The following is the second of two guest posts from John Powers, principal, Deloitte Consulting, LLP. The first can be found here on Direct2Dell. Powers recently interviewed Rory Read, chief integration officer for Dell and chief operating officer, Dell EMC, and Howard Elias, president, Dell EMC Services and IT, for Deloitte’s CFO Journal in The Wall Street Journal. Following that, and many prior discussions, he gathered his thoughts here on the historical combination of companies that created Dell Technologies.
A Merger of Equals.
History says it’s not possible; Dell and EMC prove the exception.
In my previous post, I looked at how the historical merger of Dell and EMC came about, and how their teams laid the foundation for a Value Creation Integration Office (VCIO) to manage the process from beginning to end. This not only enabled them to complete a successful merger in September 2016, but also surfaced a number of invaluable lessons along the way that should be studied closely by any company entering into a similar arrangement.
- Customer first
- Build on a legacy of innovation
- Major on the majors
- Respect culture(s) and amplify foundational elements of the new company
- One size does not fit all
Lesson 1: Customer first
As a primary guiding principle, the VCIO focused on generating value for their customers. Their goal was long-lasting value through innovation, service, and collaboration. Both companies wanted to ensure they provided true value immediately following the merger’s close, and worked diligently to shape for their customers the most valuable offerings possible. Solutions spanned the spectrum of the new company’s capabilities, offering everything from completely new offerings to simplified billing for its largest combined customers. From a successful track record of acquisitions by both companies, the VCIO knew what customers wanted and didn’t want out of the new company — innovation, simplicity, and most importantly, no disruptions.
Rather than simply rely on instinct and experience, the VCIO commissioned a study to refine the Day One offer based on a broad sample of the customer base. Using every avenue possible to listen and engage with customers, the VCIO confirmed what they knew; Customers wanted, above all, the continuation of the great client experience they had with each company before the merger. In the simplest terms, this translated to “Do no harm.”
‘We were designing the new company from the customer back. Michael said this an awful lot. Every decision needed to begin and end in the customer’s best interest,’ said Rory Read
With this in mind, the VCIO mapped the customer experience for key customer segments. They identified areas of potential conflict as the companies came together (e.g. sales people serving the same individual at a client). They built a detailed playbook for combining the customer teams into seamless groups, with a “Minimum Disruption” mantra for their customer operations teams, and implemented several leading practices designed to shepherd their clients through the integration. Key steps included:
- Creating a customer experience owner, team, and governance structure to hold business functions accountable to the strategy
- Ensuring cross-organization alignment sessions to help avoid creating conflicts or surprises for the customer
- Ensuring the account teams had a clear vision of the customer experience strategy so they could properly represent how the integration would impact the customer’s day-to-day experience
- Ensuring account transitions were closely managed through the integration process, and that there was a proper balance between soft metrics (account relationships) and hard metrics (sales revenue) moving forward
- Prioritizing the most prominent account relationship as accounts were reassigned and, in cases where there was an equal relationship between the Dell and EMC sides, soliciting customer feedback on their preferences before changing account team relationships
Proactively putting the customer first built trust across both companies, and with their customers, enabling the companies to bring their similar, client-centric cultures together and preserve their valuable, high-touch customer support models. This outside-in, customer-first mentality created the mechanism to prioritize and execute those 20 percent of the opportunities which presented 80 percent of the accretive value.
Lesson 2: Over-communicate
Before any planning could begin, the VCIO used the 60 day “go shop” window to form teams, allowing key employees to get to know each other, develop their charters and work plans, and define key objectives and outcomes, all before looking at a single piece of data, or beginning the work of building out organization charts. VCIO team members were each asked to read Stephen Covey’s “Speed of Trust” as a baseline to establish a foundation of trust and working relationships.
