MANUFACTURING

By Scott McNealy, chief executive of Sun Microsystems -- Twenty-one years ago, four 27-year-olds got together and started a small company. We had no intellectual property, no installed base, no name recognition, and a controversial strategy. Not surprisingly, we faced a lot of skepticism. But if your strategy isn't controversial, you have zero chance of making money. As it turns out, we were lucky to close crucial deals that kept us afloat in the early days -- and right to emphasize open, standards-based systems, a business strategy few computer companies were willing to adopt in 1982. The intervening years have provided ample opportunity to see what works and what doesn't -- amazingly enough, I've been at the helm longer than almost any other chief executive in high-tech today. Chalk it up to the best advice I ever got: Hire people who are smarter than you are. It's certainly more interesting that way -- and it makes you more effective. Someone smarter than me came up with the visionary statement "The network is the computer," but I latched onto it like nobody's business. It was surprising, really, how many people didn't get it, but then standalone computers were the norm when our company, Sun Microsystems, was getting started. We took some ribbing, but we stuck by our statement. It crystalized our thinking and focused our energies -- and contributed to a culture of contrarian thinking that continues to drive us today. The other thing about smart people is they often disagree -- and that's good, because business is all about tradeoffs: Short-term versus long-term. Caution versus courage. This much is clear: It's not easy to be courageous when times are tough -- and it's not easy to be cautious when times are good. We all know business tends to be cyclical, but it's easy to lose sight of that basic fact, especially during a prolonged economic boom. Looking back, we probably hired too many people and signed too many leases, but we had a very natural and understandable desire to fill all the orders we could -- and we put a lot of money in the bank as a result. Still, more caution would have been wise. The biggest threat right now? Short-term thinking. For companies and their shareholders it's easy to get caught up in a quarter-to-quarter mentality. But you have to be willing to sacrifice short-term profits to create long-term value. For us, it's a no-brainer. The short shelf-life of technology -- each advance offering greater efficiency -- makes long-term thinking essential in our business. We have no choice but to invest in research and development if we intend to remain competitive. But long-term thinking must play a vital role in any business. If you run a business, look no further than the people in your employ. They are the company, when you get right down to it. So you'll naturally want to hang on to them and develop them, especially your top performers, regardless of economic changes. Unfortunately, when the economy goes through a boom-and-bust cycle, it's not always possible to keep everyone. In fact, the expedient thing to do is let a lot of them go in order to quickly boost profits. Wall Street will love you, for a while. But remember, it can be just as dangerous to do too much as not enough. And, of course, there's no way of knowing if you've got it just right. The bottom line is, to run a company successfully over the long haul, you have to be able to make hard decisions in the face of contradictory imperatives. You have to be willing to take a chance and do things differently, or you have no chance at all.