50 companies that changed the world

The most unusual connection of all, however, came when I discovered that the scientist who founded a company responsible for both GE and RCA began his career as a chemistry teacher at th

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© Howard Rothman

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No part of this book may be reproduced or utilized in any form or by any means, electronic or

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This book is dedicated to my family, who changed my world

This book is the product of a great deal of research and many years of obser- vation Much of whatultimately shaped it, in fact, was transmitted to me in unre- lated contexts In thanking those whoassisted in its development, therefore, I find myself reaching back to other books, articles, projects,and conversations that helped to form the initial basis for the selection process along with the

analytical thinking that eventually produced 50 Companies That Changed the World I also looked

back to those direct interviews and suggestions that resulted in the shaping of the words ultimatelyfound on these pages

Thanks, then, to Ben Cohen, Hass Hassan, Peter Cove, Lee Bowes, Yvon Chouinard, MargotFraser, John Kirk, Bernie Glassman, Paul Hawken, John Hickenlooper, Bruce Hutton, Wendy Weir,Marilyn Hamilton, Joan Shapiro, Joyce Meskis, Don Banducci, and, as always, Lew Goodman

I would also like to specifically thank Pat Rothman, Ted Pinkowitz, Ed Epstein, Amy and CarlBoymel, Mary Scott, Leslie Petrovski, John Blakney, Bob Car mel, Louis Morgan, Pam Carson,David Wilbrecht, Barbara Friend, Ellen K aplan, Rober t Butler, Paul Desmond and Ken Tabb forboth their general input and pinpoint suggestions; Michael Lewis for offering me the project in thefirst place; Jackie Michaels and Kirsten Beucler for their publicity and marketing support; John J.O'Sullivan for his editing and design; and the Doors, Steely Dan, the Afro Celtic Sound System, andthe Waterboys for providing a soundtrack that helped propel it all

I am, of course, solely responsible for the contents of this book and for any and all misuses I mighthave made of the suggestions received from those cited above, and others I have inadvertently failed

to mention

Number 13: Sears Roebuck

Number 14: General Motors

Number 15: J.P Morgan & Co

Number 16: Union Pacific

Number 25: USX-U.S Steel Group

Number 26: Agence France-Presse

Number 27: Levitt & Sons

Number 28: The Walt Disney Co

Number 29: Netscape

Number 30: Coca-Cola

Number 31: Thyssen Krupp

Number 32: Proctor & Gamble

Number 40: Johnson Publishing

Number 41: Firestone Tire & Rubber

Number 42: Avon Products

Number 43: Hilton Hotels

Number 44: Ben & Jerry’s Homemade

Number 45: Re/Max

Number 46: Singer Sewing

Number 47: Shorebank Corp

Introduction

o matter how you feel about its individual entities or overall force, the corporate world has amajor and ongoing impact on our lives We work in it We eat the food it produces anddistributes We drive the cars it manufactures We communicate over its networks We house andclothe, entertain and educate ourselves with the various items that it makes Along the way, thiscorporate world helps shape what we are even as we—through our feedback and support—helpshape what it becomes

In the following pages, you will read about 50 outstanding companies that have dramatically andpermanently altered us In the process, you will also see how the general structure of business—and,along with it, our society—has evolved over the past few centuries You will meet some individualswith extraordinary vision, courage, and commitment who struggled to realize their ideas and drivetheir companies to success In a very real sense, they are the true forces that have changed our world

Growing up in a family that worked together to operate a busy retail store and a vending company,I’ve been more than an observer of the business world all my life I have participated in it activelysince I was barely in high school I started selling cigarettes and magazines during vacations, using anancient mechanical coin sorting device every Saturday morning to count the change from our softdrink, coffee, and candy machines Later, when I became a journalist, I began as a reporter on thebusiness beat for a now defunct urban newspaper Eventually, I wound up as a contributing editor forseveral large consumer and trade magazines, primarily covering business

During that period, I encountered an array of interesting companies that were doing unique andimportant things I enjoyed writing about them so much I turned several related projects into books

As a consultant or participant, I was also involved in the development of a number of commercialenterprises—ranging from a stereo dealership, an advertising agency for medical practitioners, asmall business accounting firm, and an Internet service provider

When I started this book, my goal was to look into the various ways that companies like thesecould change the world and examine the specific ones that have managed to pull off that lofty goalsuccessfully To find these companies, I began by compiling a list with the naturals, such as Microsoftand Ford Then, I drew up another with industries that regularly had earth-shaking impact, such as thefields of communications and transportation I began circulating both to a network of associates andcolleagues that represented a broad range of interests There were high-tech executives and teachers.Public relations professionals and engineers Business writers and shopkeepers Salespeople and

retired managers Everyone generously commented on my selections and most helpfully offered a few

of their own New lists were drawn up, recirculated, and refined Eventually, a solid list of 50companies surfaced that I felt accurately represented the breadth and scope (if not the totality) ofcorporate impact on human life in the 19th and 20th centuries

Then came the researching, writing, and ranking processes I began by putting the companies into

an order that I initially considered appropriate, and started examining a half-dozen of them at a time.Whenever I finished with one I promptly reconsidered its existing rank, especially in relation to thecompanies that were then immediately above and below it on the list I constantly asked myself whichhad more lasting influence, which really deserved to be on top of the other? And, more often than not,this resulted in a change of some sort For example, I decided after immersing myself in both PhilipMorris and Wal-Mart that the former has had more of an impact than the latter, so I flipped the order

of the two I soon began printing out my most current rankings first thing every morning, posting itbeside my computer, and then staring at it throughout the day Few passed without me making at least

a tweak or two as the finished chapters started piling up and my knowledge of all the companiesincreased Several times I also deleted companies that I had originally targeted After examining themfuller, I no longer felt that they honestly belonged At last, when an initial draft was finished, Icirculated the final list among many of my original confidants Most agreed with the new lineup, but afew suggested additional changes Several of those were incorporated into the ranking that thefinished book contains

The profiles themselves, read in order or otherwise, offer insight into the often forgotten details ofour various cultural metamorphoses as directed by these leading businesses For example, you willsee how our means of transportation were transformed from trains and cars to airplanes and rockets.How the communications evolution took us from newspapers, to radio, to TV, to cyberspace How

we underwent a social conversion through the introduction of electricity and telephones, chain hotelsand fast-food joints The overall picture is one of business and societal alchemy at the hands of a fewfarsighted people, whose best ideas were usually copied and ultimately adapted into the mainstream.But the individual pictures are even more fascinating, for they show precisely how these leadingfirms managed to stay atop their changing worlds by following a singular focus, but altering direction

as necessary whenever it proved critical

It isn’t surprising, therefore, to learn that virtually all of the companies in this book, no matter when

or where they were founded, still make a big impact on who we are and what we do I wrote this book, for example, on an Apple computer with the assistance of a Netscape browser, Microsoft

word processing software and Hewlett-Packard printer During the process I purchased a card table and chairs from Wal-Mart, and a lawnmower from Sears I got FedEx deliveries about three times a week, and regularly watched CNN, CBS, and the National Football League on my cable connection from AT&T My very first car was from General Motors (1959 Chevy Impalla), my next car was a

Toyota (1974 Celica GT), and my current car runs on Firestone tires (although, thankfully, not a

model that the company recalled in the summer of 2000) I exercise in Nike footwear, unwind with a

Sony CD player, take my kids to practically every movie released by the Walt Disney Company,

and when they were younger felt that I lived at Toys “R” Us When my wife and I first met, her roommate was engaged to a guy from Levittown I flew People Express for the few years we could Today, I have products at home too numerous to mention from Kellogg, Procter & Gamble, Phillip

Morris, H.J Heinz, L.L Bean, Coca-Cola, and of course, Ben & Jerry’s The most unusual

connection of all, however, came when I discovered that the scientist who founded a company

responsible for both GE and RCA began his career as a chemistry teacher at the Philadelphia high school I attended a century later.

