The phone that didn't ring -- that was the clue that told Dick Brown something was wrong. He summoned a technician to his office who explained the problem: To avoid incoming calls, the previous CEO had had his phone lines cut. The leadership of EDS, the company that invented the information technology-services industry, had had itself disconnected. More out-of-touch signs soon surfaced. Brown wanted to know how many people were employed at EDS. It took six phone calls -- once his lines were restored -- to find out. He asked to see the previous month's financials. The numbers weren't available. The company closed its books on a quarterly basis. He asked for the previous month's sales results. Same answer. Sales were totaled at the end of the quarter. "Unbelievable," says Brown. "We're a $19 billion company, and we were closing quarterly." The kicker came when Brown tried to send an email to EDS's 140,000 employees. It couldn't be done. The company, he learned, was tangled up in 16 different email systems: AOL, Exchange, Hotmail, Notes -- some EDSers even used their clients' systems. EDS was responsible for keeping more than 2.5 billion lines of code running at 9,000 corporations and government agencies worldwide, but its CEO couldn't send an email to his own people. "Totally unacceptable," Brown says, shaking his head at the memory. When he took the reins at EDS in January 1999, Brown joined a company that was floundering in a world it had created. EDS had pioneered the IT-services industry -- the fastest growing industry in the world. But when it split off from General Motors in 1996, EDS was too slow for the fast-forward IT marketplace. Faster, nimbler startups -- Razorfish, Scient, Viant -- ate away at EDS's market share. IBM launched its own IT-services division, Global Services, and promptly steamrolled EDS on the way to grabbing the lead. At a time when the market for computer services was estimated to be at half a trillion dollars -- and growing rapidly -- EDS's growth slowed, and its market cap declined. The company's sins were numerous: It missed the onset of the Internet wave. It missed the start of the client-server wave. It missed the beginning of the run-up to Y2K. Even worse, it wasn't seen as a cool company. The digerati dismissed EDS as stodgy, arrogant, and chained to old technology. "When Scott McNealy of Sun Microsystems first had us do a piece of a contract for him, he wouldn't let us publicize the deal, because he thought we were too old economy," recalls John Wilkerson, who shotguns indirect sales channels at EDS. "Sun was cool. We were the knuckle draggers." That was then. This is now: At the end of July, EDS announced a 17% increase in its quarterly profits, a 7.5% rise in revenue, and an $80 billion backlog of signed contracts. The quarter caps a remarkable turnaround for EDS, a transformation that began last October when the company outmaneuvered IBM to win a whopping $6.9 billion contract from the U.S. Navy. EDS sign ...

1. The phone that didn't ring -- that was the clue that told Dick
Brown something was wrong. He summoned a technician to his
office who explained the problem: To avoid incoming calls, the
previous CEO had had his phone lines cut. The leadership of
EDS, the company that invented the information technology-
services industry, had had itself disconnected.
More out-of-touch signs soon surfaced. Brown wanted to know
how many people were employed at EDS. It took six phone calls
-- once his lines were restored -- to find out. He asked to see the
previous month's financials. The numbers weren't available. The
company closed its books on a quarterly basis. He asked for the
previous month's sales results. Same answer. Sales were totaled
at the end of the quarter. "Unbelievable," says Brown. "We're a
$19 billion company, and we were closing quarterly."
The kicker came when Brown tried to send an email to EDS's
140,000 employees. It couldn't be done. The company, he
learned, was tangled up in 16 different email systems: AOL,
Exchange, Hotmail, Notes -- some EDSers even used their
clients' systems. EDS was responsible for keeping more than 2.5
billion lines of code running at 9,000 corporations and
government agencies worldwide, but its CEO couldn't send an
email to his own people. "Totally unacceptable," Brown says,
shaking his head at the memory.
When he took the reins at EDS in January 1999, Brown joined a
company that was floundering in a world it had created. EDS
had pioneered the IT-services industry -- the fastest growing
industry in the world. But when it split off from General Motors
in 1996, EDS was too slow for the fast-forward IT marketplace.
Faster, nimbler startups -- Razorfish, Scient, Viant -- ate away
at EDS's market share. IBM launched its own IT-services
division, Global Services, and promptly steamrolled EDS on the
way to grabbing the lead. At a time when the market for
computer services was estimated to be at half a trillion dollars -
- and growing rapidly -- EDS's growth slowed, and its market

