The Oracle of Oracle

The Story of Volatile CEO Larry Ellison and the Strategies Behind His Company’s Phenomenal Success

Author: Florence M. Stone
Pub Date: 2007
Your Price: $24.95
ISBN: 0814406394
Format: Hardcover

Chapter 9: An Extraordinary Man

Ellison as manager, leader, visionary

The press and public have become so obsessed with Larry Ellison's personality that they ignore three conclusions I have reached after considerable research:

Larry Ellison is an excellent manager.

Larry Ellison is an excellent leader.

Larry Ellison is a visionary able to anticipate the demands of his customers in the future and make them a reality.

Let me add a fourth, which is really an addendum to this chapter yet could easily get lost in talk about Ellison's commitment to his company, his mansions, and MiG jets, let alone his management ability: Ellison is also a philanthropist who has endowed an institution to provide vaccines to combat infectious diseases in the Third World. Called the Ellison Medical Foundation, it also funds research into finding cures for diseases of the elderly. He is also owner of 70 percent of a research firm called Quark Biotech, Inc. with more than 100 PhDs. The firm isn't just commercializing new kinds of gene diagnosticsóit is also seeking a cure for cancer. I only recently learned about these two Ellison initiatives. Known for his effort in self-promotion andómore soópromotion of Oracle Corp., Ellison hasn't committed any PR to the foundation bearing his name. Nor does he say much about Quark Biotech, Inc., the Israeli start-up in which he has majority ownership.

What Makes a Good Manager, Leader, and Visionary

To be sure that we are on the same page, let me share my definitions of a good manager, good leader, and good visionary.

A hands-on manager will work with employees to get the work done. A participative manager will meet with employees to determine the tactics they will use to achieve the group's goals. But a manager doesn't have to be participative in style to be a good manager. Autocrats make good managers as well. Indeed, the best managers adapt their style to meet the needs of their employeesóit's called situational management. However they supervise, good managers know how to delegate work to others, which, most important, means they know those factors that motivate and use that knowledge to get the highest productivity from workers. Good managers are very focused on the work before them.

Leaders, on the other hand, have a broader perspective. Their focus is on the mission to be achieved. Toward it, they have the ability to influence others to follow them. The secret of good leadership is skill in achieving followership, which means that charisma, though not required, doesn't hurt. Good leaders are decisive, addressing problems as they crop up. In addition, they determine the corporate culture and the values or beliefs that are to be practiced within the organization.

A leader sets the vision, which is different from being visionary. A vision is a clear, consistent course reading for the organizationóthe purpose for the organization. In sharing that vision or shared wish for the future of the organization, the leader hopes to inspire and motivate all to work toward its achievement. In hard times or times of change, as we are experiencing now, that vision can be a potent weapon against fearóto use another seafarer's analogy, like a rudder, it keeps the corporate ship and its crew on course.

What makes a visionary? In the business world, it's someone who predicts a major direction in which an industry is likely to move. In the case of Larry Ellison, while the tactics have changed, the prediction hasn't. If you separate the ramblings, self-absorbed remarks, and highly entertaining ad libs, his vision for the future is pretty much the same: software applications shared over a network, and hardware designed and priced to serve those needs.

Larry Ellison, Excellent Manager

When you write a book about an executive, you begin with the basics, such as the individual's place of birth, schooling, first business experiences, and so forth. (In fact, those details of Ellison's life are covered in Chapter 1.) Although your focus is on the business side, you begin to learn much more about your subject. So it has been with my study of Larry Ellison. Early on, as I first began to prepare for this book, I knew only about Ellison's pursuit of the good life. Yacht racer, jet pilot, epicureóI had heard him called the "playboy of the wired world." Yet, as I have come to realize, there is a serious side to Ellisonóhe is, after all, running one of the world's largest software companies and, rightfully, chasing Bill Gates.

Think about it. Microsoft Corp. became a public source of contention in the mid-1990s when Oracle offered the network computer to the marketplace; this was Oracle's way to directly compete with Bill Gates's lordship of the Internet. For the same reason, expect to hear in the future that Ellison has taken on the minions of IBM Corp., as well as Gates, since they now represent a threat to his company in the applications software market. Maybe even Hasso Plattner, CEO of German software developer SAP, will come in for some of Ellison's verbal abuse during a press conference. Already a visit to www.oracle.com reveals documents that question IBM's capability to provide Web applications and SAP's talent in hosting sites.

Over the years, Ellison may have made the wrong decision or taken the wrong turn, personally or professionallyówho hasn't? Yet throughout his life, since he founded the company that today bears the name Oracle, he has been fully committed to its success.

