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Case # L-35 | Stanford Graduate School of Business
Data First, Story Second
Throughout the SPR, Murphy consistently emphasized “data first, story second.” Now that the team had the data, they needed to take action. Over the course of two weeks, the leadership voted and shared how they felt about each business unit. Murphy recalled that it was easy to tell which unit was doing well or not, but what took more time was deciding “what to do about it?” There were instances that resembled a “diamond in the rough,” where the question was “could it do well under the right structure and leadership?”
The SPR also provided a good people filter:
"You were able to learn about people through the process as well. Some people clearly didn't like this process; other people thrived in this process, and you could see it. It became clear after that first week which of those business leaders were really going to adopt the new culture and excel at Marvell, and understood where we needed to make changes.” It wasn’t personal. It was about understanding your business. Do we have the numbers right? Do we understand really well what the competitor landscape is? Do we really think that this product with this feature is really going to differentiate us?
I said, ‘Look, I'm going to judge you more on how you respond, how intellectually honest you are, how transparent you are with me, and how aligned you are with the vision we're trying to drive, because we may have another business for you to run. We may have a whole other opportunity for you inside this company, even if we sell your business.’"
— Matt Murphy
A Refresher: Market Share vs. ROI
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Market share is a closely correlated to return on investment. Market share is more important for infrequently purchased products (Product B) than for frequently purchased ones (Product A).
Murphy was clear that the goal of this process was for the company’s engineers to work on products that would be successful.
"This isn't saying 'I like this product line,' or 'I don't like that product line.' All of us come to work every day, and we work really hard. As business leaders we owe it to the engineering teams to make sure that they're working on products that are going to be successful in the marketplace and deliver a financial return. As the leadership, we needed to make sure that we're putting our engineers to work on products that are going to be successful. I saw a lot of the engineering leaders say, 'Yeah, I like that idea, I think that makes sense to me.'"
— Matt Murphy
Simplifying The Organization And Increasing Focus
In September 2016, Murphy presented the outcome of the SPR and his plan moving forward to the board. Marvell would focus on infrastructure, specifically storage and networking, and de-emphasize the consumer commodity business. The organization would be simplified and the number of sites reduced (Marvell operated in 13 countries at the time). Murphy saw this plan as “going back to the core strategy.” As part of the transformation, Marvell would cut $200 million in operating expenses, as well as $50 million of COGS. The plan was to do this all within one year, Murphy noted, “It was fairly straightforward but really backed up by a lot of varied and very easy to understand data.”
Murphy recalled Feld’s surprise at the ambitious plan, and disbelief that the team aimed to pare more than $200 million in expenses. But, as Murphy explained, the plan came together well:
"It was amazing, because we didn’t try to solve for a number. We naturally came up with a bottom-ups strategy based on the data. This made it easier to sell to our employees and to the street."
— Matt Murphy
In October 2016, Murphy gathered leaders from offices across the US, Asia, and Europe in Santa Clara to announce the new changes – this was only the second time in 20 years that key decision-makers across the company were gathered in one place.
"There were going to be job losses. There were going to be potential divestitures. There was also going to be some rehiring because we were going to need to staff up in certain areas. So it wasn't totally doom and gloom, but this was an organizational muscle that had not been built at that point. And then we announced, and got them on board."
— Matt Murphy
Managing The Organization Through The Transition
Murphy impressed people very quickly with his openness and transparency. Recalling the meeting where Murphy presented the results of the SPR and the new strategy, Koopmans shared:
"There was a point towards the end where Matt got down off the stage, and he started walking amongst all of the leaders in the room and he said, ‘I'm down here walking with you because I'm on your team. This isn’t something I’m going to execute on alone. We are going to have to execute on all of this together, and I'm here to support you. I'm down here with you.’
I felt he was explicitly giving a set of messages and signals to the leaders in the room, that you need to own this change."
— Chris Koopmans
To Murphy, it was very important that everyone see the data, so they could understand why difficult decisions needed to be made.
"As managers and as business leaders, you spend a lot of time thinking ‘we can’t share that, we have to shield our employees from the truth’. Yet, experience has shown me that if you just tell them directly, you'll earn their respect. Hide it from them and you lose that respect.
People worry that morale will go down, and you’ll lose your employees. I'd say, do you know how bad the morale is going to be when you finally tell them that after three years of blood, sweat, and tears and 500 people working on this project, that it will never make a single dollar back for the company? I've not met a single product development person, engineering or otherwise, that's been proud of spending years of their life working on something that won’t be successful."
— Matt Murphy
To many at Marvell, this unprecedented level of transparency provided a number of unpleasant surprises. As Marvell evaluated one of its longtime product lines during the SPR, the team was alarmed to realize how much market share the product had lost, and yet they couldn’t work out why.
"I called an all-hands meeting and I presented the exact same data to the whole team. The room was shocked. I had one of the managers stand up and say, 'I thought we were number one. This is unacceptable. Like, what are we doing? Why are we doing this? Why hasn't anybody told us this before?'
The problem was that their prior leadership had constantly told them that they were great. Engineers are problem solvers and they want to know what they need to do to get better; but if you tell them that they're great all the time, then of course they will keep on doing what they were doing."
— Matt Murphy
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