I metwhen we both worked at frog. After his experience there, he joined Idean to run their Austin studio. Over time, his role expanded, and when Idean sold, he was put in charge of the integration. Later, Capgemini, the acquirer, went on to purchase frog, so somewhat ironically, Matthew found himself back where he started.
Matthew, tell me about your experience at Idean.
Idean was a global design research and design firm. It was founded in Finland, and was about a 23-year-old company when I left. Before the acquisition, we had about 200 designers in the United States, Finland, Germany, and the UK. After the acquisition, we had about 1100 designers, with new offices in Norway, Sweden, and Shanghai.
I was with Idean for almost seven years. I was hired to run the Austin studio. I ended up then running the New York studio for a short time, as well. After the acquisition, I essentially ran North American operations and all integration activities, too.
How would you describe the company culture of Idean?
The company was about fun and making great things. That’s a little bit of the ethos or tagline of most design firms, some flavor of that: love what you make; make great things… things like that. I didn’t know much about Finnish culture before I started there, and I don’t know if my founders were representative of the larger lot, but they were super fun guys, very gregarious.
That really percolated through the company. Our CEO and main founder was an incredibly gregarious guy, Risto Lähdesmäki. It was almost blasphemous at points, his energy and zeal for what we did. He founded this company with three or four of his colleagues in a room in Finland. It started from next to nothing; I think he was a keyboardist in a band when he decided to start the company.
I get together with former colleagues and employees a fair amount still, and we kind of kick ourselves now because I don’t think we realized how good we had it. We didn’t work crazy hours. I worked at frog before this, and it was a “crazy hour type of place” for the most part. I felt like Idean wasn’t. They really protected everything. We priced all our projects based on an eight-hour day. And we’d get outside of that sometimes, but not often. It was a good community of people who we hired for culture. I know everybody says they do that, but I really felt like we stuck to our guns on that at Idean, and pretty much everybody got along very well, and it was a good place where people watched each other’s backs.
How did financial operations happen at such a large scale?
Each studio had its own financials which rolled up to the country they were in, and that rolled up globally. I couldn’t see all the way to net profitability of my studio just because a lot of our costs were globally shared, like software licenses, things like that. So it was kind of hard to slice things all the way down to that level. But I was responsible for my revenue target, as well as a margin target, as well as the utilization target for the people. Those were really our main metrics: we had an Austin target, a US target, and then global stuff that really only the C-level people paid attention to.
We met biweekly with all of the heads of studios across the globe and went over our numbers together. We were all in lockstep of how each studio was doing. So we could resource from a different studio if needed, if they needed help in hitting numbers and had utilization problems. We were pretty linked together.
Idean sold to Capgemini in 2020. Tell me about how the sale came about.
We actually weren’t for sale. I don’t know how the original conversation started, but at the same time, we got several unsolicited offers from several different companies, one of them being Capgemini. Capgemini was not the highest dollar amount. I don’t think it wasn’t even close. The highest dollar amount was from another large consultancy that has bought several design firms. The executive team didn’t entertain any of them, except Capgemini, and the reason was because Capgemini had told us that they would leave us alone. They described that they had a hole in their business, and that they didn’t do things the way we did. So they told us that they were willing to put into the acquisition agreement some kind of safeguards, to ensure we could continue to do what we did.
How much of that was lip service? I’m not sure. And in hindsight, some of it seemed like it was. Financials likely end up changing people’s feelings about that eventually.
But since we weren’t for sale, we said, “Okay, we’ll do this. Here’s our number. You have 30 days to do your due diligence.” We had some leverage at the beginning.
I found out about the acquisition around day 15 of that 30 day diligence period. Leadership came to us and said, “Help us identify your key people who you want to make sure are retained, and taken care of, and they’re happy through this thing,” and started asking some opinions and questions on things at that point.
