Yankee, We Want You. Yankee, Go Home
It seemed like a fantastic opportunity for the entrepreneurial Henri Poole. He had co-founded and run Vivid Studios, a San Francisco-based Web consulting shop, before selling it in 1998 to Platinum Technology for $13 million. Then, after taking an 18-month break to travel and spend time with his newborn, Poole was approached by a group of European venture capitalists about becoming CEO of a French software company. In May, 2000, after a quick mating dance, Poole signed on to lead Paris-based MandrakeSoft, a two-year-old seller of Linux software.
Though Poole, then 36, was primed for a challenge, the Mandrake experience was tougher than he anticipated. Less than a year after joining MandrakeSoft, he departed after a split with the company's French founders over strategy. Poole had been hired to transform the company from a small Linux publisher into "a major software player," says Edward Walsh, former vice-president of communications, who resigned in July. In the end, the founders got cold feet about Poole's plan to turn the startup into a technology services provider.
"My vision was more aggressive than some of the founders and investors were comfortable with," Poole says. "They wanted the benefits at the end of the rainbow, but didn't like my plan for getting there." (MandrakeSoft executives wouldn't comment, saying the company is in the midst of a $3.7 million stock offering on the Paris Euronext Marché Libre, scheduled to close July 27.)
Poole's story highlights the difficulties many U.S. executives face when they take on the job of managing technology companies under Europe's more confining business rules. During the Internet boom, says James Hand, manager of the Global Technology Fund at London's Investec Asset Management, experienced American execs were in hot demand across Europe. But when the bubble burst and the Old Economy reasserted itself, old habits returned. As Hand puts it: "People are content to stay with the less dynamic European way, taking longer to do things."
Case in point: former Hewlett-Packard exec Antonio Perez, who was hired in the fall of 2000 to head French smart-card giant Gemplus. Perez is now under fire from unions for plans to lay off workers and close factories. His travails illustrate Europeans' limited tolerance for the tougher management style many American executives practice.
Then there's former Microsoft exec James Kinsella, hired last year to salvage Dutch Internet service provider World Online after its founder left amid a stock scandal. In January, Kinsella sold the company to Italian ISP Tiscali and was named its provisional CEO. Less than a month later, Kinsella was on the street, thanks to strategy and culture clashes with Tiscali Chairman Renato Soru.
The divergence between New Economy management and Old World thinking helped bring down Poole. At first, he was unconcerned about the differences in business culture and philosophy he found at MandrakeSoft. After all, he'd been recruited precisely because he was an outsider. "I had a more democratic management style," Poole says. "I also understood how to put together an agenda and stick to it." MandrakeSoft co-founder Jacques Le Marois, who has now stepped into the CEO slot, had sought out Poole -- not just for his skills, but also because he was an American. Having an American CEO would lend the company a certain cachet, the thinking went.
Also, Poole believed technology transcends borders. Linux is at the heart of a global movement called Open Source, whose proponents believe software should be free and available in its original form to anybody who wants to improve it. Millions of people around the world now use Linux, and hundreds of thousands tinker with it, sharing their improvements with the rest of the community. When MandrakeSoft's investors, who have invested $18 million in the company, approached Poole about the CEO job, he was intrigued by the idea of collaborative software development and developing intellectual property across borders. He also knew that some of MandrakeSoft's U.S. rivals, such as Red Hat and VA Linux, had been among the hottest stock offerings of 1999.
Despite his enthusiasm, Poole faced some immediate hurdles. The first was language. He speaks little French, and even though MandrakeSoft's managers and investors had agreed to conduct the company's business in English, the CEO couldn't communicate fluently with every employee. To win them over and inject a note of fun, he sang to the staff in French at a company meeting. Even so, says Walsh, who spoke to BusinessWeek Online before the start of MandrakeSoft's share offering: "To get along with a bunch of people who program all day, you have to speak their language." Before long, Walsh adds, "There began to be discontentment and it bubbled up to the founders."
Poole also had to get used to the Continent's different business rules: Employee stock options are harder to hand out. It's much tougher to fire people in France than in rough-and-tumble Silicon Valley. French bureaucracy and regulations are truly daunting. Another factor: The government taxes net worth, including illiquid stock holdings, unless a shareholder is on the management team -- something that often sees inexperienced entrepreneurs remain in executive positions for which they might not be suited.
There were also surprising cultural differences: Poole discovered that French employees cared deeply about titles and perks -- more than the Americans with whom he was accustomed to working -- yet he thought many lacked "the same results-oriented work ethic."
A GULF GROWS WIDER.
Poole set out to professionalize MandrakeSoft and sharpen its operations. To whip the company's finances into shape, he brought in an old friend, Jon Zimman, as acting CFO. Zimman was shocked to discover the startup had no budget and few controls. Mandrake's top-ranked financial manager was more of an accountant than a strategist. Writing a three-year business plan took months of effort and required placing big, risky bets.
That's when visions began to diverge. MandrakeSoft, with expected 2001 revenues of $3.7 million, was already a big seller of Linux. In fact, it sold more units through U.S. retail channels in 2000 than any other company, according to researcher PC Data.
Trouble was, those boxes didn't carry big margins, and Poole felt the company needed to find a more profitable niche for the long haul. His plan: Offer a suite of technical support services to MandrakeSoft's customers, including offering non-Linux products. For the founders, who had a strong emotional attachment to Linux, that was too much. "His business plan was really aggressive," says Walsh. "People here are just more conservative."
Poole concedes the point but argues that his plan was necessary to produce the return on investment that MandrakeSoft's backers were seeking. He was thus surprised when Le Marois approached him one day in April to say he was concerned about Poole's strategy -- especially since Le Marois had helped develop it. "It turned out that we weren't on the same page, but I hadn't seen it coming," Poole says. He speculates that the miscommunication may have derived from cultural factors. And he admits that he may have pushed people harder than they expected. "We were a young company with a lot of work to do, and we were really turning up the heat," he says. "Unfortunately, when you do that, some people can feel really threatened."
Like several other American imports, Poole left the company. He remains intrigued by Open Source and is looking for another gig in that area. For its part, MandrakeSoft says it hopes to continue working with Poole on a consulting basis. "He brought in a lot of vision and dynamism," says Walsh. Now, with its IPO in process, MandrakeSoft will likely have greater resources available to invest in its own growth.
Unfortunately for Poole, who gave up his stock options when he left, that windfall comes too late. But he now understands better than ever before how high the barriers of global business really are.
By Andy Reinhardt in Paris