At Fry-IT
Book highlight: The SAIC Solution
28th of November 2007
The SAIC Solution
chronicles one American technology corporation that grew to long-term success
($8bln. revenues) while motivating its employees by shared company ownership and high
degree of autonomy.
Similar in some aspects to Semler's Maverick!, SAIC Solution describes company history and a foundation of ideas on which Science Applications International Corp., a U.S. defence industry company, was built.
SAIC started essentially as a research lab, splitted from the founder's (Dr. Beyster's) previous employment, and was and perhaps continues, after his recent retirement, to be run in a style unlike most corporations -- where employees are not held too closely to the corporate core to boost the executive's ego by the size of the hierarchy they manage, but rather are given as much authority and independence as they can handle, in pursuing their own projects that are expected to be independently profitable (and at year end, assessed in that respect). The corporate core then specializes in providing services to and influencing long-term direction of its branches, without interfering in their day-to-day business.
In a way, this is a delayed-feedback learning process on the behalf of the wide-spread SAIC management as they learn to steer their own units. As an aside, I remembered how this is similar to findings in genetic programming, e.g. in Fogel's Blondie24, where it turned out to be better to assess artificially evolved checkers playing programs after a number of complete games rather than any smaller fragments, such as individual moves. Artificial players assessed on individual moves learned how to play the system rating the moves and not how to play the game. It is obvious how this would translate into office politics vs. getting things of importance done in case human beings worked similarly. My conclusion is that delayed feedback is good and micromanagement and tight hierarchies are severely suboptimal for managing tasks that involve innovation, such as what any technology business does.
Autonomy was great for SAIC, but probably the only thing that could have managed to hold the company together in such situation was widely shared company ownership. This means tens of thousands of individuals holding stock or options in the company they work for, a strong cohesive force that largely withstood all centrifugal forces from all divisions that spent most of the time on their own, only interacting with other company units when choosing to. Additionally, SAIC has synchronization on the information level through their Meeting Week where people from all branches of the company meet up once a year and share ideas in seminars. The granularity again is great, this matches my feeling how often can people from perhaps vastly different units benefit from talking to each other.
Sharing a company in such way is not something a greedy founder could do -- but even at 4% share at the end, a 4% of a massively successful company, Dr. Beyster has obviously done very well. Focusing on maintaining environment where innovation was the key to success within the company was the smart move he made in the beginning and never relented from supporting.
After all these platitutes I need to add what troubles me about SAIC -- in my opinion they could much benefit from diversification, rather than depend on contracts from the U.S. government with over 80% of their revenue. There are other interesting industries than defence and SAIC is missing out on that -- they recognized and acquired Network Solutions when the domain registration company was small and sold it to VeriSign at a handsome profit, but given further developments in the internet industry it obviously was a mistake to sell such a uniquely positioned company at all. SAIC went back to defence and regular inflow of American taxpayer's money, something thy have done very well for 40 years. I'm convinced they'll diversify one day though, but for the time being, I remain more impressed with their organization than their business.
Good luck to SAIC in the future and good luck to others in incorporating the ideas that SAIC pioneered on a large scale.