‘Lotus is the Faberge egg in IBM’s Easter basket’

Bidding adieu to a company that he had carefully nurtured was not easy. In January, Jeff Papows stepped down as President and CEO of Lotus Corp, after a successful four year tenure. Judging by the rousing ovation he received as he addressed the keynote session of Lotusphere 2000 held in Orlando recently, it was clear that he will be missed. He had been a favorite of the customers and employees, and even of IBM. Speaking to Dataquest, Papows discusses the company, its people, its relationship with IBM and Microsoft, and his future plans amongst other issues. Excerpts of the interview with Abraham Mathew at Lotusphere 2000:

For the sake of the customer, Lotus is planning to collaborate with Microsoft. But will that not weaken the anti-trust case? 
Well it might or it might not. From the perspective of our successful collaboration with Microsoft, I guess it causes a problem for some of the arguments of people who say that there is a huge Chinese Wall between the Microsoft technology and the rest. I personally have not found that. I think some of the things that Microsoft does, like the way they bundle the products, are predatory. I don’t know whether that is legal or not. I am no lawyer and I am not going to comment like one. But I, in all good consciousness, cannot say a bad thing about either Microsoft or Bill. Every time I picked up the phone and needed technical help they have responded. If that has a bearing on the case, then that is up to someone else to judge that. What I have to do is to manage the company and the relationship with Microsoft for the benefit of my customers. That has always been the focus and whatever happens happens, and we will let the courts sort that out. 

From spreadsheets to messaging, Lotus has done very well. What is going to be the next era for Lotus?
The next era is going to be about knowledge management (KM). In an era where the dynamics of competition globally is changing, managing people assets is going to be of paramount importance. Taking the collaborative infrastructure
and extending it to things like expertise, location and all of the other KM aspects is what Lotus will focus on.

Do you think KM will play a strategic role in countries like India where there are large economies of scale operating?
Yes it will, and it will be much like the way I view it in large companies. India has a large area geographically, there is tremendous degree of diversity and also a lot of change. Lotus is actually looking to India to capture some of the human and intellectual capital in terms of doing some of our research there. We need a mechanism for transfer of skill back and forth just like we needed in large companies like General Motors. So the KM imperative is enormously important in India considering the rate of change and the wealth of people.

How will the benefits of a KM implementation be quantified?
I think the results are best quantified in the bottom line. All of this, at the end of the day, is about competitive advantage and wealth creation for the share holders. It’s about organizations which are going to be more responsive. The benefits can be seen in several parameters and I think it’s possible to create a tangible matrix. We have seen it happening in companies like Proctor and Gamble and other large organizations like Coopers that we have been working with, who have seen real and tangible benefits.

What is the major challenge organizations face today?
The biggest challenge would be of speed. In a 7×24 digitally connected internet world, the pace of change in business terms is collapsing in almost real time. Also, because of the internet, global boundaries are disappearing.

The requirement to be connected and to have the capability to work across time zones have never been more heightened than it is currently. So I don’t think it’s a basic cost structure difference, but the rate and pace of change is enormous by comparison and that is the reason why there is so much focus on it today. 

Four to five years ago, the internet was not the phenomenon that it is today. It hadn’t exploded in the public consciousness and it has only been enabled as a consequence of the ubiquity of access that we are now just beginning to have. So this is not an opportunity that people can take lightly. It’s life and death and you are going to have people hugely advantaged or people who are going to run out of business. This is not an opportunity to sit on the sidelines.

In the collaborative environment of tomorrow, are partnerships going to be vital for Lotus?
They absolutely are. This is an environment where you cannot work in isolation. In fact, I think the partnerships with Nokia, Ericsson, Motorola and other companies involved in the explosion of secondary internet devices like WAP phones or pagers are going to be important. We cannot operate in the collaborative part of the infrastructure in this economy without developing significant relationships. For instance, we are dealing with a company called ABT in order to bring our unified messaging capabilities together. So things like email and voice mail are aggregated in one place and we can’t do that alone. Fortunately, Lotus is a platform agnostic company. We are a company whose technologies are made acceptable irrespective of operating system or platform. So we have a huge opportunity of growing up to Microsoft, because of the openness in the way our products are brought to the market.

Isn’t the IBM sphere of influence in the activities of Lotus increasing steadily and will this not harm Lotus?
Around the five years following the IBM acquisition, we have exercised a great deal of independence in Lotus. I think a lot of justifiable skepticism existed at the point of the merger. Nobody would have predicted, probably including me, that we would have 56 million users today which is many fold higher than what we had at the time of the merger. In all of that time, with an increased trust and understanding, has come an opportunity to create synergy and leverage the partnership with IBM for economic advantage. A lot of that was done under my leadership. We have moved about 1,300 employees under IBM in the course of the last year to core functions like legal, finance, resources and back office categories where there was great deal of integration done.

However, the need to maintain the culture, brand and the company identity of Lotus probably can’t be
overstated. And it’s coming to up to Al Zollar and IBM to nurture that. It’s critically important and I think both sides understand that. We will see how it happens but I have got big expectations of both Al Zollar and IBM.”

So there is a possibility that the Lotus identity will cease to exist?
Well, there is always that possibility. Most people predicted that it would have happened far earlier. We spent a $100 million this past year on television advertising to promote the Lotus brand. There was the yellow color, Lotus spokesmen, Notes and Domino branding and all you ever saw from an IBM perspective was the signature tagline which said Lotus, an IBM company. That is a pretty significant marketing communications investment for any company and probably the greatest proof statement that the Lotus brand will be supported independently. I can tell you I have had this conversation with Lou Gerstner and with John Thompson of IBM and they are both extremely anxious to make sure that the Lotus brand is protected. In a worldwide survey done this past year, the unaided and aided awareness of the Lotus brand was 78% which is just 2% away from the recall for Microsoft. Lotus is the Faberge egg in IBM’s Easter basket from a brand awareness stand point. 

