The story of IBM’s turnaround is well-told by the American business press, but this book by its ex-CEO Louis V. Gerstner Jr., gives us a first-hand perspective of how the company transformed from the brink of disaster in the mid-90s to become one of the largest, global technology-enabled services companies today.
Louis V. Gerstner Jr., IBM’s chief-executive officer from 1993 to 2002, best known for saving IBM from a near collapse in the early nineties, has authored a wonderful book titled Who Says Elephants Can’t Dance, detailing the finer nuances of the turnaround he kickstarted at IBM. While the book was authored in 2003, the lessons one can draw from it are immense, even after more than a decade. The book’s story-like narrative ensures it is an easy read for business professionals and entrepreneurs, and it is filled with anecdotes and experiences on how to engineer massive turnarounds.
Agent of change
Gerstner took over at a time when the media had predicted doom for IBM. He was surprised when he was offered this job as he had no technical background, but, he ended up taking it as he was drawn towards this challenge. He was further convinced by the search committee that IBM needed a proven, effective leader and a change agent.
Through the book, he gives us a blow-by-blow account of what he did in his initial days to solve some of the major problems that threatened to derail IBM.
One of the biggest problems IBM was grappling with was that its flagship product, the mainframe, was sinking with declining sales and profits. Gerstner notes that the fate of the mainframe defined the fate of IBM and to fix this he made an early and tough decision to cut the price of mainframe to match that of the competition. And that he singles out as a move that saved the company.
The other big problem was the loss of customer confidence in IBM. So, Gerstner had all the top executives meet customers; listen to their views and change their perception about IBM. This new customer focus from IBM was the first cultural change he brought about.
According to many industry observers, journalists and IBMers, the best thing Gerstner did was to transform IBM into a Global IT Services company, and this wasn’t an easy decision for a predominantly hi-tech company.
In the book, he explains the creation of IBM Global Services, the thought process behind keeping IBM as one single, big unit without breaking it up, and finally, identifying the company’s then top sales leader (and the Chairman and CEO until January 2012) Sam Palmisano, to lead this new group. In Gerstner’s words, Palmisano has since taken the business to a new level – making IBM the market leader in the Global IT Services industry.
The author also takes the reader through some of his key strategic initiatives including nurturing a strong research organisation and how IBM coined the term “e-business” and thereby, rode the Internet wave to the coveted position of industry leadership.
Interestingly, today software sales are a major chunk of IBM’s revenue making it a powerful force. Ironically, many of these software products were not originally developed by IBM. IBM acquired a lot of companies like Lotus and Tivoli during Gerstner’s rein and he writes about the rationale and vision with which these takeovers were made.
Investing in culture
Any write-up about IBM would be incomplete without a mention of the company’s unique selling proposition – its culture. Gerstner mentions that in all of the organisations he has been involved with, culture is just one of the different elements that make-up the organisation, but, in IBM, “it is the game.” He credits IBM’s founder for imbibing certain basic beliefs into the DNA of the company and that has resulted in a strong culture. He touches upon various aspects of IBM’s culture and how he fought tradition to change some of them.
The author makes notes of his observations and lessons learnt at IBM. My most favorite piece is where Gerstner, in explaining the title of the book, dismisses the popular business belief of “small is beautiful and big is bad” to be a meaningless misconception. He goes on to say that small companies yearn to be big and similarly big companies crave to be small.
Gerstner has been generous to recognise and name few individuals as ‘heroes’ of the turnaround. He has given them the credit they deserve for the roles played by them in the resurrection of IBM. Despite owning thousands of patents and being at the forefront of every other technological advancement, IBM considers its employees, IBMers, to be its greatest innovation. Every IBMer during his induction is asked to read this book and it truly is the first chapter, in more ways than one.
- Spend time and effort to see where the future is headed and fit in
- Create strategic, new business units to fit into this future and handpick your leader for this new SBU
- Stay close to your customers, explaining the ‘new’ firm
- Do not hesitate to take tough calls – on pricing, on product, on acquisitions and on people
- Culture may sound like an intangible component of success, but it is often everything
- There are often multiple options; It is not about making the right decision, but ensuring a decision you have made works out.
- Any decision is only as good as the effort you put in to make it work