BUSINESSWEEK ONLINE : SEPTEMBER 27, 1999 ISSUE
COVER STORY -- E.BIZ -- THE E.BIZ 25

David S. Pottruck


DAVID S. POTTRUCK

CHARLES SCHWAB CORP.

Position: President and co-CEO

Contribution:By embracing the latest technologies, he transformed a phone-based stock trading service into the No.1 player on the Web.

Ambition: To create a combo of phone, face-to-face, and Web services that leaves the rest of the investment houses in the dust.

Plenty of successful companies are just now getting around to cashing in on the Net. And they're starting from a deep hole. Think Barnes & Noble Inc. (BKS) It's having to claw frantically to catch up with Web book-selling pioneer Amazon.com Inc. (AMZN) But discount stockbroker Charles Schwab Corp. (SCH) was no Charlie-come-lately, thanks to the foresight of co-Chief Executive David S. Pottruck. Schwab already stands tall as the biggest broker in cyberspace.

Pottruck's track record is proof that by moving aggressively, established companies can transfer their successes quickly from terra firma to cyberspace. As of June 30, Schwab had 2.8 million online accounts, up from 1.8 million a year ago. It has an impressive 25% share of average daily trades, according to U.S. Bancorp Piper Jaffray. Dean P. Eberling, managing director at investment bank Putnam, Lovell, de Guardiola & Thornton Inc., says Pottruck sets an outstanding example for others: ''He took an existing business and turned the battleship around.''

BROAD AMBITIONS. Now Pottruck is teaching a whole new set of lessons--about how companies can thrive by melding the worlds of Net and non-Net. His so-called ''clicks and mortar'' strategy: To marry Net-based trading and customer service with Schwab's call centers and network of 300 retail branches. Staffers in the branches, for instance, can teach computer novices face-to-face how to navigate Schwab's Web site. ''We want to combine the best of the physical world with the best of technology,'' Pottruck says.

A former college wrestler and football player, the 51-year-old Brooklyn (N.Y.) native's ambitions are as broad as his shoulders. While Chairman and co-CEO Charles R. Schwab sets the overall tone and direction of the company, Pottruck oversees day-to-day operations and comes up with strategies of his own. It was Pottruck who turned Schwab's online business from a sideline into the very soul of the company.

That was surprising, since he didn't start using a PC himself until 1995. But itching to become more efficient at work, he had a machine put on his desk. In no time, Pottruck was hooked--shooting around e-mail and pulling up spreadsheets like a veteran techie. ''The Internet was starting to blossom in 1995, so my timing was good,'' says Pottruck.

Pottruck wisely set up a separate online unit--a startup-style operation with its own building, hiring plans, and power to make decisions fast. Its mandate: develop the technology and marketing needed for a full online push. The unit introduced trading over the Net in April, 1996--beating all of the established Wall Street companies. Later, he folded the online unit into the company after it had accomplished its goals.

Now Pottruck is turning up the dial on his clicks-and-mortar strategy. He believes that the vast majority of Schwab customers can digest information independently, but ultimately, many want a human sounding-board for their investment ideas. To help, he's installing PC kiosks in Schwab's branches. That way, customers can check their accounts, make a trade, or get help from a service rep on the spot.

Pottruck faces plenty of challenges. Schwab's $29.95 trades are far from the cheapest--Ameritrade Inc. charges just $8 per trade. So he's got to convince customers that his services are worth the premium price. In part because heavy customer traffic on Schwab's Web site occasionally slows down service, he's spending big to beef up computer systems--$324 million, or about 11.8% of revenue last year. ''The process of building better technology is just beginning,'' Pottruck says. And if growth on the Net keeps going, this late-blooming techie is just getting started, too.

By Louise Lee

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[empire builders]
Jeffrey P. Bezos
AMAZON.COM INC.

Stephen M. Case
AMERICA ONLINE INC.

Timothy A. Koogle
YAHOO! INC.

[the innovators]
Louis H. Borders
WEBVAN GROUP INC.

Jay S. Walker
PRICELINE.COM

Margaret C. Whitman
EBAY INC.

Glen Meakem
FREE MARKETS ONLINE INC.

James H. Clark
MYCFO INC.

Christos M. Cotsakos
E*TRADE GROUP INC.

[bankrollers]
Masayoshi Son
SOFTBANK CORP., JAPAN

Robert C. Kagle
BENCHMARK CAPITAL

Lawton W. Fitt
GOLDMAN SACHS & CO.

L. John Doerr
KLEINER PERKINS CAUFIELD & BYERS  

Bernard Arnault
LVMH MOET HENNESSY
LOUIS VUITTON  

[the visionaries]
Mary G. Meeker
MORGAN STANLEY DEAN WITTER

John Hagel III
MCKINSEY & CO.

William Joy
SUN MICROSYSTEMS

[the architects]
Louis V. Gerstner Jr.
IBM CORP.

Pehong Chen
BROADVISION INC.

David C. Peterschmidt
INKTOMI INC.

Kevin J. O'Connor
DOUBLECLICK

Ellen M. Hancock
EXODUS COMMUNICATIONS

[the pace setters]
David S. Pottruck
CHARLES SCHWAB CORP.

John T. Chambers
CISCO SYSTEMS

Michael S. Dell
DELL COMPUTER



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