Everyone knew AT&T was invincible, it was the largest company in the world, bigger than Exxon, General Motors, and U.S. Steel combined. It had assets worth over $22 billion, annual profits that topped $1.2 billion, and a virtual monopoly on the telephone industry. No reasonable person would try to take on AT&T.
But some people won’t listen to reason. And when Jack Goeken saw the weaknesses in AT&T’s system, heard innumerable businesses complain about AT&T service, and had the bright idea of establishing a ‘truckers’ two-way radio network from Chicago to St. Louis, a new from Chicago to St. Louis, a new age in the information industry was born… a new age in which MCI would lead the way. With the dogged persistence of Jack Goeken and the financial wizardry of Bill McGowan, MCI grew from a bunch of upstarts with a $3,000 war chest to one of the fastest-growing and most innovative companies in the world. Once dismissed as a long shot, MCI is now-widely heralded as a model company for the 21st century.
In this fast-paced and absorbing chronicle of corporate derring-do , veteran business writer Larry Kahaner takes you inside MCI, examining every aspect of this company’s meteoric rise. You’ll discover how Jack Goeken, naïve but blessed with good luck, petitioned the FCC and won the landmark decision that broke AT&Ts stranglehold on competition. You’ll watch the men of MCI raise 33 million dollars with their first stock offering – the largest public offering ever for a company without a product. And you’ll learn how MCI mushroomed almost overnight from a local, seat-of-the-pants operation into a national long-distance network, a major force in the telecommunications Industry, and one of the fastest growing companies in the world…and how the men of MCl – driven by their dream to beat AT&T and have fun doing it – rode their wild, often out-of-control young business to the pinnacle of success.
Bill McGowan walked into the most important meeting of his life. This wouldn’t be like the hundreds of other ones. He wouldn’t get bored and read some industry newsletter and listen with half an ear to other people. He wouldn’t get up and leave after two hours, either. That was his usual limit. He got bored easily.
This was action, good action. He hadn’t felt the need to visit Las Vegas in years. He satisfied his occasional gambling urges right here. He “bet the company” often. If you’re not willing to take chances, why bother? If you can’t try new things, make a couple of mistakes, what fun was it?
He didn’t do it because the company was invincible. Some people thought it was. They figured the company had made it and would always be around. Hadn’t it established once and forever its legal right to exist and compete in an industry once monopolized by AT&T, the world’s largest company? And wasn’t it pulling in almost $2 billion a year? Hadn’t it been cited time and time again by business magazines and newspapers as having the best managers in the world, the most aggressive and unique strategies, and the fastest growth of almost any company ever? Wasn’t it responsible for putting the entire telephone industry up for grabs, not only in the United States but overseas as well—$55 billion to anyone who had the guts to go after it?
No, McGowan knew better than that. The company hadn’t made it Anyone who thought so didn’t belong in the company. Sure, it was successful – in the past – at all the other businesses it was in. It had former lives, past businesses that it focused on and succeeded in before it moved forward to the next. That was McGowan’s greatest strength. Knowing what business the company was in, and even though things had to be done, one business took priority. The “getting the license” business, the “litigation” business, the “survival” business, and others. Yes, it was successful at those, but now things were all new, all different. They were entering a new phase, a new business. The slate was clean, and whether the company would the company’s resources had to the company’s resources had to be channeled into the new business. The “equal access” business.
For the first time, the playing field was almost level. All competitors were the same. The ground rules had been written, and the contest was beginning. It was time to put up or shut up. No more luck, no more excuses. If this phase wasn’t successful, the company would die. All those things that McGowan had said in the past would be lies. All that the company stood for, all the new management techniques it fostered would be relegated to a couple of pages in some business school’s case study course.
The company was grounded in the belief that telecommunications was the vehicle of the information age. Much like railroads and trucks moved the manufactured goods of the industrial age, telecommunications would be the conduit of this new commodity – information.
McGowan had spent most of his adult life preparing for this new age. Now he believed the company was ready. Everything was in place for it to become the world’s premiere telecommunications company. I for it to become the world’s premiere telecommunications company. It had spent more than a billion dollars building a domestic long distance network second only to AT&T’s. It had begun service to other countries, getting ready for that “global community” where anyone m the world is just a phone call away. It had established an “electronic mail” business, allowing people to communicate over their computers. It had a finger in paging networks, car telephone systems, fiber optics, microwave networks, satellites – all the foundations of the new telecommunications infrastructure. He would tell you that it all came down to filling in a basic two-by-two matrix: Domestic/International: Voice/Data. Whatever it is, he wanted the company to do it. He was betting that there could never be too much capacity and that his company would be more efficient at handling it than anyone else.
He had established a company that businesspeople thought typified the new age. It was mean and lean. It gave employees the chance to grow along with it and rewarded those who made the company money. It provided a challenge to anyone willing to accept it. It broke a lot of corporate rules along the way and took a lot of flak for it.