2. cap declined.
The company's sins were numerous: It missed the onset of the
Internet wave. It missed the start of the client-server wave. It
missed the beginning of the run-up to Y2K. Even worse, it
wasn't seen as a cool company. The digerati dismissed EDS as
stodgy, arrogant, and chained to old technology.
"When Scott McNealy of Sun Microsystems first had us do a
piece of a contract for him, he wouldn't let us publicize the
deal, because he thought we were too old economy," recalls
John Wilkerson, who shotguns indirect sales channels at EDS.
"Sun was cool. We were the knuckle draggers."
That was then. This is now: At the end of July, EDS announced
a 17% increase in its quarterly profits, a 7.5% rise in revenue,
and an $80 billion backlog of signed contracts. The quarter caps
a remarkable turnaround for EDS, a transformation that began
last October when the company outmaneuvered IBM to win a
whopping $6.9 billion contract from the U.S. Navy. EDS signed
an additional $32.6 billion worth of new business in 2000, up
31% for the year. This year, as the Scients and Viants fell to
earth, EDS's E
Solution
s unit grew by 35% in the first quarter. At a time when the tech
sector is awash in pink slips, EDS has hired 6,000 people since
January. It has signed very public and very profitable
partnerships with most of tech's corporate leaders: Cisco, Dell,
EMC, Microsoft. And as for Sun? In July, it unveiled a
partnership with EDS that is expected to bring both companies
an additional $3 billion in revenue over five years.
The EDS turnaround offers an instructive story for the post-

3. dotcom era. It's an object lesson in how an old-line company
with real assets, real size, and real profits can reinvent itself for
the digital economy, fully absorb the Internet, and turn into an
old-economy company that really gets it. But as powerful as
those turnaround lessons are, they aren't even the best part of
the story.
One hundred days after Brown arrived at EDS from Britain's
Cable & Wireless, where he had been CEO for two years, he
took a half-dozen of his top executives to the New York Stock
Exchange. As they looked out over the trading floor, Brown
vowed that they would restore EDS to its full financial health.
The company would boost its operating margin by 30%. It
would climb back to double-digit earnings per share. And its
revenue growth would meet or exceed the market's overall
growth rate. Brown committed the company to some hard
numbers. Then he set about changing the company by focusing
on the soft stuff: EDS's culture and its people.
"Most business leaders are afraid to talk about culture," says
Brown. "They're far more comfortable with numbers. While I
am very numbers focused, you can't change a business with
numbers. Numbers are the end result. You change a business by
changing the behavior of its people."
This, then, is the story of how EDS, a global company that is
larger than some cities, built a massive change effort on one of
the fuzziest, most elusive terms in business: culture.

4. LEADERS GET THE BEHAVIOR THEY TOLERATE
When Ross Perot launched EDS in Dallas, Texas in 1962, he
also created the radical notion that other organizations would
hire a company to handle all of their computer operations. Back
then, the word "outsource" hadn't even entered the business
lexicon. To sell the fledgling concept, Perot built the ultimate
can-do culture, comprised mostly of the sons and daughters of
Midwestern farmers and returning Vietnam veterans. "Ross told
us to hire the people who have to win," recalls EDS vice
chairman Jeff Heller, who flew attack helicopters in Vietnam
before joining the company in 1968. "And when we couldn't
find any more of those folks, he said to go after the people who
hate to lose."
EDS came to rule the industry that it created, and it grew
exponentially after GM acquired it in 1984. Under GM's wing,
EDS established ground-level operations in 42 countries and
bulked up to become a $14 billion giant before it split off from
the carmaker in 1996. In retrospect, the GM-sponsored success
turned out to be EDS's most crippling competitive handicap.
A hefty annuity from GM, which amounted to 30% of EDS's
1996 revenue, first lulled EDS into complacency and then
fostered an unwillingness to change within the company --
while the world was changing all around it. Individual operating
units had no incentive for cooperating with each other to win
business. The company's top leaders had grown aloof and cut

5. off from people at the front lines. "We'd have meetings,
meetings, meetings, but nothing would ever get decided," says
Heller. "It would all end up in warm spit."
In December 1998, EDS's board of directors recruited Dick
Brown from British telecom Cable & Wireless, making him the
first outsider to lead EDS in the company's 36-year history. He
arrived with an unambiguous message: "A company's culture is
really the behavior of its people. And leaders get the behavior
they tolerate."
Brown quickly signaled that he would not put up with the old
culture of information hoarding and rampant individualism. In
one of his first meetings, Brown asked 30 top managers to email
him the three most important things that they could do to
improve the company and the three most important things that
he could do. He made his request on a Monday and asked the
managers to email him their action items by the end of the week
-- at the latest. "I was interested in what they'd send, but I was
more interested in when they'd send it," Brown says. "This was
a litmus test on urgency."
Ninety percent of the managers waited until Friday afternoon to
reply to Brown. "It never crossed their minds that they could
email me within the hour," Brown says. "They just did it at the
last minute. And that's the message that they sent to their
people: Do it at the last minute. In the end, almost all of them
loaded up on what I needed to do. They were pretty light on

