Charting the CEO 100 Index
article2000CEO 100 List

Irresistible Force Management

Our 9th Annual Survey of CEO Best Practices and Investment Opportunities

Donald W. Mitchell
Chairman and Chief Executive Officer
Mitchell and Company

Find a way to make irresistible forces (like new technology, changing customer needs, government regulation, demographics, economic trends, financial markets, the weather, currency exchange rates, and so forth) outside your control always work in your favor, and you have a recipe for making and remaining on the CEO 100 for many years to come. That's the lesson of in-depth discussions with these CEOs in explaining their outstanding business success.

On the other hand, if you hitch your wagon to a trend that turns on you, life can be pretty miserable. Witness former CEO 100 companies like Conseco (brought down by its reliance on the below prime consumer finance market), Iomega (caught as technology for personal computer storage shifted) and Chesapeake Energy (crippled by plunging oil prices in 1997-98).

Although the former strategy is desirable while the latter circumstance of trend vulnerability is painful, it appears that far more high-flying companies are being temporarily helped by trends rather than having a superior strategy to always be helped by irresistible forces, regardless of their direction. That's not a surprise, because the new book I co-authored, The Irresistible Growth Enterprise (Stylus 2000 see, points out that fewer than one percent of all companies have chosen their strategies to be invulnerable to irresistible force shifts.

How important were these irresistible forces to the stock price growth that occurred during 1997-99? Many CEOs felt that they could not estimate that effect accurately. Those who did usually assigned 30-70 percent of the stock-price growth that put them on the list to the positive influence of irresistible forces like those described in this article. Without that influence, these CEOs and their companies would not have been on the list.

What are the irresistible forces today that are most likely to be propelling these highly successful companies forward? Improving technology in adjacent fields is the one most often cited. Don Nelson of U.S. Cellular (69th on the CEO 100), a wireless communications provider, pointed to the availability of new equipment permitting digital services as an important influence in expanding the growth rate of the market for his company's offerings. Chuck Lillis of MediaOne Group (57th), a cable and Internet services provider, identified the ever-expanding power of the microprocessor as expanding its opportunities by permitting more effective equipment to be available that expanded customer demand for communications. Tony White of PE Biosystems (58th) arranged to apply new mathematical techniques for computing to the data his company's DNA sequencers developed in order to speed up the deciphering of the human genome.

Improving technology in one's own business often created more demand for the products and services by either establishing more reliability or enhancing value to customers. This was especially true for those involved in making or using fiber optic and semiconductor products. EMC (15th) estimates that dropping prices for its products disproportionately expand the company's sales, for instance. Wireless communications products makers were helped by their new digital offerings, too, such as Qualcomm (3rd) and Nokia (14th).

The growth of the Internet was an important factor for many other companies on our list. The latest list includes companies like CMGI (1st -- invests in those offering services on the Internet), America Online (3rd -- provides Internet services), JDS Uniphase (5th -- provides fiber optics often used for the Internet), Vitesse Semiconductor (26th -- makes components needed for Internet infrastructure), Dell Computer (13th -- sells most of its products over the Internet), EMC (15th -- provides sophisticated electronic storage for corporate intranets, e-commerce transactions and Internet Service Providers), Cisco Systems (22nd -- supplies the interfaces needed to run the Internet), and Oracle (33rd software for the Internet).

The Internet's influence was even more pervasive than this list suggests. Barrett Toan of Express Scripts (72nd), a mail-order prescription provider credits the Internet with increasing everyone's willingness to buy products from his company using credit cards by mail and telephone. Henry Yuen of Gemstar (12th) Development credits the Internet with helping consumer acceptance of electronic commerce, paving the way for a new generation of television-based e-commerce where his company is a leader.

Many others point to strong financial markets as being an irresistible force that created access to the capital needed to pay for rapid expansion of fast-growing companies. Brokerage firms like Charles Schwab (39th) and Morgan Stanley Dean Witter (55th) saw direct benefits from the increased trading volume. Those who sold components or services to customers who received benefits from the financings also prospered. These suppliers undoubtedly included Qualcomm (3rd) and its cellular technology licensing business, Solectron's (24th) and Sanmina's (74th) outsourced manufacturing operations, Microsoft's (38th) software business, and Interpublic's (67th) advertising services.

