Michael Dell performed a ‘hard reset’ of his company so it could survive massive industry shifts and thrive again. Here’s how it’s done

Don’t just survive…thrive. It’s a phrase leaders hear often during market turbulence. The problem is it misses a critical point: Just surviving will not advance an organization to a state where it will thrive. Executing strategy in a turbulent environment requires facing uncertainty head-on as you move through a loop of stabilizing your business, resetting or changing the strategy, and then redirecting your company back on a performance pathway to thrive. It is a continuous growth loop across three modes: survive, reset, and thrive.

If you are not prepared to go through a reset and manage the changes that come with it—you will likely not get to thrive mode. Resets are hard because resets involve change. But change is hard for individuals and harder still for organizations. And what is even harder is when the reset needed is more than micro adjustments and slight strategic shifts but a fundamental change in your organization’s strategy, structure, and operating model. So, what happens when you need to reset everything?

It’s a sobering question, and it happens. I call this a “hard reset.” This comes when you have acknowledged that future performance will only come from a full set of changes, and to make these changes, you need longer to determine the scope of the pivot and how to go about it. It happens when there is a combination of the following: Your situation has fundamentally changed, and most of your beliefs about the strategic environment are challenged. Your current competitive advantage has been significantly compromised or weakened, and your historical advantages will not provide differentiation—or you realize perhaps it never did. Previous assumptions about who your ideal customers are, the value proposition you have for them, and your go-to-market and sales approach are no longer valid. This might be because these growth areas no longer provide opportunities, or you are no longer set up to win in these spaces. And your current list of priorities is no longer accurate or reflective of the situation you are facing.

When this is the case, embrace it. It does not mean you will never thrive; it just means you need longer in the reset and transition mode. You can move through a hard reset successfully by embracing a few critical steps.

Refocus and reset the team

Re-examine the team you have with you on the reset process. Hard resets are not for the faint of heart, and many on your top team will not want to go on the journey of leading this level of change. Ask each executive team member to recommit to the strategy process within this new reality and be prepared to lose team members who don’t want to sign up for it. It’s better to start with a smaller team who will commit to the change. While you want a small inner circle, you will need to actively engage a wider stakeholder body to help test beliefs and vet assumptions. Think of this as a small tiger team who will work on the reset and a wider council to engage with for testing and learning.

Cycle through a set of tough strategy questions

A hard reset asks and answers a small set of critical strategy questions. It starts with revisiting your beliefs. Discuss and debate your updated beliefs with the team and build a plan to actively test the ones where you disagree or have the most uncertainty about. Next ask what it will take to build a defensible competitive advantage going forward: Determine if you still have a competitive advantage (you probably don’t—otherwise you wouldn’t be in a hard reset). Glean what elements you can use to strengthen and build an advantage going forward. Over-index on the assets you can strengthen and discuss what you will buy or build. Make sure you anchor this in your beliefs around where the world is going. Your “where to play” choices are based on your future sources of advantage, so be open to new ideas but also be realistic around which customers are going to value your offering. Continually and actively test the market to learn and get more nuanced in your future choices, especially around what you will decide as your top, midterm priorities going forward.

Set milestones

During a hard reset, develop rolling three-month milestones set towards a six-month definition of success. Limit these milestones to ten or fewer focused tasks. Remember you are executing these milestones while continuing the reset process and related discussions, so be realistic with what you can achieve and avoid including mere operational tactics on the milestone list.

Track these milestones in a focused tracker that I call a DDD, which stands for Define-Do-Deliver. For each milestone goal, determine the following:

• Define: What do we now know that we need to know to execute this?
• Do: What activity needs to be done?
• Deliver: What result, ideally quantifiable, will this produce for the organization?

Each DDD should have an owner and a deadline with the goal of having all “defines” completed one-third of the way through that execution time frame. Meet frequently to review progress. Celebrate and communicate progress along the way and keep learning velocity high, as you will incorporate these learnings into the updated top midterm, strategic priorities when it is time for them.

Find your center of gravity

Successful transformations from a hard reset necessitate a clear center of gravity to move forward. Your transformation center of gravity is the key guiding principle or insight that encapsulates the value-creating transition needed. It is the critical outcome of cycling through the reset questions, and the main frame for all future decisions. It will only emerge after vetting and testing multiple assumptions. Let it emerge and do not force it. Once you have it, communicate it incessantly and put all other choices through this lens. Do not reset the strategy until you have a firm grasp of your center of gravity, else you will falter repeatedly.

When these are articulated, the subsequent strategy choices can be made around them.

Key to IBM’s historic turnaround under Lou Gerstner was acknowledging IBM had in many ways lost its way in the technology landscape. Gerstner successfully led the transformation of the company by reframing IBM’s center of gravity as not being a mainframe company but rather the only one that could provide integrated solutions to the world’s largest companies. Gerstner and his team knew that they were not the best in any one area, but major customers would place greater value on having confidence that the technology package would all work together than in picking individual winners and making it work themselves.

Finding your center of gravity is the critical juncture step of the hard reset. Keeping a clear line of sight into this will enable you to make further coherent choices across the board.

Dell’s hard reset

Massive shifts in industry trends can also lead to hard resets. Dell was the world’s largest seller of personal computers in 2000. In the decade that followed, there was a race to the bottom in laptop margins. The market became divided between high-end laptops and low-margin Chromebooks with little room for a middle player. The server and storage business, another of Dell’s strengths, became increasingly obsolete in the industry’s movement towards cloud computing and the Internet of Things (IoT).

Founder Michael Dell returned to the company to lead the hard reset. This included taking the company private to make big changes outside public market scrutiny. The small team, with Michael Dell at the helm, renewed focus on where the technology world was going and made deals to match it, including the enormous $67 billion takeover of EMC which owned an 8 percent stake in VMware. Using the VMware spinout to boost cash and collateral, the company eventually went public again in 2018.

Dell Technologies, its new trading name, was able to successfully compete in a renewed PC industry on the bet that companies would keep some historical data housed in servers for diversification. Its key insight was around the future of a bundled B2B offering around data, becoming one of the largest players in data center servicing, and being able to offer a powerful bundle in data storage, services, and technology infrastructure. Adding a cloud-management subscription added recurring revenue, and from 2018 to 2022 Dell had a CAGR of 6.6 percent compared with less than 5 percent for the IT industry.

Having to undergo a hard reset does not have to be bad. For many companies, such as IBM, Burberry, Dell, Tesco, or others such as Best Buy, the hard reset led to dramatic growth journeys. What is bad is to ignore the insight that you need one. When you need to press the reset button in full, assume all existing assumptions have been challenged, test and vet your new beliefs, and be prepared to build a new business.

This edited extract is from Survive, Reset, Thrive by Rebecca Homkes ©2024 and is reproduced and adapted with permission from Kogan Page Ltd.