6. what they needed to do."
Today, most of those managers are gone from EDS.
THE PHONE CALL YOU NEVER MISS
Brown moved swiftly to change old beliefs and behaviors at
EDS, unleashing a set of practices -- dubbed "operating
mechanisms" -- that were designed to create a company-wide
culture based on instant feedback and direct, unfiltered
communication. One of these practices is the "monthly
performance call." At the beginning of each month, 125 of the
company's top worldwide executives punch into a conference
call that begins promptly at 7 AM central daylight time.
Participation is not optional. "If you miss the call, you get taken
to the woodshed," says Heller.
The ostensible purpose of the call is to review in detail the past
month's revenue and profit targets. As chief financial officer,
Jim Daley reads through the figures for each unit. Everyone
knows who hit their numbers, who exceeded them, and who
whiffed. But something else is at work here. When executives
realize that they will miss their numbers -- and no one hits all
of their targets all of the time -- they must act before that call.
"We don't try to embarrass people with those calls; we try to
help them," says Brown. "At the same time, facts are facts, and
it's critical to measure each executive and each organization
against their commitments. I use the word 'commitments'
deliberately. It's easier to miss a budget than a commitment,

7. because a budget is just an accumulation of numbers. A
commitment is your personal pledge to get the job done. And
that's how we strive to behave as a team."
BLOW UP THE COMPANY
Soon after joining EDS, Brown visited Continental Airlines at
its Houston headquarters. EDS handles all of the airline's legacy
systems: accounting, payroll, maintenance, and, most critically,
its reservation system, making Continental one of EDS's largest
clients. It was in danger of becoming an ex-client.
"Systems were crashing, deliveries were failing, projects were
late," says Janet Wejman, Continental's senior VP and chief
information officer. "When projects were finally delivered, the
quality was unacceptable. I asked for meetings with the
management to explain our problems, but all I got was, 'You
don't know what you're talking about. We'll handle it.' "
Wejman was taken aback when Brown came calling. Not only
had she never met EDS's previous CEO, she didn't even know
his name. She told Brown: "Things can't go on like this." Brown
assured her that there would be changes -- and he delivered
within two weeks: A new account team was brought in. The new
account executive conceded that there were problems and
promised to work with Continental to solve them. The new
relationship, Wejman says, "isn't always nirvana. But EDS does
a better job than anyone in the world."
Still, the difficulties with the Continental account pointed to

8. deeper systemic problems within EDS. Cultural change wasn't
coming fast enough. Almost everyone paid lip service to the call
to collaborate, but not enough people acted on it.
The real problem, Brown and his leadership team realized, lay
within the structure of EDS. The company had splintered into
48 separate units, each with its own management and its own
P&L. Since the operating units refused to communicate or
cooperate, EDS lacked a single overarching, market-facing
strategy. The company was rolling out duplicate offerings,
duplicate capabilities, and diametrically opposed strategies.
"Once we were doing a strategy session on e-business, and a
guy from the energy unit announced that he had 20 people
working on a transaction system for oil- and gas-pipeline
settlements," recalls Bob Segert, managing director of corporate
strategy and planning. "Someone from finance jumped up and
interrupted him, saying, 'You're wasting your time. We already
have a system for that.' They were both working out of the same
building, but neither knew what the other was doing."
Brown and his team had a solution: Blow up the company. Build
something new.
LEADING THE BREAKAWAY
The mechanism was "Project Breakaway," a team of seven
leaders from different units, each with a different industry
expertise. Brown gave them an assignment and a six-week
deadline: Draft a blueprint for an organizational structure that is

