(FORTUNE Magazine) – CALL THEM the billion-dollar kids. They are the fastest-growing companies in America's fastest-growing markets. Innovative, opportunistic, above all entrepreneurial, they are romping through the ranks of the FORTUNE 500 like grade-schoolers at a Saturday afternoon picnic. The speed of their ascent is mind-boggling. At the beginning of the decade most members of this Shirley Temple set were mere startups, and a few didn't exist. Suddenly in American business, a childhood fantasy is coming true: You don't have to wait to grow big. You do have to accomplish quite a few other things that most companies never achieve. In general, the supergrowth champs begin their rise by tapping into ! broad nationwide or worldwide trends, such as the spread of the personal computer or the female invasion of the work force. They follow those trends -- and their market implications -- wherever they lead. Then they find ways to survive the turbulence and intense competitive pressures that follow. When the rocket lifts off, a lot of companies can't hang on. As large corporations get rapidly larger, it's hard to imagine which is tougher -- achieving the growth or withstanding it.Consider:

-- Sun Microsystems of Mountain View, California, after five years in existence, saw sales of its computer workstations more than double last year to $538 million. They'll do $900 million in the fiscal year that ends in June. -- In the Boston suburb of Canton, athletic shoemaker Reebok International increased sales 50% to $1.4 billion. The company was in its eighth year. -- Compaq Computer in Houston, the youngest superstar of the personal computer boom, saw orders for its most popular model double in three weeks last year. Sales for all of 1987 soared 95% to $1.2 billion. -- New York's Liz Claiborne, founded in 1976, leads all competitors in selling fashions to working women professionals, the fastest-growing segment of the labor force. Sales rose 30% last year to $1.1 billion. More than a score of other U.S. companies have achieved comparable growth in the past five years (see table). Many are retailers that are quickly able to implant a winning concept across the country. But the success stories encompass a wide range of industries and regions.

For many of these companies, being right has proved far more important than being first. You don't have to invent a product if you can figure out how the market will develop and position your company to take advantage of it. Consider how Compaq outdistanced its competition. When IBM unveiled its PC, Compaq was among dozens of startups that jumped into the market with compatible products. The young company became a master of what management writer Peter Drucker calls ''creative imitation, or entrepreneurial judo.'' The advantage of the strategy, says Drucker, is that ''by the time the creative imitator moves, the market has been established and the new venture has been accepted. Indeed, there is usually more demand for it than the original innovator can supply.'' Compaq's founders quickly hit upon two key tactics to differentiate themselves from the crowd. One was their now famous portable computer, which was an instant hit. Sales of the luggable machines topped $111 million in 12 months. Less known but just as crucial was Compaq's decision to develop strong relationships with computer retailers, then a new and unproven part of the industry. From the start Compaq realized that the retailers were key and that store shelf space would became scarce real estate. Unlike many of its competitors, including Apple and IBM, Compaq never tried to compete with retailers by selling its machines directly to large customers. Compaq offered key dealers exclusive franchises and attractive margins and won the distribution battle. Today one of every six personal computers sold by dealers is a Compaq. At 25%, its share of market revenues is second only to IBM's 30%. Businessland, the fast-growing six-year-old computer retailer based in San Jose, California, was also a latecomer. Like dozens of other entrepreneurs, Businessland co-founder Dave Norman looked at the proliferation of personal computer products and concluded that customers would never be content to shop directly with just one manufacturer. They would want to pick and choose and would want unbiased advice. The insight was hardly unique and Norman knew he would have to offer something more. His answer was to create service-oriented stores geared to small business customers. While that approach seems obvious now, it was not so clear at the dawn of the personal computer era, when the home market was thought to be king. Even Norman didn't fully understand that his concept was just as appealing to large companies as to small ones. This year, with some 