world?
For Nacchio, that return to the big corporation might come without his even leaving Qwest: In less than two years he's steered this company into the multi-billion dollar corporate club. At this rate, it seems only a matter of time until Nacchio rejoins the ranks he once so gleefully left behind.
As for Cannavino, he may simply be having too much fun. Heading CyberSafe, he gives the impression of a man who has found the ideal combination of challenge, important work, opportunity, talented staff, and ambition. He knows what needs to be done, is equipped to do it, and finds himself invigorated each morning by the tasks at hand.
"It's most unlikely," he says when pondering a return to big corporate life. To attract him back, a huge corporation "would have to be really ready for a change, would have to offer the same upside as a small company and be as much fun.
"And I would want to run it."
Keith Ferrell, a novelist and the former editor of Omni magazine, writes frequently about technology from the farm in rural Virginia that be bought to escape publishing's fast track.
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|Title Annotation:||Technology and the CEO: Nightmares, Daydreams, Solutions; Nightmares; CEOs leave established companies to join upstarts|
|Publication:||Chief Executive (U.S.)|
|Date:||Feb 15, 1998|
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