PHILIP J. PURCELL III IS A VISIONARY. Unconstrained by conventional
wisdom, Purcell has charted his own sometimes shocking course–one
that has eventually led him and his company to great success.
Throughout his career, Purcell has made bold, forward-thinking
decisions. As head of strategic planning for Sears, Roebuck &
Co., he convinced the chairman to purchase Dean Witter and then
sell stocks from desks in Sears stores. Later, he developed the
Discover Card, pioneering the idea of foregoing an annual fee
and offering cash rebates to customers–an idea so successful that
the company became the biggest credit card issuer in the United
States.
Then, several years after Dean Witter Discover spun off into its
own company with Purcell at the helm, he did the unthinkable–he
engineered a merger between Dean Witter, a brokerage known for
its Middle America mentality, and Morgan Stanley Group, a white
shoe investment bank.
Few outside the companies thought it would work. As an article
in Business Week noted, “the cultural chasm between the two firms
inspired such witticisms as ‘white shoe meets white belt’ and
‘the Four Seasons meets Burger King.’”
But Purcell, looking ahead, held firm. He knew that the investment
bankers at Morgan Stanley would gain from the distribution power
of the more than 10,000 Dean Witter financial advisers. And the
financial advisers would gain from being able to offer their customers
more products and “the best research in the industry,” said Purcell,
’67.
Besides that, Purcell had faith in his people. “I think it’s a
mistake to spend too much time agonizing over cultural differences.
They do exist, and when two companies merge, you’ve got to be
aware of them and deal with them,” he said. “An important part
of leadership is simply picking the right people and then giving
them the freedom they need to run our various businesses. To do
that, you’ve got to make sure you establish a great deal of trust
and mutual respect. You can’t have people second-guessing each
other all the time.”
And now, two years later, the results are in: Morgan Stanley Dean
Witter, with Purcell as chairman and CEO, is a resounding success,
with two years of record earnings and a record first half for
1999.
In recognition of his foresight and corporate leadership, Purcell
was named the 1999 Distinguished Corporate Alumnus.
Purcell’s ability to envision and plan didn’t begin at Morgan
Stanley Dean Witter; it dates back to his school days. He came
to Chicago from Notre Dame in 1964; by 1966 he had earned a master’s
degree in economics from the London School of Economics through
the GSB’s International Business Exchange. The following year
he received his M.B.A. from Chicago and was a rising star as a
consultant at McKinsey & Co., where he became the youngest-ever
managing director at age 32.
Many in his position might have stuck to the fast track at McKinsey,
but in 1978 Purcell surprised McKinsey by jumping to Sears, Roebuck
& Co. as vice president of corporate planning. While at Sears,
Purcell and then chairman Edward Telling decided to purchase Dean
Witter in 1981 as a first step toward creating the Discover Card
in 1985. In 1982, Telling put Purcell in charge of the brokerage
firm; he refocused the company, avoiding the boom-bust cycles
that plagued other securities firms. When Dean Witter Discover
spun off from Sears in 1993, Purcell became president and chief
operating officer and, four years later, chairman and chief executive
officer. Under his leadership, Dean Witter Discover thrived, becoming
one of the largest firms serving individual investors. After so
much success it is perhaps no surprise that Purcell bucked conventional
wisdom by seeking a merger between Dean Witter Discover and Morgan
Stanley.
“I try to focus as much as I can on strategy, looking ahead three
to five years from now,” Purcell said. “Thinking strategically
means you have to know your company’s competitive strengths, or
potential competitive strengths, and what your customers need,
or what they’ll need in the future. There will always be opportunities
out there and you’ve got to be ready to take advantage of them–hopefully
before anyone else.”
One recent opportunity Purcell has pursued is the potential of
the Internet. “I believe we were the first of the major Wall Street
firms to begin offering online trading to individual investors,”
Purcell said of the company’s deep-discount, online trading operation.
Several years ago, Morgan Stanley Dean Witter acquired Lombard
Securities, a brokerage firm that developed online trading technology
designed for the Internet. In the past two years, the number of
Internet trades per day for the renamed Discover Brokerage Direct
has more than tripled–this year, the company plans on making these
online capabilities available to their more than two million full-service
brokerage clients.
To be the leader in using Internet technology, Morgan Stanley
Dean Witter had to invest significant resources. “The growth in
electronic commerce in just the past year has been explosive,
and to stay ahead you’ve got to make investments in new technology
across a rather wide front. The head of our institutional equities
business says it’s like paying tuition,” Purcell said.
The Wall Street Journal noted that few on the Street have followed
his lead so far, fearing that offering such no-frills trading
will cannibalize full-service operations. Purcell, however, would
rather customers go to Discover Brokerage Direct than outside
no-frills brokers. Because some clients desire online execution
of trades, he expects that soon all retail firms will offer online
trading. This, he said, will not eliminate the need for either
professional financial advisers or the trading floor. He believes
that the Internet is an “enabling technology, like the telephone.
The key is to use it to get closer to your customers, to serve
them in whatever medium is best for them.”
Purcell is also keeping a close eye on the paths brokerage firms
and investment banks may take in the next century. He believes
that the pace of consolidation will accelerate in the next few
years, following on the heels not only of Morgan Stanley Dean
Witter, which was the first of the “blockbuster deals,” but also
Travelers/Solomon, Swiss Bank/ Union Bank of Switzerland, Citicorp/Travelers,
and others. The next generation of mergers will be bigger, he
said, with more cross-border and cross-industry mergers.
“Consolidation is being driven by deregulation and globalization
and by consumer needs,” Purcell said. He stressed that consumers
are turning to global firms that can provide advice, products,
and liquidity across all geographic markets. He noted that the
next frontier is the global distribution of securities and asset
management products to individuals. Purcell also sees an opportunity
to offer U.S.-style products abroad, where traditionally most
people have kept their assets in bank deposits or savings accounts.
Under Purcell’s leadership, Morgan Stanley Dean Witter has taken
its first steps toward seizing this opportunity, by founding a
new business unit to pursue global opportunities in retail securities
and by acquiring AB Asesores, the largest independent financial
services firm in Spain. The rest of Wall Street is looking on.
Where Purcell goes, they will most likely follow.–Jennifer Vanasco
Philip Purcell III, ’67, was named the Distinguished Corporate Alumnus.
Ernest Wish, XP-29 (’71), Distinguished Public Service Alumnus
David Booth, ’71, and Rex Sinquefield, ’72, Distinguished Entrepreneurial Alumni