There is an Ellison story that confirms his reputation as a womanizer yet simultaneously demonstrates the importance of Oracle in the scheme of things. It was just after the 1990 crisis, and Ellison received a telephone call from one of his senior managers. Ellison was asked if the manager had Ellison's approval to terminate his secretary. She had a record of poor performance, and unless Ellison disagreed, her boss planned to fire her the next day. Why was Ellison involved? He was having an affair with the young woman. He told the executive that if she were not performing as expected, then she should be terminated. See, the company came first.

I know you want to know what subsequently happened.

She was fired. Although they had been seeing each other for several months, she sued for sexual harassment, accusing Oracle and Ellison of termination for her decision to end the relationship. Oracle and Ellison came close to losing the caseóafter all, as Ellison even admitted, such action wasn't smart on the part of any CEOóbut she lost her case when she manufactured evidence to prove her harassment charge against him.

Since its founding, Oracle has been more innovative, more efficient, and more directed when Ellison was actively involved in its management.

As mentioned, Ellison isn't a paragon of virtue. But his personal lifestyle is no measure of his management ability. Oracle is the measure of that.

The results should be evident. Oracle is a fantastic company. Like many high-tech firms today, its stock value is being tested by a deepening economic downturn, as are sales by the capital market. However, if Oracle were to experience an economic downturn it couldn't have come at a better time for this company. Oracle has undergone major reinvention and transformation that cut almost $1 billion from its expense line, an effort spearheaded by Ellison in his management/ leadership role as CEO.

As I look over the last twenty-five-plus years since Oracle was launched, I find that historically it has been more innovative, more efficient, and more directed when Ellison was actively involved in its management. Ellison played the lead role in the company's founding, steered it through its early years of rapid growth, and has grown fully into his management role since 1998, when he began transforming Oracle into a Web-based business (see Chapter 8). Many members of the press may think his role insubstantial in the years from Henley's and Lane's appearance (1990 to 1998), but Ellison's importance to the business was blurred by the Barnumesque role he played as spokesperson. Lane, as president, was the inside man, Ellison was the outside man and, as such, he took over a public relations role in addition to resuming the marketing role he had held in the early years of the company when his job was to sell the idea of relational databases.

Larry Ellison, Excellent Leader

Although ultimately Oracle's transformation to an e-business led to the resignation of Ray Lane, Ellison took a hands-on role in not only building an e-business from the former database software company, but also identifying and eliminating inefficiencies within the organization. How did Ellison manage it?

Management for Ellison is about centralized controlóyes, with him in charge. He understands positive reinforcement, but if the carrot doesn't work, he'll go for the stick or negative reinforcement. For instance, when he initially asked Oracle's seventy country operations to work with him to consolidate information technology (IT) operations and databases at headquarters, they refused. He told them they could retain their own systems if they paid for them out of their own profits. Since profits are also the basis for bonuses, all country managers except the one for Canada agreed to consolidation. What happened with Canada? The subsidiary dragged its feet even after Ellison had sent an emissaryóGary Roberts, senior vice president of global information technologyóto deliver an ultimatum. When that didn't work, Ellison shuffled management responsibilities. The problem disappeared.

By the end of 2000, the company had eliminated 2,000 server computers scattered around the world. All the company's data are now stored, as Ellison had wanted, on one central database accessible via the Web. This makes for easy accessibilityóand not only for the worldwide organization. It makes it easier for Ellison to get a comprehensive view of operations and spot trouble before it gets out of hand. To quote Jeffrey O. Henley, the firm's chief financial officer, "Larry has the people in this company screwed down tight."¹

Perhaps he overreacted to the inefficiencies he saw, but Ellison personally rewrote sales contracts and established standard pricing to cut down on dickering by the field sales force. He changed the compensation system to prevent more than one salesperson from getting a full commission on a sale. And he compensated country managers for meeting profit margin targets, not simply meeting sales goals at any cost.

In essence, Ellison has resumed a role he held prior to Lane's presidency, a role that with one major mishapóthe 1990 near insolvency of Oracleóhe had handled well. After the incident Ellison admitted that he could have been a better CEO, more mindful of the numbers than he was. At a time when the workforce needed him to rally the troops, he was at home bandaging his ego for his failure to keep Oracle's growth on its previous upward path. The incident led to a decision that only a tough manager or leader could take. That was a recognition that he lacked the process skills that the company needed as it went through a major growth transition. Rather than contract with consultants who would leave never-read documents with him, he chose to bring on board professional managers to add balance to the entrepreneurial team he had assembled around him, executives like Jeff Henley and Ray Lane.

