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If you like Stephen Cases's story, you might also like:
Timothy Berners-Lee,
Jeffrey Bezos,
Michael Dell,
Lawrence Ellison,
Bill Gates,
Reid Hoffman,
Jeong Kim,
James Kimsey,
Pierre Omidyar,
Larry Page,
Carlos Slim
and Ted Turner

Stephen Cases's recommended reading: The Third Wave

Related Links:
Case Foundation

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Steve Case
Steve Case
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Steve Case Interview (page: 2 / 8)

Co-Founder, America Online

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  Steve Case

Did you have a sense that computers were going to be what they are in our society today? You said that at first interactive TV seemed like the direction. When did you get the idea that personal computers were going to be the focus of that revolution?

Steve Case: When I got involved in the industry, which was in 1983, I joined a company that had a product for video game machines, because back then, while very few people had PCs -- the Apple II had just come out, and the IBM PC was just coming out, the Macintosh hadn't yet come out, for example -- that a lot of people had Atari video game machines. And so the idea was, well maybe you can take an Atari video game machine, where people plug in a game cartridge, and plug in a modem, and tie that into a telephone, and essentially turn that game in the machine into an interactive terminal. Initially to download games, almost like an in-home arcade, but later for downloading e-mail or stock quotes or what have you. I thought it was a great idea, because at the time I knew I wanted to get involved in this sector.

[ Key to Success ] Vision

Nobody to speak of had PCs. Modems, which you need to connect, weren't really very common either. The whole process was very expensive.

This Atari video game platform really struck me as interesting, so I joined a company in Washington, D.C. in early 1983. Unfortunately, by the time they actually shipped their product in the fall of 1983, the Atari video game market blew up and all the companies -- K-Mart and everybody which was ordering lots of these game cartridges -- suddenly was sending them all back, and the companies that were in that business, including Atari, were on the brink of bankruptcy. So this wonderful product called Game Line was a great idea, but really, really badly timed and the company essentially went into kind of free fall and had to go through several rounds of layoffs and just looked fairly bleak. But, the good news is -- in addition to getting planted in the interactive industry and moving to Washington, D.C. -- two of the people that were part of that company and I ended up in early 1985 starting what became America Online: Jim Kimsey on the business side and Marc Seriff, who is more on the technology side. I was coming at it more from a marketing side.

[ Key to Success ] Perseverance

So even though Game Line was an abysmal flop, I remember when -- after the first sale cycle over Christmas -- there was a board meeting and I think we reported that we sold like 1,000 of these cartridges and they were supposed to sell 100,000. I can't remember exact numbers but it was way, way, way off plan and really an unmitigated disaster. And after the sales report was presented, one of the directors said, "Geez, you would have thought they would have shoplifted more than that." That's how bleak the situation was, but nevertheless I think I learned a lot about timing and how some things just have to be in the right place at the right time. I learned a lot about innovation and how you create different products and I met some people that we went off and started AOL in 1985. So, I guess it's all's well that ends well.

[ Key to Success ] Preparation

What gave you the courage to go on in the face of this sort of business disaster?

Steve Case: I just believed. To me, it was not that difficult. I just said,

"Okay. Well, this particular product at this particular time, I guess it wasn't meant to be." But the idea that some day people would want to be able to interact and get stock quotes and talk with other people or all these different things, I just believed that was going to happen. So I said, "Well, let's figure out another way to come at this." And what we did with this new company in 1985 is we did start focusing on PCs instead of video game machines, because we learned the hard lesson about bringing a product to market in a consumer world where it's very expensive to build a brand and get distribution and so forth. When we launched this company in 1985 we decided to partner with PC companies and use their brands and have them take the lead and spend the money. So we focused on the product and the underlying technology and the service and let other people take the lead on the marketing.

[ Key to Success ] Perseverance

First with Commodore we created a service called Q-Link and then with Apple we created a service called Apple Link Personal Edition, and then with Tandy we created a service called PC Link, and then with IBM we created a service called Promenade. So for about five years we really were in the business of creating these private label online services for PC companies, and had them bundle that software, that service, with their PCs. And we focused -- once people turned on that PC and wanted to use the service -- on providing something that people would like and want to pay a monthly fee for. So really, I think, the fact that we saw how hard it was to build a consumer product and make it successful led us to this, I think, very pragmatic strategy of focusing on PCs and partnering with the companies that already had brand recognition and already had distribution, and could help attract customers for us much more efficiently.

[ Key to Success ] Preparation

So from a mishap with bad timing you learned to protect yourself better in the future and not be quite as vulnerable financially?

Steve Case: It was very pragmatic. We knew, based on that failure, that it would be difficult and probably even impossible to raise money. "Say, we just lost a lot of money trying to bring a product to market on our own in the video game world, why don't you give us a bunch more money and give us another shot and we'll try to do it in the PC world!" So we believed that strategic alliances and partnerships were critical, and we did that for five years.

The second big crisis was in about 1989-1990, one of those partnerships started unraveling, and particularly a partnership we had with Apple, which was sort of our lead partner. They just decided after we had been in the market for about a year that they didn't like the deal. They didn't like the idea. It was the first time they had ever licensed their brand name and logo to any other third party company, and in retrospect they viewed that as a mistake, because they like to have complete control of the brand. So, as a result they were starting to block our marketing program. We'd say, "Let's go do this?" They said, "No, we don't want to do that." "Let's go do this." "No, we don't want to do that." So, it was somewhat of a crisis, because we had spent all the money on the back end to build these services, to staff up the programming team and so forth, and suddenly they were in some ways blocking our ability to get customers.

We renegotiated that deal and decided, 'We really have to do this on our own. It's too complicated to do these kinds of partnerships." It was a wonderful thing to do for five years. It was a way to learn a lot and make the transition to a business that was incredible and profitable, but we couldn't rely on these partnerships forever, which led to us deciding, "Okay, we have to walk away from that strategy." I was a little nervous about it.

We had just lived through -- earlier, in the 1980s -- the costs and the tragedy really of kind of going out on your own, but the Apple alliance blowing up kind of forced us, and that's actually when we renamed that service. Instead of AppleLink we called it America Online. We said, "We have to create our own name. We have to create our own brand. Even though it's hard, even though it's expensive, even though it's risky, we've got to figure out a way to be successful on our own two feet. We can no longer just piggy back on other people's efforts." So, again that was a crisis. Everybody, myself included, was very nervous about walking away from the strategy of private label partnerships that was working and setting out on our own and taking more risks, but we felt like we had to do it, and it turned out to be the best thing that ever happened to us. Because then it really propelled us, because we had the flexibility to do exactly what we wanted without getting permission, and we were able to really drive AOL into a position of great prominence.

[ Key to Success ] Courage

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