BUSINESSWEEK ONLINE : MAY 29, 2000 ISSUE
COVER STORY Diamond Technology: Attack of the Killer Apps Diamond Technology Partners Inc., Chicago PRODUCT E-commerce consulting SALES $136.2 million WHAT'S HOT Pushing clients to go beyond speedy, cost-effective Web plans to products that redefine a market Melvyn E. Bergstein has a way of making something out of nothing. Lacking a screen to give an overhead presentation to job candidates at Northwestern University's J.L. Kellogg Graduate School of Management, the CEO of Diamond Technology Partners Inc. (DTPI) simply hung a tablecloth on the wall, then went on to lay out what were meager revenues at the time. That was in the mid-1990s, when the Chicago technology consulting firm was a year old. ''We're not a really huge company,'' he admitted with a smile, ''but we're making payroll.'' Just five years later, Diamond is doing a lot more than that. At No. 38 on our list, it's sizzling. Sales and earnings grew an average annual 52% and 178% respectively over the past three years. The company earned $16 million on sales of $136 million over the past four quarters. Its stock is trading at about 70, way above the upper teens of a year ago. What gives Diamond its sparkle? Its specialty is advising outfits looking to leverage the Internet--or keep from being displaced by it. Diamond's credo is that companies must do more than develop a better, faster, cheaper plan. The firm's 74 partners push clients to develop ''killer apps''--applications and businesses, such as e-mail and online exchanges, that redefine a market. Bergstein, 58, started the firm in 1994, along with co-founders Christopher J. Moffitt and Michael E. Mikolajczyk. Diamond was one of the first consulting firms to advise companies that digital technology should be at the heart of their corporate strategy. Before the Internet became widely understood, Diamond helped clients think about using the Net and other advanced technologies. The approach was risky at a time when most considered technology just an add-on to their business plans. Today, Diamond has become one of the leading go-to companies for businesses transforming themselves into players in the e-world. For example, before the auto industry's Big Three--Ford, GM, and DaimlerChrysler--announced a business-to-business online exchange earlier this year, they called Diamond. Other clients include Goldman Sachs, Sears Roebuck, and buyout specialist Clayton, Dubilier & Rice. ''They helped us think outside the box,'' says Clayton Dubilier CEO Donald J. Gogel. But in the Internet Age, big-name clients can go as fast as they come. Feisty young rivals, such as Razorfish and Sapient, have emerged, and such advice titans as Andersen Consulting and McKinsey are crafting aggressive Internet units. To compete, Diamond began branching out beyond consulting last summer. Now it also helps integrate the software that drives the strategy. The extra work--building robust Web sites, for example--has helped swell Diamond's $500,000 consulting contracts into $2 million projects, says Randall A. Mehl, an analyst at Robert W. Baird & Co. ENDURANCE. Adapting is a trait Bergstein has learned over the years. After spending 21 years at Arthur Andersen, he rose to partner at Andersen Consulting and left just before the company's contentious split in 1989. He then held top posts at Computer Sciences Corp. and Technology Solutions Co., where he was fired amid a management restructuring. That experience imbued Bergstein with a respect for employees that spills over into Diamond's culture. Diamond pays 100% of medical expenses. Partners can live anywhere in the world, they are elected by an 80% majority, and they see one another's salaries. ''Diamond is one of a handful of e-consulting firms that will endure,'' says Darren Cohen, an analyst at Friedman, Billings Ramsey & Co. And if it gets into trouble, Bergstein can always pull out that magic tablecloth. By ROGER O. CROCKETT With Ann Therese Palmer in Chicago _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Hot Growth Companies TABLE: The Revenge of Brick and Mortar WWF: One Rock-'Em, Sock-'Em Company Direct Focus: Flexing Its Marketing Muscle Meade Instruments: Back from a Black Hole Diamond Technology: Attack of the Killer Apps Children's Place: Hey, Good-Looking Albany Molecular Research: All R&D, All the Time SERENA Software: Keeping All Systems Go U.S. Concrete: Breaking the Cement Mold What Happened to the Class of '98? TABLE: The 1998 Winners...and the Losers TABLE: Hot Growth Companies, 2000 (.pdf) ONLINE ORIGINAL: Somera: Top-Notch Profits from Old Tech Gear INTERACT E-Mail to Business Week Online

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