Case study: Irdeto

The story.

In 2006, Irdeto was an engineering-driven, centrally controlled organisation valued by employees for its camaraderie and informal culture in the head office at Hoofddorp, near Amsterdam.

The challenge.

Mass digitisation is the driver of growth for Irdeto, and China, with its huge population, growing economy and political commitment to digitisation, was an attractive growth market.

By late 2006, Graham Kill, chief executive, was concerned that Irdeto was missing out on big opportunities in China. The biggest problem was the “mothership syndrome”, whereby everything – including customers, product development and employees – was seen from a European perspective.

Competition in Asia was intensifying and deals were being lost. Within the company, staff in China – including Europeans on secondment – felt they were treated as second-class.

How could the company deal with the internal turmoil and become a more international company?

An experiment.

Mr Kill decided to create a “dual core” headquarters: Irdeto’s Dutch HQ would remain for the western hemisphere, while a new one would be established in Beijing for the eastern hemisphere. This was announced to staff by Mr Kill in March 2007. The news was delivered in person in Hoofddorp and live via satellite to regional offices.

The reaction.

Opinion among staff was divided in Hoofddorp but positive in Beijing. Worries expressed by staff in the Netherlands included: that the company’s Dutch identity would be diluted; that their own careers would suffer if they stayed in Hoofddorp; that the personal upheaval in moving to Asia would be unbearable; and that the company was wrong to share valuable R&D that had been confined to the Netherlands base.

What happened next.

Mr Kill moved his family to Beijing, to be followed by two senior managers by the middle of 2008.

Cultural change in Beijing.

Chinese staff had not expected the degree of change that would follow Mr Kill’s arrival. Irdeto’s open-plan offices and hot-desking policy for all employees was unsettling for workers in the Beijing office where, for instance, senior managers had their own closed, individual workspaces. Mr Kill was keen to implement the new approach both to convey Irdeto’s global philosophy and for practical reasons.

Mr Kill led by example. For about a year, he sat in the open-plan area while Chinese middle managers stayed in their offices. Local staff were surprised to see the chief executive in an apparently less prestigious space.

To encourage flexibility, meetings were held at varying times to suit either Chinese or European time zones and the role of the chairman in meetings was rotated. All meetings were held in English, and the Beijing staff had to examine issues that affected Irdeto beyond China.

Cultural change in Hoofddorp.

Finance and HR remained the responsibility of Hoofddorp, although the company’s hiring processes were relaxed to make it easier to recruit in Beijing.

However, less tangible changes were also under way: employees felt the absence of the charismatic chief executive’s hands-on and informal style. Meetings became less ad hoc and informal as they had to be held at pre-arranged times in pre-arranged locations.

By 2009, managers in the company felt the balance of influence had shifted to Asia, while the communications between the Asian and European parts also improved significantly. Sales in Asia-Pacific were growing.

The lessons.

The mothership syndrome can have damaging consequences, such as: sales leads in other parts of the world not given enough attention; promising employees in branch offices leaving because of a perceived lack of career opportunities; and money is invested in projects that reinforce activities and positions close to home.

A dual HQ strategy should be more than a symbolic move. In the case of Irdeto, it brought a necessary change in the company’s centre of gravity. Over the long term, this could establish Irdeto as a more flexible organisation aligned with the changing nature of its markets. Asian managers also feel they have more influence and weight in the overall organisation.

Set up organisational change as an ongoing study with a clearly defined hypothesis about potential changes. You cannot run a laboratory experiment in a real-life setting but with careful planning you can control many extraneous factors and you can directly assess the consequences of your actions.

The writers are professors at IMD and London Business School, respectively
- Financial Times, 6 Oct 2010