McGowan had driven hard, working almost seven days a week for nearly twenty years. Unlike the typical corporate chairman, he never married; the company and its employees were his family. He smoked too many cigarettes; drank a bit too much as well, his colleagues used to tell him, until they finally gave up. He did stop once, cold turkey. About ten years ago, but he was hell to work with. They were happy, but also sad, to see him start again.
He had always told his top managers that they should look ahead five or ten years and then look back at now. “What do you wish you done back then, to get where you want to be now?” he asked. It was a favorite game, one that allowed long-term planning often to the detriment of short-term gains. That had always been the problem with Wall Street. They looked at the short term; he believed in looking ahead. Short-term setbacks caused the stock to drop like crazy during some years, and that scared off investors. A year ago, McGowan was losing more than a million dollars a day from his personal portfolio. It didn’t really bother him, though; he wasn’t in it just for the money. He was in it for the challenge, the rush.
Now was one of those times when the company was out of favor with “the Street.” After ten straight quarters of growth, the company that was called everything from “high flier” to “high-tech wonder” was losing money. Profits were down and would be down again the next quarter. The stock had slipped to its lowest price in nearly four years. Ardent company boosters, those who had been passionate cheerleaders in the past, were beginning to doubt if McGowan could really pull this thing off.
Even though AT&T was still reeling from its massive divestiture, it wouldn’t take long for it to get up to speed. For now, AT&T was still partially regulated by the government because of its huge market presence, but that was changing. Other competitors were getting wise. Too. They couldn’t be laughed off anymore. Some people didn’t think it was the best time to change the entire company. It might show they were really in trouble. How would it look to the outside world?
The biggest threat was not from the outside, though. It was from? Within the company itself. Bureaucracy was creeping in slowly, but surely, threatening to do to the company what its competitors could not—bring it to a dead stop. The company couldn’t afford to move slowly now. It couldn’t stand to get fat, particularly now when it would have to move fast to survive. It was heading that way, all right, and now was the time to stop it.
The company had once moved like lightning. It had seized opportunities and made quick decisions on the run while the others were still talking. That was the real secret of its success. Keep moving. Focus on the business. Focus on the business.
Three years ago, McGowan wanted to decentralize the company. Put jobs out in the field where they belonged, but he was stymied. Wasn’t convinced then that the company had the right people for these very special jobs. Each person would take control of a company, a clone of the big company but with a difference. Each would have absolute control. Almost all functions would leave the Washington, D.C., headquarters and reside in the field. Each president could organize it any way he wanted to, do things the way he wanted to do them, and no one at headquarters would argue or criticize as long as it worked. The company had to get close to its customers again. It had to get a handle on its tremendous growth. Most important, in an age of vicious competition, it had to do all the little things right. A big company just couldn’t work anymore.
Unlike decentralization attempts at other companies that were merely cosmetic, McGowan wanted this one to be for real. Anything that didn’t have to be done at headquarters went out. It was better to err on the side of letting them have too much control than too little. What he was really counting on to show that he was serious was the message he sent to the company’s ten thousand employees by dismantling his management team in Washington and sending them out to the regions. At most other companies, that move might be considered political suicide. A company chairman not surrounded by his deputies was often deemed impotent and crippled. Here it was a necessary risk if this idea was to work.
The details of the plan had been talked about for months. Everyone knew who was getting the new top jobs, but this was the first time that all the new presidents were assembled and told what was expected of them. Together, they would hear how the whole thing was going to work.
As usual, McGowan walked around, cracked some jokes. Business serious, but it didn’t have to be somber. Why shouldn’t he and everyone else enjoy themselves?
He walked behind the podium, and everyone settled in. It was uncharacteristically bland of McGowan to use clichés, but on this occasion he did. He told the new presidents. “This is the first day of the rest of our life. MCI is a new company.”
“A PAGE TURNER, chock full of offbeat characters.”
“From rags to riches… from the brink of bankruptcy to a secure second place position in the $42-billion telecommunications market. On the Line takes us behind the scenes, setting the stage for each successive showdown with a not-so-benevolent Ma Bell-on Capitol Hill, in federal courtrooms, and before the Federal Communications Commission. It’s a fascinating story peopled with rebels from the conventional business world… an entrepreneur adventure story.
“On The Line is a fascinating case study of how a small business becomes a big business – and begins to act like one…. It’s written in an informal, quick-read style like a novel or a prime-time soap opera… and provides some of the best insights yet into the long-distance business. The story of the one of the greatest business battles in American history.
Fort Lauderdale News and Sun Sentinel
“BRISK, BRIGHTLY WRITTEN …LUCID.”
“A FASCINATING ENTREPRENEUR’S UP STORY”
Memphis Business Journal
“AN AMERICAN BUSINESS SAGA.”
“The engrossing text reads like a novel… .EXCELLENT”
“Provocative… exciting, fast-paced and frank… FOR ANYONE WHO WANTS TO SHARE THE EXCITEMENT AND CONFUSION OF MAKING IT BIG.”
Dallas Times Herald
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