FORTUNE VISITS 25 COOL COMPANIES
(FORTUNE Magazine) – TENTH PLANET, Half Moon Bay, Calif. Educational software for classrooms FOUNDED: 1994 REVENUES: None EMPLOYEES: 16 PRIVATE
Ever since the first PCs were trundled with fanfare into schools in the early Eighties, information technology has been hailed as the future of education. But while schools have spent a small fortune installing computers, most teachers still prefer ditto sheets and chalk. One reason: The best software for kids is "edutainment," which may be fun at home but isn't rigorous enough for class.
Tenth Planet, founded by a handful of Apple alums in the sleepy seaside town of Half Moon Bay, California, is out to change that. The company is betting it can persuade schools to redirect part of the $6 billion they spend each year on textbooks and related classroom materials toward a curriculum that puts the PCs to work. Says CEO Cheryl Vedoe: "Schools have made substantial investments in computers. The issue now is, how do they use them?"
Tenth Planet's first product, a set of books, blocks, and CD-ROMs due to go on sale this winter for $250, is designed to acquaint the kindergarten-through-second-grade crowd with the rudiments of geometry. Using one of the CD-ROMs, for example, a pupil can click on a soccer ball--covered with black and white hexagons--which then flies onto a movie screen that displays video examples of hexagons in nature, like honeycombs. Tenth Planet Explores K-2 Math is the result of a collaboration between multimedia artists and teachers. Says Tom Plati, director of libraries and educational technology for the Wellesley, Massachusetts, public schools: "It's the most exciting curriculum solution I've seen--and I've seen a lot of junk."
Fine--but can a company make money supplying cash-strapped schools? Wouldn't it be wiser to aim, say, at the $500-million-a-year retail market for educational software for home PCs? Maybe not, says Michael Hayes, editor of Electronic Education Report: "I'm a staunch believer in the power of the implied endorsement of teachers. When they start using this software in their classrooms, that will carry over into the consumer market."
One problem remains: To reach America's 85,000 public schools, Tenth Planet probably must team up for distribution with a textbook publisher; so far Vedoe hasn't found the right match. "Publishers often aren't familiar with technology," she says. "In some cases they see it as competing with their product."
- Jennifer Reese
PEOPLESOFT, Pleasanton, California Back-office software FOUNDED: 1987 REVENUES: $113 million EMPLOYEES: 1,000 (NASDAQ: PSFT)
Entrepreneurs are different from the rest of us. When Dave Duffield went to Hawaii in 1987, he lay around the beach daydreaming--about client-server systems. Turned on by the idea that networks would make PCs ever more powerful, Duffield thought: This is the future. He went home to California and presented his vision of creating software for this nascent market to colleagues at Integral Systems, a mainframe software company he had helped found--and his colleagues just shrugged.
So Duffield lined up a second mortgage on his house ("a nice house," he says) and left to start PeopleSoft. Eight years later, no one is skeptical. PeopleSoft products--software to manage basic business functions like payroll and accounting on client-server networks--are as mundane as you can get. But there's nothing humdrum about the company's performance. Revenues doubled in each of the past five years, and the stock price has more than quadrupled since PeopleSoft went public in 1992.
Pam Kline, a partner at technology marketing firm Regis McKenna, has studied PeopleSoft's practices. She says, "People- Soft has really understood its customers." For one thing, although Duffield bet his company on client-server systems, he didn't expect customers to do the same. So PeopleSoft's first product was software to manage a company's human-resources department-- important stuff, but hardly mission-critical. Says Kline: "PeopleSoft understood that companies weren't going to put their absolutely most crucial data on new software."
PeopleSoft made its product flexible and easy to use. Charles Schwab controller Evelyn Dilsaver uses PeopleSoft accounting software. She likens it to Legos: Users can move chunks of information around the network and snap them in wherever they want. But Dilsaver likes more than just PeopleSoft's technology: "Our cultures mesh," she says. "It's almost like making a marital choice. You're in bed with these guys for a long time, so you'd better like how they respond when you have problems."