What’s the point? These “50 companies that changed the world” obviously all made a tremendousmark on the business world, initiating such vital operational innovations as the assembly line,franchising agreement, brand extension, and temporary employee At the same time, they madeperhaps an even larger mark on the world in general, and on each and every one of us

There have also been negative impacts, as evidenced by giant tobacco companycum- consumerproducts conglomerate Phillip Morris and wartime armsmaker turned peacetime steelmaker ThyssenKrupp However, these firms and their visionaries, while rarely setting out to change the world,usually did so in a very positive manner

And while practically all of them still battle challenges consistently in order to remain on thatinfluential edge, most have faced down similar threats successfully throughout their existence That’sone of the primary reasons they are included in this book It is my hope that their stories will prove to

be both instructive and interesting to all

A final note: Several people who have read this book have asked about the possibility of investing

in one or more of these companies Over the years, this has generally been a smart move Several ofthem are longtime components of the Dow Jones Industrial Average, and others have been leaders onthe NASDAQ exchange during the tech boom With the market instability during the latter half of

2000, however, even these standard-bearers have taken their hits Companies such as Microsoft,AT&T, and Ford have not been immune to the fluctuations in stock valuation that have hit most market

segments Nonetheless, long-term investors can take some comfort in the fact that the companiesdescribed here are clearly established and generally profitable All have a decent chance ofrebounding with the economy in a stronger position than their peers Betting on their future success isobviously no sure thing, but if their past history is any indication they certainly should be expected tohold their own in the years to come.

Howard RothmanCentennial, Colorado

January, 2001

Distinction: Created the systems that

drive nearly all the world’s PCs.

Primary products: Computer

software and Internet services.

Annual sales: $22.956 billion.

Number of employees: 31,400.

Major competitors: America Online,

Oracle, Sun Microsystems.

Chairman and Chief Software

Architect: William H Gates III;

President and CEO: Steven A.

Ballmer.

Headquarters: Redmond, Wash.

Year founded: 1975.

Web site: www.microsoft.com.

ou may love them or hate them, but there’s no denying them: Microsoft is currently the world’smost powerful company Founded 25 years ago by two boyhood friends, the corporation grew upwith the personal computer Microsoft is neither the largest on Earth nor the most valuable Itdoesn’t set the pace for technical innovations or employee relations It isn’t sexy like a dotcom,seductive like a sports franchise, or alluring like an entertainment concern What it is, though, is thepurveyor of the software that runs 90 percent of all PCs—and that gives it a dominance that no othercompany, inside its industry or out, can match

Starting in 1975, when Bill Gates and Paul Allen translated an existing mainframe computerprogramming language into one that could be used with the very first PC, the company they christenedwith a combination of the words “microcomputer” and “software” has been uncannily successful It

soared from $16,000 in revenues in its first year to $7.5 million in its fifth It went global, forgedcritical partnerships with all of the leading computer makers, vastly expanded its product line, andwas earning nearly $150 million annually by its 10th anniversary Then, it went public—makingGates the youngest billionaire in U.S history, and eventually the richest person in the world—whileconsistently tallying an astounding 25 cents in profit on every dollar it earned.

But with those accomplishments, Microsoft also has been unceasingly controversial It has beenfaulted for taking innovations developed by others and turning them to its own commercial advantage.For leveraging its enormous power to stifle competition and force consumers into costly upgrades.For missing the onset of the Internet boom and then trying to bludgeon its way into the fray For allthese things and for making much more money and lasting far longer than anyone in its field, thecompany had been in the critical crosshairs since its beginning

And then, in mid-1998, the U.S Department of Justice and a coalition of 20 state attorneys generalofficially accused it of violating antitrust laws—a charge that ultimately led to an order that thecompany be split in two With the case in lengthy legal limbo, however, Microsoft adamantly dug inits heels to retain the tremendous power it had amassed

Paul Allen saw the future in 1975 when he picked up a copy of Popular Mechanics with the MITS

Altair on its cover Allen, then working at Honeywell, instantly understood that this primitive devicewould completely change the way computers were used He showed the magazine to long-time friendBill Gates, a fellow Seattle native and Harvard sophomore Gates wrote his first computer programand started his first computer-related business when barely in his teens Gates grew equally excitedwith the possibilities, and the two immediately began working round-the-clock to adapt the popularBASIC programming language used on large computers for this new personal-sized machine

Allen flew to MITS headquarters in Albuquerque to demonstrate their effort as soon as it wascompleted, and it so impressed the company they offered him a job He also began actively promotingthe new Altair BASIC, which attracted the attention of hobbyists who had longed for such aninnovation Gates got caught up in the enthusiasm as well, and dropped out of Harvard to follow hisfriend to New Mexico There, the two struck up an informal partnership they called Micro-soft—with

a hyphen to emphasize the corporate origins—and began refining their creation That first year, it took

in $16,005

The two opened offices in Albuquerque and licensed their program to several large firms,including General Electric and NCR Both were attracted by the Altair buzz They hired employees tomeet ensuing demand, and in 1977 formalized the company’s existence Gates also began speaking out

against hobbyists who were pirating their product, incurring the wrath of those who believed that suchprograms should be freely traded It would not, of course, be the last time Gates and his companywere accused of imposing their will on the computer world.

More licenses for BASIC were quickly negotiated, including those for the recently unveiledCommodore PET and TRS-80 computers (along with an upstart from northern California calledApple) By the end of 1977 Microsoft also began shipping a second computer language, FORTRAN,and selling BASIC on a singlecopy basis When revenues neared $400,000, Gates and Allen decided

to move their headquarters to Bellevue, Wash

After striking a deal with a Japanese firm to begin marketing BASIC overseas, Microsoft’sbusiness began to accelerate And then, just before its fifth anniversary, the company signed a seminalcontract with IBM to produce the operating system for its own soon-to-be-unveiled personalcomputer Microsoft—now with 40 employees, including a young executive named Steve Ballmerwho had recently arrived from Procter & Gamble—had nothing of the kind under development SoGates bought a program called QDOS (which stood for Quick and Dirty Operating System) fromSeattle Computer Products for $50,000 His firm then adapted it to meet IBM’s needs, renamed itMS-DOS (for Microsoft’s Disk Operating System), and wound up in exactly the right place with theright product when sales of the IBM-PC exploded upon its 1981 release Revenues hit $16 millionand the employee base was tripled to meet demand

In the 16 months after it was first offered, the company licensed its MS-DOS to 50 more hardwaremanufacturers, and Microsoft really took off It opened offices in Europe, while using its increasingincome to produce an electronic spreadsheet and move into the growing market for business software.Co-founder Allen left the company in 1983 due to illness, and the developments he pioneeredcontinued They culminated in Microsoft’s 10th year, when it shipped its first version of a graphicaloperating system, named Windows Sales were initially slow—due in part to the lack of availablesoftware—but criticism was strong Skeptics pointed out that Apple’s Macintosh already dideverything Windows could do, but better However, Microsoft continued working to improve it, andbusiness picked up in other areas Annual revenues soon reached $150 million and the payrollapproached 1,000

The company responded in 1986 by going public and moving into a new fourbuilding campus inRedmond, Wash Gates, its largest individual shareholder, became a billionaire at age 31 But as hiswealth grew and the company’s power increased, so did the complaints against it Rivals regularlyaccused Microsoft of being underhanded schemers out to profit from every computer sale in the

world Supporters also were growing in number as Microsoft enlarged its reach, however, and theyvigorously applauded the improved products that made their computers more effective and efficient.

