MaRS Library Case study: Strategic focus at Symantec
In Symantec’s early days, the only thing their dozens of products had in common was the packaging. As a result, the company sold into many markets. Management at Symantec was unaware of who was buying their products, and the company had no real relationships with their end users. Symantec lacked strategic focus.
In the 1990s, Symantec’s main product was the Norton line of computer security and performance software. Dominant in this market, management at Symantec was unable to decide which opportunities to pursue next, so the company pursued them all. In 1989, Symantec had launched the ACT product line offering tools for salespeople to manage their contacts and sales pipeline. In 1998, Symantec introduced Visual Café, a set of tools for software developers programming in Java for the PC. Though profitable, Symantec had gotten into two unrelated businesses that did not make use of the company’s technology strengths or its existing customer base. Symantec’s product development strategy of “do it all and hope something sticks” did not prove a formula for leadership in the cutthroat market of consumer and enterprise technology. Throughout the 1990s, the company’s revenue growth remained unremarkable.
In April of 1999, a new CEO took the helm. John Thompson conducted an in-depth study of the company’s strengths and weaknesses, and its competitors and customers. His conclusion was that the company needed to focus. Management sought to identify a large addressable market that was expected to grow in the near future, and they pinpointed Internet security as a market with great potential. They noted the rapid uptake of broadband Internet, increasingly borderless networks, expected growth in online transactions and the lack of a clear leader in the industry.
Although the ACT and Visual Café product lines brought in a combined $55 million in annual revenues, Thompson decided to divest these interests. Visual Café was sold to WebGain for $75 million in cash and ACT was licensed to Interact (previously SalesLogix) for $20 million plus future royalties valued at $57 million.
Thompson’s next step was to set aggressive goals aligned with the new company focus. Symantec set out to become a $1 billion company by the 2002 fiscal year, and to become the market leader in Internet and enterprise security by 2003. At the time, the company had revenues of $580 million and would need to grow by 72% over two years to meet the new target. Adding to this challenge was the fact that Symantec did not then have a single salesperson dedicated to the enterprise security market. Although the company had good traction in this market, it was due to people purchasing their products at retail stores.
To overcome these hurdles, Symantec would have to grow substantially through acquisitions. As a successful software company, Symantec had previously developed expertise in integrating acquired companies and technologies into the business. Symantec bought AXENT Technologies for $1 billion and 18 other firms in the five years following the company’s reorganization.
Thompson also introduced a process of measuring metrics that aligned with the achievement of the company’s two strategic goals. All employees were held personally responsible for their performance as measured by these metrics, and those who did not perform or who were not comfortable with the new policy left the company.
Symantec succeeded in meeting each of its strategic goals and by 2003 had become the Internet and data security supplier of choice for 950 of the Global 1,000 companies. With stellar revenues, the company achieved a market capitalization of $12.5 billion by the next year.
Symantec created and fine-tuned its corporate focus by pursuing a strategy that made use of the following insights:
- Adjacent markets. Placing an increasing emphasis on strategic focus helped Symantec identify and capture adjacent markets, leveraging the company’s core strengths. This strategy of addressing adjacent markets was also used successfully at Dell. Dell started by selling PCs to home users. The company then expanded by selling computers to small businesses. Their next step was to pursue large businesses, and then the company began offering data storage equipment to large corporate customers. Rather than pursuing unrelated market segments, Dell took a series of small steps to address adjacent markets that required similar products and sales and marketing resources.
- Focus means sacrifice. Even when your technology or market is teeming with opportunity, a company can fail if the strategy is too broad. Pursuing a focused corporate strategy means letting go of other opportunities. Symantec gave up two successful lines of business but gained a $12.5 billion company when they decided to focus on a single market.
- Set goals and use metrics. Symantec’s CEO selected aggressive goals in line with the new strategic focus at the company. To achieve these goals and motivate performance, management measured every employee by relevant metrics.
Symantec’s growth was almost flat during a time when other technology companies were experiencing dramatic expansion. Reorienting the company to concentrate on achieving near-term strategic goals in adjacent markets dramatically increased the company’s bottom line, and propelled Symantec to a dominant position in the Internet and enterprise security industry.
See additional learning materials for governance.
Seba, Tony. (2006). Winners Take All—The 9 Fundamental Rules of High Tech Strategy. United States of America.