Although Ellison lacks an MBA in management, he clearly has the instincts of a business leader if you think back to the earlier policies he set and decisions he made for the fledgling Oracle. For one, he took the company international. This is unusual because the industry itself hadn't gone global in the early 1980s. Although Ellison had done no foreign travel, he saw the value that would come from moving Oracle into international markets. At first, the company worked with a distributor in EuropeóTom Peddersen Associates. It was 1984, and the money that came in from overseas sales was needed by the fledgling business. As soon as Oracle had a foothold in the European market, Ellison chose to buy out the distributor, converting all its employees to Oracle staff members. It was a pattern that Oracle used repeatedly to reach customers abroad.

Ellison and Oracle were ahead of other database software companies in adapting and selling products outside the United States. His company was the only one for some time that offered a global solution for multinational firms, enabling it to pursue the largest deals. Using distributors in the beginning was worthwhile because they offered immediate and efficient local support and a local sales presence without the expense of opening a satellite office or creating a subsidiary organization. Ultimately, however, Oracle set up its international operation of country managers. Equally valid as a leader when that international operation demanded tighter controls, he ensured that it happened.

Balancing Sales and Product Development

During those early years, it was Ellison who, despite the role he carved for himself as top salesman, spoke up for balance between sales and product development. Even when the sales organization asked for new products or new versions with useless features to outsell the competition, Ellison stayed the course and was able to say no to members of the sales force and developers, even though it would have been easy for the company at that time to lose its focusóit often happens to entrepreneurial firms. Ellison knew that Oracle wasn't ready to expand to a second product line during those early years. Rather, he saw the worth of continuously updating the versions of the company's flagship product. Ellison created a strong development team under the direction of his partner Bob Miner, and the two men focused research on advancing Oracle's core technology. Sanity prevailed in the development and release process, despite ongoing demands for new releases from the sales force. Miner became the organization's strong technical leader, but he had the backing of the strong CEO, Ellison. Consequently, the company could take advantage of the sales opportunities with which it was presented, but it would not allow itself to become so sales-centric that it lost a sense of its mission.

Ellison determined that the Oracle path to growth would not be by acquisition.

It was also Ellison who determined that the Oracle way to growth would not be by acquisition of technology or of other companies. Generally, young firms on a fast-growth path will opt to buy further growth by acquiring other's technology. Early on, Oracle experimented with a technology acquisition, purchasing a product it called Oracle SQL*Calc. On the surface, the technology seemed like a natural extension to Oracle's offerings, but it was not built the way other Oracle products were built. Consequently, it was difficult for Oracle developers to sustain the product and release new versions. Ultimately, the product disappeared from Oracle's line, as did the idea of buying growth. Oracle's CEO had learned that while it may take longer to develop technology internally, once it was complete you knew that it would fit well with the product line. Furthermore, there were no added purchasing costs.

There have, of course, been a few purchases of technology firms. There was even talk about Ellison purchasing Apple Computer, Inc. This proposed purchase was not to acquire technology; rather, it was prompted by the opportunity to gain Apple's industry experience and expand Oracle into new markets. Even this buy was passed on. At a time when the bigger companies have the choice to buy or make new business for themselves, Ellison and Oracle clearly come down on the "make" side of the issue.

Ellison as Visionary

At about the same time there was talk of buying Apple, Ellison told the industry at large about his company's network computing strategy at an industry conference. His announcement gave those most likely to be hurt by the network computer concept (or network appliance, as it is also called) the time to beat Oracle to the marketplace with a stronger sales appeal (see Chapter 7). Consequently, the network computer became a major lost opportunity for Oracle. Certainly, network computers would have given Oracle a second product line at a time when its flagship database line's marketplace was showing signs of eroding, but consumers weren't ready yet for Oracle to host their computer needs. After all, Microsoft was the major player in both the business and consumer markets.

Let's think further about the situation leading up to the network appliances Oracle was planning to develop. When Oracle had weathered the financial debacle of 1990, Ellison's role was more P. T. Barnum than CEO; he was pitchman for Oracle products as the outside man, and he saw a need for Oracle to grow beyond its limited business-to-business roleóit needed to build awareness beyond IT if it was to regain lost growth from the 1990 situation. In 1993, he created Oracle's New Media division with the goal to develop database applications for multimedia data. In essence, the New Media division was formed to build database software to store audio, video, and graphics, as well as huge catalogs of text. Ellison's goal was to expand Oracle from simply a firm that managed numbers and information to an organization that managed information in any format. One of its breakthroughs was an Oracle database that could store digital video and deliver it to myriad users simultaneously.

