Soon after Patrick Tierney took the helm of Thomson Financial in 1999, he heard a startling complaint from one of his biggest Wall Street customers. The customer, under severe pressure to cut costs, had discovered that his brokerage firm employed dozens of people whose only job was to figure out how to integrate all the disparate financial information systems it bought from Thomson (www.thomsonfinancial.com).

That customer also grumbled about being bombarded with regular sales pitches from as many as 36 different Thomson Financial sales reps, each peddling different products.

“Our approach was dysfunctional,” Tierney says. “We needed to turn our thinking 90 degrees.”

That meant that, rather than organizing itself based on the 1,000-plus products that Thomson Financial sells, the company reinvented itself from the customer’s viewpoint, in a process sometimes known as “synchronization.”

The company did extensive research to get a much better handle on who its customers were and what they wanted. The company, a subsidiary of Thomson Corp. (www.thomson.com), then did the heavy lifting behind the scenes to make sure that bundles of products used by lots of customers could work together seamlessly and that its dozens of operating units could share information about customers.

The new approach ended the overlapping sales efforts that frustrated customers and lessened the technical difficulties they faced in integrating Thomson products. At the same time, Thomson Financial gave itself a chance to sell customers more products.

Thomson says the effort is already paying off. Profit margins in recent quarters have shown steady improvement in spite of difficult times in the financial-services markets. After peaking near 30% in 1997, Thomson Financial’s operating profit margin—measured in terms of Ebitda, which is earnings before interest, taxes, depreciation, and amortization—fell to around 22% in 2000. But margins rose from 22.3% in the first quarter of last year to 24.1% in the second, and 25.2% in the third.

“The issue they confronted was very typical,” says Mohanbir Sawhney, a professor at Northwestern University’s Kellogg Graduate School of Management (www.nwu.edu), who coined the term “synchronization.” “What was impressive was the scope of the engagement at Thomson.”

Thomson was slow to see the need for change because the old approach had worked well for so long. Focusing on individual products had made many of them ubiquitous at financial-services firms—among them, the First Call service that disseminates analysts’ corporate earnings estimates and research reports; the Portia portfolio-management system; and Thomson AutEx, an online network allowing investment managers and dealers to communicate their interest in trading securities.

But after years of successfully competing with niche players, Thomson Financial faced growing competition from lower-priced entrants, particularly those distributing equity research via the Internet. In addition, Thomson’s two bigger rivals, Reuters and Bloomberg, were starting to sell bundles of products, rather than selling each individually. Margins at Thomson Financial came under pressure, and customers grew impatient with Thomson’s hodgepodge approach to products.

“We were losing the race of competing product by product, silo by silo,” Tierney says.

He and Thomson Corp. Chief Executive Richard Harrington decided they needed to rethink the way the company was structured. Since its founding in 1980, Thomson Financial had gobbled up dozens of small to midsize companies but had left them largely autonomous. Top executives at the acquired companies got to retain a CEO title even if they were running businesses accounting for a tiny portion of Thomson Financial’s overall revenue, which is now closing in on $2 billion a year. The acquired companies didn’t even have to consolidate offices—which is why Thomson Financial had 27 offices in New York City alone when Tierney became CEO.

Once Tierney and his top managers looked at the depth of their problems, the consensus was “to blow up the organization,” Tierney says. Still, the prospect was daunting. There was so much history for each of the many products, and such distinct cultures had been developed by the largely autonomous product groups, that it was hard to get all product specialists and salesmen to think of themselves as part of Thomson and not as solely responsible for one of the products, Tierney says. Besides, it’s always hard to get so many people to make any major switch in thinking all at once.

The company’s reinvention was “easy to do on paper,” Tierney says. “What’s difficult is having the organization embrace this kind of fundamental change.”

Sawhney says the most difficult part of synchronizing a business like Thomson’s is not the technology aspect but “the human challenge you face. It’s very troubling and can create chaos in the transition.” At Thomson, Sawhney notes, lots of people had to lose their titles and be redeployed when the company moved away from having lots of “little kingdoms.”

To get started, Thomson decided it should radically rethink what its customers wanted. That was complicated, because Thomson Financial has a lot of customers: It counts among its clients 7,000 brokerage firms, investment banks, and banks; 70,000 institutional money managers at 1,300 firms; 100,000 independent investment advisers; and 4,000 corporations.

Thomson broke the customers into three major groups: money managers, equity analysts, and traders. It then paid many of them extensive visits, not to pitch them the latest products, but to collect insights about what they did each day and what they needed to get their jobs done.

“We sent product managers out with product developers to observe our clients to get an understanding of why they do what they do and how they make decisions,” said Warren Breakstone, one of Thomson Financial’s senior vice presidents. The effort to collect information involved several dozen interviews with clients. It also meant sitting down and just watching people use Thomson products as they went about their business.

