business

How At&T Thrives As Other Giants Falter

The old phone company is gone. Today, American Telephone & Telegraph Co. is widely perceived as the nation's--perhaps even the world's--most successful high-technology corporation. It has held on to most of the long-distance telephone market. Meanwhile, AT&T is moving forcefully into overseas markets, including China. Through its NCR unit, it is challenging IBM in large computers. In addition, McCaw Cellular Communications Inc. will now make it

a powerhouse in wireless communications.

There's a lesson in all this: By addressing their problems the right way, even very large companies can successfully adapt to fast-emerging markets. They don't have to suffer the crippling self-doubt and financial pain that IBM, Eastman Kodak, and General Motors are going through, as they scramble to escape the past and catch up with competitors. "Giant" doesn't have to mean slow-moving, rudderless, or overly bureaucratic. Or unrewarding: In the past year, AT&T shares have jumped 39%, to 595/8.

But what exactly is this "right way?" How does a $65 billion company such as AT&T thrive in the face of accelerating change? After all, this was America's premier monopoly not so very long ago. It measured product cycles in terms of decades--not the months that one of today's personal computers lasts before it becomes outmoded.

BOLD VISION. In AT&T's case, the right way has largely been Chairman and Chief Executive Robert E. Allen's way. Although a well-honed product of the old AT&T, Allen has moved decisively to prepare his company for the fast-moving, all-digital, multimedia, anytime-anywhere communications market he wants to conquer. In stark contrast with Louis V. Gerstner Jr., IBM's new chief executive, Allen has no problem articulating a strong vision. AT&T intends to build a global network and pump it full of every kind of traffic: voice, data, video, entertainment--you name it.

Granted, AT&T has seen dark days. Divestiture forced it to slash tens of thousands from its payroll. And its repeated attempts to crack the computer business--with its own gear and through stakes in Sun Microsystems Inc. and Olivetti--cost it billions but produced little. Today, the divestiture order seems fortuitous, leaving AT&T trim and focused years before other large corporations. And AT&T can count on strong profits from its long-distance business, an advantage most companies can't match.

Yet Allen must be credited with acting boldly. In 1989, he reorganized AT&T into a group of some 20 independent business units. In the process, says James Moore, the president of GeoPartners Research Inc., a management consultant to AT&T, the company was forced to think harder than ever about its future. And when that move raised the classic management dilemma of decentralization vs. the synergies of integration, Allen used his personal leadership to strike a balance. He set up and now oversees a half-dozen cross-unit teams, which meet regularly to address technical and marketing issues in such emerging fields as multimedia and visual communications.

Allen slyly attributes his success as an inside reformer to a "liberal arts education [at Wabash College] and my own personal makeup." But he recognized the pressing need for outsiders. "I know I don't have all the answers," he says. So AT&T has not only hired top executives from low-tech companies such as Square D Co. and Sea-Land Service Inc. but has also acquired entire companies: NCR and now probably McCaw.

It may be too early to see what AT&T will gain from those two megadeals and the many smaller ones it has done. But Allen must be given credit for his resolve. "He has put his money where his vision is," says Peter Bernstein, senior analyst at Probe Research Inc., a Cedar Knolls (N.J.) consultant. And he has had the courage to risk losing a few. That's a lesson more companies might do well to learn.

Information Processing Editor Verity reports on technology from New York.

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