The late 1980s saw rapidly continuing advances from Microsoft They introduced a “bundled”suite of applications called Office, CD-ROM products such as the Bookshelf reference collection.And as international operations tallied more than half of all sales Microsoft became the industry’s topsoftware vender Apple sued for copyright infringement The folks in Redmond seemed unconcernedand expanded their headquarters to accomodate even more employees

The biggest breakthrough of all came in 1990 when the most refined update yet of the graphicaloperating system, dubbed Windows 3.0, was released Microsoft believed it would change the world

of personal computing forever, and launched it with a $100 million advertising campaign The effortappeared justified when unit sales hit 100,000 within two weeks, making the company the first in itsindustry to surpass $1 billion in sales The impressive landmark was reached as Microsoft wascelebrating its 15th anniversary It also arrived just a little before the federal government revealedthat it was investigating the company for possible antitrust violations

Microsoft’s successes, and the protests leveled its way, multiplied during the 1990s Millionsregistered to use Windows in dozens of countries as updates became available, new software wasreleased for home and business use, and a judge ruled in Microsoft’s favor in the Apple copyright suitafter 63 months of litigation Rivals, however, increasingly complained about its practices even after

a 1994 settlement with the U.S Justice Department led to the changing of some controversialpractices

The company marked its 20th birthday with the release of Windows 95—which finally matched theease-of-use o f Apple’s operating system More than 4 million copies were sold in four days.Microsoft bundled its new Internet Explorer browser in this version to belatedly counter competitorNetscape in the increasingly hot battlefield of cyberspace They launched The Microsoft Networkonline ser vice to grab market share from leader America Online Gates redoubled his efforts onInternet-related software, but his progress brought even more governmental scrutiny on the firm And

in 1997, the Justice Department officially alleged that Microsoft had violated its three-year-oldsettlement by compelling manufacturers to include certain products in their computers or risk losingthe Windows operating system

Steve Ballmer was elevated to company president and CEO as Gates assumed the titles of ChiefSoftware Architect and chairman as the federal action continued In 1999, a judge ruled Microsofthad indeed harmed consumers by violating antitrust laws in its dealings with business partners The

following year, it was ordered to be split into two separate companies; one to handle operatingsystems and another applications The company protested vehemently, and in the fall of 2000 the U.S.Supreme Court declared a lengthy appeals process must be undertaken before any resolution wasdetermined.

Observers predicted the decision on whether Microsoft would be dismantled was thus years away.And Gates, the world’s richest person and head of its most powerful company, hunkered down tomake his firm even more earth-shaking as the 21st century unfolded

Number

2

AT&T Corporation

Founders: Alexander Graham Bell,

Gardiner Hubbard, and Thomas

Sanders.

Distinction: Launched the

telecommunications revolution.

Primary products: Telephone

services, Internet access, cable

television.

Annual sales: $62.391 billion.

Number of employees: 148,000.

Major competitors: America Online,

MCI WorldCom, Sprint.

Chairman and CEO: C Michael

Armstrong.

Headquarters: New York, N.Y.

Year Founded: 1877.

Web site: www.att.com.

dvanced communication techniques are widely considered a hallmark of an advanced society.And no corporation is more responsible for the state of that art in today’s world than AT&T Theubiquitous phone company has always been in the forefront of every development in thisincreasingly vital and complex business—from its first incarnation following Alexander GrahamBell’s first telephone in the late 19th century through its ultimate overhaul after a government-mandated divestiture near the end of the 20th century And when the resultant corporation voluntarilydismantled itself yet again a dozen years later, it prepared to make its mark in the 21st century aswell

American Telephone and Telegraph was once the parent company of the legally sanctionedmonopoly known as Ma Bell, and it grew to mammoth proportions, while providing the United States

with the best phone service in the world But its unique status always rankled regulators andcompetitors, and it eventually was split up as a result of antitrust action initiated by the U.S.Government Despite fears of subsequent disaster—both for the company, and the telecommunicationsinfrastructure it created—the new AT&T again drove its industry as an integrated equipment andservices provider centered on the delivery of long-distance phone calls And when market conditionsshifted it evolved once more, this time into three contemporary businesses that focused on voice, data,and video transmission.

With more than 80 million customers, AT&T remains the number-one firm in its field It hascertainly changed since Bell inaugurated the telecommunications revolution with his immortal words,

“Mr Watson, come here, I want you!” The company he formed to spread his invention throughout theland now provides an array of local, long distance, and wireless telephone services, in addition tocable television connections and high-speed Internet access Its founder could never have imaginedthese advances

Today, though, new seismic shifts are afoot and his successors are again grappling with changesthat they hope will help them keep pace with ongoing transformations in both the technological andthe competitive landscape

Alexander Graham Bell had been trying to invent a talking version of the telegraph…andsucceeded beyond his wildest expectations After earning patents on the remarkable device thatresulted from his endeavors, he and two partners formed the Bell Telephone Company in 1877 andlicensed their first telephone exchange one year later in New Haven, Conn Under the leadership ofTheodore Vail, who initially served as Bell’s top executive from 1878 to 1887, the company wentnational It fended off continual challenges from various would-be competitors by inking noncompeteagreements or by simply absorbing them

By 1881, Vail had installed exchanges operated by AT&T’s licensees in most U.S cities of anysize During the following two years he gained control of a firm called Western Electric, transforming

it into his internal manufacturing arm He eventually opened the mechanical department, thateventually evolved into the fabled Bell Laboratories His entire enterprise became known as the BellSystem, and soon laid claim to 155,000 connected telephones and revenues of $10 million After itwas reorganized in 1885 as AT&T, Vail began the process of building a national network to providefar-flung Americans with long-distance service

Vail was the new firm’s president, but disagreements with its financiers led to his resignationwithin two years The company proceeded in the direction he had set, however, and continued

constructing its nationwide long-distance system outward from New York It reached Chicago in

1892, Denver in 1899, and San Francisco in 1915 Many devices critical to its completion, such asthose boosting weak signals as they moved across lengthy telephone wires, were developed at theincreasingly respected Bell Labs But a plethora of competitors still threatened the corporation’sdominance

With Bell’s patents expiring and entrepreneurs everywhere entering the telephone business, theinnovative products and long-distance service were not enough to ensure AT&T’s future From 1894

to 1904 more than 6,000 independent phone companies began operation, while the number oftelephones in use mushroomed from less than 300,000 to more than 3 million Many parts of thecountry received service for the first time, but others found themselves suddenly hosting two or morecompeting providers Unfortunately, most of these were incompatible and subscribers to one couldnot call subscribers to another Vail, meanwhile, returned to AT&T as president and instinctivelyknew how to proceed

During his 20-year absence, Vail had decided that the nation’s phone system would be mosteffective if operated as a government-regulated monopoly He proposed just that in AT&T’s 1907Annual Report He followed with an advertising campaign touting such status as the only way thecompany could deliver the telephone connectivity demanded by both officials and the public Underthe “one system, one policy, universal service” mantra, he pounded home his message Thegovernment eventually accepted it in a 1913 agreement known as the Kingsbury Commitment Amongother things, it required that AT&T connect remaining independents around the country to its network.Well before Vail’s retirement in 1919, the Kingsbury Commitment finally pushed his company to totaldominance in the U.S telephone business and allowed him to successfully expand its equipmentoperations overseas