70% of its business coming from FORTUNE 500 customers, Businessland expects revenues to approach $1 billion. In the booming market for technical workstations, Sun Microsystems executed a brilliant strategy to seize the industry lead. Sun not only started late, in 1982, but it also faced a prosperous and entrenched competitor: Apollo Computer of Chelmsford, Massachusetts. Apollo pioneered workstations -- desktop machines connected to a powerful central unit and to each other -- and the company made no secret of its intention to dominate the business. Moreover, Sun's founders were well aware that workstation customers were leery of doing business with a startup. The solution: Design and build muscular but inexpensive computers that were compatible with the competition's products. That way a customer could fit Sun's computers into existing installations with virtually no risk. BUT THE REAL SECRET to Sun's astonishing performance lay in its founders' ability to convert what appeared to be a glaring weakness into a strategic asset. The young company was so financially strapped that it could not afford to design the specialized electronic circuitry considered essential in building a high-performance workstation. Sun's founders realized that in the fast-paced computer industry, custom-built components were becoming obsolete in months. By using off-the-shelf parts, Sun could take advantage of technological breakthroughs as soon as they reached the market. The approach has enabled the company to double the computing speed of its workstations every year. Sun is an example of what Raymond Miles, dean of the University of California business school at Berkeley, calls the ''designer company,'' in which the presiding genius concentrates on key innovations and contracts out for all sorts of parts and services a more mature company would supply in- house. The designer approach worked for real-life designer Liz Claiborne. She and the three other founders of Liz Claiborne Inc. are all garment industry veterans. They spotted their opportunity in 1976. Says co-founder and vice chairman Jerry Chazen: ''We knew we wanted to clothe women in the work force. We saw a niche where no pure player existed. What we didn't know was how many customers were out there.'' Clothes designers had not fully exploited one of the most profound demographic changes in the postwar era: Women baby- boomers were flooding the labor market. Liz Claiborne's founders made two other instinctive decisions that stimulated the company's rapid growth. They decided not to build their own manufacturing plants or to field a traveling sales force. Both moves disregarded conventional industry wisdom, yet turned out to be pivotal. Lack of factories increased costs but gave the company more production flexibility than any competitor. The absence of a road force impelled the company to focus on winning orders from large department stores and specialty retailers, whose buyers were accustomed to traveling to New York. With practically no overhead, Liz Claiborne was perfectly positioned for rapid growth when sales took off. Charles Lazarus saw the same social phenomenon, the working woman, but a different opportunity. He founded Toys ''R'' Us on the premise that ''when Mama went back to work, department stores were dead.'' He reasoned that working women wanted a store where they could shop for their children quickly, easily, and cheaply. Unlike department stores, which count on the rapid turnover of a limited number of items, Toys ''R'' Us offers a warehouse full of playthings. Says Lazarus: ''We don't want to decide which toys you should buy. We offer everything. And we make it easy for you to toss some crayons and coloring books into your cart.'' Toys ''R'' Us operates 350 stores, and sales last year topped $3.1 billion. Reebok co-founder Paul Fireman experienced a different revelation. ''There was a social change going on that nobody had noticed,'' he says. ''We realized that the aerobics craze was for real and that there was a huge untapped market of women seeking both comfort and style. The industry was only focused on jogging shoes. It wasn't growing with the customer.'' That realization brought Reebok 20 million customers that its competitors had overlooked. And what customers -- instead of one set of sneakers, they often bought four or more colorful pairs of Reeboks. Sales jumped from $13 million in 1983 to $1.4 billion by the end of 1987. A confluence of social forces turned Sol Price's warehouse club idea into a winner. By the late Seventies mass marketing had made consumers more selective; for many familiar items they didn't want advice, they just wanted a bargain. Then steep inflation made that desire urgent, and the California entrepreneur's Price Club took off.