PeopleSoft does try hard to be a responsive mate, the kind that never forgets an anniversary and sometimes just shows up with flowers. Employees are free to dip into a discretionary fund to make a special effort for customers--like ordering them pizza. When the Gap came calling, the sales team and members of top management wore Gap khakis. And Duffield buys stock in his client companies. Trivial? "It's the gesture," says Duffield. He can well afford it, now that his PeopleSoft holdings are worth over $400 million. But it's also good business--PeopleSoft has a 50% share of the client-server human-resources market and a strong position in several others.
- Jennifer Reese
AGAINST ALL ODDS PRODUCTIONS, Sausalito, Calif. Multimedia content creator FOUNDED: 1991 REVENUES: N.A. EMPLOYEES: 6 PRIVATE
Don't think of Against All Odds as a company. It's really just the brainchild of one inventive 45-year-old photojournalist named Rick Smolan, who loves bringing together photography, computers, and books in innovative ways.
Smolan is best known as the creator of the Day in the Life series of photo books in the early 1980s. Since no publisher would back him, he found corporate sponsors, like Apple Computer, and paid photographers with donated Macs. In 1986 he came out with A Day in the Life of America, the best-selling photo book ever. That same year he sold the franchise to Collins Publishers.
Now Smolan has a second, equally singular career--Against All Odds, a publisher of innovative CD-ROMs, including From Alice to Ocean, one of the industry's most widely distributed titles. Released in 1992, From Alice to Ocean tells the true story of Robyn Davidson's 1977 trek across Australia with four camels. Alice was the first disk to show that CD-ROM technology could in fact enhance storytelling. Like an onscreen slide show, the disk blends Smolan's stunning photographs of the trip with Davidson's oral narrative. But the viewer can interrupt the story at any point to get details about the camels, say, or to call up maps of Australia. Says Stewart Alsop, editor-in-chief of InfoWorld: "The question you ask about CD-ROMs is, why bother? Only a small percentage are engaging and worth it. From Alice to Ocean was worth it. It was a real breakthrough."
Early reviews of smolan's just-released Passage to Vietnam are raves. The Wall Street Journal's Walter Mossberg calls Passage "a thing of beauty." Like Alice, Passage ($40) offers a companion book of photos ($50; since Alice is three years old, $50 gets you CD-ROM and book), but the CD-ROM is the mother lode. In addition to historical essays, music, and photos, there are video clips of the photographers discussing their work--and even clips of photo editors (including Fortune's Michele McNally) bickering over the merits of different shots.
Smolan's wife, Jennifer Erwitt, helps with the logistics on each project. So Smolan is free to dream up new visions--in whatever medium the future happens to throw his way. "In three years, what comes across your cable or phone lines will replace CD-ROMs," he says. "I'd rather have millions of people pay me 25 cents to spend time with Passage to Vietnam over cable than 100,000 people paying me $40 for a disk. You want people to see the damned thing." Of course, if Passage to Vietnam sells anything like Smolan's previous endeavors, plenty of people will see the damned thing, no matter what the format.
- Jennifer Reese
THE OTHER 90%, Sausalito, Calif. Mind-controlled software and hardware FOUNDED: 1988 REVENUES: None EMPLOYEES: 42 PRIVATE
Ron Gordon can't seem to retire. In the mid-Seventies, he helped turn Atari into an attractive target for Warner Communications, which bought it in 1976. Then he made electronic language translators that fit in your pocket, sold 300,000 of the things, and licensed the design to Matsushita. In 1983 he launched the Electronic University Network, an online education project. Two years later he withdrew to full-time fatherhood, swearing he would never start another company. "Once you get going, it isn't fun," says the reluctant entrepreneur. "The business part of it isn't fun."
Let the bad times begin. Gordon, 55, is back with his strangest venture yet. He is about to launch a new line of computer entertainment products that employ something he calls "mind-driven technology." Instead of using a mouse, a joystick, or the computer keyboard to control game action, you will use your thoughts. That's right--think "delete" and that E-mail from your boss will disappear.
