Inside SAIC's growth strategy

Tony Moraco is the CEO of one of the newest companies in the market -- and one of the oldest and most respected.

Legally, Science Applications International Corp. is a new entity, as it spun off from the old SAIC, which now goes by the name Leidos.

As the leader of the new SAIC, Moraco faces the challenge of both preserving a rich legacy, but also creating something new. Oh, and by the way, he’s doing all this during one of the toughest markets we’ve seen in a generation or more.

When I sat down with Moraco, he talked about those challenges, his strategy going forward and what it’ll take to be successful going forward.

Q: What is the benefit of being a separate entity from the rest of the legacy SAIC?

Moraco: I think it is important to start with the value creation story, and there were two strategic lines to the decision to split: competitiveness and organizational conflicts of interest.

With competitiveness, you need to look at cost structures, and we really saw a divergence on the services side between some of the higher investment, more capital-intensive systems business and what we do.

With OCI, you used to be able to mitigate through an organizational separation, but we see much more sensitivity to it now. The impact was an inability to pursue different dimensions of the business. We self-selected out of programs that we were capable of doing.

Those two things combined to create value in the market that was contracted.

So, competitiveness and market access were the two fundamental drivers.

Q: Was being the spin-off an advantage in getting your cost structure aligned so you could be more competitive?

Moraco: Both sides had the flexibility to design and implement change, but as the spin-off, you don’t have a lot of the legacy liabilities.

We are very focused on the federal market, and that gave us the ability to be a bit more cost-sensitive and consolidate our corporate center and that first senior-level layer. We used to have a corporate organization and then groups or sectors, but we were able to collapse all that.

Because our portfolio is mostly in the federal space, we didn’t have to have different lines of business with different infrastructures.

That simplification allowed us to take corporate costs out.

Q: Why is controlling costs so critical?

Moraco: Federal budget constraints have increased the competitiveness across the whole industry. This applies to us, to Leidos, to all the other firms that you see out there. That’s today’s industry dynamic.

You have to have a competitive structure.

We have a lot of higher value services, so we don’t consider our business much of a commodity play, but you have to be price sensitive.

You can’t squander resources. You have to be selective. But it’s all just good business.

Q: Besides price and controlling costs, what does delivering value to the customer mean?

Moraco: Fundamentally, it’s delivering on the mission, whatever those requirements are.

We can help customers with the system engineering, problem solving challenges. They can then procure a platform or payload or some other system in a more efficient way.

We can help them navigate these challenging times.

We’ve beefed up our enterprise IT services, cloud and application development. Those things together give our customers a more holistic view of how you leverage your IT with the mission side.

For example, how can you manage your network smarter to deliver more mission capability? We can do things on the mission side and the IT services side.

We think the budget discussions are becoming more inclusive in these areas. Maybe 10 years ago, they were more siloed. The IT budget was over here, the CIO did his thing, and the mission guys did theirs.

Delivering on this value proposition is derived from good customer relationships and being a trusted technology integrator.

Q: As you build this new company, what kind of culture are you creating?

Moraco: SAIC had a great culture and a great brand, but only one could keep the name, and we’re thrilled that we will keep the name.

There is a legacy of employee-ownership and entrepreneurship, and we want to sustain those elements, but we also want to make sure that we can advance an organization that is committed to the process of improving and learning in a culture of accountability and responsibility.

We’ve designed the company under a matrix model, which increases collaboration between the customer knowledge set and the technical experts. That convergence is very powerful.

I want to make sure people understand the markets, understand the business and collaborate.

An enterprise view is a critical component, yet we want to make sure the individuals retain a sense of entrepreneurial innovation and customer relationships that tie to that.

The matrix, how people are organized and new relationships that drives the business are critical aspects of our culture.

We want to maintain the highest ethical standards and make sure the culture is respectful in that. And we want to stay focused on mission delivery.

If we do those things, then good things will happen.

Q: Can you describe how your matrix structure works?

Moraco:  We created customer-facing organizations. We now route for the first time, all of the Army portfolio, for example, into one business group. We have five groups that face the customers that manage the pre-award pipeline, the opportunities, and execute the programs.

In turn, we created eight service lines built around technical capabilities.

It allows for repeatability. Let's not be limited by one technical team delivering just to the Navy. That technical team should be able to take and transfer that same solution to the Army or federal civilian customers.

The matrix allows us to have more focus and prioritization in a customer domain. It allows us to aggregate resources in the capability domain.

We discovered a lot in this process. I didn't know we had as much Army work as we do, because it was spread around.

It also means we don't have to spend a lot of investment money to pursue new domains. We just have to apply what we already know to a new customer set.

We think that will play well over the next few years.