Its strategy is brutally simple: Provide incredibly low prices, low enough to undersell not only other discounters like K mart and Wal-Mart, but even many wholesale distributors. At huge, no-frills, cash-and-carry warehouses, Price sells cases, cartons, and pallets of products. The aisles are wide enough for stock boys to replenish inventory with forklifts and for shoppers to load their purchases onto flatbed carts. Last year some two million individuals and small businesses paid $25 just for the privilege of shopping at a Price Club. Total sales: $3.3 billion. SUPERGROWING companies almost inevitably face a challenge that threatens to drag them under: transforming themselves in a few months or years from exuberant startups to corporate giants that need procedures and structure to stay efficient. Unfettered entrepreneurialism was probably crucial to the early success, but channeling it in an organized way eventually becomes just as important. Otherwise, says Richard Cavanagh, dean of Harvard's Kennedy School of Government, these companies ''essentially become day-care centers for adults. People Express is a good example. They had great esprit, but they never got it under control.'' The opposing risk is that organization and control will crush the unique attributes that propelled the company. In the worst cases, writes Cavanagh in a book he coauthored, The Winning Performance, ''Opportunities for breakdowns and malfunction multiply. Layers of organization can add drastically to response time. Functional specialization can lead to major problems of coordination and control: Is manufacturing really providing what sales is selling at the time it was promised? Systems may fail to monitor costs that get out of line. Leaders may lose their in-depth understanding of business dynamics or even their fundamental zeal. People throughout the company may lose their motivation and morale, adopting a nine-to-five mentality.'' To avoid creeping bureaucracy, the founders of fast-growing companies try to push decision-making down to line managers. That's no problem for retailers like Toys ''R'' Us, Businessland, and Price, which regard each store as a business unto itself. Says Lazarus of Toys ''R'' Us: ''No matter how big we get, the key unit in this company is the store. We want our store managers to take the business home in their stomach. We want them to think that their store is the only store in the world. We reward them with bonuses and stock options, and we've made a lot of millionaires.'' REEBOK DEALT with its unwieldy size by creating five separate product divisions. The moves came just in time to avert chaos. When the company expanded to market eight different lines of shoes, most of its 2,200 employees had less than two years' experience at Reebok. They needed better supervision -- and so did veterans of the freewheeling early days who never worried about anything except what the competition was up to. Co-founder Fireman recalls, ''We had to teach our Roman legions how to operate in a time of peace.'' Lack of organization nearly led to disaster in 1986, when Reebok jumped into the sportswear business. Practically overnight clothing sales reached $39 million. Says company president C. Joseph LaBonte: ''The brand was so damn hot that anything we put on the racks just blew out of there. But we didn't know what we were doing. The product quality was not high. The good news was that our distribution was so bad that we didn't ruin ourselves. Most of the clothes never reached the shelves in time for the holiday sales. We eventually * destroyed the rest.'' LaBonte, who was brought in to clean up the mess, slashed the size of the apparel group by 50%. ''Now we are setting up an infrastructure so we don't have to panic all the time,'' he says. How much structure does a growing giant need? The contrasting examples of Compaq and Sun make that question hard to answer. Most of the billion-dollar kids have navigated on the fly, imposing organization only when forced by circumstance. Compaq is the remarkable exception. If IBM is the Zeus of the personal computer industry, Compaq is the Pallas Athena, springing to life full-blown in a suit of armor. From the beginning, Compaq's founders -- all Texas Instruments veterans -- have tried to leave nothing to chance.

Even at the enterprise's birth, says senior vice president of finance John Gribi, Compaq was ''a large company in its formative stages, not a small company trying to grow big. We had all our systems in place before day one. You have a clean slate, but you only get one shot at writing on it. Any startup has that advantage. It's just a question of whether you make good use of it. When our market took off, we were positioned to grow with it.'' Originally called Gateway Technology, the startup hired a San Francisco firm called NameLab to come up with a catchier name. Consultants also designed a corporate logo for all the company's products, literature, and advertising, with colors selected from an international color standard to ensure consistency each time a corporate trademark was printed. With sales running at an annual rate of $1.8 billion, Compaq still uses the accounting system it started with and has not fiddled with its management structure. When Compaq executives talk about how they do things, one hears caution, earnestness, relentless rationality. ''Once you announce a product, you're committed,'' says co-founder and chief executive Rod Canion, 43. ''You don't want to make any mistakes, so it justifies putting the time and resources into making the best decision possible.'' Before giving the green light to a new product design, Compaq executives hammer out a consensus on everything from its design and manufacturing requirements to its price and marketing strategies. In the process, says Canion, ''you always have disagreements. But at Compaq, instead of just arguing over who is right, we tear down positions to reasons. And when you get to reasons you find facts and assumptions. Then you try to eliminate the assumptions and come to agreement on the facts. Almost always, when you get your team to agree on the facts, you agree on the solutions.'' Canion says the approach depends on not having big egos. ''In companies you usually hear slogans,'' he says. ''From the very beginning at Compaq, what you heard was, 'Doing what makes sense.' ''