This early communication and team building proved to be extremely important at every level of the VCIO. Work teams met daily and reported out to the VCIO leadership on a weekly basis. In turn, VCIO leadership met multiple times each week, often face-to-face and through video conferencing across all geographies. In addition, all teams held monthly, face-to-face meetings, with regular updates to the CEOs and Boards of both companies. Because so much was at stake, tough calls were made, including removing some of the initial VCIO team, and taking a more aggressive approach to project management.
Lesson 3: Build on a legacy of innovation
While the VCIO determined that change for change’s sake was not desired by the customers, they also realized that the new combined organization could exceed client expectations by showing its customers how the new company could provide world-leading technology solutions for its clients’ most difficult problems.
Innovation is a long-term process, and only limited product information could be shared between the organizations before the merger close. The VCIO chartered a cross-functional team comprised of experts from key domains to focus on bringing a limited number of unexpected, extensible new solutions to market in the new company’s earliest days. The cross-functional team prioritized Minimal Viable Products (MVPs) for Day One, which they used to showcase the combined company’s technology leadership, competitive leadership, and compelling offers.
Designed through a cross-functional effort among marketing, product development, supply chain, and finance, the team converged on:
- Marketing leadership across key product areas
- Converged and hyper-converged infrastructure
- Expanding Dell Financing offerings to EMC and VMware customers
Combined with carefully designed commercial agreements that enabled working across the companies prior to the merger close, these new offerings provided customers with an obvious signal that the new company was positioned to innovate, and provided salespeople with a unified message for their newly combined client teams. The result? The combined company held its first large event (Dell EMC World) just five weeks after the merger’s closing where, with more than 6,000 customers and partners in attendance, it announced the first combined Dell EMC technology solutions.
Lesson 4: Major on the majors
In any merger, and especially in one the size of Dell and EMC, there are more work, decisions, questions, and issues than there is time to address them. With this in mind, the VCIO implemented a streamlined decision-making process to ensure that top executives were only called upon when necessary to address only the most critical issues. To make sure that the right people were making the right decisions at the right times, the VCIO defined a small leadership group that was responsible for key decisions across key business functions like product development, marketing, communications, finance, sales, and supply chain. This group worked together to address decisions that were deemed to:
- Be strategically sensitive
- Be critical to value realization
- Have a material impact on key stakeholders
- Impact multiple business units or functions
- Have a significant impact on operations
Coupled with this, the VCIO also implemented and relied upon a decision calendar to help drive planning and ensure that key decision deadlines were adequately defined and met. Through this methodology, the group was able to keep key players focused throughout the merger process and, at the same time, take up as little of the top executives’ time as possible on decisions or issues that could be delegated to the integration teams.
‘Early on, we identified the key end-to-end value drivers – customer and partner experience, team-member experience, keystone offers (showcasing the capabilities of the combined companies), and revenue and cost synergies. Every team and every decision was aligned to these desired outcomes,’ said Howard Elias
By following this strict decision-making tree, the VCIO worked to make sure that the very top executives were only focused on the most critical 20 percent of the decisions that, were in turn, driving 80 percent of the overall merger value: a perfect example of the Pareto principle in action.
Lesson 5: Respect culture(s) and amplify foundational elements of the new company
As important as it is to ensure that the technical aspects of a merger are carried out as efficiently as possible, many companies find that it’s as important – and perhaps more daunting – to embody a unified corporate culture across the two formerly independent organizations.
When you’re dealing with a merger of equals like Dell and EMC, potential cultural conflicts can be significant, as both companies have a long, and proud history with strong leaders and entrenched cultures. From a macro view, executives at both Dell and EMC saw many similarities in their respective cultures, and came into the merger process with a shared goal. As they stated early on, “We are committed to serving our customers. We have a passion for winning. We believe the key to our success lies in innovation, and we deliver results the right way, with the highest ethical standards.”
