Q&A with Doug Wagoner

What spurred the division of the company?
The decision to pursue a potential separation came after management and the board of directors reviewed several strategic options for SAIC, in response to many changes on the horizon in our traditional markets. The decision to separate into two publicly traded companies — a solutions and products company and a technical engineering and IT services company — enables the best response to the impending market changes.

What was the goal?
The goal is nothing short of creating America's next two great technology companies that are designed for the purpose of competitively serving their markets, while at the same time increasing opportunities for employees and value for shareholders.

What are the expected benefits?
There are many. Both companies will be able to bid billions more in federal contract opportunities as separate companies, because the split removes many current organizational conflicts of interest. Currently, if SAIC serves as an advisor to a customer for a new system, it cannot bid on providing the system itself. Post split, the two companies can bid independently on each opportunity. Other benefits include the companies' ability to organize differently to meet their specific market conditions, develop investment priorities specific to their own business, and better serve customers with precision and focus.

When did you begin work on it?
Actual work began late July 2012, in preparation for the board of directors to approve the pursuit of the split. The company announced its plan to pursue the split on August 30, 2012, and we were off to the races.

What was the first thing you had to do?
The first thing we did was establish the leadership team. I was asked to be the program manager, reporting to the chief operating officer. I was running a $900-million business unit for the company at the time but had my deputy take over.

Within a week, I took the reins of what we internally call the Gemini Program (to signify creating “twins,” or two equally successful firms). We then established a program management office to provide structure and oversight — we did not want this split to be a distraction to our employees, who have a job to do every day for our customers, fellow employees, and investors.

I ran this like any complex program SAIC does for our customers and used our engineering and management processes to do so. This helped everyone stay on the same page and use the same language.

What did the split cost?
At this time, we are unable to provide specific cost information. We will be providing information on that in our financial filings during the year.

How many people were involved in working out the details?
The program management office consisted of 30 people at its height who were dedicated full-time to the separation transaction. Other people were brought in from time to time to provide specific guidance or support.

What were some of the big picture or top priority objectives you had to consider while working out the split?
The board of directors was very clear on the priority objectives for the separation:

  • Allow for effective management structures focused on the uniqueness of each firm
  • Unleash two strong companies on Day One, with growth opportunities for both firms
  • Remove current organizational conflict-of-interest constraints
  • Spotlight the higher growth businesses within the solutions company
  • Complete the split without tax implications to shareholders
  • Prevent the split process from diverting the attention of the enterprise, so we could continue to focus on our customers' missions and meet commitments to employees and shareholders

What were some smaller concerns?
When you split an $11-billion company with 38,000 employees in a highly complex transaction, there are innumerable smaller issues to manage. But some of the other priorities we had were:

  • Keep employees informed on the process and the major milestones; involve them as much as possible, but don't create a distraction
  • Provide information that can be shared with customers and partners to keep them apprised of the progress
  • Maintain a focused core team of executives whose first job was working in the program management office and dedicated to the split
  • While you want the two firms to start being “independent” prior to Day One, you have to ensure that you remain one company with the same goals until the actual split

Was there anything that distinguished SAIC's split from other companies in the industry that went through the process?
Absolutely. I think there is one very fundamental difference in the approach we took from splits in our industry and others that I studied. We did not take the approach of a “divorce,” where each business goes its separate way but otherwise remains largely unchanged. Instead, we reevaluated each business, starting with the strategic intent of each firm, and looked for ways to optimize how they would operate as independent companies that were very different from each other.

Using each firm's strategic intent and a systems engineering approach, we launched two independent design teams and asked them to develop a detailed list of requirements specifically for each company. For example, if you were to create a $7-billion technology-based solutions company today, what would your organization structure be? What type of IT systems would you need? How would you structure business development? What is your incentive system?

After weeks of developing very finite requirements and getting approval from the executive leadership team, we looked into the current organization to find the people, assets, and processes that best met those requirements. We found that we had about 90 percent of what was needed today for each firm, but some things had to be created new. Also, we discovered assets, processes, and organizations that neither company required going forward, and that led to substantial cost savings.

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