Telephone companies heard about the development and wanted to offer video-on-demand to their customers; these telephone carriers were looking for a business that would make use of the bandwidth on their networks and allow them to expand their product offerings beyond simple voice calls. Ellison, the Oracle spokesman, touted the benefits of the new technology each and every time he could. He talked about enabling home shopping with a personal shopper, as well as home banking and all kinds of applications involving consumer interactivity. Ultimately, he talked about how consumers would no longer need a personal computeróthey could use the television as their interface. Ellison, the corporate cheerleader, dubbed the project Alexandria, named for the world's first library in Alexandria, Egypt, to play up Oracle's role as a vast library as well, and talked up the project's "Excitement Factor." Oracle staff began wearing T-shirts with the New Media group's slogan: changing the world.

Nothing became of Ellison's dream of interactive television. Indeed, nothing came of the subsequent network appliances, an idea that also initially came from the New Media operation but was embellished by Ellison. But both, in turn, led to a new vision of the role of Oracle as a service provider (see Chapter 10). Oracle's image significantly changed as a consequence of Ellison's public presentations of the idea of network computingówhich may have had greater significance than the products that were being touted by Oracle. Ellison was seen as a visionary and his company was regarded as on the cutting edge.

Ellison's goal was to expand Oracle from simply a firm that managed numbers and information to an organization that managed information in any format.

The company's visibility grew. No longer were Oracle's products solely of interest to IT specialists. Suddenly chief information officers (CIOs), even CEOs, were interested in what Oracle was doing.

Leader/Visionary in the Software Industry

Larry Ellison is a leader in the software industry who's attuned to the needs of businesses. He's not only a CEO but a visionary CEO. While both Edward Oates and Bob Miner, Ellison's partners in founding Oracle, were interested in the relational database technology that came out of IBM Corp., keep in mind that it was Ellison who saw the commercial value in the technologyóin a flash of insight. And, as important, he was also the individual who sold it to those within the corporate management community who had yet to see its value.

There were no promises, no guarantees that he would correctly anticipate the corporate customer's needs. Yet Ellison decided to take an extreme risk because he expected an immense return. He knew the market and understood some of the issues that businesses were facing based on his previous jobs, but for the most part it was a risk.

He also recognized the need to move aheadóto develop other software programs based on that flagship database to minimize the impact of a single failure. I was once told by a CEO whose organization had an impressive record for innovation that someone who had come up with three out of five successful ideas was ahead of the gameóthe best most people do is two out of five wins. Leaders of software companies recognize that failure isn't the exceptionórather it is the rule. Consequently, they go for several wins to minimize the cost of failure.

They move quickly and they aim highóas Ellison did when he pushed Oracle's growth to 100 percent annually during its fledgling years. In his mind, getting big fast was a matter of survival. The software industry was moving quickly toward maturity, and Oracle had to be among the major players if it was to last.

If he were the kind of industry leader who could adapt quickly to trends, he also would have had to build a highly dynamic organization. Gates did it in 1995 when he stood before hundreds of analysts and reports and announced that he would refocus every project and every product to meet the Internet challenge. Ellison did it 1996 when he told, first, his own company and later the world press that his company saw the end of client/server computing and would reorganize to develop hosted applications softwareóand that it would save $1 billion by transforming its own internal operations via use of that software.

Ellison was also able to keep his promise because he had built Oracle into a flat, team-structured organization. The structure of an organization is a key leadership responsibility. The flatter, the more adaptable, the more suitable to move to meet the needs of client firms.

Take the values by which a business operates, add in the vigor of a strong management team, and the vision of someone who looks to the opportunities that change brings, and you will have an outstanding company. You will have Oracle and its oracle, Lawrence J. Ellison.

Search the Full Text of This Book:

The Oracle of Oracle

The Story of Volatile CEO Larry Ellison and the Strategies Behind His Company’s Phenomenal Success

Author: Florence M. Stone
Pub Date: 2007
Your Price: $24.95
ISBN: 0814406394
Format: Hardcover

Chapter 9: An Extraordinary Man

Search the full text of this book

Search the Full Text of This Book:

The Oracle of Oracle

The Story of Volatile CEO Larry Ellison and the Strategies Behind His Company’s Phenomenal Success

Author: Florence M. Stone Pub Date: 2007 Your Price: $24.95 ISBN: 0814406394 Format: Hardcover

Chapter 9: An Extraordinary Man

Search the full text of this book

Author: Florence M. Stone
Pub Date: 2007
Your Price: $24.95
ISBN: 0814406394
Format: Hardcover