AT&T continued on a roll long after Vail’s departure It moved into unrelated fields, such as radiobroadcasting, but the new management wanted to focus on providing telephone service to everyone inthe United States Before long, AT&T toned down or sold off most of these peripheral projects Tokeep moving toward universal connectivity for all customers, the company did initiate a few newservices, such as transatlantic calls to London Despite the cost—which was $75 for five minuteswhen it began in 1927—these proved so popular that other European cities were soon added Suchinnovations, along with its privileged monopolistic position, quickly helped AT&T become theworld’s first corporation to generate more than $1 billion in annual revenues

By World War II, Bell was manufacturing 90 percent of all phone equipment in the U.S and

controlling 98 percent of its long-distance market The number of Americans with telephone servicealso rose as AT&T had promised, reaching 50 percent in 1945, 70 percent in 1955, and 90 percent in

1969 But even putting phones into virtually every American home could not keep federal regulatorsfrom looking askance at the favored deal bestowed on AT&T decades earlier They finally tookaction in 1949, filing suit under the Sherman Antitrust Act This led to a 1956 consent decree underwhich AT&T agreed to limit its activities to government work, and the regulated business of thenational phone system

This arrangement continued until the 1960s, when several upstarts received approval to operate anew wireless phone service and initiate microwave-based long distance service AT&T was by thenthe world’s largest company—employing nearly 1 million and claiming more total assets thanGeneral Motors, Exxon, and Mobil combined—and federal officials became increasingly uneasy with

it handling 80 percent of the expanding U.S telecommunications market And so, in 1974, the JusticeDepartment filed the lawsuit that eventually spelled the end of Ma Bell

As the legal proceedings dragged on, AT&T realized it would inevitably be forced to spin off the

22 regional companies through which it provided local phone service Announcing it was setting itsfuture sights on “the business of information handling,” it began preparing new initiatives for the day

it was freed from government control When the end did come in 1982, AT&T was indeed forced todivest itself of the monopolistic local exchanges, but was allowed to retain its long distance,manufacturing, and research and development units The Justice Department agreed to lift its 1956decree in return and on January 1, 1984, the new AT&T was born—along with seven independent

“Baby Bell” operating companies

The break-up, the biggest since Standard Oil was split in 1911, brought fearful protestations frommany Some predicted phone service would be permanently disrupted; others forecasted persistentaggravation for consumers and rapidly rising rates Americans by then were making 800 millionphone calls a day and the anxiety was palpable, but the actual transformation passed as uneventfully

as the equally overhyped Y2K computer meltdown With about $35 billion in assets and 373,000employees, AT&T remained twice as big as its nearest competitor And for the next decade, it usedits resources to become a major supplier of communications services, network equipment andcomputers To further that goal, it announced in 1995 that it was splitting again into three separatecompanies: AT&T, which offered long-distance and other telecommunications services; LucentTechnologies, which made and marketed telephones, network switching equipment, computer chipsand other hardware; and NCR Corp., the computer company it acquired four years earlier

C Michael Armstrong took the reins as chairman and CEO in 1997 and within a year pushed thefirm in yet another direction by purchasing TCI, the nation’s largest cable TV provider He thenunveiled plans to combine AT&T’s various telecom utilities and offer unified cable televisionconnection, local and long-distance phone service, and high-speed Internet access The very next year

he branched out again by forming an alliance with British Telecom to provide wireless phone serviceworldwide

A few additional acquisitions followed, but as the century turned AT&T’s growth still slowed Theformer head of TCI expressed interest in acquiring the corporation that had acquired his, andspeculation arose that Armstrong would be forced to break up his company once more Regardless ofthe eventual outcome, however, AT&T’s role in the development of our modern world remains apivotal one

Number

3

Ford Motor Company

Founders: Henry Ford, Alexander

Malcomson, John W Anderson, C.H.

Bennett, James Couzens, Horace E.

Dodge, John F Dodge, Vernon C.

Fry, John S Gray, Horace H.

Rackham, Albert Strelow, and

Charles J Woodall.

Distinction: Completely transformed

the process of manufacturing.

Primary products: Cars, trucks, auto

finance.

Annual sales: $162.558 billion.

Number of employees: 364,550.

Major competitors: DaimlerChrysler,

General Motors, Toyota.

Chairman: William C Ford Jr.;

President and CEO: Jacques A.

Nasser.

Headquarters: Dearborn, Mich.

Year founded: 1903.

Web site: www.ford.com.

he Ford Motor Company’s primary claim to the corporate hall of fame has always been itsinvention of the assembly line, a remarkably simple yet stunningly effective innovation thatcompletely changed the course of manufacturing In ensuing years, Ford has additionally becomeknown as a global goliath, an amalgamator of some of the best known brands in the auto business,and even a leader in the industrial charge toward the Internet These days, however, it is alsodeveloping a new and somewhat surprising reputation for environmentalism

In an industry never associated with “green” activism, many consider Ford’s drive in this directiondownright astonishing It began in May 2000, when recently installed board chairman William ClayFord Jr.—great-grandson o f founder Henry Ford—conceded for the first time that sport utilityvehicles emit more pollution than cars and can be dangerous to others on the road He pledged tomake these SUVs, which accounted for 20 percent of the company’s sales and most of its profit,cleaner and safer He followed through by promising to boost their fuel efficiency by 25 percent overfive years And he challenged his competitors to do likewise.

The initiatives caught many off guard, but Ford has always been good at assessing public taste andadjusting its output accordingly The Model T, its first success, dominated the embryonic automobilemarket by providing inexpensive and reliable transportation for the earliest drivers When saleslagged, the company developed flashier and more comfortable alternatives And as demandcontinually evolved, so did Ford It introduced new features, became one of the first automakers toexpand overseas, modernized its facilities, opened a finance subsidiary, and even purchasedcomplementary companies to help expand its market share

Today—with a stable of brands that includes Aston Martin, Jaguar, Lincoln, Mercury, Mazda, LandRover, and Volvo, as well as the Ford brand name—the company is the world’s number-one truckmanufacturer and second largest car maker Its Ford Motor Credit division is the top auto financecompany in the United States It has implemented computer programs that are as innovative as itsdevelopment of the assembly line And, according to consumer demand, it is leading its industrytoward greater environmental responsibility

The Ford Motor Company began operation in 1903, when Henry Ford and 11 associates raised

$28,000 to open a tiny manufacturing plant in a Detroit wagon factory Initially the company’s president and chief engineer, Ford had been looking forward to this nearly all his life A few weekslater, he sold his first two-cylinder Model A to a Chicago dentist Over the next 14 months, he sold1,700 more

vice-Born in 1863 in Greenfield Township, Mich., Ford always preferred mechanical pursuits to thefarm duties he was expected to perform with his five younger siblings His fate was sealed at age 13,when he saw a steam engine traveling under its own power Ford jumped off the wagon on which hewas riding with his father to examine it, and decided right there to become an engineer Three yearslater he left for Detroit and a job as an apprentice machinist with the Michigan Car Company Aftertwo years, he accepted a better position as an engineer with the Edison Illuminating Company

During his stint with Edison, Ford began work on a gasoline-powered vehicle In 1896 he

produced his first: the Quadricycle, which had four bicycle-like wheels, a tiller for steering, and twoforward gears In order to focus full-time on advancing his ideas, he left Edison in 1899 to open theDetroit Automobile Company That enterprise failed, as did a second one started two years later Buthis third attempt, which he named after himself and opened with sufficient capital to weather initialdifficulties, proved a winner.

