'Lotus is the Faberge egg in IBM's Easter basket'

-Jeff Papows, former President and CEO, Lotus Corp.

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:

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 7x24 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 were 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."

E

Abraham Mathew



in Orlando


abrahamm@cmil.com