Surely Compaq's alter ego is hard-charging Sun. Past policies exert no hold over its present. Though the company prospered by using off-the-shelf chips, last year it surprised the computer industry by commissioning its own microprocessor -- the heart of all desktop computers. The gamble paid off almost immediately. Sun's new computers are a huge success, and competitors were so impressed with the new microprocessor that a number of them, including AT&T, Xerox, and Unisys, have decided to license it. Sun co-founder and Chief Executive Scott McNealy is an admirer of Compaq, but he disdains the company's measured approach to decision-making. At Sun, he says, ''We're more emotional. We get all fired up. Our adrenaline gets going and we start knocking against walls. Our new microprocessor's success was 90% assumption and 10% fact. It was an emotionally charged issue. How much courage do we have vs. what do the facts say? Facts are available to everybody else, but intuition is proprietary.'' At times Sun seems incapable of backing away from an opportunity, no matter how risky. In just the past year the company has committed itself to major development projects at the top and bottom of its product line. First the company introduced a high-performance ''supercomputing'' workstation, and then it unveiled a high-powered personal computer that will compete with Compaq models. SOMETIMES SUN even tries to recreate that little-company feeling. When the initiative of the startup days began to slacken, McNealy would break up the growing mass of employees. Last year, for example, after a key development project got bogged down, he ordered a team of engineers to clear out of headquarters and finish the job off site. The project got back on schedule. Another division, formed to design a new line of low-cost computers, was set up on the East Coast. Says McNealy: ''You have to fire-wall product development groups and give them enough autonomy to do their jobs.'' Aware that their progress is exceptional, the founders of fast-growing companies are obsessed with keeping it going. They fret about losing their entrepreneurial magic, losing touch with their markets, or not being able to hire ambitious go-getters like themselves. Most act like owners of small businesses rather than managers of large public corporations. At Businessland, for example, Norman still makes frequent sales calls. ''I let all our store managers know I'm available if they need me,'' he says. Toys ''R'' Us's Lazarus frequently monitors sales statistics for individual stores on computer screens installed in his office, his home, and his beach house. ''I don't ask people how they are doing, I look at the tube. I can see all kinds of things. I look for items not sold. Nine times out of ten it means they are not stocked on the shelves,'' he explains. Even the slightest stumble provokes endless agitation and self-doubt. When Liz Claiborne laid an egg with high hemline dresses last fall, Chazen put the blame on himself. ''I should have known better,'' he says. ''We didn't recognize conflicting social phenomena. The working woman wants to be stylish, but she also wants to be dignified. It was the biggest boo-boo that I know of in my 35 years in the business.'' In Compaq's business, new models replace old ones about every nine months. As Canion says, ''Your last successful product doesn't mean olive oil. One success is gone almost before it even happened. We never even consider slacking off. You've got to keep running.'' Why the obsession with momentum? Most of the billion-dollar kids are in fast-growing industries where eventual shakeouts seem inevitable. Says Businessland's Norman: ''There will always be two or three companies that will have a major share of any market. If you don't grow, you'll die.'' Adds Sun's McNealy: ''There are only going to be a few major computer companies. A billion dollars in sales isn't big enough. We have to get bigger.'' ANOTHER REASON to keep up the growth is that Wall Street loves it. Security analysts are infatuated with the supergrowing companies. Smith Barney's Ilene Goldman rates Sun a top pick because ''the company will outpace the industry's growth rate,'' which she figures at 25% per year. Salomon Brothers' Jack Seibald thinks Price Co. will also grow at a 25% rate. Montgomery Securities and Drexel Burnham are bullish on Reebok. Analysts at Prudential-Bache Securities issued ''aggressive purchase'' or ''accumulate'' recommendations in April for Sun, Toys ''R'' Us, and Businessland. First Boston's Charlie Wolf says that Businessland's stock ''is significantly undervalued.'' Morgan Stanley pushes Compaq. When the growth stops, often the rave reviews do too. ! There's apparently another reason to press the chase for supergrowth: It just feels good. Is growth a narcotic? ''My wife asked me that same question,'' says Toys ''R'' Us President Norman Ricken, who pauses, then blurts, ''The