AT&T; Mavericks Do It Their Way
Employees are united in their devotion and unbridled enthusiasm for a company they all were fed up with and preparing to leave only two years ago.
There was a time in Alan Wlasuk’s career with American Telephone & Telegraph that he would stay in fine hotels and fly first class. But when he went to San Francisco on business recently, he took a $35-a-night room at MaryAnn’s Guest House--and shared it with another AT&T; worker.
You’ll hear no complaints from Wlasuk. It was the 35-year-old computer graphics wizard’s own idea to stay in the cheap room, saving the company money. And his feelings for his job border on reverence.
“I don’t think anybody views this as a job anymore,” says the soft-spoken Wlasuk. “This is our child.” Talk to any of Wlasuk’s 10 compatriots at AT&T;’s first new-venture company, lodged in a secluded two-story house here on the wooded outskirts of Indianapolis, and the story is the same: Devotion and unbridled enthusiasm for a company they all were fed up with and preparing to leave only two years ago.
What transpired in the interim was the breakup of the Bell System, formation of an incubator to tap and coddle unconventional new-business ideas and an environment suddenly ripe for new ventures. When word spread that top management would let these business upstarts bend some longstanding AT&T; rules if that’s what it took to get a jump on the competition, Wlasuk and company were back in the fold.
Four months after they went to work on Wlasuk’s idea for a computer graphics board that would let home-computer users call up TV-quality pictures instead of the usual cartoon-character images, the new-venture team had its first product on the market. Having shaved 14 months off the usual AT&T; product cycle, they then tackled a more sophisticated board. It was out two months later.
To stay ahead of the competition, their goal is to introduce a new product every six months, a rigorous schedule they already have surpassed.
With electronics buffs and industry trade journals praising the first board as one of the more significant microcomputer products of 1985, sales soared. And by June of this year, just nine months after the first board hit the market, the venture was profitable--13 months ahead of schedule.
Of that achievement, AT&T;’s new-ventures chief, William Stritzler, says: “I couldn’t be more proud.” That this group of young mavericks (average age 32) was able to take four products to market in a year when the AT&T; videotext outfit for which most of them worked previously didn’t develop and market a single product in more than three years lends credence to the wisdom of the move at many companies to smaller, more entrepreneurial work groups.
Stritzler is a believer. “There’s not one” employee at the Indianapolis venture, he asserts, “who doesn’t have a gleam in the eye and fire in the stomach.”
What a difference two years make.
Wlasuk was “headed for the outside” after AT&T; decided to kill the graphics-focused home computer that he and several of his current teammates were developing. That decision followed months of tense encounters between the young developers and top AT&T; executives and marketing managers.
Raring to Go
“We were like a racehorse raring to go and the gates wouldn’t open,” says Rose Ann Alspektor, now in charge of marketing support for the graphics-board venture.
In hindsight, Wlasuk recognizes that the home computer was a high-profile venture and major corporate commitment for AT&T.; It “was going to affect the stock and the image of the whole corporation.” So, management was bound to be more cautious and slower moving than it can afford to be with a small, low-cost, low-profile computer graphics board.
Nonetheless, when the home computer group was disbanded, most of its members started looking for other jobs. “Being blended back into the AT&T; mainstream was unacceptable,” says Wlasuk, a most unlikely candidate for the corporate suite in his attire of blue jeans, faded blue T-shirt and thongs.
Wlasuk approached consumer products director Hans Mattes to vent his frustrations. Mattes heard him out and suggested that AT&T;’s consumer products group might be persuaded to take a closer look at an idea Wlasuk had hatched while working on the home computer.
Computer graphics is Wlasuk’s hobby. He dreams about producing a short computer graphics movie, a small-scale version of the creative full-length film “The Last Starfighter.” So one day, while playing on the computer, he idly shaded in some images of balls flashed upon his computer screen. The results were surprisingly dramatic: The images appeared three-dimensional and far more lifelike than pictures usually do on a computer terminal.
Persuaded Executives
Mattes liked the idea of an affordable computer board that would give consumers access to television-quality pictures and pitched it to AT&T; executives. They were sold.
Wlasuk, officially the team’s technical director, rounded up a small team--”small,” he says, “is the only way to go”--and chose the Indianapolis house for its availability, family-like ambiance and seclusion. Built as an AT&T; market research lab, a home of the future, the house contains a plethora of electronic gadgets, all linked by 16 huge computers. Nothing identifies it as AT&T; property.
The venture was set up in June, 1984, as its own little company, run by a mini-board of the venturers’ choosing. Wlasuk and company handle their own development, marketing, advertising, scheduling, finances and billing, all outside the purview of the normal AT&T; staff, and contract out the manufacturing.
