Case Detail

Case Summary

A Tale of Two Turnarounds at EDS: The Jordan Rules

Case Number: 5-409-754, Year Published: 2010

HBS Number: KEL425

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Authors: James B. Shein; Rebecca Frazzano; Evan Meagher

Key Concepts

Turnarounds, Electronic Data Systems, Information Technology, IT Consulting, Outsourcing, Outsourcer Client/Server, Michael Jordan, IBM, Perot, Super Bowl, NMCI, Cash Flow, Contracts, Management Credibility, Stock Performance, Bankruptcy, Cash Collection Issues, Slow-Pay Customers, Blind Pursuit of Growth, Government Contracts, Large Companies, Contract Bidding, Indian Outsourcing, Outsourcing to India, Offshoring, Internet, Silos, Fiefdoms, Morale Problems, Mega-Deals, Bookings, General Motors (GM), A.T. Kearney, Navy

Abstract

The case briefly describes EDS’s history under Ross Perot and GM before turning to the beginning of a tumultuous decade in the late 1990s. As the turn of the century approached, EDS made critical strategic missteps such as missing opportunities in the Internet space, overlooking the onset of client-server computing, and failing to obtain major Y2K-related projects. The company attempted a turnaround by replacing the CEO with Dick Brown, whose leadership helped streamline the sprawling company. Despite initial successes, Brown’s tenure ultimately ended in failure, due largely to his failure to recognize the growing Indian market and his willingness to buy business at the expense of the company’s margin. The disastrous multibillion-dollar Navy & Marine Corp Intranet contract typified the type of high-profile transactions that Brown pursued, often boosting EDS’s stock price in the short term while eroding its cash flow short term and its profitability over the long term. EDS management went through several stages of the turnaround process: the blinded phase, the inactive phase, and the faulty action phase, until Michael Jordan replaced Brown as CEO and enacted a three-tiered operational, strategic, and financial turnaround.

Learning Objectives

EDS’s near-decade of turnaround efforts takes students through every phase of the turnaround process and demonstrates that even initially successful turnaround efforts can become distracted, rendering them ineffective. The case will show both a failed turnaround and a subsequent successful one, while adding an international component with respect to EDS’s overlooking an important, growing Indian market.

Number of Pages: 24

Extended Case Information

Teaching Areas: Economics, Entrepreneurship, Finance, Operations, Organizational Behavior, Management, Strategy

Teaching Note Available: Yes

Geographic: Texas, United States

Industry: Technology

Organization Name: Electronic Data Systems

Organization Department: Management

Organization Size: Large

Decision Maker Position: CEO

Decision Maker Gender: Male

Year of Case: 2008