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August 2000, Volume 68, Number 4 |
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August 2000, Volume 68, Number 4 |
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| Built to Flip, a Flop for the Long Term
A FEW YEARS AGO everyone wanted to create enduring corporations, and the 1994 business bestseller Built to Last, by organizational behavior professor Jerry Porras and Jim Collins, MBA '83, reflected that goal. In the new economy, however, there is a competing philosophy. Collins calls it "Built to Flip." In an article in Fast Company, Collins decried this new approach to entrepreneurship in which the aim is to get rich quick by selling off and cashing out in 12 to 18 months. "It doesn't matter whether the idea can be built into a profitable business, or a sustainable organization, or indeed a great company. All that matters is that the idea be flippable: Get in, get out, and get on to the next idea before the bubble bursts," he lamented. In another article, Business School lecturer Kirk Hanson spoke about the ethical implications of the new mind-set. "It's not that these are evil people; it's just that in the rush, a lot of things just don't get reflected upon," he told Fortune. "You see gold in the vein, and jumping the claim or grabbing the idea you hear from somebody else becomes much more tempting. So there's a coarsening of standards." Boom in Mergers Total mergers and acquisitions reached 20 percent of U.S. gross domestic product in 1999. This record level activity is not surprising, finance professor James Van Horne told the San Jose Mercury News. M&A activity traditionally booms in tandem with a strong economy and rising stock market, he said. The previous record, set in 1901, was led by the steel industry and reached only 10 percent of GDP. "The recent wave has been off the scale," said Van Horne, who has studied the history of merger activity. European Execs Have Global Gusto Europe's new business elite is dazzling observers with the audacity of its deal making, according to Fortune. Among the corporate chiefs mentioned were Sir John Browne, Sloan '81, of energy giant BP Amoco. Fortune said that BP's merger with Amoco, like Daimler's with Chrysler, is symptomatic of the fact that "while Europe's new business elite respect corporate America, they certainly don't fear it." These corporate stars are also versatile, with the Internet forcing them to learn new tricks. Sir John sits on the Intel board and is urging his own company to move at Net speed. He and other new-Euro CEOs are such "masterly global operators that it's doubtful whether their corporate style is any longer distinctively European," Fortune added. Hot Idea, Cold Feet He got the idea from his wife, and when he started his venture it reminded him of getting married all over again. "It's like a wedding," Steve Hochman, MBA '95, told the Industry Standard. "You spend six months planning, and it's not that you don't want to do it, but when you're finally ready to go to the altar, you have apprehensions."Hochman was referring to Lucy.com, an online retailer of sports apparel for women he launched last November. Among its backers is Bill Younger, MBA '75 and a partner at Sutter Hill Ventures in Palo Alto. What may have sealed Younger's support, according to the feature story, was a guided tour of Stanford Shopping Center, where he got to see how bad the selection of women's workout clothes really was. Pampering for the Right Price A new Seattle company is making the spa experience less intimidating to individuals and more accessible to a broad market. InSpa, founded by Colleen Stone, MBA '89, has opened in a popular mall and offers facials and other services priced between $10 and $49, with no tipping allowed. "We offer services and products that people use in everyday life," Stone told the Seattle Times. "And because we offer them in an everyday environment, retail developers have interest because they want repeat customers." The idea for an affordable day spa came to Stone when she was an executive vice president at Merle Norman Cosmetics. She went home to Seattle to launch her company. "Seattle has a tradition of retail start-ups, and I wanted to be in that environment," she said. Attitude Adjustment The stock market's recent roller coaster ride required a certain philosophical attitude, and the New York Times found it in Paul Matteucci, MBA '86. The CEO of HearMe, which makes software for voice chat over the Internet, told the newspaper that he tried not to look at his company's stock price until the end of the day. "If I happen to see the stock price on my browser, I try to forget it as quickly as possible," he said. Matteucci said