by W. E. Pete Peterson
Copyright 1993, 1998 W. E. Peterson
The "teach" theme helped us do a better job of promoting our products, but it also pointed out one of our weaknesses. We were great at giving presentations, but we were not very good at listening. Our reps had turned into demonstration machines, some committing what I thought was the worst presentation sin of all--asking customers to hold their questions until the end of the presentation. "Listen" would be the theme for 1990. We would continue to teach, but we would also pay attention to what it was our customers wanted to learn.
In January Microsoft offered to make us a beta test site for Windows 3.0. We accepted their generous offer, but did little more than look Windows over. In hindsight, it is easy to see we should have done much more right away. At the time, we could justify not doing a Windows 2.0 version in favor of completing WordPerfect 5.1 for DOS, but it is now difficult to defend our further delays. Unfortunately, we did not have any experienced Windows programmers inside the company to form a development team, and there were not many outside the company to recruit.
Some of us were ready to postpone OS/2 in favor of Windows, but the programmers in the OS/2 group, who had also been given the assignment of eventually creating the Windows version, were not ready to give up on OS/2. They were making good progress and hated the idea of starting over or splitting their development team into two groups. They wanted to believe in IBM, as did the rest of us. The failure of OS/2 meant having to play on a field owned and operated by Microsoft, with Microsoft making the rules.
We tried to help OS/2 succeed as much as we could. Alan Ashton and André toured the country with IBM, visiting their largest customers and reassuring them that OS/2 was the one and only true operating system of the future. We all took every opportunity to show support for OS/2 at industry events, in our quarterly newsletter to customers, and in comments to the press.
About this time Egghead Discount Software, a chain of 200 software stores, asked me to drop by its office in Issaquah, Washington. It was one of those times when a customer pulled our chain to see if we were properly obedient. Large companies like Ford did it all the time. They wanted a president or vice president to show up periodically to make a formal demonstration of devotion and consideration. A good product and good service were not enough. After all, Bill Gates himself was visiting Ford to tell them how stupid they were to buy our products, so the least we could do was to show an equal amount of concern for the relationship. Because Egghead sent us a check for a few million dollars each month, we had to answer their tug.
I was not the only person invited to Issaquah. Jim Manzi from Lotus was there. Gordon Eubanks, CEO of Symantec, was there, and so was a president or vice president from almost every other software company. Egghead was pulling everyone's chain at once, and we all obediently came running.
Victor Alhadef, president and founder of Egghead Discount Software, was our host. The theme of his speech was a request we had heard over and over again from our dealers and distributors over the years. Sometimes the plea came in the form of a blatant threat, as was Businessland's practice. Sometimes it was merely a cry for help. In every case, the dealer was hoping to get special pricing. Every reseller wanted a price which was better than the competition's, and all had a good reason for justifying their special breaks. In Businessland's case, the company demanded better pricing because it offered its customers more services. In the absence of a price break, it tried every way possible to avoid selling a product. Not surprisingly, no one in the industry grieved much when Businessland failed. In Tandy's case, the company believed it had to have a certain gross profit margin before carrying a product. If other dealers generally discounted a product, which was the case with all of the popular software, Tandy expected the software manufacturer to give it an extra discount to keep its hallowed margin intact. If a vendor refused, its products did not appear on Tandy's shelves.
In Egghead's case, President Alhadef made it clear that his company was in trouble. He complained of low profit margins, which was ironic because for years Egghead had been one of the dealers most responsible for the deep discounts. As part of his plea for help, he took us on a tour of his facility, hoping to demonstrate why he deserved an extra discount. He was very proud of the 75 programmers he had writing accounting software for the IBM AS/400 (the AS/400 was IBM's new midsize computer, smaller than a mainframe, but larger than a personal computer). Seeing more programmers working on Egghead's accounting software than we had working on WordPerfect for DOS was proof enough that Egghead was having trouble. Mr. Alhadef's appeal brought him a lot of sympathetic looks, but no special favors. By now we had all learned from experience the inevitable bad effects of special pricing. Soon there would be a reorganization at Egghead, and Mr. Alhadef would be gone.