Deregulation was important to many of these companies. Dennis Bakke at AES (86th) used this trend to speed the company's development of new power operations and to purchase government owned ones. International markets were opened up to cable and telecommunications companies. Expanded competition in U.S. markets often speeded up domestic growth, as Don Nelson of U.S. Cellular reported.

Many others also pointed to a strong world-wide economy as stimulating opportunities. Dennis Kozlowski of Tyco International (92nd) used acquisitions in the past to focus the company into telecommunications and electronics that were especially helped by the strong global growth.

Riding a positive trend is always desirable. What was surprising was that these positive trends sometimes created problems that our CEO 100 leaders benefited from solving. Mark Leslie of VERITAS Software (9th) saw that the Internet made consumers and companies intolerant of errors in availability of data, especially after some Web sites, like eBay, crashed unexpectedly. This provided an opportunity for VERITAS Software to help ensure on-line and network data availability. Mike Ruettgers of EMC (15th) reported that the shortage of Information Technology professionals in many customer companies drove the demand for automation of storage-related IT tasks, and accelerated the acceptance of EMC's software products.

The technology boom turned directly negative for these companies in some ways. For example, the growth in technology meant that there have been severe shortages of technically-competent people in many areas. Wim Roelandts of Xilinx (44th -- a semiconductor manufacturer of logic devices) turned this problem on its head by seeing it as an opportunity to improve on engineering effectiveness. As a result, product development speeded up, costs dropped, and the company accelerated its growth.

Mike Birck of Tellabs (80th 7 time repeater) reports that the structure of voice and data communications networking is changing rapidly, going from opaque to transparent for the users. This rapid shift in technology is making it harder to anticipate what will happen next, and what products will be needed. Complicating the normal problem of anticipating technology changes is the presence of venture capital money to fund many technologies and companies that not otherwise have had a chance.

Many of these companies are still held back in their success by their lack of public visibility as well. Mike Ruettgers of EMC (15th) reports that his company was recently identified as the most successful company no one had ever heard of by Wired, despite sporting an equity market capitalization of over $150 billion and having been the fastest growing stock on the New York Stock Exchange in the 1990s. As you can imagine, EMC will be doing a lot to raise its coverage of the market place in the future. Despite large market capitalizations, JDS Unisphase (5th), Jabil Circuit (23rd), Solectron (24th), Xilinx (44th) and AES (86th) are growing in relative obscurity that limits their ability to gain new adherents.

The most effective CEOs clearly saw irresistible forces as opportunities, regardless of their initial impact on their companies. Bob Swanson of Linear Technology (85th) has been especially far-sighted in this regard. Early on, he noticed that whenever human beings come in contact with computers or communications devices, there is a need for analog electronics. Further, whenever electronic devices become portable, battery life becomes an important limitation. Analog electronics are also very powerful aids in this circumstance. Next, when systems need to be connected, analog devices are very critical. Unlike digital electronic components, analog ones are consistently high margin when you focus on the high performance end of the market. As a result, Linear Technology has a strategy of exploiting a leadership position in its analog technology to take full advantage of irresistible trends all around it, regardless of the near-term direction or speed of these trends. This area is viewed as a backwater by many technologists which helps to protect Linear Technology from excess competition.

The other reason that focus on irresistible forces is so critical is because these factors have become much more volatile than in the past. Currency exchange rates are a good example. The currency crisis that began in Asia in 1997 continued to affect many of these companies two years later. Those who imported from Asia saw their costs decline. For Macon Brock, Jr. at Dollar Tree Stores (97th), this meant maintaining the companies $1.00 price point while providing greater value for the customer. The Gap (41st), Dayton Hudson (64th), Costco Wholesale (68th) and Bed Bath & Beyond (96th) probably benefited as well. Those who exported to lesser developed Asian countries saw their businesses do less well.

