SEVEN WARY VIEWS FROM THE TOP What do these global corporate chiefs foresee? Shorter product cycles. Terrific opportunities to reduce costs. A growing split between the very rich and the very poor. Maybe higher U.S. taxes. And surely many more international marriages among companies.
By Maggie McComas, Richard I. Kirkland Jr., Joel Dreyfuss

(FORTUNE Magazine) – THE chairman and co-founder of Cetus Corp., Ronald E. Cape, 54, led the Emeryville, California, biotech company in developing Interleukin-2, a compound that has shown promise in stimulating the body's immune system to combat cancer. On global competition: Our problem in biotechnology is that if we slow down in basic research -- which is what I think we're doing -- other countries will take up the slack. The Japanese in particular have the necessary patience and determination. Takeda Chemical Industries, Japan's largest pharmaceutical company, is producing and testing both Alpha Interferon and Interleukin-2. Because of the way Japan Inc. works, with research dispersed among companies, universities, and research institutes, it's hard to tell exactly how much they're spending for biotechnology research. But from what I've seen, I'm convinced that their spending is on the increase, while ours has peaked. What counts is not the total outlay today, but the trend. In ten years, if what I'm saying is correct and the Japanese come to dominate world biotechnology markets, I bet we'll have hearings in Congress and a lot of American industrialists will bitch and moan about how the Japanese have done unfair things in trade. But that is not the case with biotechnology. The Japanese are doing the right thing. If you need an anticancer drug in the future, will you care whether it's made in Japan or the U.S.? Our defense is not to change what they do; we can't. Our only defense is to do the best we can -- and we're not. On basic research: You can't predict the eventual practical application of basic research. We simply have to argue, ''Look back and see the payoff we have already gotten.'' But when you look at the budget for the National Institutes of Health, you come to the conclusion that somebody somewhere has made the decision that the research game has played out. About 1975, real growth in the NIH budget tapered off, just after recombinant DNA was developed. You would think that with such a payoff, funding for research would have been increased, not decreased. The value of basic research shows up in situations like the search for an effective treatment of AIDS. The public and politicians should appreciate that the knowledge we've accumulated about AIDS over the past five years would not have been possible without basic work done in the 1960s, which discovered the viruses that produce DNA from RNA. The discovery was important enough to win a Nobel Prize. Without that unfettered research, we'd be absolutely nowhere today in trying to address the problem of AIDS. On biotechnology's risks: The public knows more about research in biotechnology than about any comparable development in the past. There's no theoretical reason to expect any ''sneezes'' that would spew the viruses in a test tube all over the world, and in fact there haven't been any sneezes. Yet some people are still talking about biotech research as if we're dealing with plutonium. The great paradox of all this is that the public expects more of us more quickly than we can promise or hope to deliver. On curing cancer: We now know that there is a unifying principle in cancer treatment. The principle is not the cancer itself; it is the body and its healthy reaction against abnormal cells. We've proved without any question that the immune system can be stimulated so that the body can help itself fight cancer. I don't think anybody would dispute that. We're identifying and making products whose principal activity is to help the immune system do its job; and these substances are not foreign chemicals being introduced into the body.

Without saying which components of the immune system are going to be the hit products of the year 2000, there is no question some of them will be. It's really a new era of medicine.- Maggie McComas

CO-INVENTOR of the integrated circuit, Robert N. Noyce, 59, helped found two semiconductor companies, Fairchild and Intel; he is now vice chairman of Intel, in Santa Clara, California. On technology: A lot of things are technologically possible, but only economically feasible products will become a reality. We have the technology to become energy independent, but will we do so? Probably not, because the cost of developing alternative sources such as solar power would drive energy costs up. Where costs can be pushed down rapidly, however, great new vistas arise. It has become cheaper to store information on computer disks than to keep it in filing cabinets, for example. Now we're moving toward electronic publishing and electronic mail because these systems are cheaper than taking a piece of paper from point A to point B. On basic research: Immediately after World War II the Defense Department was funding a lot of research that had civilian utility. During the infancy of computers, for example, military developments in this area could be applied in the commercial sphere. More recently, however, we've seen commercial and defense interests go their separate ways, and this will probably continue. High-powered X-ray lasers with enormous destructive capability are not going to be very useful in industrial processes. So where does that leave us? The government should do more than it's doing to support nondefense basic research. Private foundations will continue to be an important source of funds, but you can't expect corporations to spend a great deal. Industry has to concentrate on applied research, where the ''capture ratio'' of benefit will be relatively high for an individual company. To the extent that we can increase the public pool of knowledge in technology, the government ought to subsidize research activity. On foreign competition: As an industry, we were initially reluctant to file dumping charges against the Japanese. That would have drawn attention to the fact that customers could buy products more cheaply from competitors. But if we had known how much damage would be done, we would have acted earlier. Will the Japanese keep cutting their prices? The availability of capital in Japan and the rate of investment in the Japanese semiconductor industry suggest that they can continue to do so. Their pockets are far deeper than American pockets. It's a game of chicken, and they can play it longer than we can. The one thing we have that can be used to enforce our view of fair trade is the denial of the American market. That's the only tool we have. On education: In the future people will have to be well educated to perform new jobs. They can no longer assume they'll get work on an assembly line, where monopolistic labor practices keep wages up. The frightening thing is that we may not be doing as good a job in educating our labor force as other nations are. If that's the case, there will be no justification for a higher standard of living in America than in countries that have organized their societies better, that have better education and greater savings and capital availability. It will not be easy for us to accept the erosion in our standard of living, for we have historically lived so well.- M. McC.

