Effective Leadership and Corporate TransformationLawson Software case study

Harry DebesPresident and CEO, Lawson Software

January 27 2010

Roger Bannister

May 6, 1954

One Mile

3:59.4

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1. Vision of what is possible

2. Commitment to change in behavior

3. Attention to detail

4. Leading by example

5. Perseverance

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Transformation Requires

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Lawson Transformation case study

The Lawson / Intentia merger – our quest for the 4 minute mile

Leadership style to enable transformation

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Agenda

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Lawson History

1st

Internet Application

20 Years:• Financials• HR• SCM

IPO

Established U.S. Healthcare Leadership

Company Established

Founded in Minnesota - 1975

NASDAQ IPO - late 2001

2,000 customers in healthcare, public & services industries

97% of revenues in Americas

Various small acquisitions

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Lawson Before the Transformation

Lawson FY02–FY05 Revenue and Operating MarginUS Non-GAAP

1. Lawson: FY02-FY05 reported non-GAAP results.10 Minute Mile

Intentia History

Founded in 1984; IPO in Stockholm, Sweden - 1996

2,200 customers in manufacturing, dis’tion, maintenance industries

Number 2 mid-market player in Europe

83% of revenues in Europe, 11% Asia Pacific, 6% Americas

1984 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

1,000 employees

Company Established

Java platform adopted

Transformation Plan New management team

Symphony & Tennenbauminvestments

Integration of 40 country operations

Major international expansion

IPO Stockholm Exchange

Major international expansion

BUT Transformation Plan did not Transform

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Intentia – Before the Combination

Intentia FY02–FY05 Revenue and Operating MarginSwedish GAAP & IFRS

1. Intentia: FY02-FY05 is company estimate of Intentia performance using Intentia reported quarterly results for CY2001-CY2005 excluding the hardware business converted to USD at average FX rate during annual period .

2. Intentia reported under Swedish GAAP in CY2001-CY2002 and IFRS in CY2003-CY2005.

15 Minute Mile

Intentia Challenges

Complexity 30 countries

Poor Systems material weaknesses

Old Products no new release in 4 years

Customer Loyalty? renewal rate at 84% vs 95%

Employees Loyalty? no raises in 3 years, 22% turnover

Lawsuits 35 customer suits worth $80m

Accounting Rules IFRS

Culture / Laws European

Financial Status no cash, losing $15m/quarter

Is this going to work ?????

+ =

Let’s Put These Companies Together!

Global balance and reach

Broader product portfolio, more industries

Bigger – size and scale matters when competing against Oracle, SAP and MSFT

Platform for revenue and earnings growth

Rationale for the Lawson-Intentia deal

We were bigger, but a lot more complicated

Customer, employee, product & systems issues

Financial weakness

Different cultures

Big (expensive) legal issues

Customer & employee fear that we are an acquisition target

Shareholders hate it – stock drops 25%

Let’s Review – Day of Acquisition

Now What?

What’s the right leadership approach?

Great ManCharismatic

Bureaucratic

AutocraticDemocratic

Theory X / Y

TransactionalTransformational

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What’s the Right Leadership Approach?

Transactional Leadership I know how to get

things done.

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What’s the Right Leadership Approach?

Transformational Leadership I have a Vision for

a new America.

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What’s the Right Leadership Approach?

SituationalLeadership The last thing IBM

needs right now is a Vision.

Louis Gerstner JRChairman & CEO IBM

1993

My Post-acquisition Game Plan

Year 1 – FY07

Transactional LeadershipDon’t screw this up (even more)

Stabilize

Integrate without negatively impacting customers

Year 2 – FY08 and beyond

Transformational LeadershipRe-define the culture

Change behaviors and thereby outcome

Year 1 - Transactional Measures

Focused on financial stability

Set up weekly CEO team meetings

Held people accountable for results

Changed compensation plans to pay on company goals

Changed management where needed

Identified & crushed rocks in our backpack one by one

Crushed RocksCrushed Rocks

Set Specific GoalsSet Specific Goals

Year 1 - Transactional Measures

MinutesPer Mile

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6

4

2006 2009 Goal

Time

Our Goal

Measured ProgressMeasured Progress

Year 1 - Transactional Measures

No good answer to the “Where are we going” questionTrying to do too muchChasing every deal, even when it was not right for us