The first few years of Ford Motor were heady ones indeed The firm expanded rapidly, openingFord Motor Company of Canada just one year after its founding By 1907, it was exporting cars toEurope Within a decade, it had plants in Australia, South America, and Japan At the same time, Fordkept tinkering with new designs He used one letter of the alphabet after another to designate them,although many never made it out of his shop One that did was the Model N, a spunky four-cylindervehicle that sold for $500 Since he was almost solely responsible for these early products, it was notsurprising that Ford soon became the company’s president and majority owner

His big breakthrough came in 1909 when he unveiled the Model T Also known as the Tin Lizzie, itreally captured the public’s attention and Ford quickly received an astounding 10,000 orders forthem Demand forced him to open a larger plant in nearby Highland Park, but even that provedinsufficient because of a production process that had individual workers assembling one entire carbefore moving on to another Ford put his engineering skills to work on the problem and in 1913found a way to speed up production by using and improving upon a recent manufacturing innovationcalled the assembly line At first, it had workers walking from one partially built car to the next inorder to install the same component over and over; eventually, he improved the procedure by puttingeverything on conveyor belts so parts and cars would travel directly to workers The system proved

so effective that in a single year Ford was able to produce 168,000 cars—helping the Model Taccount for one-third of the entire American automobile market

Ford was hardly finished, though He bought out his partners and built the world’s largest industrialcomplex He purchased the Lincoln Motor Company and began producing trucks, tractors, and evenairplanes (He even ran for the U.S Senate, but lost.) And when Model T sales lagged due toincreasing competition shortly after the millionth one was produced, Ford developed a faster andmore comfortable version that he named after his first product This new Model A was announced in

1927, and 400,000 orders were placed even before production began Almost 2 million were solduntil the stock market crashed two years later

But even the Great Depression could not stop Ford Ford introduced the powerful V-8 engine andmedium-priced Mercury line which boosted sales…that is until World War II temporarily halted

civilian production During the war, his plants turned out B-24 bombers, jeeps, tanks and relatedmachinery And in 1945, passenger cars again graced his assembly lines Ford died two years later atage 83, however, and did not have long to savor the resurgence.

The system he developed, nonetheless, continued functioning smoothly Innovative models like theThunderbird sports car were regularly unveiled, and shortly after the company went public in 1956 inthe largest stock issue to date it produced its 50millionth vehicle Grandson Henry Ford II took over,with day-to-day responsibilities going to heavy hitters, such as Robert McNamara (who resigned in

1961 to become Secretary of Defense) and Lee Iacocca (who left in 1978 to assume the presidency ofChrysler) A series of down years followed—as they did for all American automakers—thanks toindustry-wide arrogance and increasing Japanese competition But innovative cars, such as the Taurusand Escort, along with the F-series pickup truck, helped bring Ford back By 1986, earnings exceededthose of General Motors for the first time in six decades and it purchased Aston Martin, Jaguar andother companies Just five years later, though, another period of malaise and stagnation led Ford toannounce its largest one-year loss ever Desperate for recovery, the company finally decided thatenough was enough

Beginning in the mid-1990s, as Ford produced its 250-millionth vehicle, the company initiated aseries of changes that were more far-reaching than anything since Henry first cranked up his assemblyline Chief among them was Ford 2000, an ambitious plan to eliminate duplication in operationsworldwide They also included development of several innovative new models, an agreement withNissan to sell Fords in Japan, and the acquisition of Hertz, the world’s largest rental car company.These moves were soon joined by the purchase of Europe’s largest auto maintenance chain, and plans

to launch a similar effort in the United States; the acquisition of Sweden’s AB Volvo, which gaveFord additional luxury lines along with increased European presence; aggressive movement intopreviously under served countries like China, India, and Vietnam; and joint ventures with Microsoftand Priceline.com to build cars specifically for online customers and deliver them through localdealerships

Ford additionally began using computers to cut costs and development times for everything fromcrash simulations to initial car designs (The former, which cost $60,000 apiece in 1985, could be runfor only $10 in 2001; the latter, which once took 12 people 12 weeks to complete, now could beaccomplished in three weeks by a single person.) To further increase computer literacy among itsemployees, Ford also announced a trailblazing program that permits all workers to purchase a homecomputer, color printer and Internet access for just $5 a month

The most striking program of all has been Ford’s newly expressed effort to “merge industrialism

with environmentalism,” as the chairman and family heir told Newsweek in the spring of 2000—but

that is hardly the end of its ongoing transformation Barely a month after that announcement thecompany became one of the first major manufacturers to offer full medical benefits for same-sexpartners of its employees, and one month later said it might begin building cars in Japanese plants run

by its partner Mazda Motor Corporation as soon as 2002

Henry Ford may not have agreed with all these moves But he probably would be pleased that,through them, his company remains firmly atop the industry he helped establish

Number

4

Apple Computer

Founders: Steve Jobs, Steve

Wozniak, and Mike Markkula.

Distinction: Brought computing to the

people.

Primary products: Personal

computers, peripherals, multimedia

tools.

Annual sales: $6.134 billion.

Number of employees: 9,736.

Major competitors: Compaq,

Microsoft, Sun Microsystems.

CEO: Steve Jobs.

Headquarters: Cupertino, Calif.

Year founded: 1976.

Web site: www.apple.com.

nce upon a time, in a tale that’s often told, two young Steves were practicing a kind of 20thcentury alchemy in a tract-house neighborhood in northern California…when lightning struck.Working in a nondescript garage, the pair was twisting wires and chanting incantations in anobscure language called Programming when they came up with a device that would change theworld On April Fools Day of 1976, they borrowed the name of the recording label used by theirfavorite musicians and brought their first Apple Computer into the sunshine

Throughout the land, those awaiting a sign instantly recognized that this device would indeedchange their lives It put an astounding power—previously available only to a select few—directlyinto the fingertips of the masses It did have some limitations and cost almost its weight in gold, but itsparked a revolution nonetheless in which the two young Steves were revered as gods

From the start, an eager flock willingly offered financial and creative assistance and the Apple

flourished Many of those who served it realized riches far beyond their wildest dreams Many othersclamored to join the crusade Disciples built even newer devices that captivated even more fanaticalfollowers The two young Steves were on top of the world.

Then, everything collapsed Another messiah offered a compelling alternative Supporters split intoopposing camps Visionary leadership disappeared Both nolonger-young Steves left their positions

of influence, replaced by a series of pretenders who tried in vain to recapture the lightning.Reluctantly and otherwise, followers turned away from the device they once worshipped

But just when all seemed lost, those still struggling with the once-mighty empire had a revelation.They met with one of the two now-middle-aged Steves and pleaded with him to return To mosteveryone’s surprise, he did—albeit cautiously at first And, in virtually no time at all, he showed that

he still had the touch

When Steven Paul Jobs initially moved back to his native northern California in 1975, the old college dropout was casting about for something interesting to do following his recentpilgrimages to India and a communal farm in Oregon Working as a video-game programmer forAtari, he got wind of a hobbyist group in Menlo Park called the Homebrew Computer Club He beganattending evening gatherings, and was there when a member showed up with his spanking new Altairpersonal computer The primitive contraption had been built from a kit ordered through anAlbuquerque mail-order company, and to folks like the Homebrewers it was a very big deal Most inattendance saw potential Jobs envisioned a business plan