IN HIS six years as chief executive, William S. Woodside, 64, transformed American Can Co., based in Greenwich, Connecticut, from a major manufacturer into a $4-billion financial services and retailing company. On the service economy: People ask me, ''Could we ever become a 100% service economy?'' My answer is, aside from defense and certain other strategic considerations, ''Yes.'' The developed nations of the world have already evolved from agrarian economies to industrial ones. That's the way the global economy has grown. Ever since World War I there's been a trend toward services; it is just that the pace has accelerated enormously, and that's what we're gagging on. American Can is an extreme example. We had $4 billion worth of container and paper products manufacturing businesses six years ago; now we have no manufacturing but $4 billion worth of life insurance, mutual funds, and specialty retailing businesses. We were in industries with very little growth. A friend used to tell me we were following a high-risk strategy by going into financial services. I argued that the only higher-risk strategy was staying where we were. In our case, I don't think we had a choice. On management: We have the poorest productivity growth of any Western industrialized country. And managerial ineptitude has put us into this box. The way to get higher productivity is to train better managers and have fewer of them. Four years ago we had more than 1,200 people at corporate headquarters. We're coming down to 250. Could that go to 150? I don't know, but you have to keep pushing against the limits all the time. On restructuring: I don't think it's going to stop. American Can existed for 60 very profitable years on a single product line. The product life cycle in the future isn't going to be 60 years; we'll be lucky if it's five or ten. Businesses will continue to become obsolete. I would be very surprised if we're not out in the market ten years from now selling a number of businesses we've bought recently and that have been very successful for us. On education: I have three main concerns about our educational system. First, if we don't get more federal and state funding, with more qualified teachers at higher pay levels, we're not going to have a qualified work force. Second, because education and income are directly correlated, a poorly educated population will result in consumers who cannot afford to buy the products we are used to making. Finally, over the longer term, I don't think that democratic institutions can survive a two-tier economy comprising the very rich and very poor, and that's what we are rapidly becoming. I'm a strong advocate of a liberal arts education. I think undergraduate business education is a waste. I don't think that business education does much to address the key issues that people meet in management: how to communicate, how to motivate others.- M. McC.

RICHARD P. Simmons, 55, of Pittsburgh-based Allegheny Ludlum Steel is a rarity -- a chief executive of a steel company that consistently makes a profit. On the importance of manufacturing: Service industry employment is not going to provide the economic growth we need over the long haul. Many service jobs depend on the manufacturing base for their existence. If we're not producing any steel, we obviously don't need computer services, software, banking services, and the like. Our main business, stainless steel, has grown at an annual average of 4% over the last 25 years, and we see even more rapid growth over the next ten. Our exports are starting to go up again; we've just taken some orders from Japan. We're using new technologies in manufacturing, and we're developing new alloys. We're going to replace the plastic, aluminum, and carbon steel now used in many products. We can do this because our steel is more cost competitive than these other products. There used to be four to five pounds of stainless steel in an automobile; now there are 50. As long as we aren't asked to compete with companies that don't have to meet the discipline of producing a profit, we're extremely optimistic. In the long run there's no way any manufacturing company can go up against concerns that are heavily government subsidized. On deficits: The big uncertainty for us is how the political process will deal with such external factors as the national debt and the trade deficit. How policymakers handle a national debt that is already $2 trillion -- and growing at a rate of $200 billion a year -- determines the cost of capital, real interest rates, and ultimately the rate at which the economy grows. I see two scenarios. First, government could monetize the debt by printing more money, thus producing high rates of inflation. We would once again run our businesses as we did in the late 1970s and early 1980s, raising prices as fast as we can. The alternative is for government to reduce the debt by increased taxation and lower spending. That would lead to slow or no growth for a long period. I am almost positive we're going to see higher taxes in the 1990s if for no other reason than we find it easier politically to raise taxes than to cut spending. I think we'll have a value-added tax despite the argument that it's regressive. On foreign competition: The trade deficit, and how it is dealt with, will determine what happens to manufacturing in the 1990s. You can no longer ignore a deficit that has reached $170 billion and has cost us about two percentage points of GNP growth over the past year.

