What Problem Do You Solve For Whom And How?

DiGiammarino heads one of the US government’s favorite tech suppliers. Compusearch is the largest supplier of procurement systems to US federal civilian agencies including the departments of Agriculture and Energy.

 

The 30-year veteran of the software and services industries ran a $200 million chunk of American Management Systems and, since 1996, has helped turn around a succession of companies in the sector. He graduated with an MS in IT and Organization Development from MIT’s Sloan School of Management in 1977.

 

For Compusearch, the recession has meant cutting back on “marginal growth initiatives”, like a planned expansion into State government agencies and into Europe. The firm is concentrating on businesses that “continue to make money all the way through the trough”, in particular the software through which federal agencies will spend or grant half the $787 billion government bailout.

 

The discipline of a downturn can create an impetus for growth, according to DiGiammarino. In the depths of the late 1970s recession, while at American Management Systems, he designed an automated credit collection system for Wells Fargo bank. Banks at the time were in dire need of a technology that would raise productivity, and his division went on to become the leading supplier of such systems to banks in North America, with revenues growing from $1m in 1980 to $40m by 1989.

 

“You can’t do anything alone. It always takes a team”, says DiGiammarino, and this was the most valuable lesson he learned at business school. “Setting up groups that work well together… partnering with a CFO to form the nucleus of an executive committee and bringing in other strong players… I first learned this at Sloan”, he says.

 

He also advises any student to build a network “that you can live off your whole life”. DiGiammarino describes this aspect of business school as a “phenomenal” one-off opportunity that “you won’t get 20 years out”.

 

Around the time he started at MIT, the 21-year-old came across an article asking former students what they wished they’d done more of, and the answer that cropped up the most was Organization Development. “I didn’t know what it was but I took all the classes in it that I could”, says DiGiammarino.

 

As someone with a scientific background, he says he craves order and structure and likes working with executives who are trained engineers themselves. But he admits scientific and analytical skills aren’t enough: “You need to develop your creative right brain… I sometimes think people should get an MBA and then get an MFA (Master in Fine Art)”.

 

Business schools, argues DiGiammarino, have been “churning out” graduates who excel in analytical, linear thinking. This may have contributed to the kind of poor decision-making that led to the credit crisis and for which business schools are now under fire: “Students were thinking too linearly: take advantage of a system that favors you… they were finding the easy way out and running with it”.

 

“The reality is there’s tons of money and it is looking for good things to invest in. But it’s hard to find it”, says DiGiammarino. A typical start-up can probably go twice as far as its owner thinks without raising money, he adds: “You should spend more time on the business and be clear about whose problem you’re solving and how… you will give up a lot less when you go to investors”.

 

When a start-up does need money, DiGiammarino believes there will always be at least three investors in its specific area. To find them: “You have to approach it like a project. Look at similar companies, look at your customers’ shareholders”.

 

He also recommends using an intermediary: “investment bankers are there for a reason… they have a lot of connections. If you find a good one you can save a lot of time”.

 

DiGiammarino’s own role has evolved from operating businesses, to helping executives and their private equity and venture capital funders work together. “I’m a deal-oriented operating guy”, he says, “I know how to deal with money”. He was recently asked to help turn around a tech consulting firm for the Carlyle Group.

 

According to DiGiammarino, funders make the “systematic blunder” of not having enough confidence in management, while managers find it difficult to communicate with investors and integrate them into their businesses.

 

His advice to people running new companies is to establish a consistent pattern of performance against expectations. “It’s a hard game to play… you have to know yourself and what you’re capable of… you have to manage presentation ahead of performing, and then you have to deliver”. However if you achieve this the trust earned will be invaluable.

 

On leadership, DiGiammarino makes two observations: first, early-stage CEOs tend to be successful through their hard work and abilities. But to grow beyond $50 million turnover (a nice problem to have) chief executives need to stop having their people help them and start helping their people.

 

Second, he is wary of the myth that a leader must necessarily have a “big persona”. Leaders should be open to people who think completely differently to themselves. DiGiammarino, who describes himself as an introvert, says that leaders must recognize that there’s a “whole lot behind them to make things happen”.