When Pascal Daloz was made COO (chief operating officer) of Dassault Systèmes last February, he was just starting to combine the role with the CFO position he had taken on in 2018. Then coronavirus struck.
If the challenge of addressing the growing the 3D software specialist- which enables designers and engineers to create virtual models of products- during the pandemic were not enough, he was also tasked with completing the acquisition of clinical trial software group Medidata Systems that had begun the previous year.
Referring to Dassault Systèmes chief executive Bernard Charlès, he says whimsically: “Our CEO is a genius. He took two decisions in 2019. The first one was to spend €6bn to acquire a company doing clinical trials. And the second one was to appoint myself as a COO before the crisis,” he says.
Fortunately for Daloz, his 20 years in Dassault Systèmes ensured he was not only able to fully understand clearly what the challenges were, but was also able to execute the necessary changes to navigate the group in the challenging period.
“When the pandemic started, the first mission combining the CFO and the COO roles was to protect the recurrent revenue stream. I redirected part of our sales force to secure recurrent revenue and not chase new licence growth, because I knew at that time that it was going to be a difficult year,” says the Frenchman.
He says an initial reaction from customers, counting many global companies such as AstraZeneca and BMW, was to review spending with suppliers “I convinced them that we are not the problem, but the solution for them.
“I discovered that if you want to continue to grow, the subscription model was probably an easy way to go because it gives a lot of flexibility and agility for them, in this time,” says Daloz.
But the biggest challenge was delivering a strategy to negotiate the uncertain economic landscape ahead. “At the end of February we said we were announcing the plan for 2020, and then in March, we were in lockdown. In April, I had to come back in front of the market with a new plan for the year. And we were one of the few companies, who did.
“I came back with new objectives, in a new plan for the year including a comprehensive framework and then stuck to it.
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“The way we did it was relatively simple. We said what kind of investment we want to protect. And at the end we came to the conclusion that we wanted to protect the R&D (research and development) at this time, as this is where you can make a difference,” he says.
As a result, Dassault Systèmes increased R&D spend by 10 percent in the period. “It was really easy for me to do, because I was wearing two hats, that of COO and CFO, so I was in agreement with myself,” he says. “It was an advantage because I did not have to argue too much with all the organisations to make it happen, because I was ultimately the guy deciding,” he adds.
Daloz believes that the strong growth that Dassault Systèmes has delivered in recent years, is testimony to the sense of purpose developed in the group that was spun off from aircraft maker Dassault Aviation 30 years ago and was listed in 1996.
“This is very important to understand,” he says, “because engineers can do great things but the way for them to be aligned is if they believe in something. And we developed this sense of purpose, almost 10 years ago,” he says.
The metamorphosis of Dassault Systèmes into a leading 3D design software giant servicing multiple sectors has contributed to a steady rise in its share price, including through the last year, to reach a market value of €50bn by mid-February. Much of that success has been down to the breadth of products and services that can be created virtually to assess how they would work in the real world- from a water bottle to an entire city infrastructure or a human organ- in order to simplify collaboration, speed up product design or reduce waste in the design process.
Daloz’s own path to Dassault Systèmes in itself reveals something of his nature. He previously worked as a technology sector analyst at Credit Suisse First Boston (CSFB), after periods at a home appliances firm and management consultants Arthur D. Little, but left the investment bank after two years.
He had joined CSFB in 1997 “when the IPO rush of tech companies was starting in Europe,” but left in the peak of the tech bubble when he says was “struggling to make a valuation” on a particular tech company IPO. The dotcom boom turned to bust the following year.
Trained as an engineer, with the acquired skills of “connecting strategy, and a deep understanding of the technology and numbers” he contacted Dassault Systèmes CEO Bernard Charlès, with the line: “If you want me to join, I’m ready to do it.”
From being hired to work in R&D, he progressed through roles across strategy, marketing and corporate development, becoming CFO in 2018, where his tech acumen paid off. He says that background was vital when supporting investments in a largely fixed cost sector “where 70 percent of the cost structure is people. Usually you see the result of your investment, five to six years after.
“Understanding the technology was really an advantage for me because I was capable to discuss with the engineers and also the salespeople, because I understood very well the products and the value proposal,” he says.
“When it came to pushing the salespeople to improve the price or to articulate in a much better value, I was able to do it,” he says.
Daloz describes his journey through Dassault Systèmes as “spending billions building some product lines and monetizing them, then as CFO having to make the decision of continuing to reinvest internally or acquiring companies.”
The continual juggling of options to find new ways of creating value has seen Dassault Systèmes move into new areas such as life sciences, where the group is “helping provide answers on how to accelerate the development of vaccines,” says Daloz.
Medidata Systems, which Daloz chairs, supported the clinical trial process of US pharma giant Moderna’s Covid-19 vaccine, through its Rave clinical cloud platform.
“One of the key things I did when I took on my CFO role, adding to my strategy position, was to accelerate the diversification of Dassault Systems into areas such as life sciences. The ability to reinvest, mixing against the value creation concept with strategic thinking is really an advantage,” he says.
But along with acquisitions, Daloz says he and the rest of Dassault Systèmes’ senior management team have worked hard to continually finesse the business model of the group that has 20,000 employees servicing 290,000 clients in 140 countries.
The need to be creative struck a chord last year when “the recipe you were using to make the numbers in 2019, are not anymore working,” says Daloz.
“My innovation background was really helpful, because I put people in in a creative solving context, for them to bring new ideas and take the benefit of those situations to accelerate a transformation we wanted to make internally,” he says.
“We wanted to develop new product lines to target new type of customers or sometimes to readjust simply the value proposal from there. I think we made a lot of progress in 2020 to realign many things accordingly. We could see the negative side but we could also see the positive side, because we it was easy for me to ask people to come with new ideas.
Part of the change was driven by a huge industry migration from being an on-premise software company to a cloud software company, but in the remote working practices forced by lockdown, that move paid off.
It also meant the platform Dassault Systèmes had been developing became a go to option for customers to lead their product marketing, development and manufacturing and product introductions.
“The platform is becoming a way to connect with our customers, but also with our employees, in this time because the vast majority of people are working from home, and are using it to do day to day work,” says Daloz.
As well as using the platform to manage the company broadly, it is also being harnessed in the transformation of the finance team, by automatising manual processes in recent years to to unlock productivity. “I said we’re going to use the platform as it should be the way also to count how much time people are spending with our applications. It should be the way to understand how much data they can produce and how much value they create,” he says.
“There is a lot of information we can extract, in order to rearticulate the value of what we do, and sometimes to optimise our system,” adds Daloz.
A combination of sound technology and a creative touch has ensured Dassault Systèmes has been able to fully capture the value of its staff working remotely. “When people are working from home, you cannot visit customers anymore, so you have to do many product demos online. There is no other way to make it happen,” he says.
Daloz says the lockdown period gave him a licence to drive through a transformation by breaking down the silo system of the organisation, and encouraging staff to “have the same vision,” he says.
“I looked at all the different roles of the people, at their cycle of activities and defined the moment when they should be on site because I wanted to maintain creativity amongst them.
“For example, the research and development groups have to be together when we are defining the content of a new release,” he says.
The finance function too was given time to rethink its approach, to address the fast-changing macro environment. “One of the transformations I undertook was to transfer part of the finance team into a specific R&D role because some of our products need to integrate some finance features,” says Daloz.
“By the Summer finance had come up with creative ideas, leading to the implementation of rolling quarterly forecasts, a creative solution to the challenge,” he adds.