I predict that we'll have a trade bill of some kind in 1987. Now that the trade deficit has spread to high-tech industries, I think we'll get down to a rational debate instead of simply reverting to a policy that would exclude all foreign goods. On the social costs of restructuring: There's a growing division between the very wealthy and the very poor. The middle class is shrinking because many high-paying industrial jobs and middle-management positions are being lost through corporate restructuring. College-educated managers at least are mobile, culturally, intellectually, and geographically. When they get the pink slip, they know to go to employment agencies and start looking at want-ads. The impact is greater on the blue- collar worker who grew up and went to work in Kokomo, Indiana. A manager from our operation should be able to go to work for, say, a financial institution with a relatively small amount of retraining. I don't think the typical blue- collar worker can do that.- M. McC.

CARLO De Benedetti, 52, the chairman of Olivetti, revived a nearly moribund Italian office equipment manufacturer in just six years by striking up alliances with such multinationals as AT&T and Volkswagen. On the globalization of business: Throughout history the creations of the human brain were put at the disposal of the prince, the king, or political parties. Now technology enables men to bypass not only the state but also the barriers of time and distance. This globalization of the markets is not the result of political or business decisions. Globalization means giving away power in terms of politics, and giving away markets by the businessmen who presently have them. In the future the limitations imposed by the Mafias of the world -- and every country has its Mafia; Establishment is just another word for Mafia -- will continue to fall apart. Does this create more instability? Yes. But it's healthy. I adore the destructive power of capitalism. Because it means more freedom to create wealth. Poverty is lack of freedom; wealth doesn't guarantee freedom, but at least it creates the possibility for it. Initially as technology creates this new global market, the rich nations will become richer, the poor, poorer. But within the next ten years I think we will see a Marshall Plan-style initiative for the less-developed countries involving both the newly industrialized countries and the old industrialized countries. This will be a necessity, not an option. On international joint ventures: As markets become global, you need to be able to offer a range of products that provide complete solutions. In general people are asking for solutions, not hardware. In your home in ten years' time, maybe even sooner, you will not buy a compact disk player or a television set. You will ask for one supplier to take care of your sound and your viewing, and maybe also your heating, your appliances, and your telephone. At the same time the pace of technological change is shortening the life of products to from ten years to one year to six months. Unless you have world volumes for your production you cannot afford the R&D cost, the engineering cost, to develop these new products. But you don't have time to export anymore. The only way to be German in Germany, Canadian in Canada, Japanese in Japan is through alliances. In the high-tech markets of the 1990s we will see a shaking out of the isolated and a shaking in of the allied. On managing alliances: Is it easier to live with a girlfriend or a wife? It's much easier to live with a girlfriend. But normally in that relationship you don't have children; you don't create anything for the future. It's the same between companies engaged in joint ventures. It's much easier to have a very simple arrangement by which you go to bed sometimes -- say, twice a week or twice a month -- with an ally, let us say in a supplier relationship. But I believe an effective alliance must join the life of two companies. That's the only way to create something for the future. On the future of Europe: In the coming global economy there will be different areas of specialization, probably to be decided in the next few years. And here I am very concerned about Europe. As exporters of high-tech manufactured goods, we are far behind the U.S. and Japan, and we have to change this absolutely and radically. Otherwise Europe will become allied with Japanese and U.S. companies, but allied as a market -- a passive ally, not an active one. And I don't believe in a service-oriented economy, which is what we are moving toward, without a strong industrial base. The only way Europe can be saved is to speed up the process of market integration. On global growth: In a world dominated by a network of alliances with a rapid diffusion of technology, you will create a steady flow of blood between different economic areas. It's like the body, where there is equilibrium in the flow of blood. It doesn't just go to one foot and stay there. In the future I believe we will see more equal growth rates in Japan, Europe, and the U.S. And these rates of growth will be roughly the same as what we see today. On protectionism: It is the greatest danger to my vision. But if present trends between Japan and the U.S. continue without any change, we won't just have a trade war. We'll have a war. And this is why I believe it will not happen. - Richard I. Kirkland Jr.