market is just out there and it belongs to us.'' His boss, Charles Lazarus, looks at a map of the U.S. studded with bright red pushpins for each Toys ''R'' Us location, then adds, ''Growth creates problems, yes, but it also eliminates them. The only thing I know how to manage is growth. We're in the growth business. What we sell is toys.'' The parents of the other billion-dollar kids could make similar statements, for down deep they all seem to be empire builders. They have developed compelling visions of the future of their industries, and they aim to exploit their leadership positions. Nearly all are convinced that their markets are still largely untapped. Retail chains like Businessland, Toys ''R'' Us, and Price Club can open stores in new locations. As Compaq and Sun computers get more powerful and easy to use, they become more attractive to larger groups of customers. The hotter the Reebok and Liz Claiborne brand names become, the more kinds of products they can sell. The supergrowing companies have several other strategies for maintaining their pace. Many are expanding overseas. More than 35% of Sun's revenues already come from exports. Compaq makes its personal computers in Scotland as well as in Houston. Reebok shoes and Liz Claiborne dresses are best sellers in Tokyo. By the end of the year, four Price Clubs will be open in Canada. Toys ''R'' Us, long established in Canada, now operates in Britain, West Germany, Hong Kong, and Singapore. France is next. Exults Lazarus: ''We're getting terrific store sales volumes. It's what the U.S. was like ten years ago.'' Companies with plenty of cash look for strategic acquisitions. Reebok is the most active so far. Over the past two years it spent almost $300 million to buy Rockport and Avia, two fast-growing competitors. Fireman says both companies exemplify what he calls the ''sense of aliveness'' that the Reebok brand stands for. ''Reebok is two companies,'' Fireman explains. ''Reebok the brand, and Reebok the corporation, which acquires younger companies that can connect with our image. One of the things Reebok the corporation can't get caught up in is becoming the product. That's what happened to Cadillac. They built the same product, but the customers moved on. Reebok the brand will compete with Avia the brand. I figure that between the two of them, one will win.'' Businessland also acquired two smaller competitors, but for much more straightforward reasons. Explains Norman: ''Our biggest suppliers, IBM and Apple, were putting moratoriums on the numbers of dealers they were licensing. We needed to make these acquisitions to get authorized IBM and Apple locations. We were buying medallions.''

The most popular growth strategy is to diversify into related product lines and services. Liz Claiborne expanded from its initial base of sportswear into dresses and knitwear. The company has also started a surprisingly successful menswear division. Says Chazen: ''We discovered that 70% of our women customers also bought clothes for their husbands.'' Price Clubs will soon be opening pharmacies, as well as photo-processing, optical, and automotive service centers. New from Reebok: golf and bicycling shoes, plus Weeboks for children.

IN ADDITION to its stores, Businessland now sells its products through a mail-order catalog. The company is also beefing up its service operation. In the future, says vice chairman and co-founder Enzo Torresi, ''We will help you tie your personal computers into your mainframes. The potential for revenues is three times bigger in service than in product sales.'' Adds Norman: ''We'll try anything if it fits our basic strategy.'' Compaq, the most tightly focused company in the group, is looking into building such peripheral products as printers. Many of the billion-dollar kids are also committing themselves to ambitious and risky ventures outside their proven lines of expertise. Price Co. is getting into real estate development with plans to build shopping centers in Connecticut, California, and Arizona. Liz Claiborne moved into retailing. ''It's a huge opportunity,'' says Chazen. ''We saw retailers like the Limited and the Gap move into manufacturing, and we said, 'We can manufacture better than these guys. Why don't we get into retailing?' '' Five new Liz Claiborne stores, called First Issue, are already open, with eight more planned by the end of the year. Toys ''R'' Us bred Kids ''R'' Us, a new chain devoted to childrens' clothes. Says the ever ebullient Lazarus: ''We planned the store for Mama. She's our customer. All the things she needs in one place. This will be a billion-dollar business in two years. You can go in with confidence. If you look at it that way, business is very easy.'' | No company's supergrowth can continue for long. If Sun were to grow as fast in the next five years as it did in the past five, it would be bigger than Du Pont. Five years after that it would be half the current size of the U.S. economy. In a more realistic scenario, these companies that have weathered the strains of exceptional growth must soon face a new challenge: surviving the slowdown. For them as for all prodigies, adjusting will be difficult, and as adults some may not fulfill the promise of their adolescence. Win or lose, they are teaching lessons in a new business phenomenon -- and inspiring entrepreneurial fantasies that no caveats can diminish.

CHART: TEXT NOT AVAILABLE CREDIT: NO CREDIT CAPTION: 25 OF AMERICA'S FASTEST-GROWING LARGE CORPORATIONS DESCRIPTION: 1983 and 1987 sales and average growth rate per year from 1983 through 1987 for 25 fastest-growing large corporations in United States.