During the calm before the Windows storm, we released a new product. Once the original desktop publishing team finished putting graphics capabilities into WordPerfect 5.0, its members wanted to continue their work with graphics. They wanted to produce a software package that would make visual aids for presentations, or as it is called in the industry, a business presentation graphics package. Although the marketing department knew the product, which was given the name DrawPerfect, was coming, the ship date had slipped a number of times. When DrawPerfect was finally ready, we were taken by surprise. In February we had a product ready to ship, but no advertising.
The surprise appearance of DrawPerfect helped us pull off our most effective product roll-out. Our usual style was to place our ads too early, in anticipation of a ship date which would later slip. By the time the product was ready, our dealers were frustrated with us, because we were sending customers into stores to buy a product which was not available. This time our reps delivered a demonstration copy to our dealers long before their customers knew the product was coming, so by the time our advertising came out, dealers had ordered and received real product for their shelves.
Despite the fact that DrawPerfect was a DOS product in a world anxiously awaiting Windows products, it sold well. For the first time in our history we had three products--WordPerfect for DOS, WordPerfect Office for PC Networks, and DrawPerfect for DOS--selling more than a million dollars a month each.
It was in the spring of 1990 that we invented what was lauded as one of our most effective innovations--the hold jockey. By now we had about 600 operators in customer support divided into approximately twenty-five teams, but we were having trouble with how calls were distributed to the various teams. Rather than give each team a different assignment, we had groups of teams covering the same areas. For example, we had a group of six teams taking questions for general features, a group of five teams answering printer questions, a group of three teams covering network questions. The telephone system we used was not capable of distributing the calls evenly to each team in a group all of the time. While in theory each team was only supposed to have twelve incoming lines, sometimes fifteen incoming calls would end up in one team and only nine in another. One answer to the problem was to purchase better equipment. We had been buying our phone system from Rolm at a cost of about $2,500 an operator. To move up to better equipment we were going to have to throw out the old system and replace it with one that would cost us about $5,000 an operator, or about $3,000,000 for the 600 people we had in support.
At a meeting to discuss whether to purchase the better system, I asked if it was possible to have a real person keep an eye on the support screens and transfer callers from one group to another when necessary. I was thinking that a real person with real intelligence would be a much cheaper solution than a new phone system with artificial intelligence. As we discussed the idea, we decided that a real person could also select and play the hold music, do live commercials for our products, provide traffic reports (information about wait times on the hold lines), and offer ski reports in the winter.
We were not sure whether we were the first to invent and use live hold jockeys, but the program did get us a lot of attention. A number of television and radio stations ran stories about our innovative approach to hold music. Not only could we offer a more personal service to our customers, but the interest that accrued on the $3,000,000 we didn't have to spend on the new system was more than enough to fund the program.
In May Microsoft shipped Windows 3.0, and our worst fears became a reality. Just at the time we were decisively winning in the DOS word processing market, the personal computing world wanted Windows, bugs and all. To make matters worse, Microsoft Word for Windows was already on dealer shelves and had received good reviews. That little cloud on the horizon, which had looked so harmless in 1986, was all around us, looking ominous and threatening. IBM's strength and size were no protection. Not even an elephant could ignore the impending storm.
May 31, 1990 was a sad day in WordPerfect Corporation's history. I wrote a press release announcing that we were postponing our OS/2 product, so we could produce a Windows version of WordPerfect as quickly as possible. I wrote, "While we still are strong supporters of OS/2, we have decided to test and release the Windows version of WordPerfect before the OS/2 version. The reasons for the schedule change have to do with the expected delays in version 2.0 of Presentation Manager and particular requests from our customers. This change should move up the release of our Windows product by three to four months and will delay our release of a PM product by four or five months."
We had few friends that day. IBM's best large accounts did not understand how much trouble OS/2 was in and were upset at us for breaking ranks. Those customers at the other end of the spectrum who were Windows supporters were quick to fault us for our tardiness and tell us "I told you so."
