In the Company of Giants

by Rama Dev Jager

  We know of one—Sandra L. Kurtzig. She managed to sell her ware to large manufacturing giants while raising two sons. If we had to choose one word to describe this entrepreneur who built a $450 million company, it would undoubtedly be

  “moxie.”

  Kurtzig’s interest in computers took hold while a sopho-more at UCLA. She interned there for the summer in the university’s computer center. Despite her complete lack of programming skills, she immersed herself in an attempt to solve her first major assignment—pinpointing the location of Eastern bloc radio waves bouncing off the ionosphere.

  Kurtzig dropped out of Stanford’s Aeronautical Engineering Ph.D. program with a master’s degree and a yen for something more exciting than academia. By 1971, she found herself selling computer timeshare accounts for GE. At the time,

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  Copyright 1997 Rama D. Jagar and Rafael Ortiz. Click Here for Terms of Use.

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  the vast majority of businesses could not afford their own mainframes and instead rented time on others’.

  On a sales call to a prospective client, her new company, ASK, was born. The customer, a telecommunications equipment manufacturer, needed custom software that tracked inventory, bills of materials, and purchase orders. After some thought, Kurtzig agreed to write this software, quit her job and received $1,200 for her work—a modest but sound beginning.

  Kurtzig found that other manufacturers were also badly in need of her software for manufacturing management, called MANMAN. ASK blossomed as it expanded its product line and its base of customers.

  Any entrepreneur with a growing company inevitably faces the decision to sell the business to a larger concern or continue alone. Kurtzig arrived at this crossroads in 1976 when Hewlett-Packard (HP) made a $1 million offer for ASK to sell the rights to its software. Kurtzig’s negotiating counterpart was a young Ed McCracken (who would later go on to head Silicon Graphics). McCracken was less than thrilled at the prospect of having to go outside HP for programming talent.

  The frosty relations between the two didn’t help matters.

  Determined to demonstrate her young firm’s programming superiority, she spurned the offer and worked harder than ever to grow little ASK into an industry leader. HP was never as successful as ASK in providing a manufacturing software package of its own.

  Confident in ASK’s stellar ascent, Kurtzig abdicated CEO

  duties in 1985 to raise her two children. She remained as chairman until 1989 when her firm’s revenues exceeded $185

  million.

  Less than a year into her retirement, ASK’s board of directors persuaded her to rejoin as CEO to shepherd the company through increasingly turbulent waters.

  Kurtzig repositioned the firm as a database provider and took her company to $450 million in 1992 revenues. Again, comfortable that her company was back on track, she retired to let professional management take over. Two years later, ASK

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  was purchased by Charles Wang’s firm, Computer Associates, as part of its acquisition strategy. All ASK products are now sold under the CA label.

  We met with Kurtzig in her private office along Sand Hill Road in Menlo Park, California, home to most of the top Silicon Valley venture capital firms. Her office, easily the most ornate of any of those we interviewed in, oozed refinement and wealth. Our interview took place while we unhurriedly sampled coffee from elegant china cups.

  “How many times have you seen a product in the

  market and said, ‘I had that idea.’?”

  You moved from an idea to a company in an unusual way. Tell us about it.

  The company started as a part-time job in the second bedroom of my apartment. I started with $2,000, unlike many other entrepreneurs who had a lot of venture capital. I clearly didn’t have a grandiose plan for creating a half-billion dollar company. I just wanted to produce some grandchildren for my parents, because they were getting on my nerves about giving them some grandchildren. I wanted to keep my mind active, so I thought I could have children and do something to supplement the family income and keep my mind occupied. So it started as a part-time job in the second bedroom.

  I had read a lot of business journals. I read that American manufacturing companies were among the least productive of the industri-alized nations and I thought to myself that it was because those manufacturing companies were only using their computers for payroll. It’s important to pay your employees, but I realized that computers could serve greater needs in a manufacturing company. My first customer told me, “I really need something to track inventory and provide manufacturing information in a timely way.” I thought that he was probably similar to a lot of manufacturing folks. After I developed the first series of software for that first customer I went to a second company and said, “Can I help you computerize your manufacturing operation?”

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  It was at this point that you started sending out flyers advertising your services?

  Right. The second company said, “We also need to organize our manufacturing operations and keep track of inventory, but we’re very different from the first company you worked with. Nothing you did there applies here.” I said, “Well, tell me about your business.” I would listen a lot to their problems. I realized that the problems of my customers—although they thought they were very dissimilar—in fact were very similar.

  I took the base of what I wrote for the first customer and enhanced it with all the little nuances that were different for the second customer. Of course, I charged the second customer as if I started from scratch, because he thought he was unique. I didn’t want him to think that he wasn’t. I installed the software for the second company; they were very happy. I went to a third company, and the same thing happened. The customer said, “We’re very different from the other ones. We’re successful because we do everything differently.” I listened to his problems and realized that again there were many more similarities than dissimilarities, even though there were some unique things he was doing.

