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How to Change Direction — But Stay Together

When WebTV was acquired by Microsoft, the company’s founders worried that they’d lose their close-knit team in the process. Four years later, more than half the original employees are still with the company. Here are the secrets to keeping your best people on board despite choppy water.

One of the defining realities of the new economy has been that few things worked out the way people planned. In 1995, when WebTV Networks Inc. made its debut, it was supposed to make TV a portal to the Internet. Six years later, that vision has yet to materialize. Instead, WebTV has undergone multiple reinventions as it seeks to determine the sweet spot between TV, the Web, and audience interactivity.

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The product has changed many times (the most recent iteration, UltimateTV, winning rave reviews from Wall Street Journal tech reviewer Walt Mossberg), and the company has morphed from a feisty startup to a subsidiary of giant Microsoft. But much of the original 200-person team assembled back in Mountain View, California — including several members of the founding garage crew and most of the engineering team — is still together.

In an age when a tech-sector employee’s job tenure is often measured in months, that accomplishment may be more remarkable than scaling the technical hurdles involved in launching interactive TV.

The lessons that WebTV’s leadership has learned along the way are useful for any company looking to grow and mature in turbulent times. Fast Company talked to Phil Goldman, cofounder and vice president of advanced TV services, and Tim Bucher, vice president of consumer products, to hear more about WebTV’s principles for keeping great talent while growing smart.

Commit to the Vision, Not to the Method

The original strategy behind WebTV was to make TV a low-cost window to the Internet for people who don’t own a PC. Though WebTV always championed a “TV enhancement” strategy, the company set its sights on bringing the Internet to the masses. But even before the first version of the product went to market, focus groups suggested that the real money was in building a better television, not in providing a new way to surf the Net.

“Our ultimate vision was ‘to enhance television,’ ” Bucher says. “But some people in the company really believed that it was about getting the Internet on TV. As we broadened the product and added features like interactive TV and the ability to record two programs at once, those people felt that we were getting away from the company’s mission. It took real energy from the leaders to help people understand that we weren’t compromising our core vision; we were just choosing a different path to get there. We were more dedicated to that ideal than to one particular product.”

Great Vision Can’t Compensate for Bad Execution

WebTV learned a tough lesson with its first product launch: Even if you build it, they won’t necessarily come. The company vastly overestimated its sales for its first holiday season, in 1996. And then it underestimated the following Christmas. Learning how to make accurate market forecasts — as opposed to pie-in-the-sky projections — was one area where Microsoft helped its new charge immensely.

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“When you’re a startup, your vision extends forever, but you don’t always worry about your execution plans extending forever,” Goldman explains. “In the past five years, nearly all startups have had a business-growth plan that looks like a hockey stick: It starts flat and then zooms straight up. When you’re in the slow phase, you assume that the steep ramp-up is going to happen soon. And sometimes startups push out the hockey stick instead of dealing with reality. One of the things Microsoft helped us do was to think rationally and realistically about the business and to make the right decisions using forecasting tools.”

Don’t Just Add People, Build Infrastructure

As a company that has more than quadrupled in size since its inception, WebTV knows a thing or two about growth. Bucher says that investing energy and money in the parts of the company that support growth — HR practices, software and tools, infrastructure — even when it seemed excessive, proved invaluable.

“Within one or two days of getting hired to supervise the engineering team, I put together a proposal to get multiple licenses for some technical software we needed,” Bucher says. “It was expensive stuff — tens of thousands of dollars per seat — but I knew that we had to get it set up. Then when we needed to, we could go from 5 to 10 engineers overnight. The software was a big-ticket item. But it allowed us to grow fast and attract great talent because candidates saw that we were serious.”

Closeness Can Scale

As WebTV went from a team of dozens to a team of hundreds, it was inevitable that size would change the way the company did business. But leaders were determined not to let size change the culture itself. Although the company could no longer have weekly all-hands meetings, managers came up with innovative ways to help people get acquainted and to preserve a sense of intimacy.

This year, WebTV employees got a day off for a company-wide softball tournament. Teams were matched by a computer program that mixed different skill levels and departments together. “The whole point was to get to know new people, not play with the same people you work with every day,” Bucher says.

Honor Your Roots

To help maintain a unique WebTV culture after being swallowed by Microsoft, Bucher and Goldman made it a point to share the company’s startup history with every employee. Both men believe that it takes more than stamping a mission statement on the back of a name badge to get people to understand and revere a company culture.

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Each new WebTV employee attends a new-hire orientation where Goldman, Bucher, or another member of the executive team shares stories. Those tales might recount the early days in the garage, the first product release, or even the company’s debate over whether to try for an IPO. The session contributes to a shared legend and history — an idea reinforced by artifacts like the framed original project-management chart outside Bucher’s office or the case for the souped-up old computer that held the original prototype for the product, which Bucher carries around by a brass handle screwed to the top.

“We make a constant effort to touch people personally with the story of the company and how it faced certain challenges,” Bucher says. “Our history is present in day-to-day conversations here. You really know what you’ve gotten through when you hear new people repeating stories about events that took place before they joined. That’s when you’ve reached the point of collective history.”

Make Trade-Offs for the Right Reason

Many of WebTV’s employees were understandably anxious at the prospect of being acquired in 1997. Instead of dismissing those fears, leaders tackled them head-on and acknowledged some of the downsides of becoming part of a big company. But they also were able to describe compelling advantages that helped people understand that the trade-offs were made for good reasons.

“We had great concerns about joining Microsoft,” Goldman says. “It seems that the media always casts Microsoft as the evil empire when it’s doing things well and as inept and malicious when it makes mistakes. The scrutiny associated with that is overwhelming.

“But we believed that Microsoft was the only company in the world that could acquire WebTV and improve it. We knew Microsoft was committed to the consumer-TV market and would build its internal business division around WebTV. The company delivered on everything it promised — and more. It’s funny. At the time, we were so worried. And now we’ve been part of Microsoft for longer than we were a startup.”