Marketer proves leaders are firm’s top assets

June 1, 2005

BY MICHAEL KRAUSS

Is it the jockey or the horse?

Do great tech leaders make the difference? Or does a focused company facing a rising marketplace tide lift emerging Microsofts and Googles to success? That was the debate at a recent private equity conference at the University of Chicago.

Finance professor Steven Kaplan, a leading thinker on venture capital, analyzed 49 IPOs. “The results suggest VCs find management replacements or improvements for good businesses. We do not find cases in which VCs invest in good managers who find business replacements,” Kaplan says.

I think Kaplan should meet Pat House, co-founder and vice chair of San Mateo, Calif.-based Siebel Systems Inc. Without House, I doubt diskette manufacturer Verbatim Corp. of Charlotte, N.C., database software provider Redwood City, Calif.-based Oracle Corp., or customer relationship management pioneer Siebel Systems would have done as well.

Though House eschews the CMO title, her trail to the top of the technology marketing realm is the stuff of legend. Trained as a classroom teacher, House started at the bottom training factory workers at Verbatim Corp. in Sunnyvale, Calif., in 1982. In those early days of the PC, files were shared and software was delivered on floppy disk.

Verbatim was a leading diskette maker. Because she was bilingual, House was recruited to train factory workers. She quickly caught the eye of management.

One day the company president sought her out on the shop floor. Impressed by her writing, he moved House into marketing. “I didn’t have any idea what marketing was,” House jokes. The MBAs might have expected House to fail. They misjudged.

Verbatim had trouble with manufacturing. Scrap levels were high. A small number of rejects in a production run caused full shifts of production to be discarded or reworked at considerable cost. House was assigned to find a market for the rejected production. She quickly identified a new outlet: software copying firms that test diskette quality as part of their routine manufacturing process. House opened up a new class of customer and won marketer-of-the-year honors to boot.

In 1986, Oracle founder Larry Ellison approached House. “Larry asked if I would like to have the most exciting job at Oracle,” House says. Oracle was only $150 million in revenue with a 20% market share, according to House. Its product worked on large mainframe and midrange computers. Ellison asked House to launch a PC version.

At the time, Oracle required more memory to run than was available on the 286 vintage PC. Undaunted, House says she packaged 40 floppy disks, a brick of documentation and sold her software with an extra memory card to deliver a PC version.
To cost-effectively reach a broader market, House launched a unique direct marketing and telemarketing initiative. She and (future Siebel Systems co-founder) Tom Siebel, then an Oracle executive, created a precursor CRM system. “We built a thing called OASIS, the Oracle Automated Sales and Marketing Information System,” House says.

In the fiercely aggressive, make-your-numbers-or-get-fired Oracle culture, House prospered. She hit her bogies. “We went from $8 million to $16 million to $32 million in three years’ time. Oracle vaulted to greater than 50% market share,” House adds.
In 1993, House saw a pressing need in the marketplace for software that could provide marketing and sales information. “We saw a need across all industries for robust information systems to enable sales and marketing professionals to know their customers,” House says. Siebel Systems and the CRM movement were underway.

For 12 months, House, Siebel and 16 others took no salary. They worked in a rundown office in East Palo Alto, Calif. They paid 11 cents per square foot in rent and never bought anything for more than $5 except computers for software developers. House says Siebel’s desk was a card table.

What House lacked in fixtures she made up for in business partners. She lined up Microsoft founder Bill Gates to be Siebel’s sales evangelist. “We were the first application built on what was then a risky piece of software from Microsoft called Visual C++. Bill Gates personally agreed to be our account rep,” House says.

House turned to George Shaheen, then CEO of Andersen Consulting (now Accenture). Andersen Consulting saw a big opportunity to sell CRM consulting if Siebel succeeded. Shaheen went on the Siebel board. (Shaheen was recently appointed CEO of Siebel Systems.) According to House, Shaheen recruited Michael Spence, dean of the Stanford Business School, to the Siebel board. Spence in turn recruited financial services entrepreneur Charles Schwab.

“We’re sitting in East Palo Alto and have a board that could be running GM,” House says. “We’ve got Bill Gates marketing us. We’ve got George Shaheen from Andersen Consulting and its thousands of partners marketing us.”

The combination orchestrated by House prospered. “Today we have 4 million customers,” House says. On average, she says, her customers generate a 15%-to-20% lift in revenue as a result of running Siebel software.

House adds that everyone at Siebel is compensated based on customer satisfaction audits conducted twice annually. “That is how we pay people,” House says. “If any customer reports below an 80% satisfaction score, no one involved makes any money,” she adds.

If you’re looking for a role model marketer, House is it. Speaking recently to a group of business marketers in Chicago, House offered this formula for success. “I’m pretty old-fashioned about marketing,” she says. “I don’t understand what eyeballs, stickiness and clicks are about. I understand one thing--customers. Revenue, profits and customers are all you need to focus on. If you can keep your eyes on the prize, marketing tends to guide itself.”

In lieu of the traditional four P’s of product, price, place and promotion, House offers five parameters that guided her hand at Verbatim, Oracle and Siebel:

• Pressing need--Only accept a role where there is a pressing need for your product.
• Permutation--Make change. Avoid the status quo. Never be the 250th supplier of toothpicks.
• Pragmatism--Marketing should be simple, easy to understand, straightforward, practical and measurable.
• Partnerships--Stand on the shoulders of giants. Identify win-win opportunities.
• Profitability--Marketing isn’t worth doing unless you return value to shareholders.

Phil Clement, president of Chicago-based Clement Group, who hosted House in Chicago, says, “Pat drives every dollar spent in marketing to one critical asset--contribution to revenue. There is no fluff in her programs. She doesn’t spend time on alliances that are going nowhere.”

I think Pat House could turn a weak horse into a racing champion. I’d bet on Pat House at Verbatim, Oracle or Siebel or any other start-up. For my money, jockeys matter, and Pat House is one of the best.

Michael Krauss is a partner with Marion Consulting Partners based in Highland Park, Ill., and can be reached at Michael.Krauss@Marionpartners.com or news@ama.org.