Rick Belluzzo transformed Quantum by completing a risky acquisition Featured

7:00pm EDT November 25, 2010

When Rick Belluzzo came into his position as head of Quantum Corp. in 2002, the company was at a point where it had to transform itself into something new.

“The hard drive business had been sold, and we had a number of businesses under a tremendous amount of pressure from the dynamics of technology,” he says. “That was the challenge — where were we going to take the company to make us be successful?”

He decided fairly quickly that the company had to transition from a device-focused OEM company to a storage systems company focused on backup recovery and archive segments of the storage industry.

“Part of your job as a leader, which is especially true in technology, is getting on the right side of gravity,” the chairman and CEO says. “There are certain things you do that just seem to work. Forces around you are helping you succeed, and the opposite is also true — when you’re pursuing something that’s just an uphill battle. Part of driving your strategy is making sure you get into a position where you’re not working against gravity — the gravity is working for you.”

That’s the biggest challenge he had to tackle as a result of Quantum’s position in product segments that were going against gravity.

“We can fight all day long to try and stop it, and no matter how good we were, that working against gravity was really a problem,” Belluzzo says. “We spent a lot of time getting ourselves in an opposite position where we’re in markets that are growing, we’re in technologies we know how to do, there are a number of things that are working for us, and we talk about that a lot. I often ask when we’re facing a business problem, ‘How much of this is gravity working for us or against us, versus we’re just not performing well?’

“No matter how good you are and how experienced you are, if you’re working in a situation that is against the laws of physics, as a leader, you’re responsible to not just fight that, but you’re also responsible to get your business and your team working so the gravity is working for you instead of against you.”

He led the company through a number of changes, and by 2006, Quantum was still under tremendous pressure. But that didn’t stop Belluzzo from borrowing $500 million to complete an acquisition.

“That really was the watershed moment in terms of getting us to where we are today,” he says. “We were struggling up to that point, and we had to do something big. This was it.”

Here’s how he used the acquisition to move Quantum forward.

Get your people in place

Acquisitions are always huge undertakings, and the key to Quantum coming out of this successfully was to integrate properly, which started with getting the people aspect in place.

“We took on a strategy that was harder to do — [take the] best of class in both companies to build a new company,” Belluzzo says. “Textbooks tell you that you acquire someone, you integrate deeply and go forward. We didn’t have all the right ingredients at Quantum to pursue our strategy, so we had to acquire and integrate in such a way that we had the best of both worlds.”

That meant that both the executive and the general employee base would be chosen from both companies.

“We took an unconventional approach to doing this,” he says. “That was essential for us to have the skill set and background that we needed to move in this new direction.”

But there are certain things you have to look at to make these decisions — it can’t just be a random selection or who you like best. Belluzzo looked at two things, the first being strength of capabilities in every area — manufacturing, sales, R&D and so on.

“I had to make the decision, ‘Which company was better at that?’” he says.

Then the second part was looking at which leader was better.

“Often, those are the same things, but other times, there was a bit of a mix,” Belluzzo says.

While he worked to pick the best from both companies, he also had to look outside both organizations at times and make hires in addition to the moves and the downsizing.

“We had to, pretty quickly, change the skill base that we had as a company,” he says. “A lot of companies that go through this fail, and I would argue that most of them fail, and part of it is because what they need to do to be successful going forward is very different than what they know how to do. That’s a very hard path to cross, and we had to be aggressive about that.”

Where he had gaps in skill sets, he looked to bring in people to fill those talent voids.

“You start by bringing on a few people who are the real experts in the field,” he says. “They help you define what else you need and how you want to get them. At Microsoft, this was a technique used often that if they were going to go into a new field, they would hire one or two key people and build around them, and we did a lot of that also.”

This comes down to a lot of personal recruiting on your behalf and talking them through your vision.

“There’s not a formula for how to do that,” Belluzzo says. “That’s what part of leadership is — to be connected with people and to recruit and to make sure you know what you want to build around.”

Ultimately, he was largely successful, but he says it’s important to recognize that you won’t get every move right.

“I feel like 80 percent of what we did initially we did right, and we had to adjust to the 20 percent that we may have done wrong in that process, because you never get it fully perfect,” he says.

That’s a key in integrating acquisitions — not getting bogged down in the decision-making process and instead forging ahead.