Basic Problem: Lack of Focus

⇒ Poor Decision Making⇒ Unhappy Customers⇒ Dissatisfied Employees

Year 2+ Transformational Measures

Enduring companies don’t exist to merely deliver profit – they have an underlying mission and set of core values which remain constant, even as the business goes through various evolutions.

Jim Collins, Good to Great

Year 2+ Transformational Measures

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A Simple Mission, Focused on the Customer

To make our Customers stronger.

By listening to them to first clearly understand their objectives

By improving their business performance by

• providing them with a comprehensive solution • streamlining their business processes• reducing their costs• providing them with a platform for growth • making their lives simpler• providing them with a superior experience

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A Clear Vision

To be the global ERP leader in each of our target markets.

We will achieve this Vision by:

1. Focusing our development and go-to-market efforts in our target markets

2. Offering our customers a superior experience

3. Achieving world-class performance in each of our functional disciplines

A Focused Strategy

SERVICE INDUSTRIES

EQUIPMENTSERVICE &

RENTALHEALTHCARE PUBLIC

SECTORFASHION FOOD & BEVERAGE

Growth Markets

MANUFACTURING& DISTRIBUTION

INDUSTRIES

STRATEGIC HUMAN CAPITAL MANAGEMENT

General Industries

How do 4000 people in 35 countries make the right decisions ?

Clear Core Values & Behavioral Expectations

Decisions are easy when Values are clear.

18-month inclusive process to define Core Values

Passion and CommitmentIntegrity and honesty in all of our relationshipsTeamworkPersonal responsibility for resultsA conviction that Simpler is Better

Clear Core Values & Behavioral Expectations

Operationalizing the Core Values

WHAT you do is as important as HOW you do it

What = Hall of Fame How = Hall of Shame

Operationalizing the Core Values

Core Values

Living the Values has become a hiring / performance / promotion criteria

Measuring adherence is part of our performance review process

LOTS of communication– Use symbols (rocks), Icons (Lars), metaphors (4 min

mile), celebrating people who live the values, and many illustrations to communicate the mission, vision and values

What Role Does the Leader Play?

Core Values

Have a multi-year (or phased) plan

Paint a vision of the future and include strategy and tactics that make it real

Establish Trust - live the Mission, Vision & Values every day

Set high but realistic goals and show people how they can be accomplished

What Role Does the Leader Play?

Core Values

Inspect what you expect. Transactional review does not end when you move to Transformational phase

Spend at least 30% of your time with customers

Coach, develop upgrade the team

Communicate, communicate, communicate

Did it work ?

+ = ?

Return to License Growth

1st Half

2nd Half

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Bottom Line Results – the Ultimate Yardstick

1. FY’05 company reported result was 6%. 3% is company estimate of Lawson and Intentia performance for FY’05. Intentia acquisition closed in Q4 of FY’06.2. FY’06 company reported result was 11%. 5% is company estimate of Lawson and Intentia performance for FY’06. Intentia acquisition closed in Q4 of FY’06.

(Non-GAAP)

Pre full impact ofIntentia acquisition

EPS Growth

Pre full impact ofIntentia acquisition

63% CAGR in EPS between FY’05 and FY’09

+63%CAGR

Non-GAAP EPS

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1. A Vision of what is possible Short-term / Long-term

2. Leading by example Role Model

3. Changes in behavior Moving Cheese

4. Attention to detail Transactional Leadership never ends

5. Focus on what matters Find the 4-5 KPIs

6. Perseverance Be right, then persist

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Transformation Requires

Summary

From this … … to this

But we’re not finished … the transformation continues …

The Lawson Transformation

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