BMC and the Anatomy of a Successful Turnaround

Most tech companies trying to turn themselves around start with the products that customers don't want right now, not the products those customers will want several years from now. That's why most turnaround efforts fail. BMC, having gone private and assembled a new executive team, seems to have learned its lesson.

I've been fascinated by corporate turnarounds ever since I architected one at IBM, only to have the executive in charge agree with my plan but decide it was too much trouble and sell the business unit in question (ROLM Systems). I also helped evaluate buyers and provide a report clearly showing that selling the unit to Siemens would be a catastrophe. Of course, that's exactly what the executive did — and it was a catastrophe.

I've covered a number of turnaround efforts over the years and closely follow Dell, HP, BlackBerry and BMC these days. Recently I had a chance to talk to Paul Appleby, BMC's executive vice president of sales and marketing. The meeting took place under NDA, but I can give you some general impressions. (Disclosure: BMC is a client of Rob Enderle.)

Telling It Like It Is

Sales executives often try to blind you with BS, for some reason thinking that folks are incredibly gullible. Appleby was candid and BS-free, which allowed me to ask a series of pointed questions about his background and what was happening at the company.

Appleby mostly mirrored my beliefs on how to do a turnaround, some of which are proven best practices. The best part of candor, though, is that it builds trust. That's core to a leader trying to execute a process that generally fails because of investors. Because if employees don't trust you, you'll still fail even if everything else is executed excellently.

Looking to the Future

Appleby has his eye on 2020. This is important in a turnaround, as it takes between five and seven years to pull it off. If you focus on the tactical as a template for the turnaround — in other words, current market needs — you'll likely find, assuming you even complete the effort in the first place, that you're now five to seven years behind the market.

[ Related: How Tech Companies Can Succeed by Going Private ]

Now, predicting what the world will be like several years from now is virtually impossible with any degree of accuracy. However, you can identify current trends, project them forward and refine your vision so that, when the future is now, your company is with it. Appleby fully understands this process and had implemented it at BMC.

Drawing on Experience

Experience with turnarounds, of course, is a key foundation for success. Appleby has an impressive pedigree in this practice and cited three instances where he successfully managed turnaround efforts. You learn a great deal when you execute one of these. (Most seem to learn never to do one again because their efforts failed.)

Appleby understands what it takes to pull one off, which means he lacks the uncertainty most executives experience when coming up with a plan and then executing it. One common misstep is simply avoiding a plan in the first place. Appleby knows you can't do a half-hearted turnaround and suggests that his team has properly provisioned its efforts.

Start With the Customer

In many turnaround efforts, the executive team starts with the existing product set in order to formulate a strategy. That's backwards — if the product set properly targeted customers, you wouldn't need to turn around. Appleby believes, as I do, that you need to start with customers, define solutions around them, create the perfect offering on paper and, only then, start looking at the existing products to see how they fit.

[ News: BMC Automates the Mainframe Change Ticket ]

[ More: BMC Puts Hadoop on the Company Timesheet ]

Remember that Steve Jobs basically recreated Apple's entire product set during his turnaround and focused on consumer electronics, not the PCs that Apple had been known for. Had Jobs tried to build a strategy using printers, PDAs, cameras and PCs for both business and consumer — all of which Apple sold when he took it over — he'd have never created the iPod that transformed the company into the world's leading consumer electronics firm.

This goes back to the directive Thomas Watson Jr. left with IBM: Be willing to change everything but what you stand for. If you start with customers rather than products, your mind opens to what needs to be done, which helps you create a strategy that will actually work. You have to be willing and able to reinvent the company around the customer. That appears to be BMC's secret sauce.

The New, Private BMC

BMC has gone private, which has allowed the company to approach its turnaround much more aggressively than a public company beholden to shareholders and quarterly earnings reports. That, plus an impressive executive team, points to a high likelihood that the firm will succeed.

BMC already anticipated the need to protect IT with efforts such as MyIT and the Cloud Planning Workshop, both of which enhance IT's ability to survive and even prosper during the cloud age. Expect BMC to top these offerings as its turnaround effort dovetails with the changing world.

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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