20-year-Lacking the technical skills needed to make his vision a reality, Jobs teamed up with another haired Homebrewer named Steve Wozniak “Woz,” as this 25year-old son of a Lockheed missileengineer was known, had already written programming language and designed a circuit board He hadalso parlayed his passion for electronics into a job at Silicon Valley pioneer Hewlett-Packard, but herecognized the possibilities in what Jobs envisioned To raise the funds necessary to proceed, he soldoff his programmable calculator while Jobs parted with his Volkswagen van The pair then got down

long-to business in the garage of Jobs’ parents’ home in Los Allong-tos

The first product of their collaboration was the Apple I, a basic circuit board they sold through alocal retailer for $500 Ready to move their business to the next level but recognizing theirlimitations, they convinced 34-year-old Mike Markkula Markkula was a recently retired electricalengineer from Intel who became a multimillionaire on its initial public offering With Wozniakfocused on technical matters, Jobs and Markkula gathered cash and loan commitments, leased abuilding in Cupertino, and formally incorporated on the third day of 1977

Their first honest-to-goodness computer, the Apple II, was introduced some 15 months later Builtalmost singlehandedly by the resourceful Woz, it debuted in 1978 at the inaugural West CoastComputer Faire Observers were instantly smitten with this powerful new self-contained gadget thatattractively incorporated screen, keyboard, power source, and graphic capabilities Annual salesquickly reached $300 million, landing the company on the Fortune 500 and attracting the attention ofthe media (along with would-be competitors such as Tandy and Commodore) Hordes of earlyadopters made a beeline for the technology By 1980, sales of personal computers topped $1 billion.

The scruffy gang at Apple had captured more than 15 percent of the rapidly expanding action whenIBM belatedly realized it could no longer ignore these upstarts And when the king of the mainframesdid jump into the desktop marketplace, its traditional suit-and-tie image (not to mention its longelectronic heritage) proved compelling to major businesses Apple’s once-insatiable appeal—whichalways relied heavily on hobbyists, educators, and artistic types—never really crossed into the world

of big business—suddenly stopped growing In fact, its market share began a precipitous decline thatwould increasingly prove difficult to stem

Jobs and Apple were convinced that they would prevail They stubbornly cultivated ananticorporate image that further accentuated their differences with the new sales leader, which had theultimate and unintended effect of driving the critical corporate market even further from their door Atthe same time, they consistently widened their technological lead

The company’s next ground-breaking innovation began forming shortly after Jobs toured Xerox’sPalo Alto Research Center (or PARC) in 1979 Xerox produced a very early computer called theAlto, which was the first to use both a mouse and a graphical interface

He eventually incorporated the revolutionary graphical interface developed (but never used) by thelegendary PARC lab into Apple’s third big introduction— the Lisa computer (named after his ownyoung daughter) The Lisa was the first commercial computer to put both ideas together With it, hewas drawing the definitive line in the sand between his nonconfor mist Apple corps and itsbuttoneddown rival But while Lisa was a technological marvel and a brilliant estheticaccomplishment, its $10,000 price tag proved too steep for consumers IBM’s newest PCs, on theother hand, flew off shelves

Apple pressed on A band of its top engineers had been working on a totally different computercalled Macintosh while Jobs was engrossed with the Lisa It was based on a remarkable click-and-drag technology that even a small child could learn and use In a move that forever split Apple intobitter factions, Jobs unilaterally appropriated the project as his own after he was removed from the

failing Lisa endeavor He drove out those uncomfortable with his lead, relocated the developmentteam into its own building, raised a skull-and-crossbones flag, and took over “the computer for therest of us.”

Its introductory commercial, one of the most famous advertisements ever made, was designed todefinitively drive the computer-buying public into either Apple or IBM camps And it’s messageremains as obvious today as it did on that 1984 Super Bowl Sunday, when the gritty vision of amonotheistic future—a blatant warning against a Big Blue-dominated computer world—was bashed

by a freedom-loving young woman with a sledge hammer The intense ode to George Orwell,directed by Ridley “Blade Runner” Scott, cost $1 million to make, and aired one time It left morethan a few company executives nervous and football fans puzzled, but it was seen in almost half of allAmerican homes By the the next morning when Jobs officially unveiled his new 20-pound, $2,495baby, the public was primed and ready Apple says 72,000 Macs were sold in 100 days Within ayear, company sales hit $2 billion This changed everything in computer operating systems, shiftingoperation from hard-to-remember DOS commands to the direct manipulation of windows and icons

The decades since the advent of the Mac have been up and down for Apple, to say the least TheMacintosh roll-out would be its last high point for more than a decade Woz had moved on practicallyfrom the moment his offspring took off He snaged an engineering degree, staged rock concerts, andtaught kids about computers Jobs was unceremoniously ousted in 1985 by John Sculley, a formerPepsi executive brought into Apple specifically to tighten up the company’s image on Wall Street.Just 30 and quite wealthy, Jobs didn’t wait long before starting another iconoclastic computercompany called NeXT He also bought Pixar Animation Studios, which would go on to produce the

acclaimed A Bug’s Life and Toy Story movies.

Apple continued to falter IBM couldn’t hold its advantage in the desktop business as lower-priced

“clones” flooded the marketplace However, the technological conventions it established—althoughdecidedly inferior to Apple’s—became the undisputed industry standard More than 95 of every 100customers began choosing an “IBM-compatible” computer, leaving Apple in the dust Sculley waseventually replaced by Michael Spindler, who in turn was replaced by Gil Amelio And then, in July

1997, Amelio was ousted and the prodigal Steve was welcomed back as “interim” CEO

One day after his return—for which he was initially rewarded with just one share of stock and $1 ayear in salary—Jobs began work on a device that would once again change the world: the iMac.Introduction of this striking translucent computer one year later reaffirmed Apple as the leader on thetechnological curve, and jumpstarted its long languishing sales as well as its depressed stock price

Several record quarters later, in January 2000, the board rewarded his efforts with a Gulfstream V jetand $10 million in stock options In turn, he dropped the “interim” from his title.

Can lightning strike twice in the corporate world? Who knows But as Jobs continues rebuildinghis once and future empire, he demonstrates with every move that no ending can be written just yet forthis oft-told tale

Number

5

McDonald’s Corporation

Founders: Richard and Maurice

McDonald and Ray Kroc.

Distinction: Initiated, and still leads,

the global fast-food revolution.

Primary products: Burgers, chicken

nuggets, fries, and shakes.

Annual sales: $35.9 billion

worldwide.

Number of employees: 284,000 in the

United States alone.

Major competitors: Burger King,

Wendy’s, Taco Bell, Pizza Hut.

Chairman and CEO: Jack Greenberg.

Headquarters: Oak Brook, Ill.

Year founded: 1955.

Web site: www.mcdonalds.com.

ost Americans can’t remember when cigarette commercials were commonplace on theirtelevisions, just as they can’t recall when fast-food restaurants were not in their neighborhoods.Surprisingly, there’s a connection between these two emerging and descending icons Theconnection stems from a business principle that was devoutly practiced by a man who is almostsinglehandedly responsible for the proliferation of these casual eateries in every corner of the globe

Some four decades ago, when broadcast ads for tobacco products were far more prevalent thanquickie hamburger outlets, many companies were hoping for the chance to install cigarette vendingmachines in their lobbies In those days, such devices were enthusiastically welcomed as a customerconvenience in any establishment—in the fanciest steakhouse to the most casual diner They alsoprovided a healthy profit for the owner, as well as the vending company Why shouldn’t they be

allowed inside fast-food upstarts as well?