By this time we had been saying that our OS/2 product would be ready for Fall COMDEX and that a Windows version would appear six months later. Using these dates, my memo suggested that the Windows product would be available as early as February of 1991 and that the OS/2 product would be ready in May. The dates would prove to be far too optimistic, however. The Windows product would not ship until much later in the year, and a GUI based OS/2 product would not ship until 1993.
Ironically, even though we were in trouble, our sales were up more than 80% over 1989, and we were making a lot of money. We were doing so well that a few of our DOS programmers could not understand why some of us were in a panic. DOS was still king, and 5.1 was now raking in 70% of personal computer word processing sales. Though Windows was selling well, Windows-based word processors were not. It appeared that most customers were willing to wait for a Windows version of WordPerfect before buying another company's product.
I was not sure why Microsoft was having so much trouble selling its Windows word processor. Perhaps it was because Windows was still a novelty and customers were content to play with it rather than use it full time. Perhaps it was because a lot of people did not enjoy doing business with Microsoft. The company was so driven to dominate the computer industry that its people came across as overly serious and arrogant. They were almost always giving nerds a bad reputation.
Technical support was one reason we enjoyed a strong customer loyalty to our products. We offered toll free support lines and tried our best to answer the calls that came in, because we felt a real responsibility to help our customers if they had problems with our software. Microsoft had much more money and resources than we did and their software had at least as many problems as ours did, yet they never put in toll free lines. Moreover, when they answered their phones, they tended to sound surly. In keeping with their slogan of "making things make sense," they were quick to give the impression that they knew all the answers.
I loved to go to user groups when Microsoft was there. A favorite format of many user groups meetings was to bring two competing products together and have a debate, or a shootout. I liked the format, because I could use humor to get a crowd behind me. Microsoft representatives were generally too serious to appreciate the humor and were easily rattled if I pointed a joke at them. They also came across as a little too competitive and a little mean-spirited.
In June, as in years past, we went to PCExpo in New York City. Despite our great sales, the press was already writing our obituary. Everyone at the show was asking when our Windows product would be ready. Even customers who had no plans to buy Windows were still curious as to when WPwin would be ready. (WPwin was the official abbreviation for WordPerfect for Windows. Alan insisted that we not capitalize the "win" part of the name so as not to give emphasis to Windows.)
The only bright spot for me at PC Expo was our introduction of LetterPerfect, which was our newest, smaller version of WordPerfect. Sam and Wendy, my oldest children, came with me to New York and participated in our press conference announcing the product. We explained the product with a little skit. Sam was an experienced word processing user who wanted the most powerful product, so he needed WordPerfect. Wendy was a young woman too busy to learn all the ins and outs of a complex word processor, so she preferred LetterPerfect. I played the part of the serious writer who required the larger program to meet his word processing needs. Clive Winn, vice president of sales, played the part of a busy executive who wanted the smaller, quicker product for his laptop. The skit was fun and gave us something to talk about other than our uncertain WPwin release date.
It was not uncommon for my kids to accompany me when I traveled for the company. For those trips that did not require me to work very many hours, I would take two or three of them along to keep me company. This was only one example of how my personal life blended into my business life. By now we lived right next door to the research park, and our home was like another building in the WordPerfect complex. Our phones and our computers were tied into those of WPCorp, so I could work at home or at the office with the same phone number and the same network name and password. This was a great convenience for someone who never wanted to stop working, although it was embarrassing one morning when everyone in the company heard my son Joe yelling, "Mom, the phone is for you" over the company public address system, because he had dialed in the wrong zone number. Even our television reception came from a WPCorp antenna.
Most of my friends and a lot of my neighbors and relatives worked at WPCorp. When I went to lunch, it was with friends from work and the conversations were mostly about work. When I played tennis in the late afternoon, it was with friends from work and the conversations were mostly about work. When my wife and I went out to dinner with another couple, usually the other couple was connected to WPCorp in some way. If my wife and I went to New York City for a vacation, I would always fit in a few visits to large accounts. If we had a family reunion, there would always be three or four of us from WPCorp, and conversations would inevitably turn to the company or the software industry. If I watched TV or went to a Jazz basketball game, I always kept something related to the business at my side to read during breaks. When the entire family went on vacation, I would have my mail delivered daily to the hotel. Every night after my wife and children were asleep, I would log on to CompuServe to check my messages and check on the reps. I certainly did not mind the intrusion WPCorp made on my private life. The work was always exciting and interesting.