Shifting equity valuations are playing a similar role now. They allow some to raise capital inexpensively and acquire others (the latter being a critical element for Cisco Systems 22nd), while denying the same options to competitors. This also affects the ability to attract and retain outstanding employees. Further, for some, the suddenly available acquisitions have proven to be a good way to add engineers.

As volatile irresistible forces become more prevalent and powerful, CEOs who build flexible approaches to benefiting from all sorts of and directions for irresistible forces will probably dominate the future of their markets. Those who organize only to optimize the forces when they are positive will face grave difficulties when the forces shift their directions. These companies may well crash and burn, as a result.

For those who master these lessons well and continue to prosper, the rewards can be enormous. The world's three largest capitalization stocks all made the list John Chambers of Cisco Systems (22nd), Bill Gates of Microsoft (38th), and Jack Welch of General Electric (87th). We expect to see the lists of most valuable companies crowded with CEOs from the CEO 100 who are best at Irresistible Force Management.

Why is Irresistible Force Management so tough? Many companies experience forms of stalled thinking that delay and reduce the effectiveness of responses. Some of these stalls include defensiveness about the impact the trends are having on the company, trying to deal with irresistible forces using only the company's resources, covering up problems that indicate important shifts in forces, wishful thinking that favorable conditions will soon return, and not being clear about the company's direction.

Even if your company is not subject to those stalls, you may lack a useful process to help you identify your irresistible forces and develop superior ways of taking advantage of them regardless of their direction. These weaknesses often show up in an inability to locate the causes of powerful force effects on the enterprise, not examining what the implications of force shifts are, and being over-reliant on forecasting rather than using strategy to achieve a superior performance level.

Stay tuned for next year's article, as we will then look at how flexible these CEOs have been in their approach to irresistible forces. The recent downdraft in the values of technology stocks should present new challenges. Undoubtedly, others (as yet anticipated) will add their own complications.

Donald W. Mitchell is chairman and chief executive of Mitchell and Company, a business process improvement and management consulting firm in Waltham, Massachusetts, focused on how to make rapid, successful improvements in organizational performance. He also heads OUTSTANDING CHIEF EXECUTIVE OFFICERS (a best-practice-improving organization whose members are primarily current and former CEO 100 CEOs) and TWENTY TIMES PROGRESS (an organization for teaching executives breakthrough methods for increasing the effectiveness of important management processes). He is co-author of the highly acclaimed The 2,000 Percent Solution: Free Your Organization from "Stalled" Thinking to Achieve Exponential Success, published in January 1999 by AMACOM Books. He is also co-author of The Irresistible Growth Enterprise: Breakthrough Gains from Unstoppable Change, to be published in June 2000 by Stylus Publishing. Additional research and analysis for this article were conducted by Mitchell and Company's Lyra Jakabhazy. The basic data for determining which CEOs might be qualified for this list were again supplied by the outstanding people at Zacks Investment Research. For more information, to see the whole list of 100 companies and to read fuller versions of prior articles, visit Mitchell and Company's Web sites (,,, and

CEO 100 Profiles

All-Star Repeaters

Last year, three CEOs and their companies appeared on the CEO 100 list for the sixth time, something that had never happened before. This year, that success has been surpassed as two of the three CEOs appear for an unprecedented seven times consecutively: Michael Birck of Tellabs (80th) and Lowry Mays of Clear Channel Communications (46th).

Two other CEOs and their companies reached the list for a sixth time: Bill Gates of Microsoft (38th) and Charles Schwab of Charles Schwab (39th).

A great benefit for you is that having such sustained success helps to focus attention on the attributes that differentiate these executives from less successful ones. In our future articles, we will focus attention on describing the key lessons for you. Since three of these four CEOs are not household names yet, you will be receiving new insights that will not be appreciated by others for years to come.

Perhaps the most interesting finding is that 3 out of 4 of these companies provide services, rather than physical products. This observation is all the more remarkable in that most observers believe that service companies lag manufacturing firms in management effectiveness, and that service companies are much more difficult to manage. Whatever the facts really are, our all-star CEOs are overcoming the popular wisdom.