  I again used the base product and embellished and enhanced it.

  We became the first company to really develop standardized software as opposed to custom software. At the time, it was considered very innovative to be standardizing software. We started developing standardized software for the minicomputer market, specifically the manufacturing segment—financial and manufacturing applications in the manufacturing segment. That’s how the company began.

  The key was just listening to customers’ problems, and then designing software. I did all the selling, and the collecting of money—I was sort of a one-man band. But two things happened.

  First, I never considered myself to be the best programmer, but my strength was in understanding what it took to write a program. I could communicate with very skilled programmers in terms of what was needed in the program. Also, by listening to my customer, I was able to learn enough about his manufacturing process to translate what he said, and think through the design issues. I was able to communicate what was needed to the programmers. My best skill was identifying the problem, translating the problem to the technical people, and understanding enough of each. I was also very hands-on. I did all of the bookkeeping at first, even though I didn’t have a business background.

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  In growing the company, I knew enough about all the areas of the company, so when I started hiring people, I quickly knew whether they were BS-ing me or whether they were doing a good job.

  Whether the job was investing money or banking, I was very hands-on and felt it was like “take the heat or stay out of the kitchen.” You shouldn’t have employees doing anything you wouldn’t do. So I’d work very long hours, and so forth. I never said “just give me some people to do this” and then be hands-off. I was very involved. At the same time, I realized that I couldn’t do everything by myself. So when I hired people I recognized that t
hey weren’t going to do their work exactly the way I would. But, even if they did it 90

  percent, they would do many things better than I could. I could only do so much. So I was very willing to give people responsibility, authority, and let them work with it. So, I delegated. My attitude has always been that people are basically good.

  That’s a good attitude. Why is it unique?

  It’s a different attitude than a lot of companies around here have. A lot of bosses are very scared about hiring good people, because they think someone above will decide that the good people should get the promotions, not them. I’ve always felt that it’s the good people around me that made me look good. It’s definitely not threatening to me to hire people that are good. The way I see it, you always want to hire your replacement.

  I was very concerned about giving up a big percentage of the employees’ company, because they would think they no longer had control. If you’re really out to create a big company, the first thing you should do is have the best people. If you want the business to be a success, whether you’re running it or not is academic. If you’re good, everybody is going to keep you in control. That’s for sure. If you’re not good, then you want someone else in control to make you rich.

  In your case, you were in control.

  I was, but it wasn’t because of control. I never thought, “Is this company ever going to be worth anything?” I didn’t have any venture capitalists, which was both good news and bad news. The fact that I didn’t have venture capitalists meant I could make every mistake in the world without anyone looking over my shoulder. I would never have to say I was sorry. It was my neck on the line, no one else’s. I think that allowed me to make a lot of mistakes.

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  No venture capitalist would have given me any money at the beginning. First, I was a woman. Second, the product was software and in those days, software had no value. It was difficult. Today, I would do it differently, but I would do it differently because of who and where I am now. If I went back to that time again, I would probably do it the same way again. It’s as I said before: get as far as you can without outside money, because you don’t really need a lot of money at the beginning when you’re developing software. When we went public, I still owned 90 percent of the company.

  When we first gave stock options to employees, they put them on the bulletin boards and they used them for dart practice. One Thanksgiving, ASK gave people turkeys. The employees didn’t like it, so the next Thanksgiving I gave them some stock, and they thought that was worse than the turkeys. There were comments like, “This is really a turkey, giving stock” or “What’s this piece of paper? This is ridiculous.” Our lawyer said he knew that ASK was a real company when the stock options started coming off the dart board. For most of the people you’re talking to, there wasn’t that much money around.

  We all managed through hard times, as well as good times.

  What concerns you about today’s managers?

  I’m concerned that a lot of today’s managers haven’t managed through the down times. There was an article this weekend in the newspaper about skyrocketing housing prices. It’s very nice that everybody’s gotten rich around here, but it’s paper wealth. There are a lot of people running companies in Silicon Valley who haven’t had the experience of managing through both up and down markets.

  Is it that they lack the toughness to persevere?

  They don’t know if they have the toughness. They’ve never had to face it. They’ve only had up markets.

  Some people think that there isn’t going to be a down market. Steve Jobs said that the computer industry is going to just blast off; that this phenomenon is just the beginning.

  I’m not saying they’re not good companies, but nothing’s worth the kind of multiple at which a lot of these companies are trading. In my mind, multiples are determined by the expectation of a company’s growth rate into the future. So if your multiple is thirty, investors

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  expect your earnings to grow at about 30 percent per year. That’s a rough estimate.