And when I found out, it felt good. The executives shared with us how it happened—that we weren’t for sale, and that Capgemini said that we’ll continue to do what we do. I think some people were a little more cautious and worried or nervous. Some of the management team had been there since closer to the beginning. People who had moved from Finland to the US in positions at about my level. But they were also in a better position to make some money, so I think overall everybody was happy. Just nobody really fully knew what to expect. But one thing we did know is nothing would actually change for a while, and that comforted everybody.
Why did you think nothing would change?
It was part of our acquisition agreement: it’s a Change of Operations clause. There could be no change of operations for three years.
It was in writing.
A Change of Operations clause is key. At some point, some of the people are going to be uncomfortable with the acquisition. And at some point, probably all of them finally will be. There’s no perfect way to do it, because you’re being acquired most likely by someone who either just wants the bodies—they do what you do, they just want the bodies—or they don’t do what you do and they don’t fully understand and respect it. They say they do, they maybe walk the walk, but in the end they don’t. And so at some point something’s going to change. So the best thing you can do is protect your people and your business, or the brand you built, for as long as you can. There’s probably a Cinderella story where it’s perfect and everything works out, but I don’t see those in our business, anyway.
I think the Change of Operations clause was the best thing that my leadership did. And we called Capgemini on it many times, where they tried to change something, step over the line with attorneys.
The Change of Operations clause basically said that there were to be no changes in Idean leadership, that all changes within operational procedures had to come from Idean leadership, and that Capgemini couldn’t force any changes in our business model and operating procedure. It meant that Capgemini couldn’t touch us directly. They could come to our leadership and try to make changes. But if we said no, that was off the table.
Did that Change of Operations clause cover everything?
We still did have to move to their expense reporting systems, which were terrible, and a couple of things like that. But we pushed back on that for probably a year and a half because we tried it and we’re like, “It doesn’t even work on a Mac. So you want everybody to install parallels just so we can submit expense reports?” It was time reporting, as well. And it was like, no, we’re not doing it. You can get somebody offshore to enter our time for us. We’ll send you an export.
They tried to tell us we couldn’t have certain tools. Figma was brand new, but Sketch or Photoshop or something? They would say, “No, we don’t support that and you can’t get a license for it.” Okay, I guess we just lock the doors because that’s how we do our work. It did get pretty detailed, but the thing was, if you were a studio that was performing well and making money, then they kind of left you alone.
Our business dipped right after acquisition, which is fairly common because you’re distracted, you’re not paying attention as much. But then it did really pick up. And we still weren’t working on any Capgemini projects for a while, so they kind of left us alone for a while.
What happened when that Change of Operations clause stopped being applicable?
They had some influence to get us to work on some stuff, but they didn’t have the absolute say. Before that three year mark, we could kind of say no. But we were saying no with less frequency. And then it kind of came to the part where we said, “Okay, it’s time to work together now.” And that’s kind of where the pain started. They’re like, “Redesign some SAP screens. We just sold a hundred-million-dollar SAP implementation. Can you design it for us? We need it to be pretty.” We got a lot of that “I want it to be pretty” stuff. I would respond, “If research shows it needs to be pretty, it’s going to be pretty, but otherwise it’s just going to do really what it needs to do.”
And honestly, I think one of the important things anybody who’s entertaining an acquisition should do with the acquisition partner is really figure out before the acquisition happens, how are you going to work together, and how you fit into their business. And make sure both parties agree. That’s what didn’t happen with us, and I think that was the only real problem I saw. My leadership disengaged from those conversations, and my peers and I were kind of left holding the bag: we had to try to figure out a way to work together. How do we make this thing fit? And in the end, I don’t really think it did fit very well, but we tried to make it as painless as it could be.
Part of it was that they’re a consultancy, and being a consultant means every person can kind of do everything. That’s what they train consultants to do: to dive in, figure it out, do this job, do that job. They’re all just doing a job. It’s kind of like a widget. But designers aren’t like that. A visual designer can’t do interaction design, or vice versa. Some can, yes, but in general they’re very siloed practices which augment each other. And they started trying to do our resourcing for us. They would say, “Oh, well, that person’s on the bench.” But they don’t know how to do that. Those were conversations that ate up tons of time and frustrated people. But I think what really started to sour was having to work more and more on their projects which weren’t a great fit for a firm like ours.