The head of the class already was a newfangled burger joint called McDonald’s It was spreadingrapidly across the United States, and the most ambitious vendors were hot to get their feet in the door.But even if they managed to reach an official at the firm, they always were immediately rebuffed.Company chairman Ray Kroc, it seemed, did not want anyone lingering in his restaurants for a smokeafter they had finished their meals The idea behind McDonald’s, then as now, was to quickly serveand feed customers and then get them on their way so the booths could be filled with those next inline

Bucking tradition was typical for the iconoclastic Kroc, whose empire is now as ubiquitous as theno-smoking sections in restaurants across the land While the company’s growth has slowed of late,more than 15 years after his death it oversees 25,000 outlets in 119 countries—and, with them,controls almost half of the industry it originated McDonald’s does this, observers agree, bycontinually adhering to the underlying philosophy that its founder championed from the outset: buildsimple, casual and easy-toidentify restaurants where the service is friendly, the prices are low, andthere’s no waiting for tables while someone finishes a cigarette

The rise of McDonald’s, and of Raymond Albert Kroc, is proof that worldchanging entrepreneurialdrive knows no boundaries Kroc always had aspirations to reach the top of his chosen field, but hedidn’t realize true success until he reached middle age In his 20s, after a brief stint as a Red Crossambulance driver, he was scratching out a living by selling paper cups during the day and playingpiano for a radio station at night One of his biggest cup customers was Earl Prince, who invented afive-spindled milkshake maker that he called the Multimixer Impressed by this revolutionary device,Kroc invested everything he had to become its exclusive distributor He dropped the musical gig aswell, and over the next 17 years tirelessly traveled around the country to peddle the machine

Despite a host of physical ailments that included diabetes, arthritis, the loss of his gall bladder andmost of his thyroid gland, Kroc was effective on the road He saw greener pastures ahead in 1954when he met two brothers from California named Richard and Maurice McDonald The pair owned arestaurant in San Bernardino that was so busy it needed eight Multimixers to keep up Kroc, then 52,decided to see what kind of establishment could generate such demand He checked the place out andimmediately decided it was time for a career change

The McDonalds’ restaurant was a hamburger stand with a twist Ever since the automobile firstappeared, eateries catering to the motoring public began surfacing—particularly in California Thefirst was A&W Root Beer, which opened in Sacramento in the 1920s It was followed by dozens of

these so-called “drive-ins,” where “carhops” would bound to the parking lots and serve customerswho never left their vehicles The McDonald brothers joined the fray in 1940, and within a dozenyears their burger-and-barbecue joint was a booming teenage hangout In 1948, though, the pairdecided to make the place stand out by initiating some significant changes They eliminated theircarhops, dropped their prices, and opened two windows where customers would place ordersthemselves from a newly limited menu The main attraction, a 15-cent hamburger, was always servedthe same way: with mustard, ketchup, onions, and two pickle slices.

This unique approach attracted even more business, and six years later the McDonalds werecalling on Kroc to supply them with multiple Multimixers Kroc saw national possibilities in therestaurant’s design and quickly made a deal with the brothers to become their franchising agent Thenext year, he opened his first restaurant in Des Plaines, Illinois (This building is now a museumhousing corporate artifacts, including a Multimixer.) In 1961, when he was running 228 outlets acrossthe U.S., Kroc bought out the brothers for $2.7 million He later told the media he needed theMcDonald’s name because a “Kroc burger” just didn’t have the same ring He also said he hoped thatone day he’d operate 1,000 such eateries

Now in complete control, Kroc stuck with his proven principles “If you’ve got time to lean,you’ve got time to clean” became one of his favorite sayings, and he regularly followed through on itssentiments by personally picking up a broom to sweep floors and parking lots “The definition ofsalesmanship is the gentle art of letting the customer have it your way” was another, which heregularly offered as an explanation of his business philosophy The actions behind these and similaraphorisms helped McDonald’s sell more than 1 billion hamburgers by 1963, and the milestone wastrumpeted on neon signs out front That same year Kroc opened his 500th outlet and introduced theenduring Ronald McDonald clown—initially portrayed by soon-to-be weathercaster Willard Scott—

in a series of TV commercials that ultimately became as well-known as the chain itself

In 1965, McDonald’s went public (Two decades later, it was named a component of the company Dow Jones Industrial Average; stock valued at $2,500 in that initial public offering would

30-be worth about $3 million today.) Kroc tried to initiate several other restaurant concepts in thefollowing years, but none caught on McDonald’s continued to flourish, though, and Kroc’s dream of1,000 locations was realized in 1968 Three years later, his company made its initial foray outsidethe U.S by expanding into Europe and Australia When Kroc died in 1984 it had more than 7,500outlets worldwide

McDonald’s continues to break new ground, and customers eagerly follow even in places that

many would consider unlikely In 1994, for instance, some 15,000 lined up on opening day at a newMcDonald’s in Kuwait City Today, the overseas network accounts for nearly 60 percent of thecompany’s total sales and profits Its 12,500 facilities in the U.S., bolstered in recent years by theaddition of mini-restaurants within non-traditional venues like Wal-Mart and Amoco service stations,now account for some 40 percent of this country’s fast-food business.

Operations on the domestic front have not been proceeding without problems, however Acombination of market saturation and intensifying competition—from other burger chains as well asthose pushing pizza, Mexican food and fried chicken— limited new U.S restaurant openings to just

92 in 1998 Changing tastes and perhaps even some backlash against its widespread reach alsocontributed to flattening sales But McDonald’s continues to fight back with highly publicizedpromotions featuring children’s toys, often tied to the day’s biggest movies Highly focused TV ads,promoting such familiar items as the Big Mac along with new products like the McFlurrie dessert,also are deployed At the same time, recent investments in small pizza and Mexican chains providethe company with new growth potential And officials predict they could still open as many as 10,000new McDonald’s in emerging global markets in the years ahead

Just as the company he founded is more than a simple restaurant chain, Ray Kroc was more thanjust a businessman Believing it was critical to give back to the communities in which he was located,Kroc started McDonald’s on a philanthropic path in 1974—when such actions were few and farbetween—by opening the first Ronald McDonald House in Philadelphia Designed to providefamilies of critically ill children with a comfortable place to stay, there are now 200 of theseworldwide following a 1999 dedication in Budapest In addition, the McDonald’s CharitableFoundation and Kids Charities are among its corporate arms responsible for some $20 million inannual donations

Two year’s after Kroc’s death, his widow Joan continued these efforts by founding the RonaldMcDonald House Charities Since then she has personally contributed more than $100 million to thatcause, in addition to others focusing on everything from the homeless to nuclear disarmament Inrecent years she also has quietly given $15 million to flood victims in North Dakota, along with $80million to the Salvation Army for construction of a community center in San Diego

McDonald’s hires thousands of older and disabled workers, and has implemented programs to helpadvance their careers along with those of women and minority employees After years of criticismaimed at the litter that is generated by its products, the company also has been working with theEnvironmental Defense Fund to reduce solid waste generation by, among other things, switching from

polystyrene foam to paper-based packaging.

Additionally, since 1994, some 8,500 McDonald’s have voluntarily become totally smoke-freeenvironments And, of course, they still don’t have cigarette vending machines in their lobbies

Number

6

America Online Inc.

Founder: Steven M Case.

Distinction: Opened cyberspace to

the masses worldwide.

Primary products: Internet access,

online content and related software.

Annual sales: $6.886 billion.

