proves leaders are firm’s top assets
June 1, 2005
BY MICHAEL KRAUSS
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.
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.
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
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,”
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,”
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 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,”
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:
need--Only accept a role where there is a pressing
need for your product.
change. Avoid the status quo. Never be the 250th supplier of
should be simple, easy to understand, straightforward, practical
on the shoulders of giants. Identify win-win opportunities.
isn’t worth doing unless you return value to shareholders.
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.
Krauss is a partner with Marion Consulting Partners based in Highland
Park, Ill., and can be reached at Michael.Krauss@Marionpartners.com