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Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround by Louis V. Gerstner


Rating: (Highly Recommended)


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Not only did IBM dance under Lou Gerstner’s decade of leadership, but it danced nimbly, flexibly and with steps never before taken. In his reflection on those years, Who Says Elephants Can’t Dance?, Gerstner tells his own story and the journey of IBM. With the benefit of hindsight, and speaking from the winner’s circle, Gerstner is able to make decisions look easy in retrospect. His avoidance of extensive press coverage while on the job gave him the opportunity in this book to make his own case clearly. For many IBM observers of the Gerstner years, there will be “aha” moments on different pages of this fine book.

Here’s an excerpt from the chapter, “The IBM Network,” (pp. 159-60):

Some may think that the task of moving data from centralized computers to distributed computers, or from one manufacturing site to another, or from one country to another, would be the natural domain of telecommunications companies that had been providing voice transmission for nearly a century. However, until very recently telephone companies had minimal skills in data transmission, all voice services were based on a totally different technology. Moreover, the industry was nationalistic, monopolistic, and highly regular Global telecommunications companies did not emerge until the mid-1990s.

So in the spirit of "If they need it, we will build it," IBM in the 1970s and 1980s created multiple data networks to allow its customers to transfer data around the globe. We filled an important void.

By the early 1990s, however, the telecommunications companies were shifting their focus dramatically. Driven in part by de-regulation, as well as by the revenue potential of digital services, all of the world's major telecommunications companies were seeking ways to create a global presence, as well as digital capability. In the parlance of both the IT and telecommunications industries, they were talking about moving up the value chain. United States companies that had provided telephone service to customers only in a certain geographic sector of the country were suddenly investing in Latin American telephone companies. European telephone companies were joining consortia and building wireless networks in remote parts of the world.

In a period of about twenty-four months, the CEOs of nearly every major telecommunications company in the world traveled to Armonk to talk with me about how their companies and IBM could team up to create digital services. The proposals presented to us ran the full spectrum—from modest joint activities to full-blown mergers. However, affiliating IBM in one way or another with a telephone company made no sense to me. I saw little to be gained from a partnership with a regulated company in a different industry. Besides that, we had enough problems in IBM's base business. I wasn't inclined to take on additional challenges.

What did occur to me was that we had an asset that most of these companies would be seeking to build over the next five years. And if the world was moving in the direction we anticipated—toward a glut of many networks (the Internet wasn't even an important consideration at the time)—then the value of our network would never be higher. So we chose to auction it off to the highest bidder. We thought we'd be doing well to get $3.5 billion. But the frenzy eventually produced a bid of $5 billion from AT&T; that was an extraordinary price for a business that produced a relatively tiny percentage of IBM's profits.

This doesn't mean it wasn't a good transaction for AT&T. It allowed AT&T to leapfrog its competitors. But for IBM it was a strategic coup. We got out of a business whose value was going to deteriorate very quickly, as massive capacity was added around the globe. We avoided the huge capital investment to maintain the network. And we exited from another part of the stack that was not strategically vital.

To say there was heavy resistance inside parts of IBM understates the point. People argued, passionately, that we were shortchanging our future. They simply couldn't see the logic in jettisoning a global data network when we all believed we were on the brink of a networked world. Once again there was the “Do it all to be the best” argument. And once again we opted for focus over breadth.

That excerpt provides a great illustration of the benefit of clear strategic thinking, and courageous executives who decide to forge a specific destiny for their organizations. One of my favorite chapters in the book came from being surprised about Gerstner’s perspective on corporate culture, (pp. 181-2):

Back in the early 1990s, when a person saw or heard "IBM," what words and images came to mind? "Big computers," "PC," and "ThinkPads," maybe. But inevitably they would also think "big company," "conservative," "regimented," "reliable," and "dark suits and white shirts."

What's interesting is that these latter descriptions refer not to products or services, but to people and a business culture. IBM may be unique in this regard; the company has been known as much for its culture as for what it made and sold. Even today if you pause and think "IBM," chances are you'll think of attributes (hopefully, very positive ones!) of a kind of enterprise and its people rather than of computers or software.

I have spent more than twenty-five years as a senior executive of three different corporations—and I peeked into many more as a consultant in the years before that. Until I came to IBM, I probably would have told you that culture was just one among several important elements in any organization's makeup and success—along with vision, strategy, marketing, financials, and the like. I might have chronicled the positive and negative cultural attributes of my companies ("positive" and "negative" from the point of view of driving marketplace success). And I could have told you how I went about tapping into—or changing—those attributes.

The descriptions would have been accurate, but in one important respect I would have been wrong.

I came to see, in my time at IBM, that culture isn't just one aspect of the game—it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value. Vision, strategy, marketing, financial management—any management system, in fact—can set you on the right path and can carry you for a while. But no enterprise—whether in business, government, education, health care, or any area of human endeavor—will succeed over the long haul if those elements aren't part of its DNA.

You've probably found, as I have, that most companies say their cultures are about the same things—outstanding customer service, excellence, teamwork, shareholder value, responsible corporate behavior, and integrity. But, of course, these kinds of values don't necessarily translate into the same kind of behavior in all companies—how people actually go about their work, how they interact with one another, what motivates them. That's because, as with national cultures, most of the really important rules aren't written down anywhere.

Still, you can quickly figure out, sometimes within hours of being in a place, what the culture encourages and discourages, rewards and punishes. Is it a culture that rewards individual achievement or team play? Does it value risk taking or consensus building?

I have a theory about how culture emerges and evolves in large institutions: Successful institutions almost always develop strong cultures that reinforce those elements that make the institution great. They reflect the environment from which they emerged. When that environment shifts, it is very hard for the culture to change. In fact, it becomes an enormous impediment to the institution's ability to adapt.

You’ll find your own favorite section of Who Says Elephants Can’t Dance?. Gerstner’s personal disclosures are insightful, his business acumen crisp and clear, and his personal success evident.

Steve Hopkins, April 19, 2003


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The recommendation rating for this book appeared in the May 2003 issue of Executive Times

URL for this review: Says Elephants Can't Dance.htm


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