…anyone who can bring Big Blue back from the brink of oblivion must have done something right.
 


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Book review: How Gerstner reinvented IBM from the customer in

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Book review: How Gerstner reinvented IBM from the customer in

(Who Says Elephants Can't Dance, by Louis V. Gerstner, Harper Business, 2002)

Anyone who manages to bring Big Blue back from the brink of oblivion and drive it to a position of IT industry leadership in nine years must have done something right. It's therefore no surprise that the memoir of outgoing IBM chief Lou Gerstner arrived in bookstores last month with a good deal of fanfare.

However great a CEO Gerstner may have been, let's establish one thing right away: he is not a good writer. Admittedly, he offers some interesting and occasionally humorous insights into IBM's insular culture, complete with tales of meetings that looked and functioned more like UN sessions (with hordes of advisors lining the walls), fulltime staff managing the company's art collection and secretaries who were required to re-set the clocks every morning. But for the most part, Who Says Elephants Can't Dance is a laundry list of accomplishments from Gerstner's tenure presented in dry, matter-of-fact prose, and it pointedly avoids touching on the company's setbacks.

It also fails to acknowledge any of the valid criticisms leveled at IBM or his leadership in particular, so don't expect any comment on how mighty IBM allowed upstart Dell to dominate the PC business on Gerstner's watch. You won't hear any reflections on how he let Cisco eat the lunch of IBM's once-promising network division. Nor should you expect any insight into how Oracle made off with IBM's brilliant IT innovation, the relational database. And Gerstner absolutely, positively won't address critics who argue that IBM's stock price really was propped up by clever financial engineering tactics like share buy-back programs and overly aggressive assumptions about pension funds. These issues were conveniently glossed over in a few sentences, if they weren't ignored altogether.

Selective memory and poor prose notwithstanding, Gerstner's memoir does offer a compelling account of how the ultimate IT outsider, recruited from RJR Nabisco, "traded cookie chips for computer ship" (as one IBM employee gleefully put it). Along the way, he managed to rebuild the insular, sclerotic, senile and hemorrhaging IBM from the outside in. Under his guidance, IBM became a customer-driven company with a clear voice in the marketplace.

The book suggests three ways in which this was accomplished.

1. Aligning the organization around customers

Gerstner reorganized the company completely, shifting the focus from product groups and geographic organizations into customer segments. He put the heads of the customer units on top of the organizational charts, in charge of power and perks. Gerstner describes how he stopped creating P&L statements for geographic units: "Many of our geographic leaders went ballistic… 'Sorry,' I said, 'you no longer manage a business. You now serve as a critical support function to our integrated worldwide customer organization.'" Gerstner has little patience for leaders who talk a good game about customer centricity but delegate its execution. True leaders involve themselves in every step of the implementation and align rewards, authority and titles with customers. IBM is still a complex four-way matrix of customer, geography, process/function and products, but the customer axis takes precedence over the other three.

2. Listen to the customer and speak to them with a single voice

Who would have thought that the same person who, at the onset of his CEO tenure, uttered these now-infamous words - "the last thing IBM needs is a vision" - would later guide IBM through the Internet boom and bust with an amazingly clear and coherent vision of "e-business"? One of Gerstner's most noteworthy successes was getting IBM to articulate its vision with a single voice in a cluttered and confused marketplace. He notes that unified messaging allowed customers to see benefits that were not being articulated by IBM's competitors: "The concept of e-business galvanized our workforce and created a coherent context for hundreds of products and services… [it] reestablished IBM's leadership in the industry." The message was integrated across hundreds of executive speeches and was the centerpiece of the company's advertising, which was developed by a single global ad agency (Ogilvy).

IBM not only spoke with a single voice, it integrated its listening. Big Blue barely listened to customers at all before Gerstner's arrival. The few customer surveys that were done were rigged by the sales force, which had selected their best and favorite customers to be interviewed. These sham surveys were executed not to drive productive change, but to justify existing business practices. Today, a small number of comprehensive surveys are conducted by third-party vendors who are responsible for independently selecting the customers, and findings are incorporated into processes as benchmarks for improvements.

3. Offer customer solutions instead of boxes and software

Anyone who has worked close to an IT company can relate to Gerstner's description of IBM's obsession, upon his arrival in 1993, with chip speeds, software versions and other technical considerations. Perhaps Gerstner's single greatest accomplishment was that he turned what was essentially a one-trick pony, a System/360 mainframe manufacturer, into a company that solves problems for customers by integrating computer systems. Unfortunately, Who Says Elephants Can't Dance is short on reflections about how this colossal transformation from a hardware and software maker to a service, consulting and outsourcing powerhouse was effected.

While much has been made of the Gerstner's lack of IT background, he points out that he brought something more important with him when he parachuted in as CEO: experience as an IT buyer. Gerstner had dealt with IBM for many years from the client side as an American Express executive and CEO of RJR Nabisco. While the finer points of relational databases, memory chips and disk speed were lost on Gerstner, he understood the business imperatives of IBM's customers. What IBM needed was not another technogeek, but an executive how would understand how to solve the complex information processing needs of today's and tomorrow's client executives. His lessons on turning the company outside-in, reconceiving the business from the customer's perspective, is a valuable one for companies of any industry.


   © 2002, Gronstedt Group, Inc.