In his last interview before retirement, Roger Krone reflects on the company's early struggles and what "put the bounce back in our step."
Roger Krone sat in his office just days before ending his nearly nine-year tenure as chairman and chief executive of Leidos.
Gone was the artwork by his children, models of aircraft that sat on the shelves, and the numerous challenge coins he had collected running the federal technology market's largest company.
This was his last interview as CEO and he was more than willing to reminisce before turning over the reins to Tom Bell on Wednesday morning.
Krone has seen plenty of milestones during his time at Leidos, just to name a few:
- Acquiring the former Lockheed Martin Information Systems and Global Solutions business
- Winning the Navy Next Generation Enterprise Network contract
- Capturing the U.K. Logistics Commodities and Services and Transformation Program
Because Leidos is the perennial No. 1 company on the Washington Technology Top 100, it is easy to think that the company's growth has come easy and was always a foregone conclusion.
But Krone clearly recounted the challenges Leidos faced when he started as CEO in July 2014. Krone also remembers losses more than the wins.
He joined Leidos almost 10 months after the "Old" Science Applications International Corp. undertook a complicated split, including the spinoff of a business that took on that SAIC brand.
"Old SAIC" became Leidos in September of 2013.
Krone said he had to learn to be more of a people person as CEO, a characteristic that apparently didn’t come naturally to him. But as Krone talked about the state of Leidos in those early days, he primarily talks about the people and how people drove the company’s success.
“I don’t think what anyone realizes is when you split a company, you tear the fabric of that company because half your talent leaves because they go to the other company,” he said. “All of a sudden your leadership team is cut in half; your bench strength is cut in half.”
Leidos’ financial performance also was suffering when Krone came on board, so that first year became a restructuring effort. The company wrote off half its net worth in the quarter after Krone joined.
“I came in with kind of an idea of a new company built around digital technology and we are going to grow and move into these areas,” he said.
Instead, he found himself steadying the ship and rebuilding. Leidos put new processes and tools put in place, increased training efforts and added new talent. Krone also put a focus on diversity.
“We had no employee resource groups when I joined. We didn’t even have a director or vice president of employee engagement and diversity,” he said.
The split of "Old SAIC" meant there was a lot of emphasis on cutting overhead.
“They had cut everything to the bone,” Krone said.
On top of that, the company wasn’t growing. At the time of the split, Leidos had about $6.5 billion in revenue. But within the next 18 months, revenue was down to $5.1 billion.
“We were not growing. We were not competitive,” he said.
But Krone had a strong team and “everyone rallied.”
The senior managers sat on the same floor at that time.
“We were small enough that we didn’t really have meetings. We just all got together,” Krone said. “We didn’t have the governance structure in place that we have today.”
That close proximity paid off in 2015, about a year after Krone became CEO.
Leidos led a team including Accenture, Cerner (now part of Oracle) and Henry Schein to capture the $4.3 billion Defense Healthcare Management Systems Modernization contract for helping the Defense Department integrate a new electronic health records system.
“That was a real milestone for me,” he said. “We beat IBM.”
The DHMSM win was followed by the U.K. logistics capture, another contract worth multiple billions of dollars.
“I can assure you we all worked on the proposals,” he said. “I was in the proposal pit. I wrote part of the executive summaries. We were all involved every day. We worked nights and weekends.”
Those wins were signs that Leidos’ core people and core technologies were valued by the customers.
“It really put a lift back in our step,” Krone said.
The wins also set the stage for the IS&GS acquisition in 2016 that was structured in a way that protected Leidos’ balance sheet, Krone said.
“What I think a lot of people miss is in that one transaction, we got back the talent that we lost in the split,” he said. “And we sent a strong message to IS&GS that not only did we get you, but we want you and you’re valuable and you fit in our plans.”
The integration of IS&GS led to the reworking of Leidos’ mission statement and strategy.
Leidos also reworked processes that have made it easier to acquire and integrate other companies such as Gibbs & Cox, Dynetics, the 1901 Group and the Australian business of Cobham.
“Something that is not well understood is that we rebuilt our internal process framework through the [IS&GS] transition. It’s not very sexy but we created what we call the Leidos business framework, the Leidos way of doing things,” Krone said. “It made merging in acquisitions more straightforward because we had something you could merge into.”
Leidos developed common processes for accounting, business development and human resources.
There is still some soul searching even with every win or milestone. Krone has tried to avoid the common pitfall of successful professional sports teams that win the championship one year and fail to make the playoffs the next.
“You have to ask what got us here? What are the things that made us successful,” Krone said. “You don’t let success get in the way of continuing to do those things.”
For Krone that means staying humble and continuing to do things from a people, process and tolls perspective that work.
“We are now in a position where we can hire the best. People want to come here. We can add people to our team who can take us to new heights and new markets,” Krone said. “As a company you have to be dynamic because if you get static, people are going to pass you by.”
The full conversation with Roger Krone will feature in an upcoming episode of our WT 360 podcast.