How will this be done? Gordon won't offer finished products until January, but he has a prototype--a downhill skiing game--intended to demonstrate mind control at work. First he slips a sensing device with a velcro strap around your fingertip. The device, connected to a computer the size of a Nintendo game box, detects minute changes in your heart rate, temperature, electrical activity on your skin, and other nervous-system indicators.
Next Gordon turns on a PC in front of you and asks you to think yourself through the series of slalom gates that appear on the screen. So you think, "Turn, for God's sake!" But no matter how hard you concentrate, you still crash into the flagpoles.
That's fine, says Gordon. His games are not about thinking an action and then having it happen on the screen; they are about entering into a mental state that will allow what you want to happen. In other words, you've just had a learning experience.
"Relaxation under stress is a tremendous skill," says Gordon. "You have to let go and do it at the same time." He hopes that in playing the games, you'll become aware of your internal physiological conditions and gain some control over them. If all goes well, you'll eventually use more than the 10% of the brain people ordinarily use.
Sound far-fetched? Gordon is betting he knows better than you. "I've hit every single projection of every business I've ever made," he says in the soft-spoken manner that belies his penchant for hype. He predicts $40 million in 1996 sales, and $200 million the following year. He plans to offer hardware (the finger device) bundled with software on a package priced somewhere between $99 and $199.
Gordon says the inspiration for thought-controlled computing first hit him at Atari, when he envisioned a game called Mind Pong: "Over the years the fascination became an addiction. This is probably the only thing that could have gotten me to start another business." In his grand plan, consumer electronics is just a first step on the path to greater glory. Gordon wants to develop products that will allow quadriplegics to run wheelchairs with their thoughts, for instance. "There's all these incredible things that we're sure we can get to," he says. "But you've got to be successful and profitable, and then you can do all the nice things."
- Mark D. Fefer
TRIAD SYSTEMS, Livermore, California Inventory database software FOUNDED: 1972 REVENUES: $178 million EMPLOYEES: 1,450 (NYSE: TRSC)
It's possible to be cool by accident in the Information Age. Triad Systems makes most of its money providing an electronic catalogue for auto-parts and hardware stores--it's why your mechanic pecks at a PC to find parts instead of thumbing through grimy catalogues. The company, which operates out of an industrial park in the middle of the dry, brown hills of Livermore, is run by buttoned-down types like CEO James Porter, 59, and info-services VP Donald Wood, 57. Says Porter: "Our customers have found that parts proliferation just makes it impractical to keep up without being automated."
Do you need, say, a carburetor for your '69 Ford Mustang? Triad protects its 60% share of the parts-information market by staying up on such minutiae. each month Triad delivers a $70 CD-ROM to repair shops in the Goodyear, Kmart, Sears, and Chief Auto Parts chains; the disk lists some 13.5 million parts, including the 150,000 new ones introduced annually. Triad has a similar catalogue for hardware-store owners.
The business is so lucrative that in 1989 the cash-laden company was one of the last takeover targets of Drexel Burnham Lambert. Forced to pay big dividends to keep shareholders loyal, Triad took on $159 million of debt. It's been battling back financially ever since. Now, with only $35 million in debt remaining, Triad is poised to expand.
It recently started collecting, sorting, and analyzing point-of-sale data from the thousands of hardware dealers and distributors it serves. Result: Vista, a monthly CD-ROM for manufacturers that lets them analyze sales on a national and regional level. They can see the effects of new programs, promotions, and prices sooner than by relying on their internal tracking measures. Triad has 35 Vista customers so far, each paying between $20,000 and $100,000 per year.
Triad is also readying an ambitious software package for automotive-repair chains. Called Marketpace Inventory Tuneup, it helps store managers tailor inventories by correlating point-of-sale information with vehicle registration records. When more families in the neighborhood register pickup trucks, you don't want to be caught short on mudguards.
- Connie Guglielmo