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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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Fandango 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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ã 2003 Hopkins and Company, LLC The
recommendation rating for this book appeared in the May 2003
issue of Executive
Times URL
for this review: http://www.hopkinsandcompany.com/Books/Who
Says Elephants Can't Dance.htm For
Reprint Permission, Contact: Hopkins
& Company, LLC • 723 North Kenilworth Avenue • Oak Park, IL 60302 E-mail: books@hopkinsandcompany.com |
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