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Novell Turns In on Itself

When Craig and Judith fell out of favor, it was a sign that looking outward was not the road to success at Novell any longer. Those who stayed with Novell after Craig and Judith left found their fortunes depended much more on what was happening within Novell than in the outside marketplace.

This was a condition the new senior managers had all seen before—some many times—so they adapted very quickly. Within weeks the “glib defectors” were making new policies in order to protect their incipient fiefdoms. There was a flurry of memos describing how Novell employees should communicate with others, and those memos all ended with an ominous paragraph announcing that anyone ignoring these new policies was “subject to immediate termination”. This was the first time this kind of wording had shown up in Novell memos. It marked a distinctive change in the company ground rules.

With startling speed, Novell became a rather average billion-dollars-in-sales high tech company. Most of the senior management worked out of the Silicon Valley area, to keep up appearances and to stay in touch with the flow of ideas in that valley. Production parts of the company were farmed out to lower cost hinterlands, such as Utah and Texas. At the new Novell it was not important that the production people have access to the idea flow that senior management did, and ideas generated within the production areas of the company received no more consideration than ideas that flowed around Silicon Valley.

The result was a steady loss of anything distinctive about Novell ideas and implementation.

Ray “Lets the Company Breathe”

Another Ray practice exaggerated the problem of Novell turning in on itself.

When Ray was in “company doctor” mode, he thought he was making surgical layoffs. In his words, and a different metaphor, he wanted a company to breathe.

But layoffs are a tool that cuts many ways. When a company is in a life-threatening crisis—and if most members of the company feel that the crisis is real—layoffs can do what they’re supposed to: “Get rid of deadwood” so the company can cut costs and survive. Layoffs in such a time of crisis work because the company as a community sees the necessity of getting more efficient, and the company acts as a community to make layoff decisions within that survival context. This was the mood of most of the companies when Ray came into them to turn them around, so his first rounds of layoffs at these companies worked.

But when most of the community company members see layoffs as a periodic ritual, serious crisis or no, different thinking emerges. Layoffs become a tool for solving factional disputes. “Deadwood” is redefined: The first definition becomes “people who are threatening to those with layoff power” and the second, “those people whom those with layoff power just plain don’t like”.

In the early ’90s Ray would announce layoffs and justify them as happening because a quarter was soft and earnings weren’t rising fast enough. This was hardly a life-threatening crisis to the Novell community, so factionalism was given a great boost. Workplace priorities changed: In the early ’90s at Novell, time and attention devoted to protecting yourself from layoffs was time and attention well spent.

In sum, watching what happened within Novell was important to survival at Novell, so the company watched itself a lot.

While the Novell layoffs were traumatic for anyone who got caught up in them, they had one silver lining: A lot of good people with a lot of good ideas found themselves hitting the pavement in Provo. The Novell alums started a whole bunch of new companies that became the core of Utah’s Silicon Valley.

Acquisitions and Strategic Partnerships

While all this internal politics went on, Novell also pulled some of the outside world in.

As reported in the online Free Encyclopedia of Ecommerce:[Footnote 1]

Novell benefited from strained relations between IBM and Microsoft in 1991, when IBM agreed to market NetWare in an effort to limit Microsoft's increasing control over PC standards. In other deals, both Hewlett-Packard Corp. and Compaq Computer Corp. agreed to work with Novell to develop and market computer-networking technologies for their machines. Acquisitions that year included Digital Research Inc. for $136 million and a five-percent stake in AT&T Corp.’s UNIX System Laboratories. Novell and UNIX also founded Univel, a joint venture that developed UNIX-based products. Noorda restructured Novell into three units: NetWare; general operations; and a division working on the development of extensive corporate networks that would later become known as intranets.

Lotus and Novell agreed to increase the compatibility of NetWare and the Lotus Notes networking software in 1992. By then, Novell had become the world leader in computer networking. Its products included operating software, network management software, hardware, and services. Novell acquired UNIX System Laboratories from AT&T in 1993. Eventually, the UNIX operations were folded into Novell's NetWare division. NetWare 4.0 was shipped that year. In 1994, Novell paid $1.4 billion in stock for WordPerfect, a leading word processing software maker. The firm spent another $145 million on the spreadsheet operations of Borland International, which formed the basis for the Quattro Pro spreadsheet.

The Sharks Eat Ray

As company doctor, Ray was—to take a term from my essays on politics—being a “ruthless leader”. Ruthless leaders thrive on crisis and perceived threats.

But by laying people off in times of plenty with no apparent crisis, Ray stepped over the line of appropriate behavior for a ruthless leader and he lost support. Each time he made enemies in the company, and those enemies would do their best to stop the terror of more layoffs in the future.

This behavior strengthened the powerful, experienced faction leaders who did not owe Ray much loyalty, and he lost the naive young people whom he had “made” and who had been loyal to him. Finally in 1994, an all-too-familiar theme in Ray’s business career happened again: He lost control of the company. Robert Frankenburg became CEO, Chairman, and President.

In the end, it seemed that Ray needed Craig and Judith as much as they needed him. Novell of the ’80s truly was a “magic moment” in the history of business, and when it shattered, everyone had to move on.

Exorcising Ray-ism

When Ray left, as when Craig and Judith left, his legacy had to be dismantled. The vision of out-Microsofting Microsoft was abandoned and the acquisitions of his final three years were dismembered.[Footnote 2] This burden fell to the new President, who spent two years at it and then moved on. As with the necessary layoffs in Dave Guerrero’s presidency, it was a thankless task, and no one thanked him for it.

With Ray’s departure, Novell became totally immersed in the flow of professional ideas, and has made no history since.

Footnote 1: At A few misspellings—“Netware” (which is also sometimes correct as NetWare) and “WordPerfect”—have been corrected.
Footnote 2: For example, from the previously cited article in the Free Encyclopedia of Ecommerce, “Taking a huge loss, Novell sold WordPerfect and Quattro Pro—both of which were struggling to compete with Microsoft’s word processing and spreadsheet programs—to Corel Corp. for $186 million in 1996. The firm then refocused on its core network platform operations.”

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