“It took a while for the staff at AT&T; to understand why we are operating out of their purview,” says Joseph Haaf, the venture’s marketing director. “In fact, for a long time, the corporation at large thought it would be better if we just rolled over and died.” Instead, it took the concept of self-ownership a step further.
Each member of the original team risked between 8% and 25% of his salary in order to pump an additional $100,000 of capital into the project. (AT&T; originally awarded the group $50,000 to cover salaries and expenses before it started generating cash, and from time to time adds more to the pot. The group, in turn, regularly pays back the parent’s funds over a prearranged schedule. It is not permitted to exceed a negative cash flow target.)
Rich Rewards Possible
If the venture succeeds, the original team recovers its risks plus up to eight times the amount it invested. Those who arrived and invested later (all 11 entrepreneurs are investors in the venture) are entitled to up to four times their investment because their risks weren’t as high.
As a group, they could collect $890,000.
“I had originally discarded the equity thing as being unnecessary,” Wlasuk says. “But now I’m convinced I was right to put it back in. These people do not work for money . . . but it helps provide a focus. After all, the whole idea here is to run a business; not just to enjoy our work. It makes each of us feel explicitly that this is my business and I contribute to the bottom line.”
Engineer Brad Pillow agrees. Compensation is “a rationalization more than a motivation. More than anything it’s a good rationalization to my wife for all the long hours I put in.”
To get the cost down, he and his team focused on producing pictures that were good enough for the average consumer but not as sharp as needed for certain specialized, commercial purposes. (More recently, responding to customer requests, the team introduced a line of higher-resolution boards for the more advanced graphics needs of small TV and cable stations, publishers, video-production crews and the like.)
With everyone from the engineers to the sales director and owner, costs are something nobody at AT&T; headquarters has to tell the tightly knit team to keep down.
Watch Their Expenses
Hence, they stay at cheap hotels when they’re forced to travel, they agonize over equipment purchases and everyone pitches in with cost-saving suggestions.
“When cash flow looked pretty grim one month,” says Cathleen Asch, business manager of the Indianapolis venture, “the fellow responsible for producing our technical manual came to us and asked whether it wasn’t possible to hold off on the manual’s production because that would help the cash flow. That’s his baby, it’s what his whole job here is about and yet he volunteered to hold up on it. To me, there was no better sign of what this place is all about.”
Asch entered the picture when Wlasuk was scouting around for someone with some business sense. “I’m not a business person,” Wlasuk says. “My wife puts money in my wallet from time to time.” Asch viewed the venture as a shot at “really running a business.” Although not thrilled about the location--”I’m a New York City girl. I wasn’t sure I could survive in Indianapolis”--she relished the thought of “starting with a clean slate and making of it what I wanted.”
She hasn’t been disappointed. “We are quite autonomous,” she says. “It’s rare to have to go to New York for approvals.”
The autonomy is evident in the company’s advertising. Ads point to the boards’ compatibility, not only with AT&T; hardware but with IBM computers. “The corporation would rather we didn’t mention IBM,” says Haaf. “But they allow it.” Nor is the venture obligated to buy from or sell to other AT&T; operations. As is the case with the handful of other AT&T; new-business ventures, “it is strictly a vendor-user relationship,” says Stritzler. “We don’t step in.”
The graphics board permits personal computer users to view full-color pictures of actual houses anywhere in the country. They can skim through catalogues and pictures of missing children or criminals. Because of its capability to show shades of gray, the boards also enable doctors in different cities to simultaneously view an X-ray and share their opinions.
With the more advanced board, consumers can capture their own pictures on videotape, flash them onto a TV screen and then manipulate them. So, makeup artists and hairdressers can show a customer how she would look with a new hairdo or different shade of makeup. Plastic surgeons can show a patient how a face-lift or nose job would alter appearance. Exercise studios can entice overweight customers with a real-life look at the effect of shedding 30 pounds.
Asch says the venture also has sold boards to users of machine-vision equipment, home-security companies, the advertising and real estate industries and businesses that make their living selling T-shirts with peoples’ faces and names at amusement parks. Recently, she even talked with someone about the possibility of using the boards for making interactive-conversation story books for children.
In all, the AT&T; venture has 22 products on the drawing board as it pushes toward the day next April when employees’ bonus pay is determined. (They have had one already, far ahead of schedule.) And after that? The team will recommend to the company whether the venture should be used as a spawning ground for other businesses, be integrated back into the mainstream or spun off as a public company.
But for Wlasuk, the payoff is in something far less tangible.
“See this?” he says, pointing to the circuit board, on which there are carved a string of letters, meaningless to anyone outside the company. “Those are our initials, everybody on the team. And they’re on every board and visible in every ad.” That, he says, “is all the reward I need. It says this is our company and our product and we’re terribly proud of it.”
