Gerstner’s Who says Elephants Cant Dance – Summary and review

The guy is one of the reasons from my being in this company. It’s a very commonly held view that had it not been for Gerstner, IBM would have filed for bankruptcy, signalling what many called a defeat for America. IBM was infact such a precious jewel in America’s crown that when Gerstner was contemplating about the IBM CEO offer, Watson came up to him and told him, “Take up the challenge Lou, You owe it to America”!
Well, we all know that this kinda emotional hogwash is not the normal working style of these executives.. so let us also put that aside for a moment and get down to business.
IBM, for quite some time had been a mammoth, fragmented, paternal, inward looking and process oriented organization. This was acceptable till the 70’s, but once the 90’s came on, the competitors had wisened up, while IBM remained the same. And the losses began to mount. Lou took over in 92-93 and brought with him, some sweeping changes in the culture and processes within IBM. In his book, he describes the changes that he made is a simple and lucid style. Here is a brief summary:
1) De-fragment the Company: He dumped suggestions that IBM could be productive only if it could be broken into smaller companies. Instead, he chose to create a one of a kind end to end solution provider, something all clients were always craving for. To this end, he:
a. Ended the geographic fiefdoms, and decided to concentrate on business units that used resourses from multiple geographies. To Encourage Business unit heads to look out for IBM’s success rather than their units success only, he based their compensation packages into two parts.. Business unit Performance holding a smaller share, and IBM’s performance, holding a greater share.
b. Created a centralized advertising unit to send a coherent message.

2) Shift the Focus to the Customer:
a. Direct research towards what customers want, not what the researchers want.
b. Operation Bear Hug – All execs visit 5 customers and solve major problems faced by them. Signified a cultural change, making IBM easier to deal with, and showed the customer that we cared

3) Created cultural changes:
a. Instill the sense of urgency. If we make misteakes, let them be because we were too fast, rather than too slow.
b. Cut down on beurocracy and politics, encourage the team to act in accordance with the spirit of the process, not just in accordance with the process.

4) Trimmed down the machine:
a. Cut down more than 100, 000 jobs.
b. Re-engineered business processes.
c. Sell unproductive assets and real estate, subsidiaries

5) Pay:
a. Made stock options compulsory to the executives, thus tying up their pay to their performance.
b. Differentiated Pay: Pay the better performers better.

6) Strategy:
a. Placed a big bet on services
b. Embraced Open Standards based rather than a proprietary Business style (like Microsoft).
c. Sell off units with no future (IBM Network to AT&T), exit the OS2 vs Windows race, leave application software. Choose focus over breadth.
d. Reposition the mainframe, cut its cost and let them all know its vital. Change in technology to CMOS from bipolar was crutial
e. IBM could never use all the patents that it created. Lou decided to sell patents and technology to others.


The book is a must-read for executives looking for a new job and a great read for all IBMers as it puts forth all that lovely history while helping us understand what this huge monster is all about. However, I will warn the “not so management inclined” folks against this one.
And a major suggestion I will bring up sometime in IBM is to create a book, written in this kind of a story book fashion that explains our strategy to our people (and mind you.. keep it as an internal document! )