9. centered around the client -- a structure that increases
productivity, promotes accountability, and drives a
collaborative culture across the entire enterprise. The goal: to
break away from the old ways of doing business.
Getting there wasn't easy. "As soon as Dick left the room, the
fighting started," says Segert, who won the dubious honor of
facilitating the discussions. "I set up a straw model for what a
new organization might look like, and they just tore it apart.
One of the executives -- who is no longer here -- stood up and
challenged the entire process. But I was thinking, 'Great, the
discussion has started.' We had just formed, and we were
already starting to storm."
They debated for 16 hours a day, seven days a week -- right
through the July 4 holiday. After six weeks, they had hammered
out a new model: The 48 units were slashed to four lines of
business, all of them focused directly on the client. Each client
had its own "client executive" -- a top performer who would be
responsible for troubleshooting problems with the client. To get
the job done, the client executive could draw from all four lines
of business.
The "Group of Seven," as they came to be known, unveiled the
new model at an August off-site for EDS's top executives.
"There was a lot of skepticism," recalls Segert. "But then one of
the leaders grabbed a microphone and said, 'I feel like I'm at a
new EDS. This thing might have flaws, but I'm excited to think

10. about how far we can go with this new model.' And that turned
the tide. And thank God it did, because if the senior leaders
weren't walking the talk of collaboration -- if they weren't
living the business model -- the effort would have collapsed."
7-ELEVEN SEES RED
Despite the massive reorg, there was still one practical problem:
customers. EDS's once-a-year customer-satisfaction surveys
offered little in the way of urgency or transparency. When
Brown asked, "How are we doing on the Continental account?"
no one had a good answer.
The solution: the "Service Excellence Dashboard," a Web-based
tool that measures and tracks service quality in every EDS
business at all times. The Dashboard displays a color-coded
rating system -- green, yellow, and red -- for critical customer-
service benchmarks, including value, timeliness, and delivery.
But the Dashboard is more than a display of cold, hard facts. It's
also another force for transparency and cooperation. The status
of 90% of EDS's accounts is displayed on the desktops of the
company's worldwide leaders. If you're responsible for
Continental, and your client executive has put up a "code
yellow" for the account, your peers will know about it. The
Dashboard also fuels collaboration, because many of those
executives will quickly contact you with offers to help. Such
was the case with EDS's 7-Eleven account.
EDS supports the network, hardware, and applications for 7-

11. Eleven's retail-information systems, which link up all 5,200 of
the franchise's stores. In August 2000, the system flatlined.
Servers crashed. Applications failed to work correctly. Stores
tried to place product orders but couldn't dial into the host
system. When they did manage to dial in, the system sometimes
couldn't connect with 7-Eleven's suppliers. "If we can't process
our orders, we can't get product into the stores," says Jimmy
Pitts, 7-Eleven's point man for coordinating with EDS. "And if
we don't have product in the stores, we don't have sales."
7-Eleven CEO Jim Keyes put in a direct call to Frank DeGise,
EDS's client executive for the franchise. Shortly thereafter,
DeGise put up a red light for the entire account. Within 24
hours, EDS had mobilized.
Don Uzzi, EDS's executive sponsor for the 7-Eleven account,
quickly assembled a SWAT team of senior leaders. The team
brought in the company's top network guru and handpicked an A
team of systems administrators. More significantly, it partnered
with 7-Eleven's top IT troubleshooters and formed a joint-
company project -- "Going for the Green" -- to fix the network.
Working together, the two companies did an architecture review
that revealed design flaws in the network's structure. It took 60
days to reconfigure the network and streamline the hardware.
After an additional month of testing, all systems were go. The
7-Eleven account flashed green.
"At the old EDS," says DeGise, "the culture was, 'Fix the

12. problem yourself. And while you're fixing it, make sure you're
signing new business.' " The new EDS is sharing information
internally -- and the next EDS will extend that reach to its
clients. By the end of the year, all of the color codes, metrics,
and comments from the client executive and other leaders from
within EDS will be pushed to the client's desktop.
"We're taking the original design intent behind the Dashboard --
which is to create new relationships that are based on trust and
collaboration -- and we're bringing it right to the client," says
Charley Kiser, who leads the Dashboard team. "Clients will see
the good, the bad, and the ugly. They will truly be part of the
team."
WHEN EAGLES FLOCK
Walk into the fifth-floor reception area at EDS headquarters in
Plano, Texas, and you can't miss it: a great bronze sculpture of
a screaming eagle, its wings unfurled and its talons flashing. It's
a legacy of the Perot era, a symbol of the qualities that Perot
valued. The eagle is courageous. It is predatory. But eagles
don't flock.
There are signs that the old culture still reigns at EDS. Despite
the downsizing, there are still multiple layers of hierarchy.
Despite the reorg, there are still instances where salespeople
from different business practices call on the same client.
Despite efforts to increase the cool factor, blue suits still
prevail at corporate headquarters.

13. There is also abundant evidence that the company that was
wired to compete has learned to collaborate. Consider how Brad
Rucker and Robb Rasmussen work together. Both are leaders in
the E