50 Years InTech. Part 4: The Exxon Delusion

by Jean-Louis Gassée

Exxon’s failed foray into the world of information systems proves once more that culture devours everything, about $4B in its case. How come the supposedly wise Boston Consulting Group didn’t tell Exxon about incompatible cultures?

(Tempting as it is, I won’t comment today on Apple’s traditional September product event. There’s much to say but I’ll wait until I’ve taken a closer look at the products, especially the really innovative ECG app on the new Apple Watch.)

Late 1978, Data General’s VP Europe Barry Fidelman returns to the Westboro, MA mothership and a new boss descends from the sky, more accurately from General Electric. The company descends concomitantly, from Barry’s thoughtful finesse to a more regimental drill management style. Time to make a change.

After briefly fantasizing about a return to HP’s warm embrace, I’m contacted by a headhunter — pardon, an executive recruiter. As you may have experienced, recruiters and their clients generally have no imagination, they function like Central Casting: Send us a 6-foot Caucasian male, wide shoulders, lantern jaw, blue eyes… I have none of these attributes but I’ve become known as a turnaround specialist after my adventures at Data General France, and that’s exactly what the client, Exxon, is looking for.

After a short stroll along rue de Courcelles — the recruiter’s office is practically next door to DG Paris — I’m greeted by a smiling gent who proudly offers glossy press cuttings, including a Fortune Magazine article that praises Exxon for its visionary plan for a post-petroleum future. I’m also treated to a set of slides from the Boston Consulting Group (BCG), the management consulting company Exxon had hired after two destabilizing and disorienting Middle East supply crises. I don’t know what psychedelic mushrooms or toad exudate the BCG shamans used on the Exxon execs but it worked: Exxon’s mantra becomes ‘Information Is the Oil of the 21st Century’. Exxon Information Systems was born to lead Exxon into its post-oil future.

As part of the transformation, Exxon wants a more tech savvy CEO for their French Information Systems affiliate. This sounds like a good opportunity to put my turnaround experience to work in a promising, forward-looking, well-financed context.

Sales and Customer Service staff seem happy when I arrive at the office tower on the eastern edge of Paris. Months of uncertainty have been dispelled — they’re keeping their jobs.

The reception is frostier on the finance side of the house where I can’t understand the head of Finance’s bizarre objections to my conventional requests. I initially feel sheepish and blame my own inchoate financial education for the constant misunderstandings (you may recall that I had remedial finance instruction at the INSEAD business school early in my DG years), but with some advice and confidence boosting from an older friend, I seize the opportunity to deploy a theorem that I had developed at DG:

“If I don’t understand what you’re saying, I can’t possibly be the idiot. Either you don’t know what you’re talking about, or you’re hiding something. Would you like to go back to your desk and come back when you’re ready to make sense?”

It sounds a bit arrogant, and, of course, it’s only justified in the individual’s area of responsibility — it would unfair to ask a software engineer to explain how to account for goodwill impairment — but it works. An audit reveals irregularities. The gent did have something to hide. I promptly bring in a replacement from my former employer (a friend who would follow me to Apple and be later taken from us by tobacco cancer) and the misunderstandings disappear.

On paper, the Exxon Information Systems conglomerate looked like a behemoth-in-waiting, circling the bits-and-bytes market from several angles, amply financed by the rich oil giant. Undoubtedly, information is the oil of the 21st century…so how is it that today’s Exxon Mobil (XOM on stock charts), is only worth $350B versus about $1T for Apple and Amazon, more than $800B for Google and Microsoft, $470B for Facebook, and so on?

It wasn’t for lack of dues. Soon after the BCG redemption, Exxon put about $2B on the table — that was real money before Uber and Snapchat billions — to buy Vydec, a word processor company; Qwip, a fax machine; Qyx, a smart typewriter; Intecom, a telephone switch, a.k.a PBX; and Zilog, a microprocessor company started by the illustrious and outspoken scientist Federico Faggin, whom I would later befriend during my Logitech years.

These weren’t toy technologies. Zilog created the well-respected Z80 microprocessor. The Vydec word processor system had an elegant, full-page vector display, much more legible (and pleasant) than the coarse dot-matrix display used by competitors. Law firms and other high-volume document producers appreciated Vydec’s polish and professional features.

It was an exciting time, but I soon saw Exxon for what it was: An out-of-its-depths organization that had no feel for the world of bits and bytes, hardware and software engineers, end-user sales and marketing. For Exxon leadership, these concepts were just that: Ideas without a reality. It was impossible for them to make the right choices.

For example, Exxon execs felt they were being told tall tales by shifty entrepreneurs…and sometimes they were, but the execs couldn’t judge. Nervous Exxon accountants overrode local management’s authority all over Europe, demanding written advance justifications for the smallest office expenses…because they didn’t know what was essential and what was petty office graft. It was an unbridgeable culture obstacle; BCG had convinced the company to perform dance steps for which it had no internal rhythm.

Sitting in my office on the 17th floor, and after months of non-communication between the disparate acquisitions, I begin to see the negative power of incompatible cultures. Culture isn’t a set of rational dicta. Culture works below our consciousness, processing, filtering, and labeling raw data before passing the result to our “waking” selves. That’s how we end up with Obvious Truths, that’s how we get to the powerful and destructive It’s How We Do Things Here.

I jump ship and start to look for my next assignment…and I know where I want to land. After having visited Loveland, CO during my HP days, I long for a return to the US.

Exxon would spend another $2B trying to make the Exxon Information Systems work, a total of $4B wasted dollars. After years of failure, it finally threw in the towel and returned to the business it knew in its head and its gut.

Right idea, wrong culture — it’s retroactively obvious. I can forgive myself for not seeing it as a rookie executive. But how could the all-seeing, all-knowing Boston Consulting Group take money from a company when they must have known that the culture was incompatible, no matter how good the idea?

— JLG@mondaynote.com