Even so, the actual integration process of the two workforces made it clear that, despite shared values, there were key differences in how these beliefs were manifested in the approaches employees at each firm took toward their everyday work. EMC was very proud of its world-class customer support, which made a lot of sense given the large size, and relatively low number of transactions it conducted. Dell was also very proud of how it brought superior value based on its design and supply chain innovation, which made sense given the relatively small size and the large volume of transactions it conducted. These differences exposed some different ways to put customers first and exposed some potential conflicts, such as:
- Efficiency and scale versus innovation and support
- Delegation versus collaboration
- Speed to action versus Six Sigma execution
The integration team used surveys to identify and understand the core differences between the companies and their approaches. Using that knowledge as a basis, each company began surveying their employees regularly and consistently to understand when culture clashes began to emerge, and to address them before they become serious challenges. In addition, the team leveraged a variety of more direct techniques to shape its new culture, including the monthly checkpoints with integration leaders to discuss and address cultural challenges as they emerged. They also relied on “change agents” in each organization who were tasked with conveying key messages, gathering critical input, deploying global leaders to manage the integration plans, and customizing them for their specific countries and locations.
While there was no way to completely avoid conflict across the new organization, this proactive approach and consideration of their employees’ sensitivities meant that problems could be addressed quickly and efficiently with a minimum amount of discomfort and, more importantly, employee turnover.
Lesson 6: One size does not fit all
Given the companies had both grown around different customer engagement models, choosing one integration strategy for the full company portfolio would pose a significant risk to the business and culture. As such, the companies began by identifying their key operating differences, which could be contrasted as high-touch for low-volume/high-value relationships (EMC) versus a lower touch for high-volume/high-value relationships (Dell).
Upon merging, the new organization had to determine how to bring these two differing viewpoints together, especially in areas where there was overlap between Dell’s and EMC’s existing user bases. The solution? Dell and EMC navigated their differences by leveraging the best parts of their existing approaches, and implementing customized integration approaches to suit different types of business operations areas across the new organization:
- For enterprise solutions, Dell’s operations were integrated into EMC in order to leverage the strengths of EMC’s operating model and structure, and high-touch model
- For end-user, computing centric solutions, Dell’s operating model was leveraged
The supporting organizations also split approaches based on their primary missions. Information Technology was integrated leveraging the EMC approach to take advantage of key innovation investments, while supply-chain, HR, and finance were integrated leveraging the Dell model to take advantage of the scale and global optimization of the organization’s supporting technology.
Additionally, businesses which were majority-owned, but not materially integrated into either company (e.g., VMware) retained their model where key functions are coordinated to drive scale and consistency, but the business operated as strategic business units of Dell Technologies.
Merging two large, well-established organizations into a new, single entity didn’t happen without considerable planning, thought and effort. While it might have been easy to simply try and combine existing workforces, where possible, eliminate redundancies, and rebrand the new entity to achieve new economies of scale, the executives realized that type of quick and dirty approach would not meet their larger goals and objectives.
Instead, they took a different approach and started by defining what the goal of the merger was for their organizations, as well as the advantages their new entity would bring to their existing and loyal, customers.
By doing this, they were able to devise a new “best of” approach that defined not only the direction they wanted to take the combined company in, but also, the culture they wanted to foster throughout the organization.
John Powers is Deloitte’s Global Corporate Development leader. He drives the inorganic growth strategy of Deloitte, in coordination with our global business and member firms.
John, a principal in Deloitte Consulting LLP, formerly led Deloitte’s Defense Sector and its Mergers & Acquisitions (M&A) practice in the US and globally. Throughout his career, he has helped to execute several large M&A transactions, including the Dell/EMC merger, and the eBay/PayPal divestiture. His work has spanned the globe and has enabled the effective transition of more than 400,000 employees over the course of his career.
John is a visiting executive lecturer at the University of Virginia, Darden School of Business on the topic of merger integration. He joined Deloitte upon completion of his MBA from Northwestern University Kellogg School of Management in 1994 and graduated with a BA from Brown University in 1988. As an undergraduate, he received an Army Reserve Officer Training Corps (ROTC) scholarship and later served as an Army Finance Corps officer.