“We were decisive,” he says. “We were decisive, and we didn’t let things float, because we didn’t have time to let things develop. We had to be clear about what we were going to do and move forward with conviction.”

His decisions weren’t always popular though, and you have to be prepared to handle that.

“Frankly, a lot of people were dismayed at how I went through this process, because they thought I should pick people I was closest to,” he says. “I spent a lot of time with people one on one. I had a lot of input to make those decisions. I knew it was a matter of survival. I put my neck on the line to borrow this money and make this move, and I was not going to make decisions based on anything other than what would drive us to success.”

Communicate

Whenever you’ve got so many major changes going on in an organization, it’s critical that you keep all the affected parties in the loop about what’s happening.

“You spend a lot of time developing a clear communication strategy, and make it clear and as direct as you can in what we are going to do,” Belluzzo says.

He spent a lot of his time visiting his teams all over the world during this process to make sure he was telling them what his plan was and what the decisions were.

“We used the traditional broad communication around employee meetings, but in addition to that, [there was] a lot of face time in front of groups. I know shortly after the launch, I flew around the world and visited almost every site to tell them what we were going to do, what the implications were, to stay very close with people through that process,” he says.

One of the challenges in communicating such a large-scale plan to such a large group of people is ensuring that what you say doesn’t get ignored.

“I don’t know if you know that immediately, but you keep following through and reinforcing the message and expect people to come on board,” Belluzzo says. “We try to make it clear that this is where we’re going, and we need you to be with us, and you can take some time to sort it out, but ultimately you have to get on board.”

You have to make the judgment call as to when people need to get on board.

“There’s no formula for that,” he says. “It depends on the person and the areas they’re in and how critical they are, but you can’t give it very much time.”

Some people self-selected out by saying that the new direction wasn’t what they wanted to do, and he was OK with that.

“You ask, ‘What are some of the success factors?’ and it’s to get a team that has the skills and believes in the future and can work together collectively to take on the challenges that are ahead,” he says.

Between what you’ve created and who’s stayed, you should be on the right path.

“You get it mostly right, but there’s subsequent changes that you inevitably need to make because it doesn’t quite work,” he says. “It is a challenge, because when you go through transformation like this, especially for us, we were de-emphasizing certain skills in the company, certain technical skills in the company, and we were embracing new things, and there are a lot of people who feel threatened by all of that. They used to do a particular thing well, and we just said, ‘We’re not going to do that anymore.’ That’s hard.”

Move ahead with your plan

As he moved forward after the acquisition, he needed to make sure that the new Quantum was on the right track, so he created a scorecard to ensure that happened.

“It would be based on a set of objectives of what we think the most important priority is,” he says. “Virtually at any point in time, I’ve got a very short list of the things I think we need to get done, and so I will communicate those. We will have metrics around them.”

Some of those are a year in duration and others will have more intermediate check-in points. He shares these across the company and they grade themselves on meeting them. Having check-ins helps ensure they’re on the right path.

“I like to lock things down and run hard for six months,” he says. “Then you kind of reflect on what’s gone well and what’s not working and what’s changed, and then you alter it and go put your heads down and run for another six months. That’s about the rhythm that we were on. We’ve not changed the goal, but we do change how we get there.”

In addition to the data, Belluzzo was also careful to pay attention to his instincts.

“There’s data and it’s intuitive,” he says. “You have to follow your intuition about it. For me, the way I know to make a change is if I’m going down a path, and I get really uncomfortable and I start challenging myself, I have a lot of internal turmoil over something, and I reach a point where I say, ‘OK, this turmoil has been here too long, and I need to find a different path.’ The faster you go through that process, the better off you are.”

When you combine your numbers and your intuition, you should know if you’re on the right side of gravity again.

“You can look at your scorecard and look at your results and say, ‘Are we improving in this area as fast as we need to?’” he says. “I would say that if my intuition feels right and the numbers and the progress look right, we keep going. The difference being you spend time looking at the future — you’re always trying to assess whether you’re moving in a direction that’s ultimately going to be successful.”

Now, more than four years after the acquisition, Quantum has reached $681.4 million in total revenue in fiscal 2010. The business has successfully transformed and is profitable.

“Borrowing money was a pretty controversial move,” Belluzzo says. “Yet that’s how we were able to put together enough of the strength that we needed to get to the point where we are today, which is a very profitable tape business and a growing disk and software business.”

How to reach: Quantum Corp., (408) 944-4000 or www.quantum.com