Many company acquisitions are purely financial transactions, designed to bolster the acquirer's business with additional customers, talent or assets. A small minority aim to achieve more fundamental impact, bringing in new 'DNA' that will change the strategy, operations and culture of the acquiring company.
While the former type of acquisition can bring financial rewards when executed well, those of the latter variety have wider repercussions — particularly so when they form part of a larger trend within an industry. In the current transition to new digital technologies, we await with interest the outcome of several recent tech industry transactions where more established businesses have absorbed next-generation players. Will NetSuite change the emphasis of Oracle's cloud strategy? Will AppDynamics really help Cisco become more of a software business? Can Wipro reinvent itself as an IT services business after its recent acquisition of Appirio and its earlier purchase of Designit in July 2015?
Wipro's leadership clearly aims to achieve a fundamental transformation. When I spoke last year to Avinash Rao, global business head of Wipro Digital, he told me the Designit team had brought a new way of looking at projects that was changing the mindset within Wipro:
What we’ve been able to come in and help with that particular complementary capability is to get everybody within Wipro to start appreciating the fact that it is, always, not technology first. It is experience first, and technology follows ...
There’s a whole amount of focus we’ve had in reshaping mindsets, reshaping our methods, recalibrating skills and capabilities to our digital academy and therefore being able to engage with clients on a much more relevant basis.
Connecting things in a new way
This month I heard the other side of that meeting of mindsets. Designit's founder and CEO Mikal Hallstrup says that as part of Wipro, his team is much more conscious of the client's entire technology stack and what can be achieved by effecting change within that broader infrastructure:
It definitely has opened our eyes that clients have other problems than just design problems. When we were an independent design company we were much more focused on, 'Design can do this and that'. Wipro, as a big technology company, you realize there's much more to this — and the power of design is much bigger than you expected.
If you want to create an amazing experience, that's the tip of the iceberg. The bottom of the iceberg — we have to insert ourselves down there in the engine room. In order to deliver the front-end experience you've got to fix that back end.
We're entering a new phase here — intersections between things. A lot of our clients' need in the next generation of digital is connecting things in a new way, more seamlessly.
At the same time as learning to work alongside the Wipro organization, the Designit business has had to manage continued strong growth, growing revenues by 21% in the year to February and scaling headcount from 320 to almost 500. It's also opened its first US office, in New York. Hallstrup says the continued expansion has been achieved without any attrition after the acquisition:
We haven't lost clients or people because of being part of a big company. In the middle of all that change we're growing and scaling dramatically. We don't want to lose our shape.
Catalyst for change
He acknowledges that there are challenges, but believes Designit can be a catalyst for change across Wipro.
It's a mouse and elephant game. Is the mouse really going to be able to change the elephant?
We're considered as the creative change enzyme, what you add to make change happen in a more efficient way.
A company wanting to internalize design, they realize that if they overmanage it they're going to lose it. If they want to impose all the systems and the compliance and procedures, that creativity is going to die ... It's complicated but a lot of fun. We know we're doing the right thing.
Designit also benefits from the resources that Wipro brings, he adds.
Why did we join with Wipro? It was getting the access to technology and to a global partner with whom we could scale, and get access to clients and the C-level. I think we got all three and we're better positioned to make the long term and right decisions all design firms need to do — because the market is changing.
Digital design is becoming such a fundamental need as enterprises pursue transformation that any agency needs to have sufficient scale to handle the complexity and costs involved in delivering ever-larger projects, he explains.
We're handling much bigger things now. That takes different bandwidth, budget, capabilities ...
The cost of transformation programs would have been difficult for us to handle. The problem statements we get from clients are more complex.
Evolution of digital design
When Hallstrup founded Designit a quarter century ago, his background was in industrial and product design. Over the years, the business has added skills in service design and digital design, to the point where now 90% of its work is digital design and only 10% classic product design, he says. That has reflected the growing trend towards 'servitization'. Where once an enterprise might sell a thousand products each of which fulfilled a single function, now the trend is a small product set supplemented by thousands of services — the Apple iPhone being the archetypal example.
What a lot of clients are realizing is that they are competing in a very different industry than they expected. Design comes in in a very new way. It's not shaping formats ... it's shaping interactions.
The challenge enterprises face is to adapt their systems and processes to provide better experiences to customers, employees and partners. "We want it to be seamless, to be human shaped," says Hallstrup. But so often, the back-end systems that lurk just below the surface quickly sabotage the engaging experience promised by a digital front-end.
You've got to think about that. Beyond the third, fourth, or fifth click, then you end up in a horror show. The party's over and you hit the old back end.
The only way is to focus throughout on the human perspective, he believes.
Our way of dealing with this is, we need to create new belief systems. You've got to think of IT in a different way and that's the human dimension.
There's still a human need in this and if you focus on this it's a very constant thing actually. It's the only safe bet you can make.
By connecting across the enterprise, digital technology makes it easier to focus on outcomes rather than functions, and thus people-focused design becomes a foundation of any digital transformation project. This is creating an explosion of demand for design skills that businesses like Designit must scale up to satisfy. Many are doing so by joining forces with IT services providers, becoming catalysts for transformation of this industry.
Designit's story provides a template for the path of this transformation and illustrates how the practice of design itself has evolved with the growth of digital.