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Lotus After Kapor: Will It Lose Its Spark?

Alex Beam in Boston
Business Week

July 28, 1986

At Lotus Development Corp.'s monthly employee meeting on July 10, Chairman Mitchell D. Kapor decided to skip the routine introduction of new employees. Instead, he stunned the group by announcing that Lotus' most senior employee--himself--would be leaving the company he founded. Clad in his trademark Hawaiian print shirt, the former Transcendental Meditation instructor explained his decision in simple terms: ''My personal interests have begun to diverge from what Lotus as a company is doing. It's time to start getting on with the rest of my life.''

Kapor, 35, later elaborated that he was tired of working as a full-time businessman and was leaving Lotus to pursue such ''idiosyncratic'' projects as starting a foundation to fund artificial-intelligence research. He remains on Lotus' board of directors and plans to finish a two-year AI program he's been developing for the company.

A ROLE REJECTED

Kapor's departure marks the end of an era for Lotus. In just four years, the company parlayed an unknown program called Tiny Troll into Lotus 1-2-3, the best-selling personal computer program of all time. Lotus is now a $225 million multinational corporation. Although Kapor's success made him a visible example of the hippie-turned-millionaire, it was not a role he liked. ''Mitch doesn't love managing, which is why he didn't want to manage the company,'' says Marv L. Goldschmitt, a friend who left Lotus last year.

Kapor's decision to leave comes at a crucial time for Lotus. Unlike competitors Microsoft Corp. and Ashton-Tate Inc., which have broadened their offerings to include a variety of programs, Lotus has not moved beyond its core business of financial spreadsheets. Critics say the company is too dependent on 1-2-3, which accounts for more than 60% of its revenues. Lotus officials respond that the company is building on its strength. And for the moment, 1-2-3 is strong. On July 14, Lotus announced record quarterly earnings of $11.8 million, up 15% from the previous year.

Lotus intends to use the 1.7 million customers of 1-2-3 as a springboard for marketing other Lotus services and products. In early July, for example, the company presented a mainframe software network to sell to large corporations where analysts use 1-2-3 to massage data stored in central computer files. Still to come: Hal, a version of 1-2-3 that can be programmed in English rather than computerese, and a retooled 1-2-3 for the Japanese market.

Now the success of the company's product-development strategy rides squarely on the shoulders of Jim P. Manzi, Kapor's handpicked chief executive officer. The two men are a studying contrasts: Manzi, a 34-year-old former management consultant, favors button-down collars and dark suits over Kapor's flashy wardrobe. And the differences extend beyond clothing. Many of Kapor's software-development cohorts have left the company during Manzi's tenure. He recruited a team of mainstream managers from such companies as International Business Machines and United Technologies to instill management discipline at laid-back Lotus.

SEA CHANGE?

Manzi's no-nonsense style has alienated many Lotus staffers who were nurtured on the relaxed corporate culture of Kapor and his followers. Manzi denies that Kapor's departure represents a sea change for Lotus: ''The culture here isn't a function of any one individual.'' And for those uncomfortable with his management style, Manzi says: ''I'm the nicest person I know.''

Nice guy or not, many outsiders feel Lotus will be the poorer for Kapor's departure. The day after the announcement, Lotus' stock slid 2 points, to 31. ''On net balance, Kapor's departure has to be a negative,'' says Harvey H. Bundy III, a partner with Chicago's William Blair & Co. William H. Gates III, chairman of Microsoft, fears Lotus is losing a key technology guru: ''Mitch had great influence on new product development,'' Gates says. ''You can't do it all with market research.''

The job of moving the company past1-2-3 now belongs to Manzi. Kapor's last words to his staff were that ''everything is going to be fine.'' It's up to Jim Manzi to prove Kapor was right.

Photo: MANZI: TO IMPROVE DISCIPLINE, THE NEW CEO HAS RECRUITED MAINSTREAM MANAGERS

Copyright 1986 McGraw-Hill, Inc.