Web site: www.aol.com.

hose who cannot accept the future as envisioned by Steve Case have never been shy aboutrejecting the man and his ideas Such behavior dates back to at least 1980, when the recent collegegraduate boldly proclaimed that cable television would be the one-stop information medium of thefuture He was roundly rejected by every firm in the business to which he sent a resume, includingthe new HBO channel created by a rising Time Inc executive named Gerald Levin Case, in fact,could not get his foot in the door until he refined his thoughts on technology and consumers duringstints outside the industry at Procter & Gamble and Pizza Hut

Armed with a new understanding of his own goals and the electronic tools becoming available toachieve them, Case resumed his quest and ignored the naysayers He refashioned an online videogame company into one of the first interactive computer networks, although most observers doubted itwould fly He would set up shop in a nondescript suburb near Washington, D.C., and drew derisionfrom the high-tech digerati on both coasts He went public in a triumphant IPO that led to seven two-

for-one stock splits in seven years, but financial people were always skeptical of his abilities Hetook on major competitors as his ideas gained validity, and observers consistently predicted hisdemise.

Today, of course, Case’s America Online got the last laugh With more than 23 million subscribers,

it is the world’s top provider of online services by a huge margin It owns its biggest former rival, apopular Web portal and the omnipresent browser software developed by a cyber-pioneer, and adiverse array of other sites and products Its 15,000 chat rooms, ubiquitous e-mail, and InstantMessenger utilities, and world-class sources of information and news are now offered in sevenlanguages, available in 15 countries, and delivered over telephones and televisions in addition tocomputers

And, if that weren’t enough, at the beginning of the millenium Case announced an historic $172billion merger with entertainment goliath Time Warner that promised to make AOL the world’sundisputed media leader Among other things, it also elevated Case to the head of HBO—the cablechannel that rejected him 20 years earlier—and placed him above its former head on the neworganization chart

The first online services began appearing in Europe a little more than a dozen years after SteveCase was born in Honolulu At the same time he and brother Dan were forming “Case Enterprises”which sold everything from seeds to personalized Christmas cards with help from a neighborhoodpaper route The beginnings of an interactive world were forming at the hands of government-ownedtelephone agencies striving to promote local computer networks A few daring newspaper publishersaround the globe soon followed with early electronic editions accessible through televisionterminals This development didn’t escape Case’s attention until years later when, as a student atWilliams College, he became interested in the fledgling cable TV industry Case saw a synergy, asthe potential convergence would come to be called, and decided to make it his life’s work

In a surprisingly prescient projection that has since been reproduced in numerous publications,Case predicted in his 1980 resume that “innovations in telecommunications (especially two-waycable systems) will result in our television sets (big screen, of course!) becoming an information line,newspaper, school, computer, referendum machine, and catalog.” Potential employers like HBOrefused to bite, so he put his marketing skills to work at a couple of major consumer-productscompanies while learning all he could about both consumers and products When he bought a Kayprocomputer in 1982 and discovered how much farther this technology could advance his ideas, heswitched gears and accepted the chairman’s position at a Control Video, a debt-ridden start-up that

planned to help computer users communicate with each other After several shakeouts Control Videowas reconstructed in 1985 as Quantum Computer Services, and within a half-dozen years had secureddeals to provide general online services for machines made by Commodore, Tandy, Apple and IBM.

In October 1991, with 156,549 members, its name was changed to America Online

Growth was exponential from the start as the personal computer became increasinglycommonplace Five months after its revamping, AOL took advantage of the climate and went public

on the NASDAQ market, raising an incredible $66 million The good times were hardly over, ofcourse: Stock splits over the next seven years made an initial $10,000 investment worthapproximately $6.8 million Case, who owns or has options on nearly 31 million shares, saw thevalue of his holdings increase to $1.8 billion by early 2000 Despite competition from heavy earlyhitters such as CompuServe, owned by H&R Block, and Prodig y, owned by Sears and IBM, AmericaOnline continued to pick up steam By the end of 1993 it exceeded 500,000 members and tallied $40million in revenues But the real boom—as well as the real challenges—were yet to begin

Due in large measure to Case’s fanatical insistence on simplicity and consistency— and thecomputer savvy public’s growing passion for chatting online, membership doubled during the nexteight months, and then doubled again in a little over eight more By the time AOL’s ranks swelled to4.5 million at the close of 1995, its reach was felt well beyond the so-called early adopters whoinitially embraced the online world After it was recognized as “Best Consumer Online Service” by

publications like PC Magazine and Family PC, growth came even more rapidly AOL capitalized on

it the following year by inaugurating its first efforts outside the U.S., adding service in Canada, theU.K., Japan, and France A million new members kept joining every five months, and AOL movedfrom NASDAQ to the New York Stock Exchange

Naturally, the ride was not destined to remain so smooth AOL prospered by providing consumerswith unusually safe and incredibly easy access to the brave new world of cyberspace, as well asoriginal “content”—chat rooms, e-mail, news, stock quotes, shopping and the like But with totalonline participation reaching 13 million in 1996, the stakes increased and so did competition on allfronts Adversaries from CompuServe to newcomers on the upstart World Wide Web battled forcyber-travelers with equally useful and attractive features, while access providers shifted frompricing by the online minute to unlimited flat-rate connections to attract newcomers AOL stretched itsresources to the limits to keep up Resultant technical problems surfaced regularly, as did charges ofunderhanded marketing and persistent overbilling Investment bankers also convinced Case to easeoff in deference to his notable lack of people skills, and he reluctantly handed over the CEO reins to a

confidante named Jim Kimsey.

Compounded by personal problems that led to the breakup of Case’s 11-year marriage, AOL’swalls seemed to be crumbling Customers, though, refused to give up on it The service kept addingmore and better features, and membership kept climbing—reaching 8 million in January 1997 and 10million the following November Three months later, AOL announced it was buying rivalCompuServe In less than a year it also purchased Netscape, made a critical e-commerce alliancewith Sun Microsystems, and saw its subscriber base exceed 14 million Before 1998 was over, AOLalso was added to the S&P 500 Index

Suddenly, the critics stopped sniping It was obvious, even to the most skeptical, that Case and hisideas had finally become accepted

America Online has thrived in the evolving online world mainly because the calm, confident Casehas always kept his focus on the customer Since retaking the CEO role, he has demonstrated anability to react more effectively than his competitors to the industry’s constant changes With AOLtraveling in a positive direction in 1999, he shifted a long-held strategy and began relying more onoutside sources to provide members with unique content This was embodied by a deal he made withOxygen Media, the firm run by a high-profile group that includes Oprah Winfrey and Nickelodeoncreator Geraldine Layborne, to develop a new women’s site It additionally was reflected in an

agreement he inked with popular online employment Web site Monster.com, making it the exclusive

poster of job listings on AOL

The Netscape purchase was also completed in 1999, as was the acquisition of Internet chatcompany Mirabilis—giving AOL control of three of the most-visited destinations on the wide open

Web (NetCenter, ICQ and AOL.com) Its hot Instant Messenger utility surpassed 45 million users, and

it launched service in Hong Kong as well as a Portuguese-language site for Venezuela and Brazil.Finally, as the year came to a close, it announced a deal with Wal-Mart to provide Internet access tocustomers of the giant retailer

But the biggest news of all came on January 10, 2000, when Case announced his historic merger.His dreams would come true later the year in Decmember 2000, when U.S antitrust authorities gaveAOL the okay to buy Time Warner They gave a number of conditions, such as having Time Warneropen up its cable lines to competing cable providers, ensuring consumers have a wide choice ofcontent The resultant AOL Time Warner—worth about $290 billion—would produce books, music,movies, and other products for distribution over broadcast networks, cable TV, theaters, and theInternet Offices would be relocated from AOL’s in Dulles, Va., to those of Time Warner in New