What CSC Is Doing Right (and Wrong) In Its Turnaround Efforts

What CSC Is Doing Right (and Wrong) In Its Turnaround Efforts

The Hewlett-Packardturnaround started around a decade ago and has been badlyhampered by a revolving door on the CEO office. Mark Hurd and LeoApotheker arguably made things worse, leaving current CEO MegWhitman a nasty mess to clean up.

Meanwhile, ComputerScience Corp. CEO Mike Lawrie started a few months afterWhitman (February 2012 versus September 2011) but has gone fartherfaster. Understanding why, as well as what both CEOs are missing,provides some insight into how to turn around a complexcompany.

Why CSC Can Recover Faster Than HP

For starters, there are three key differences between the twocompanies that explain why the HP turnaround has been far moredifficult.

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These three factors give Lawrie a huge advantage. He's givenmore freedom to make changes, he has far less complexity to dealwith and he isn't constantly under attack by other globalcompanies.

CSC Streamlines Offerings, Replaces Executive Team

I spent a bit of time with CSC executives at EMC World 2013. Thedifference between Lawrie's execution and Whitman's at HPis dramatic. CSC at its worst was admittedly simpler than HP, soLawrie's success is understandable but still amazing.

Even though IBM's Louis Gerstner and Sam Palmisano trainedLawrie, his execution is more reminiscent of Steve Jobs, who facedsimilar problems and also enjoyed greater latitude than evenGerstner had. As a result, Lawrie has made far more progress inturning CSC into a well-managed company.

Both CEOs came to companies with far too many products tomanage. While HP's relatively profitability makes it hard forWhitman to make dramatic changes, Lawrie has whittled CSC'sproduct line from nearly 3,000 products to fewer than 100.

In addition, CSC no longer treats every technology vendorequally. Under Lawrie, the company has tied itself tightly to firmssuch as EMC and positioned itself as a more strategic partner-whichmeans more aggressive promotion for CSC.

Mirroring Jobs and Gerstner, Lawrie also replaced 90 percent ofhis executive staff. (In contrast, Whitman left her executive staffin place, even though at least one member of that team was, andlikely still is, considered for the HP CEO job.)

Jobs' success in creating a focused executive team, and inturn recreating Apple, helped him take the company further thanGerstner took IBM during a similar term in office, so it'sdefinitely a model worth following.

It's also worth noting that a surprising number of new CSCexecutives came from HP, given that Lawrie came from IBM. He didthis for two reasons. One, it meant he'd have a loyal,well-oiled machine. Two, the team would know intimately the easiesttarget for the firm's expansion efforts.

CSC Missing Marketing, Financial Opportunities

It's interesting to watch CEOs work. Even those who appearto be specifically trained by prior experts tend to ignore areaswhere they haven't developed competency.

There are two aspects to both the Apple and IBM turnarounds thatneither CSC nor HP are addressing. The first is the selection of aformative chief financial officer such as Jerry York, who came toIBM after driving Chrysler's turnaround under CEO Lee Iacocca.York actually came to IBM before Gerstner did, and the CEO likelysaw York as a rival more than as a member of his personal team,even though York drove most of IBM's initial progress.

Here Whitman is in better shape than Lawrie. Her situationmirrors Gerstner's, actually. HP CFO Cathy Lesjak has been atthe job since 2007 and is considered one of the best in thebusiness. Whitman has given her the authority to materially assistin the turnaround effort.

In contrast, CSC CFO Paul Saleh, appointed in May 2012, didparticipate in the Sprint and AOL turnaround efforts. While neitherendeavor is currently seen as a success, this is more a matter ofsparse resources than Lawrie actually missing Gerstner'slesson.

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The second missed opportunity is aggressive marketing. Gerstnertook the unique approach of building the most powerful IT marketingteam ever created, largely by hiring advertising experts out of theindustry, while Jobs took the lead in marketing Apple personallyand handpicked a CMO who would execute sharply on his vision.

Both CEOs then took aim at fixing their respective firms'image and product line before the companies were themselves fixed.Jobs and Gerstner knew that perceptions change slowly but trumpreality; if they didn't start with perception, it would addyears to their marketing efforts. I don't know Apple'sinternal, but I know IBM needed five years of massive marketingspending to restore the Big Blue brand to any semblance of itsformer power.

Starting early helped Apple and IBM better match customerperceptions to the real improvements the companies were making oncethey were, in fact, accomplished. It amazes me how so manyCEOs-even TimCook at Apple and Ginni Rometty at IBM-don't understand themassive leverage that marketing can provide.

Are Those Who Ignore History Doomed to Repeat It?

Apple and IBM taught us the four factors of a successfulcorporate turnaround:

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Lawrie's turnaround efforts have been more dramaticallysuccessful because CSC was in more trouble than HP but, at the sametime, represented a simpler problem to solve. This means Lawrie hasmore latitude to make changes that Whitman does at HP.

Lawrie's direct training under Gerstner at IBM has paid offhandsomely, though it's clear that he, and many other CEOs,underestimate the power of marketing in turnaround efforts. This, Ithink, is because CEOsdon't get much training in marketing or much education insocial science.

Since Given CSC is targeting HP's revenue base and reportingincreased penetration, CSC's approach-and relevance-should be ahigher executive priority for HP than it currently is. After all,CSC's tight relationship with EMC, Cisco and VCE makes it alarger threat than it would be alone.

Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.

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Tags businessHPbusiness issuesAppleIBMHewlett-Packardsteve jobscscManagement TopicsMeg WhitmanManagement Topics | Financial ResultsLouis GerstnerComputer Science Corp.Mike Lawrie

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