One of my best friends at WPCorp was Clive Winn. Back when I was in the drapery business, we were next door neighbors. Clive worked as an undercover narcotics agent for the State of Utah and then as the director of the state police academy. About two years after I went to work for SSI, Clive went to work for the FBI, and he and his family moved away. When Clive's mother-in-law was diagnosed with cancer, his wife, Kathy, wanted to be near her. When the FBI would not agree to move Clive to Southern California, I helped him get a job as a WordPerfect rep in that area. A year later, Clive and his family moved back to Utah, so he could work at the company headquarters with our government accounts. He did a great job once he learned that to be a businessman he needed to continue thinking like a policeman rather than always try to be the nice guy. He was good at what he did, and in spite of some objections of cronyism, by the summer of 1990 he was the vice president of sales.
That summer Bruce asked both of us to come to his annual summer meeting of the general managers of all the international offices affiliated with WPCorp. The meeting was held in Nice, France and was scheduled to begin on a Wednesday. Clive and I, along with four or five other people from the home office, left on Monday, so we could arrive a day early and rest up for the meetings. Instead of landing on the first leg of our journey in New York City, we were diverted to Philadelphia because of storms over JFK Airport. Knowing that we would likely miss every connection to Europe if we waited around, we grabbed our luggage and took a taxi to JFK, hoping to catch a late flight across the Atlantic. The other guys traveling with us stayed with the plane in Philadelphia hoping the weather would clear.
Of course, even though all the flights into JFK were delayed, the outbound flights all left on time. By the time we arrived, the last transatlantic flight of the night had departed, and we were stuck in New York City for the night. We were determined not to arrive late for Bruce's meeting, however. We stayed the night in a hotel close to the airport listening to gun shots, which made ex-policeman Clive feel right at home, and in the morning we hopped on the 9:00 Concorde flight to London. We arrived in London in the early evening and found a flight at 8:30 p.m. to Turin, Italy. After arriving in Italy, we rented a car and drove for four hours through the darkness to Nice. We would have made it a little sooner, but we had trouble understanding how the toll road system worked. Once I stopped trying to talk Spanish to the Italian toll booth agents and Clive started talking with a $20 bill, we made good progress.
We arrived in Nice about 3:00 a.m. and managed to get about five hours sleep before the meetings started at 9:00 a.m. Bruce was amazed to see us and congratulated us on our ingenuity. It added to our sense of accomplishment when the other guys dragged in at 11:30 a.m. without their luggage, wearing clothes they had worn for three days.
We had a lot of fun explaining our marketing programs to the European general managers during the day and then sitting under the stars on the beach figuring out how to improve them at night. One improvement we dreamed up applied to schools. We wanted very much to eliminate all the separate packages we had to manufacture for education, and we came up with a clever way to do it and still give schools a better price. We decided we would allow schools to use seven free copies of our software for every copy purchased. The idea was especially helpful in Europe, where they had trouble finding room for all the different SKU's (stock keeping units).
A lot of the work I did for WordPerfect Corporation resembled this trip to Europe. I worked long hours, but the work was interesting and fun, and the settings were beautiful. My life was a series of great adventures.
One of the toughest decisions the Board had to make in 1990 was whether to ship a 5.2 version of WordPerfect for DOS. The DOS programmers were not content to sit around, and they were not overly anxious to help out with the Windows product. By mid-summer they were well into their next DOS version of WP. The Windows group was committed to using 5.1 as the basis for its version and was having a tough enough time matching the 5.1 feature set without having to add in the new 5.2 features as well. If we let the DOS group continue at full speed, there was every chance that the DOS version would come out right on the heels of the Windows version with an incompatible file format. For better or worse, Alan, Bruce, and I killed the 5.2 release, making our DOS customers wait for features that could have been available sooner. We felt the file incompatibilities 5.2 would create would severely hurt our chances in the Windows market.
