Jorge Titinger’s first day as president and CEO of technical computing leader, Silicon Graphics International Corp. was Feb. 27, 2012 — and the next day, instead of having time to ease into his new role, he was telling investors about the company’s shortcomings the quarter before.
“There were a lot of questions about the direction of the company, why the miss happened and why it was not visible to the prior leadership team,” Titinger says.
What happened the prior quarter, was that the company reiterated guidance in early December 2011. The then CEO left in mid-December and the chairman of the board stepped in as acting CEO. By the time the books were closed and the earnings were announced, the company did not meet guidance.
“Even though it was reiterated less than a month before the end of the quarter, the actual results were worse, from an earnings perspective, than had been expected,” Titinger says. “That coupled with the departure of the leadership produced some significant concerns in the investment community.”
While Titinger was new to his CEO role, he wasn’t unfamiliar with SGI. He had worked for the company, which delivers high performance computing, server, storage, data center, cloud computing solutions and professional services, a few decades prior and had a good grasp of the organization.
“I had the luxury of being able to do a pretty detailed due diligence before joining, so I had some level of understanding of what needed to be done,” Titinger says of the more than 1,400-employee, $753 million company. “I was able to focus on talking to the investment community about what changes were necessary to get the company back on the right track.”
Following the investor conference, Titinger had to develop a plan to move SGI forward.
“It was a great way to come into the company by facing the folks that I need to keep talking to in the future,” Titinger says. “While it was a little adversarial because the results that the company had achieved the prior quarter were not what they were expecting, these are people who want to see what we are planning on doing, how we are turning things around, and they’ll be cheering for us. That’s how I approached it.”
Here’s how Titinger came into a struggling SGI and got the company on the right track.
Find what needs fixing
To better understand why the company wasn’t performing up to snuff the quarter before Titinger’s arrival, he spent the first several weeks and months diagnosing issues that needed to be fixed.
“I spent a lot of time traveling, meeting with customers, meeting with suppliers, and meeting with the different groups inside the company to get more clarity on the cause and effect of the issues we had to fix,” Titinger says.
After coming into the company, he realized there were certain business practices missing. Without those practices in place, it wasn’t a surprise that the results were unknown.
One of his commitments to SGI’s board of directors was to develop a strategic plan within three months that would guide the company down the path it needed to follow.
“The diagnosis involved a number of areas: How good are our products in the markets that we’re competing in?” he says. “How good are our processes? Is our strategy the right strategy? Are there relationships with customers at the right level? And lastly, is our team the right team?
“I had spent the early part of my tenure here making sure we had clarity in those areas and where to develop action.”
A lot of the initial focus that Titinger had in the turnaround was putting those business practices in place.
“My diagnosis of the business was that there was a misalignment between structure of incentives and the objectives that the company had, especially with the sales force that was incented on bookings only, and we were too complex for the size that we were,” Titinger says.
“SGI today is a combination of the old SGI and Rackable Systems Inc., and the combined company is still quite a bit smaller than the old SGI used to be, but many of the business practices and processes were from a much larger, complicated company.
“So we have spent a lot of time in this past year simplifying what we offer to the customers, refocusing on certain vertical markets instead of trying to be everything for everybody,” he says.
“The essence of the plan is focus, simplify, be able to deliver more value to a narrowed set of customers, and then clean up the internal processes to make sure we don’t get in our own way when we’re working on behalf of fixing customers’ problems.”
The No. 1 thing that helped Titinger identify SGI’s trouble areas was his ability to listen.
“The tendency to come in with prefabbed solutions will be high,” he says. “Anybody who’s gotten to the CEO level has had lots of successes and there’s a danger in thinking every problem can be solved the same way. I would caution people to not just start applying your tool set into the situation, but spend time listening and keep an open mind so you learn what is relevant in this particular situation.”
Take the next steps
The next step, after identifying issues in the business that needed fixing, was to focus on three things.
“One was to set the strategy,” Titinger says. “I view this as a key role for the CEO. You’ve got to set the strategy. You’ve got to drive the culture in the company that will be able to execute that strategy, and then you have to have the right team in place.