Another important characteristic is that these companies were far more likely than the average company to compete based on innovative new services and products rather than simply providing the same offerings more efficiently. This jibes with earlier research with the CEO 100 that showed that these CEOs have felt that having innovative strategies is the best way to grow stock price.

Interestingly, only one, Clear Channel Communications, has placed much reliance on acquisitions. Even in that case, Lowry Mays has emphasized operating the new businesses differently as well as more efficiently than under the prior ownership and management.

We look forward to reporting on any eight time repeaters next year, as well as additions to the seven time repeater list. Since Bill Gates stepped down as CEO of Microsoft earlier this year, we know that he will not be back with us next year for a seventh time. Will Charles Schwab repeat for a seventh year? Will Tom Golisano of Paychex (a six-time repeater last year) rejoin the list? Stay tuned to this series of articles to find out.

Disk Storage Wonder
Michael C. Ruettgers, President and CEO, EMC Corporation

In The Innovator's Dilemma, Professor Clayton Christensen of Harvard Business School outlined the extreme challenges faced in the disk storage market for personal computers. Had Professor Christensen looked a little further, he might have found the living embodiment of the solution to that dilemma (how to compete with ourselves in new technology) at EMC's headquarters in Hopkinton, Massachusetts.

In 1990, the company had only $171 million in sales. Revenues in 2000 are expected to top $8 billion. The company sees no end in sight to its growth.

EMC sees providing and managing disk storage as its market, its only market. Located near the former headquarters of one-time minicomputer star, Digital Equipment, EMC learned from DEC's problems to focus rather than fragment its efforts. This single-minded vision has allowed the company to wrest leadership away from IBM, which was the original innovator in this area. The company provides both hardware and software to allow customers to combine all of their data in enterprise-wide applications, regardless of the computer systems and software being used. Demand is so great that the growth that can be stimulated by improving value or price for customers exceeds virtually all other technological markets.

According to Mike Ruettgers, "There has been a significant change in the attitudes of business executives regarding the use of information for competitive advantage. This shift caused the advent and proliferation of computer applications such as data mining and data warehousing, which in turn drove the demand for central repositories of information storage. A dramatic cost decline and performance improvement of the component technologies has occurred in the disk drives and DRAM chips used in our products."

For the future, Ruettgers says EMC will focus "on the one business we understand well, be serious about listening to our customers, and will manage as if every quarter is the first and last quarter in the life of the company." To overcome negative influences of uncontrollable forces in the future, EMC "will closely monitor external forces and execute swiftly."

The company continually seeks to expand its lead based on open software solutions to provider faster, less expensive, and easier-to-access data storage.

Once More, Simply -- Interactive Television Commerce
Henry C. Yuen, President and CEO of Gemstar International Group, Ltd.

Gemstar is all about making your life a little easier. In the past the company has developed proprietary technology to make it easier to view and record video and television programming. VCR Plus+ is probably the company's most famous product.

Being a technology developer has advantages as a business model, like the 44 percent after-tax margin on revenues of $215 million the company enjoyed in 1999. Revenues have quadrupled in the four years since Gemstar went public.

Now, Henry Yuen, the company's visionary president is on to bigger and simpler things. The company is in the process of purchasing the venerable TV Guide, as a base for expanding Gemstar's lead in electronic program guides (EPGs). Yuen plans to turn the EPGs into e-commerce portals. A key advantage will be to allow advertisers to have the emotional impact of television advertising combined with simple push-button electronic ordering that is easier than using the Internet.

The company plans no smaller challenge than to drive the Internet away from television sets for electronic commerce. Deals are already in place with leading television set manufacturers and foreign cable service providers to put the infrastructure for television-based e-commerce in place. But the Internet is a friend, too. "The familiarity with electronic transactions fostered by the Internet takes away the skepticism and concern of potentially conducting transactions on televisions, allow us to couple the deep emotions generated by television with the ease of a 'one-click' response to construct a powerful impulse selling experience. Together with the increasing realization that the Internet is too 'frictionless' for a profitable retain model to be constructed, 't-commerce' is emerging to become the preferred e-tailing model in the new millennium."