Although Lotus has done well in the enterprise space, has it ignored other market spaces?
We could be justly criticized for having been over enterprise focused but it has been a phenomenally successful strategy operationally. In the past year, we successfully moved into the middle part of the market in companies with about a 1,000 PCs where it tends to be a centralized procurement function. We have had a hard time penetrating the lower end of the market other than with 123, which you know is out there in 28 million homes. That is why we spent a $100 million on the Lotus brand last year, because you don’t sell to the small medium business (SMB) space. You create brand identity and people buy. It’s a pull as opposed to a push market. The only way that Lotus and, from a software perspective, IBM will be successful in the SMB market, is to continue to have a strong brand identity because there is no other way to penetrate that market. We haven’t always had the product. It will be a challenge for us and we will see what happens in the course of the next couple of years.

Even in the enterprise space, Lotus does not have a product that could be referred to as being mission critical. Isn’t that a worry?
I think there are critical technologies in the enterprise beyond Lotus. Relational databases, would probably have as much control over the enterprise in software terms as any company. But Domino and Notes, from both a messaging and web application stand point, control about 78% of the Fortune 1000 in terms of owning the majority of that collaborative infrastructure as opposed to just copies here and there. Talking about mission critical software, email today is not like the spreadsheet. If there is an interruption in service, companies stop working. It’s not like SAP and it’s not like Oracle in that a lot of the information is more unstructured and it’s
more of a peer-to-peer relationship, but it’s probably no less critical. So I actually think we have a lot of control.

Is the India emphasis going to be more than what it has been in the past for Lotus?
We have tried to attack markets aggressively irrespective of the economic downturns of the countries. As a result, we have seen tremendous growth throughout south-east Asia and therefore we have invested heavily in places like Singapore and Malaysia. Obviously, Japan has always been a big market. But I don’t think we have made all of the investments in India that we could have or perhaps even probably should have. I think we understand the size and scale of the market place. Our investments in India will have to be stepped up quite considerably. I know that IBM has serious designs on the Indian market place, we can build on their infrastructure and have the opportunity to leverage the relationship there. In a way that will perhaps be more important than it has been in some of our more established markets.

Does Lotus have plans to open a development center in India? 
Actually, we are moving to have development out of India in the course of the next 24 months for SmartSuite. We think we have access to both 
good quality talent and there are some economic advantages which make it advantageous. So there are already plans that I have put in place that 
will be executed in 2000-01. It will not only be maintenance, but some original research and development out of India. We will begin with some SmartSuite development and once the lab gets
established it is likely that it will stretch to other things as well.

What has been the most significant achievement for Lotus during your tenure as CEO?
This is a company that stood in the vortex of one of the most competitive market segments in the industry, and partly one of the most strategic. We have been competing with Microsoft which is one of the most phenomenal companies on the planet and won. When you think back it is hard not to get a lot of gratification out of that kind of an accomplishment particularly with companies that are as capable as Microsoft.

What about achievements on a more personal front?
The thing I have got the greatest personal satisfaction out of, in the course of my career here, has been the people. Every CEO thinks his company is special in one way or another and I am no different. Lotus has a unique culture in the company and the employees here have been consistently willing to make sacrifices that I think are unimaginable. I think a huge part of the success of the company is certainly the people and employees. Years later, when I look back on my career it is the people that I will remember the most.

Can you describe the Lotus culture?
The most fervent aspect of the Lotus culture that has been consistent here over the years, irrespective of the individual in the corner office, is passion.

Lotus is not a place where you go to work, Lotus is a place where you run to work. People invest almost unhealthy amounts of their energy in the company.

We have to deal with the capability and the talent of Microsoft which everyday brings out the best in our people. I think that the competitive frame of reference that Lotus has always enjoyed, has brought
the best of passion and competitive anger in the people of Lotus in a way that has allowed the company to benefit tremendously. People don’t work here, but they live here and that is what makes Lotus so special.

What made you quit Lotus at the height of your success?
I think because I care so deeply about the company and the people that if I had ever waited to a point where there was any uncertainty whatsoever about the business or the product momentum of the company, then it would have been impossible for me to leave. The other thing is that, IBM and Lotus are merging their operations as set by design. 

Some one with my breadth of experience will not be fully tested in running a company not completely independent in all of its functional dimensions. So the opportunity for me to go run another publicly traded or soon to be publicly traded company made me quit Lotus. What made it difficult and makes the timing perhaps a little bit more curious is, there is an enormous amount of emotion for me in this decision. It is one of hardest things that I have ever done. But you know Michael Jordan left at the top of his career and people understood it. I am no Michael Jordan by any stretch of imagination but I think people understand the desire of any kind of athlete to go out at the top of the game. I have given Lotus physically, intellectually and emotionally everything a CEO could give a company. We have just had one of the best years in the company’s history and I would much rather leave in those circumstances.

What are you future plans?
I am like a clean sheet of paper, unlike a lot of CEOs in this situation, I made a conscious decision not to look for a job or even think about a job while I was in the role of CEO of Lotus. It is too big and too complex a position and I don’t think I would have been fair to the employees, customers and shareholders if I had done so. I haven’t had a whole lot of time to think about it in truth. But I am sure, that it is going to be an internet-based software company. The economic opportunities that are germane to dot.com companies today, are extraordinarily well illustrated. So, maybe there are Indian investors or venture capitalists with interest in US companies who will pick up the phone and contact me. I am going to wait and react for the offers to come in.”

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