he tries to persuade his 250 employees to focus on building great products. The stock price should follow, he said. But he acknowledged that the market does not always abide by such logic. For example, in January the share price fell after the firm announced better than expected revenues. "I have no idea why," Matteucci said. Internet Marketing "Buy" the Book About 200 schools will be using The Principles of Internet Marketing by fall according to its author, lecturer Ward Hanson. Hanson told the Industry Standard that the textbook, published by South Western College Publishing this year, was already being used on campuses as far away as Singapore and Russia as well as at MIT, Columbia, and UC-Berkeley. Editions in Japanese and Spanish are on the way. Mexico's Upstarts After two years of discussing the Internet and rubbing elbows with Silicon Valley entrepreneurs, Eric Perez Grovas changed his mind. The Mexican national had intended to join a large company after receiving his MBA in 1999, but instead he became a partner in MercadoLibre.com, an online auction site operating in Mexico and Latin America.According to the Industry Standard, MBA graduates like Perez Grovas are turning the traditional Mexican business world on its ear. Not only do they avoid the traditional trappings of long lunches and offices filled with underlings afraid to make decisions, they're also not relying on connections to Mexico's old and wealthy families to launch their young companies. Bernardo Zamora, MBA '95, left Booz Allen for eBrainstorm. com, a company that helps firms build Web businesses. While interviewing two programmers for the Mexican startup, he asked one of them to order a pizza. The applicant refused and said the other candidate should get the pizza. "You're going to hire me tomorrow and you're going to hire him in two weeks, so I've got more seniority," Zamora recalls him saying. The reluctant programmer did not get the job. Clicks Need Bricks The century-old construction giant Bechtel Group is one of the Internet's new kids on the block, the Wall Street Journal reported. The contractor, based in San Francisco, has realized that even some e-commerce companies need big bricks-and-mortar facilities, and fast. Last year, for example, Bechtel struck a $1 billion deal with Webvan to put up 26 distribution centers for the Internet grocery store. Bechtel is a privately held concern run by CEO Riley Bechtel, MBA '79. He and his father, Stephen D. Bechtel Jr., MBA '48, represent the fourth and third generations of the corporation's leadership. The Dating Game Five female graduates from the Class of 1999 found a way to improve their odds at that high-risk social enterprise, the blind date. Called "Project Yenta," the game gave incentives to matchmakers. Each woman got points every time she went out on a blind date, and the friend who set up the couple got double points, plus bonus points after the fifth arranged date. According to the New York Times, the winner was Sarah Rogers, who arranged at least two dates for each of her friends Anne Enna, Mari Nayvelt, Margie Backstrom, and Kirsten Bartok. "Who says you can't take what you learned in business school and apply it to everyday life?" said the Times. Swinging CEOs A commercial for Sun Microsystems features a giant rolling ball, symbolizing Sun's image as "the dot in dot-com." Given what we know about its CEO, however, a golf ball might be more appropriate. Scott McNealy, MBA '80, this year was ranked No. 1 by golf handicap among CEOs of the top 200 Fortune 500 companies. He boasts a 3.3 handicap. Others on the Golf Digest list include: at No. 9, Charles Schwab, MBA '61; at No. 36, Samuel Ginn, Sloan '69, of Airtouch Communications; and at No. 79, Richard Kovacevich, MBA '67, of Wells Fargo. In a Fortune cover story, McNealy divulged that he had used golf to gain quality time with his business hero, GE's Jack Welch. McNealy capitalized on Golf Digest's 1998 list as an excuse to challenge Welch to a match. Welch and McNealy were then ranked Nos. 1 and 2, respectively. The two have since become friends and McNealy sits on the GE board. Although Welch now has the inferior handicap, the fact that he won in both 1998 and 1999 prompted Fortune to wonder if McNealy "took a dive." A New Model for School Reform
Traditional schools operate on an old fashioned factory model," noted Lee, who joined the San Carlos, Calif. based organization from McKinsey & Co. last year. The group operates under a California law that provides state funds to so-called "charter schools" outside the mainstream public system. "Our hope is that existing public schools will look at us as an example to follow," Lee said.
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