The story of a turnaround

This year will see a major milestone for one of the most imposing technology companies of all time as International Business Machines Corporation (IBM) enters its 100th year of existence. No better time than this to start reading Who Says Elephants Can’t Dance by Louis V. Gerstner Jr., IBM’s chief-executive officer from 1993 to 2002, best known for saving IBM from a very near public collapse in the early nineties; transforming it into a services company and guiding it back onto the path of market leadership. What I expected was a typical account of a business turnaround, but, I was in for a surprise as I felt the author had cut out the mundane gyaan and kept to a story-like narrative of the compay’s revival.

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.

Strategic partnerships

According to many industry observers, journalists and IBMers including me, the best thing Gerstner did was to make IBM an information technology (IT) services oriented company. He shares with the readers the thought processes behind the creation of IBM Global Services, right from his early decision to keep IBM together as a single unit to betting big on the IT industry’s shift towards a services-oriented model and finally, picking the company’s then top sales leader, (and the current Chairman and CEO) Sam Palmisano, to lead this new group. In Gerstner’s words, Palmisano has since taken the business to a new level – IBM is the market leader in its segment.

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 onto 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.

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