They were not a fan of us having our own business development team. And when that three year mark hit, they kind of got rid of it. Their people did not know how to sell our stuff, even though we ran workshops and everything on how you sell design services, showing them how it’s a consultative sale more so than, “Hey, here’s my spec sheet and I got all this stuff. Which ones do you want to buy?” That’s kind of how they sell their work. Once we lost our sales team, or most of them anyway, we became more beholden to the work they were selling, which was not fun, sexy, challenging. Actually, it was challenging, but not the type of work we would’ve ever gone after.
It was like we were in afterthought, and they would start coding an application before we’d even do discovery. And it’s like, you’re making something nobody’s going to use. Then we’d get eight months into a project, or six months into a project, and they’d say, “Well, this kind of sucks.”
We would respond, “Yeah, it does suck because you didn’t even bother to find out what people need. You listened to a couple engineers and executives say what they need, and that’s really not how you make a great product.”
It’s because they’re much more financially motivated than we were. Their main tool is a spreadsheet. And they want to start coding on day one because that means they start burning more revenue on day one. They don’t want to backload their revenue. They need to get it this quarter.
How did the designers react to this approach?
We shielded it as much as we could from them. They sensed some things for sure, but we kept a lot of it away from them for the betterment of the work, and for their wellbeing. It wasn’t to hide anything, necessarily; I was always much more open about how our business worked with all of my people. I really wanted people to understand it because when I had to ask somebody to do something they didn’t want to do, I wanted them to understand why. And it worked very well, and it made a good, close team. But some of these things, the political stuff, the operational stuff, I did try to keep from them. And we did a very good job of fighting that stuff for a long time and winning. That wasn’t just me. That was my CEO. That was the rest of our executive team as well.
But in the end, I was there after all of them had left. And so it was kind of me holding the stick. Every one of the C-suite was gone by the time I left. Their earnout stuff had happened, and they had done all the protecting they could. The three-year timeline had run out, so there really wasn’t much more for them to do.
It was a pretty large acquisition. Clearly the C-suite benefited financially; did other people see a material reward from the transaction?
Yes. I did; I was a minority equity holder in the business, but they were pretty generous with the equity on who got it. It wasn’t enough to retire, but it was a sizable amount of money and it was motivating.
Another great thing my executive team did was that they negotiated additional compensation for certain key people. So for three years, as long as you were employed at the end of each of those years, you got additional compensation. But maybe 70% of the people left that money on the table and left the company. And it was not a small amount of money for some people.
How did the team at Capgemini react to this attrition?
By that point, I’m not even sure how much they cared. Well, I’m sure they cared, but they didn’t really do much to stop it, to be honest. Most people got good raises after that, better than we could have given. They did those things to help, but I don’t think they knew how to stop it, and it wasn’t a big enough problem for them to stop what they were doing to focus on it. We were a blip on the radar for their revenue.
That’s what you get when you’re in a company of 300,000 people. They run it like a machine, not like this family who cared. Family may be a corny word to use, but at Idean, we were people who cared. Unhappy designers don’t do great design work, but that’s not really the consulting mindset. The consulting mindset is more like, “Let me crack this whip and you’re going to crap out some spreadsheets.” And you can’t. I can make spreadsheets if I’m in a bad mood, but I couldn’t come up with a badass information architecture to handle the super complex problems.
People just saw more and more of their grip coming onto us. And every inch it got closer, something got worse. Whether it’s just your time reporting software, then it’s this thing or that thing, then it’s all the types of projects we’re getting. More than anything, it was probably the types of work we were seeing come in. We would say, “Oh, the cool stuff isn’t coming in anymore. We’re kind of getting stuff that nobody really wants to work on,” but we kind of had to suck it up and do it.