“My next steps were exactly down that path. Who are we going to be and what are we going to do? We had to shift the mood from despair to a can-do attitude. That was buried in the company a little bit, so we had to make that come back up. And then we had to strengthen the team significantly given the task we had to go fix.”
Titinger had spent a lot of time talking to customers and employees who served customers — so that’s where the strategy focused.
“If the strategy doesn’t start with the customer, chances are you’re going to have a hard time with market relevance,” he says. “Based on those conversations and that analysis, the focus was where we can differentiate and provide value-added solutions to customers.
“We then mapped our markets from the perspective of where we could bring differentiated value, but at the same time, determine if they were markets that had growth and where we thought we could succeed. We then narrowed down the market focus and narrowed down the product offerings to support those markets.”
Titinger made sure he involved not only the executive team, but people deeper in the organization who needed to execute this strategy during the development process in order to make it successful.
“Strategy serves two purposes — No. 1 is for the company to understand how it can bring differentiated value,” he says. “Everything the company does has to support achieving that. Equally important is what you’re going to stop doing so you can dedicate your resources to those things that you need to do really, really well.”
One of the biggest problems companies may have is saying no to things that either have been going on in the past or are great ideas, but are ones that don’t add value to customers.
“That is the hardest part in the strategy when you’re figuring out what not to do,” Titinger says. “It comes back to the customer. You can have a great strategy that looks great internally, but if it’s not interesting to your customers, it’s going to be irrelevant.”
Deliver on the strategy
With an internal goal of three months to deliver a strategy to the board of directors, Titinger started in March 2012 and in May presented the strategy. Endorsed by the board, the strategy was presented to investors in June.
“The strategy in the end really had three pillars,” Titinger says. “No. 1 was simplification of our focus on vertical markets and product offerings. No. 2 was a shift from an infrastructure provider to being a solution provider as a company, and No. 3 was operational excellence to improve those processes that were not necessarily the right ones.”
Today, SGI is right on track with the strategy and ahead of plans on the operational elements, spot-on with the simplification elements, and making the kind of progress Titinger wanted to make.
“Given that we’re on track and maybe slightly ahead on the execution of the plan, my assessment of the company is that we have done very well,” he says. “We have turned the company back to profitability within two quarters. We’ve gone from thinking we needed to raise cash to actually generating cash.
“We have a much more focused product roadmap that addresses market needs. We’ve improved the quality and capability of the senior team and that has long-term positive effects for the future of the company.”
With the new strategy in place, SGI employees are enthusiastic and see a path to success.
“I’m excited about the possibilities the company has to add value to our customers,” Titinger says. “I want our investors to view us as one of their best investments, our customers to view us essential to their success, and I want our employees to view SGI as the best place they can be.” ●
- Understand where the issues are in your company.
- Design a strategy to fix the problems.
- Deliver on launched initiatives to make a better company.
The Titinger File
Name: Jorge Titinger
Title: President and CEO
Company: Silicon Graphics International Corp.
Born: Lima, Peru
Education: He has a bachelor’s and master’s degree in electrical engineering and a master’s degree in engineering management from Stanford.
What was your first job, and what did you take away from that experience?
I’m in high-tech by accident. I came to Stanford and studied electrical engineering. I played for the soccer team all four years and played in the North American Soccer League after college. Then the league went bankrupt in 1985 and that’s when I went back to school. I also played soccer on the U.S. Indoor National team from 1988 to 1993.
That was a tremendously fun time. I learned a lot from the world of sports that is relevant to the world of business such as teamwork and feedback. The early parts of my career were divided between running around chasing a ball and going to the office.
What position did you play in soccer?
I played center forward.
Do you still play?
Yes. I have a saying, ‘The older I get, the better I was.’
Do you have a favorite player?
In my office I have a picture of Pele, but today I think Leo Messi is out of this world.
What is the best business advice you’ve ever received?
I had a mentor who used to say, ‘Mood is everything; the rest is just details.’ I find that to be incredibly relevant. The other piece of advice is that there is no substitute for hard work.
Who do you admire in business?
I started my career at HP and I have studied the path that both Hewlett and Packard took. Those two are people to learn from and admire. They were relentless about driving profitability and doing it by adding value to customers. For me that has always been a guiding principle.
How to reach: Silicon Graphics International Corp., (510) 933-8300 or www.sgi.com