ANALOG Devices Inc., of Norwood, Massachusetts, has carved out a high-tech niche in systems and components that link sophisticated measuring instruments to computers. But its founder and chief executive, Ray Stata, 52, is discovering that high tech no longer guarantees high growth. On technology: I think machine vision will become a reality in the next five or ten years, to replace hordes of quality inspectors and also for ''intelligent'' robots. We expect to play a role in that ''intelligent vision'' market. Speech recognition will become available in the next decade, too, and office workers will be able to give computers voice commands. On management: We are furthest behind in what I call ''management technology'' in our company, in the high-tech sector, and in all of American industry. While the technologies we develop and market are quite new, our management practices and policies are archaic. We've been managing through vertical, departmental structures that seemed to work well. But we've done a miserable job of linking the disciplines across the organization -- engineering, manufacturing, and marketing -- in a way that yields the best product for the customer. Once you awaken to that challenge and decide to do something about it, you may face a five- to ten-year correction exercise. And you may wind up replacing a whole generation of people in one discipline before you're though. In a company like ours most people are relatively young and at the beginning of their careers, so they can still make that transition. At the end of our current five-year plan, I want us to have gone through a management revolution, to have changed the culture to one in which improving productivity and making the best products better becomes a way of life. On growth: There's a great deal of uncertainty about whether we will return to an era of substantial growth anytime soon. The explanation that makes the most sense to me is the long-wave theory of economics: In the transition from one technological era to another, you get to a crossover point where the decline of old industries and technologies proceeds at a faster rate than growth of the new ones. During this crossover, there's a growth hiatus. I think this is what we're seeing today, and it could go on for several years. For 20 years our company counted on one scenario: high growth. Now we have two-scenario planning. One view says that in another three to six months or a year we'll move into an era of unprecedented prosperity. The other calls for us to be prepared for much slower growth. The pressure is to straddle the conflicting requirements of those two. Doing so requires greater flexibility in our existing businesses. We're reducing cycle times, for instance, so that our design, manufacturing, and flow of revenues take into account a rapidly changing market. We also now have stricter criteria for new investments; we won't go into areas where we aren't likely to develop a strong competitive advantage within our planning cycle. On innovation: A lot of innovation in this country tends to come from smaller companies; start-ups have been an important part of American culture. Yet there is legitimate concern about the continuous bleeding of the best talent out of the established companies and into start-ups. America cannot compete globally through small companies. As we move toward more complicated technologies and the channels of distribution they require, an operation run out of a garage can't vie with the huge enterprises of Japan, Korea, and Europe.- M. McC.

SINCE LAST April when he became C.E.O. of Toshiba, the giant Japanese electronics company, Sugiichiro Watari, 61, has had his dogged optimism about the future tempered by the rise of the yen, the roller-coaster performance of the semiconductor industry, and the sudden shutdown of a promising consumer market in China. On looking ahead: The electronics industry in Japan is in a slump caused primarily by the appreciation of the yen. But new technologies and new products will continue to be created. For example, consumer products, which were meant simply for convenience, are today expected to make your life richer. Videotape recorders, high-definition TV, and compact disks offer opportunities for intellectual fulfillment that is active, not passive. For this reason I expect sales of more complex electronic equipment will increase. On the importance of manufacturing: I do not believe that advanced countries should abandon manufacturing to less developed countries. Service industries will continue to expand and diversify, but not unless manufacturers are producing high-performance equipment. While we will leave the production of less expensive, lower-complexity products to the nonindustrialized countries, we must continue to work on the development and manufacture of more sophisticated equipment -- in particular, high-tech products. On management: The speed of change will be accelerated in the 1990s. The Japanese management style may change some procedures and appearances, but it will not change radically. We will need to put more weight on ''the top-down system,'' while Japan's traditional ''bottom up,'' consensus-style system will continue to function. I believe it is possible to achieve greater efficiency through a mix of these two systems. On international joint ventures: Toshiba has been an aggressive pursuer of collaborative research and marketing arrangements with foreign companies, including Motorola, LSI Logic, and Germany's Siemens. Collaboration will become even more important in the 1990s because of the accelerating pace and cost of technological development. The investment for a single company is huge. So you try to find a complementary situation: Offer your strong point and get the strong point of your partner. The point of joint ventures should be to strengthen the potential of both companies, and management should remember that.- Joel Dreyfuss