For the future, Gemstar will be working hard to add U.S. cable service providers to make the coverage of its new services universal. With future generations of cable boxes improving, this will make t-commerce more viable and attractive. The company will run hard to stay ahead of competing technologies (such as broadband through fiber optic cables) that focus on making the Internet more accessible in homes through television sets.

Bringing It All Together for Computer Data
Mark Leslie, Chairman and CEO, VERITAS Software

VERITAS is the leading supplier of software to bring company-wide computer information together. As firms come to see their competitive edge in data warehousing and mining, they need VERITAS to bring existing applications packages together. This puts VERITAS in the business of enabling the most important new functions for its customers.

The company has been a rapid grower, expanding from $11 million in revenues in 1993 to an expected $1.1 billion in 2000. This soaring increase was aided by a single-minded focus on making UNIX more effective for file and disk management. The current technology was enabled by an agreement with AT&T to develop the next generation of UNIX. Mark Leslie chose to restart a prior company, Tolerant Systems, as VERITAS to focus on this opportunity. Only 3 of the original 20 investors went along. The others missed the chance to make a large fortune.

Through acquisitions, VERITAS has added a strong position in backup software. Internal development allowed the products to be segmented into direct and OEM lines, and a sales force was established from scratch.

Mark Leslie credits close attention to shifting forces in the VERITAS markets for the company's success. "Our job is not to change the reality of the business environment. Our job is to recognize reality, react, and respond appropriately. We have to respond to investors and employees, in addition to our customers." Leslie finds that keeping a close watch on sales trends is a good wind vane for new trends. To encourage this focus, he insists on having the most conservative accounting possible. As a result, VERITAS sees shifts occurring long before they show up in financial reports to the investment community. Leslie says, "It's important to be certain of uncertainty. I worry about this." As a result, Leslie says "I'm a firm believer that successful company strategies must be flexible enough to evolve with market demands and changes."

For the future, VERITAS plans to extend its technology lead in advance of the development of emerging trends. Internet businesses, Network Attached Storage, professional services to support these applications, the Hewlett-Packard market, and its own e-business structure to distribute its products will be top priorities.

Running the Numbers and Improving Your Portfolio Results

To produce the latest CEO 100 list of companies that delivered superior stock-price gains over the prior three years -- calendar years 1997 through 1999 -- we drew on the expertise of the Consulting Group at Zacks Investment Research. Accessing their data base of more than 6000 public companies trading in the United States, we selected the 100 fastest growing stocks where:

(1) the same CEO was heading the company from January 1, 1997 through December 31, 1999;

(2) the company was public from 1995 through 1999;

(3) the company's common stock had a market capitalization value of at least $1.43B at the end of 1998

This last measure is an annual update of our prior methodology, by matching the size of company we look at to the changes in the level of the S&P 500 since the CEO index was begun.

As has occurred on average over the prior years this list has been published, buying the CEO 100 once again proved to be a good way to make money. The 1995-97 list published in 1998 returned one-year stock price appreciation of 21.5 percent compared to 19.3 percent for the S&P 500 and 3.9 percent for the Russell 2000.

To execute this investment strategy, you simply buy equal dollar amounts of each of the 100 stocks at the end of the month when the list is first published, then hold the stocks for 12 months.

Over 7 years, the cumulative gain for the CEO 100 has outperformed more than 95 percent of professionally managed portfolios and the S&P 500 and the Russell 2000. This is remarkable because there is no option to sell stocks of companies undergoing severe problems, no ability to borrow money to buy more stocks as hedge funds and some mutual funds can do, and no use of derivatives. Transaction costs and taxes on gains are also low because the portfolio turnover is less than 65 percent a year, far less than most professionally-managed portfolios.

With normal investment disciplines applied, this approach could easily yield returns at 150 percent of the S&P 500.

A major test of this investing approach will come in the coming two years as we see the effect on the results of drooping multiples on technology stocks and dot com companies becoming eligible in substantial numbers for the first time.

2000 Mitchell and Company

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