For example, we had one very large client from a Capgemini project.
We had an empathy workshop with the client, and it was nothing the client had been through before. Our designers said, “Okay, let’s play ‘day in the life of your customer’, and I want to hear about your customers.”
And the client, of all people, described the customer in a very derogatory way.
And my team was horrified; “Oh my God, you really don’t get what the word empathy means. That’s how you think of your customers?”
And it was like that example, over, and over, and over.
They almost always removed our discovery phase. You’re just going to throw us into something very complex and very foreign to us? Because I don’t know how to create a quoting engine for an insurance company. That’s not easy stuff. It’s up our alley, but we need to dig in and understand.
And they would say, “No, no, no, don’t worry about that. We know what it needs to do. We just need it to look good.”
Do you think there are things your team at Idean could have done during the negotiation process to mitigate some of these things?
We needed an integration plan.
We needed to ask, “Do you see us working on projects together? And if so, how?”
We could have laid out general approaches of how the project approach should work. We had the discover, design, deliver approach. We could have asked, “How does this approach look and work in the future? Who contributes what? When do certain resources get pulled onto a project?”
We could have tried to get them excited about that, or at least bought into it. Their opinion might change over time if that’s not working, and that makes sense since they’re most likely a very financially motivated party. I think you’ve got to come to that agreement first before you get fully in bed with these people.
But it would’ve required more change on their part, too. We changed a fair amount to be part of these big, huge implementation deals, and we could have worked on those and been fairly happy, but it needed to accommodate a little more of the design process. And if they would’ve been willing to shift their pitch process and approach, I think it could have worked.
It seems like finally Accenture might have figured out some of it a little better than they had originally, so maybe they have something that worked. And somehow it worked at McKinsey. So I think it’s possible, but it requires pain and effort on both parties.
During all of these fairly negative experiences, did the positive culture you described earlier maintain?
As much as possible. We didn’t get to do as much cross-studio stuff, because travel budgets were cut a little. But we had a good relationship within our group and within the people who had been at Idean for a while. We just didn’t see each other in person as much anymore.
We did a company trip every year with the whole company prior to being acquired: they went to Hawaii; we took the whole company to Iceland. It cost a lot of money.
But then the last one we had, which was after acquisition, our CEO paid for part of it himself because he was like, “This is happening. This is my last move as CEO. I’m making this happen.”
The founders had been at it for 23 or so years. My CEO drove a 1990 Toyota Corolla or something like that when we sold the company. They were not living large. Our company did well, but none of them probably ever made over $200 grand a year before any of this; most of them lived in Palo Alto or New York, where that’s not incredible money. I think they deserved to do the sale. And then a lot of other people made a good chunk of money that they wouldn’t have gotten anywhere else, and they never counted on. And then they got a better salary for three or so years. At some point you kind of got to let your baby go.
Given what sounds like a not-great experience for you, what would you tell a design leader who is thinking about selling their company?
Make sure you’re picking the right partner.
Make sure you all see eye to eye in how you see your business integrating into theirs, or augmenting theirs.
Ask, “What are your goals? Why are you doing this?”
And make sure you cover all of those things, as many of them as you can, in writing.
If you’re just looking for a check, who really cares? But if you’re looking to keep the thing you’ve made alive, and keep the people whom you’ve employed and trained happy and growing, those are bigger concerns. Everybody likes getting a check, and accepting that check and walking away is easy. But the hard parts are protecting your people and protecting the thing you made. And I think that’s where most of your work should happen, even more so than the dollar amount that it’s for.
Do your due diligence. It’s not only the acquirer that needs to do due diligence. You need to really figure out what you want to get out of it, and put in safeguards to make sure you get those things. And I think those things are: no change of operations, retention bonuses for key employees, and making sure some of your employees have stock in the company before the sale—because as many people as possible should benefit from these things.