  When a stock sells at a 60 P/E multiple, do you think this company is going to grow for 60 percent per year into the future? You can’t grow a company for very long at that kind of rate if you have to hire new people—even if they’re standing in line and you don’t have to interview them. You can go from one million to two million; that’s a hundred percent growth. Two million to three million is really fifty percent. You just can’t do that. As you grow, you can’t sustain growth at the rates the stock market is currently expecting. It’s unrealistic.

  You probably can’t grow, realistically, at much more than a 25 or 30

  percent rate. Look at Intel; look at Hewlett-Packard. These companies are growing at those rates, and their P/Es are in the teens or low twenties. And those are great companies. Those are companies I can invest in and sleep at night. Their P/Es are about the market average.

  Let’s move to the topic of ASK. Early in the company’s life, you received what was essentially a buyout offer from Hewlett-Packard. How did you make the decision not to sell?

  That was a weird deal. HP realized that software for the manufacturing industry was a good industry and they recognized that our software could help them sell a lot of hardware, mainly because they’d been trying to get into the Boeing account for years and couldn’t.

  Data General and DEC were way ahead of them. And here we were, this no-name company that got a big deal with Boeing, and our software turned out to be the beginning of the relationship that HP had with Boeing. HP sold Boeing millions of dollars worth of LANs and millions of dollars worth of hardware. And, they recognized that our software could be a key for them, but we alone were not big enough to pursue all the places HP wanted to be.

  Ed McCracken [then on the HP negotiating team and now CEO

  of Silicon Graphics] is the only person I have anything negative to say about with regard to this negotiation. In all fairness to him, he says it’s a good thing that the deal didn’t happen because ASK went on to such success. HP and ASK basically had an agreement where HP was to buy the software or buy the company. They had one price in mind and I had another price in mind, which was double theirs. To me, these were big numbers. When we had our pseudo-final negotiations with McCracken and Paul Ely [then HP Vice President], Ed started the conversation by saying, “I don’t know why we should give

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  these little kids anything. We have all these fantastic, brilliant HP

  engineers that can write all this software.” That didn’t start the conversation off on a good note. I don’t know whether it was a negotiating strategy on Ed’s part to get the perceived price down, or whether he honestly felt that way. I said, “You guys can’t write this software in nine months.” Paul Ely said, “We’re going to do this in nine months with or without you, and we just want the software. Why don’t you come design the software for HP?”

  I replied, “You’re not going to do this in nine months. It’ll take you three years.” End of HP negotiations! And of course, it took them much longer than three years. ASK kept staying ahead of the game.

  In software applications, you keep adding to application software and create a barrier to entry. The rest is history. We ended up becoming the largest purchaser of Hewlett-Packard computers. Instead of HP

  bringing us in with our software, we convinced them that we wanted to OEM [Original Equipment Manufacturer—essentially an arrangement between a supplier of a technology and another company which, in turn, adds its own logo and product name to the product for eventual resale] their hardware because we were doing all the selling work. That was also a unique arrangement, because until then, OEM meant a hardware OEM—that you added value with hardware. I said that adding value were the operative words, and we added value with software. At that time software was not considered an added value.

  It was a gut
move on both our parts, but HP is a classy company.

  Our choice to write software for the HP machine—part of it was by accident, part of it was that they were right in our backyard—was very key to our success. They were such a good and classy company and they wanted to be fair.

  If McCracken had offered what you wanted, would you have taken it?

  If they had offered $2 million, yes, absolutely. What you don’t know about the future doesn’t hurt you. At that point the money was more than I could ever imagine.

  What role has luck played in ASK’s success? Is it the dominant force in your case, or is it skill?

  Al Shugart [founder and CEO of disk drive maker Seagate] once teased me when we were both giving a speech together. He said

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  something like, “Luck’s more important than your mother and Sandy will talk about luck.” The role of luck has always been an inside joke on the peninsula, but I think you make your own luck.

  I think luck is seizing opportunities. There are opportunities all around. There are millions of good ideas, but it’s those people who seize the ideas and seize the opportunities that appear lucky. When you see an opportunity in the market, are you lucky that you see an opportunity? I think it’s the seizing which is the key. There are plenty of brilliant ideas. It’s those people who take those brilliant ideas and make a company that make the difference and, of course, reap the rewards of success.

  How many times have you seen a product in the market and said,

  “I had that idea.” It happens every day. You really have to go for it to be in business for yourself.

  Would you consider yourself to be someone who is driven and seizes opportunities at every juncture?

  I used to be.

  Would you define yourself as someone who is willing to take incredible risks?

  I don’t see them as incredible risks. I don’t think any entrepreneur would say that what they did was an incredible risk. I think most could tell you many reasons why it was obvious to do what they did.