WordPerfect Office was turning into a big problem. The program was useful, but it had a few weaknesses. The directory services, which listed all the people on the mail system with their electronic addresses, could not hold more than one or two thousand people. The schedular, which could be used to put together a meeting, was slow and sometimes unreliable. Installing the program was a very difficult process.
My approach to selling the product was to be very open about what the product could and could not do. I wanted potential customers to understand the product's shortcomings, even if it meant lower sales. I thought we should discourage very large customers from buying the product until a future release, when the program would be able to handle large numbers of users more effectively. Office had its strengths, and as long as we did not oversell it, we would find plenty of customers for the product who would not be disappointed.
Not everyone liked this approach, however. The lead programmer on the project, who was also a vice president of development, started jumping on airplanes to visit customers and pitch the product his way. His basic sales pitch was that Office was in its fifth year of a ten year development effort. He promised that improvements were just around the corner, making Office the right choice for any size of company. I kept trying to get Alan to stop him from overselling the product, but Alan was overselling it himself. Alan loved to visit customers and tell them about all his products. He loved to promote them without reservation, and my suggestion that we explain the negative along with the positive was not well-liked.
As Office sales increased and a newer version of the product was delayed, there were many customers who were having trouble getting Office to do the job they wanted it to do. I suggested we tell the customers we were sorry and use our resources to get an "off the shelf" product out the door as quickly as possible. Alan disagreed and wanted to hire technicians to visit the customers and help them get the program up and running.
"Off the shelf" to me meant that a product was sold from a dealer's shelf, without someone from WordPerfect actually participating in the installation. A product which was not off the shelf, for instance, was All-in-One from DEC. A VAX customer likely paid $25,000 for DEC's office automation product and then paid another $25,000 to hire systems engineers from DEC to come in and write code that would make the software work. That was not how I thought our software should be sold. We should not have to send out a systems engineer or integrator to make our software functional. As Scott McNeally from Sun Microsystems put it with an analogy, "When you go buy an automobile, you don't want to deal with a systems integrator. You want to buy the automobile and drive it away. You don't want to have to have someone deliver it to your house, put you through a training program, reconstruct your garage and configure the automobile for you."
Off the shelf software was the only type of product I thought we should be writing and selling. I certainly did not mind if a dealer were to help a customer get going, but I did not want us getting involved to the point that we were sending out a corps of technicians to help our customers work through their problems. I was afraid we would end up having to take responsibility for our customers' computer systems, and that responsibility was a lot more than we were prepared to handle. It was also not likely to bring us much money. If we had to actually touch a customer's machine for our product to work, then I thought we needed to re-engineer the product.
This was probably the biggest disagreement Alan and I had over the years and probably contributed to my leaving the company. Alan loved his products and his programmers, and he did not seem to like me pointing out their deficiencies. Eventually he would send out technicians to help customers without my knowledge and behind my back, because he knew how strongly I opposed the idea.
We put on our best face for COMDEX, considering our lack of a Windows word processor and the problems and delays with Office. André and our actor friends from Chicago did a show which was a take-off from the Broadway musical City of Angels. The star of the show was a detective who used different WordPerfect products to solve cases. The great thing about the show was that it had a lot of music, dancing, and acting, which helped us to avoid getting too specific about our release dates. As always, our dealers and customers jammed into our booth to watch the show and pick up their free detective hats.
By the time of our Christmas party, the mood in the company was a little somber. We were starting to get some bad press, something which rarely happened before. The Gulf War was raging, and we were in middle of a recession. We had cause to be cautious, but for some reason I was feeling that we should not be fearful. When I spoke at the party, I asked everyone to close their eyes for a moment and ask themselves if it was time for caution because of the war and the recession, or if it was time to do more. I gave people time to quietly listen to their feelings and then asked for a show of hands. How many thought it was a time for caution? Only five or six hands went up. How many thought it was time to do more? Two thousand hands went up. Perhaps it was the way I asked the question, but I felt something inside. This was not a time to worry about the future. This was a time to promote our products more aggressively, to continue our building projects, and to plan optimistically for the future.
1990 sales ended up at a hard to believe $452 million, and our pre-tax profits were up to 35%. 1991 was going to be even better.