Once Thomson learned how customers used combinations of its products, it had to do some retrofitting to get them to share information. At one time, a client might have been bouncing among five different terminals all at once to access the information he needed to make an investment decision. Now, for instance, a portfolio manager considering buying a company’s stock can run a query across several databases and bring together information about the company’s earnings outlook, the stock’s price performance over time, and how the company compares with its peers. The manager can also check his existing position in the stock and see how an additional purchase might change his risk exposure to that industry. If a change is made in one place it will be updated in another, much the way Microsoft Office users can update data on an Excel spreadsheet file and expect it to be updated in a spreadsheet they have inserted into a PowerPoint slide presentation.

Thomson also needed to make sure its products complied with industry standards so that clients could buy Thomson content without needing to use Thomson software. In other words, clients can choose to have Thomson’s financial data feed directly into their own systems.

In addition, Thomson set standards for data for its internal information-technology systems, so that every organization could share information about customers and coordinate sales efforts.

The pleasant surprise was that the I/T work wasn’t horribly expensive. Thomson basically left existing data systems alone; it just used standards so that information from one product organization’s system could be expressed in a way that another organization’s systems would understand.

“The efficiency that you can gain along the way should pay for the cost of making the transformation,” Tierney says.

These days, things look a lot different around Thomson. The top three dozen or so customers now have a single contact person who manages the overall account at each firm. And Thomson is essentially now in the business of pulling together platforms for clients that will allow them to integrate all of the market data they receive from Thomson, as well as information from third parties and all of their own internal communications.

For some customers, the improvement has been vast. Two years ago, when Tony D’Agostino took the job as chief operating officer for equity capital markets at Wachovia Securities (www.wachovia.com), Thomson vendors besieged him with products to sell. “They’d come in and say ‘I’m from Thomson, I’m from Thomson, I’m from Thomson,’” D’Agostino says. “I’d say, didn’t I just meet Thomson people last week? Who are you?” The answer was always: “Oh, we don’t work with them. We’re a separate vertical.”

After a few months, D’Agostino got a call from John Murphy, who introduced himself as the new global account manager from Thomson. D’Agostino’s first reaction was: “Great. Another Thomson guy.”

But it wasn’t long before he realized that Thomson was getting its act together. And for good reason. It turns out that Wachovia was one of Thomson’s biggest clients, based on all the different products and services it bought from various parts of the company. The first thing Murphy did was provide D’Agostino with a complete summary of what Thomson’s relationship was with Wachovia. “These other guys had no clue,” D’Agostino says of the Thomson salesmen who once called on him. Now D’Agostino goes to ballgames and dinner with Murphy and refers to him as “Murph.” They have renegotiated rates on some of the products now that they both know how much business Wachovia and Thomson do together. “It’s like night and day for me,” D’Agostino says. “We’re a big client. We should be treated as a big client.”

Meanwhile, Thomson has been able to sell Wachovia new services that D’Agostino didn’t even know Thomson had. One of those products is TF Press, which lets D’Agostino display his own equity research data and compare it against external metrics—all in one place.

The new approach has helped Thomson overcome another obstacle, too. Because of the way it went to market, many of its customers weren’t even aware that some of the products they used were part of the Thomson family. Now, by tying products together and selling in a more integrated way, Thomson Financial has increased its brand awareness.

“Thomson was regularly acquiring different companies, and sometimes we wouldn’t even know they were a part of Thomson,” says Rob Brown, an executive vice president at Scott & Stringfellow Inc., a brokerage and investment firm (www.scottstringfellow.com).

Brown says he has noticed a significant difference in the way Thomson now deals with his firm. “We feel like we can talk to fewer people, and they’re talking to each other,” Brown says. “It’s been a real plus for us.” The investment firm was using First Call for research, as well as a Thomson product for mutual-fund information and its ILX system for quotes. None of those products worked together easily until Thomson integrated them. Because of the closer relationship Scott & Stringfellow now feels it has with Thomson, Brown says his firm is likely to call Thomson first when it is looking for help on an issue. “The negotiating process and review process are easier now,” he says.

Synchronization has helped Thomson expand the size of contracts with clients. Tierney said Thomson is in the process of negotiating a deal with Merrill Lynch & Co. that is on a scale that would have been “unthinkable” a few years ago.

The approach also has helped Thomson win back former clients, such as New York Life Investment Management LLC (www.nylim.com). In announcing a three-year contract with Thomson recently, a New York Life executive said Thomson had worked closely with the firm to deliver a “one-stop-shopping” solution that couldn’t be duplicated.

While it’s not a “winner-take-all” market, “you could liken Thomson’s strategy to [Microsoft’s],” says Neil Godsey, a senior analyst in the San Francisco office of ThinkEquity Partners (www.thinkequity.com), an institutional investment boutique. “Thomson wants to own the financial professional’s desktop.”

She is interested in hearing about companies that have tried to synchronize their business.