IBM: Memoirs of an elephant trainer

Gerstner's account of reviving IBM offers a blueprint and principles for managing any organization.
Written by Dan Farber, Inactive on
When Louis V. Gerstner Jr. came to IBM on April 1, 1993, there wasn't much that was right with Big Blue. It was a beached whale, once the king of the oceans, now practically incapacitated.

Ten years later, Gerstner is walking away a hero and chronicles his experiences reviving IBM in his memoir, "Who Says Elephants Can't Dance? Inside IBM's Historic Turnaround".

Like most of what he does, Gerstner took a hands-on approach to the book. He wrote the book himself, and presents an unvarnished glimpse into what he faced in turning IBM around and how he did it.

What's clear from the start is that Gerstner is neither starry-eyed nor seized by an out-sized ego and literary ambitions. He is a battle-tested field general who can't be bluffed and who shoots people with political agendas at dawn. Gerstner was able to apply principles established during his stints at McKinsey & Co., American Express and RJR Nabisco to keep the enemy--primarily IBM's outmoded culture--at bay.

Gerstner describes his reluctance to take the plunge, and his acceptance of the job as new, stimulating challenge, and as a kind of patriotic duty to keep IBM, symbol of American ingenuity, from failing.

In many ways, Gerstner got more than he bargained for. He thought the turnaround would take five years; ten years later, it is still in process. I have to wonder how many sleepless, tormented nights he experienced living through the early days of his tenure. Or, perhaps he is the Zen master of turnaround specialists. Gerstner makes clear that the path to reviving IBM was in sight early on, but the frozen IBM culture was an impediment.

The first part of the book portrays IBM as a dysfunctional company preoccupied with internal politics, saddled with an ominous set of financials, customers bailing, a foxhole mentality permeating the organization, and a management class that presided rather than acted.

He compares the administrative assistants who did the bidding of IBM executives to the eunuchs who wielded power behind the scenes of China's Imperial court. The company was bloated and inefficient. In 1993, IBM had 128 people with CIO in their title, 266 ledger systems, and 155 data centers, Gerstner reports.

IBM executives and employees who thought they could weather the storm got more than they bargained for in Gerstner. The DNA most prevalent, as evidenced in the book, is Gerstner's stamina and his desire to win. In fact, he says it very plainly: "More than anything, I like to win." The other trait he values most in an executive is passion.

That passion for winning meant removing any obstructions standing in the way of making IBM a leader once again. Gerstner and team brought a huge dose of common sense, not a miracle or new technology breakthrough to save the company. He first set out to reduce expenses, take inefficiency out of business processes, and sell marginal assets to improve IBM's cash position.

Gerstner declared war on the geographical and product fiefdoms and reshaped them along customer and market needs. As he puts it, he "seized the microphone from the business unit heads" in order to set the agenda for a unified enterprise. "The only person who could communicate that [message] was the CEO-me."

Gerstner also made a decision within a month of joining IBM to keep the company intact, rather than follow the conventional wisdom at the time to create a bunch of independent companies. He considers this the most momentous decision of his business career. Size does matter, and leveraging the assets of IBM to bring integrated solutions rather than disaggregating the company jived with Gerstner's experience as customer of IBM for 20 years.

Keeping the company together also led to a decision to create IBM Global Services. According to Gerstner, services have accounted for 80 percent of IBM's revenue growth since 1993.

The albatross around his neck was IBM's culture. "I came to see, in my decade at IBM, that culture isn't just one aspect of the game---it is the game," Gerstner wrote. The challenge, according to Gerstner, was to change the culture from the inside out, to "invite the workforce itself to change the culture."

He rallied the 300,000 IBMers around e-business, which he called the equivalent to the IBM System/360 of a previous era. "It gave us both a marketplace-based mission and a new ground for our own behaviors and operating practices-in other words, a culture," Gerstner wrote. He backed up the e-business initiative with US$5 billion in marketing, and rode the Internet wave without getting seduced into spin offs and acquisitions outside the company's wheelhouse.

Gerstner admits that the battle to transform the culture is not over, and that IBM could once again become fossilized and too codified--or the company will figure out how to maintain its newfound edge and nimbleness.

Clearly, Gerstner deserves the credit for bringing IBM back from the brink. His unfettered account offers not just a brief history, but also a blueprint and principles for managing any kind of organization. I would have liked to see more detail on how various decisions were formulated and more about the decisions that didn't pan out, as well as how IBM missed the market opportunities exploited by Dell and Cisco.

I was fortunate to interview Gerstner during his first year at IBM. I remember thinking, during the hour in his Manhattan office, that this was a very serious, professional manager. It didn't matter that he wasn't steeped in the technology world. He knew how to surround himself with people to make up for his deficiencies and, most importantly, he knew how to analyze issues and not belabor decisions. That first impression proved to be accurate.

As he rides into the sunset, Gerstner says he plans to focus on public education reform, do some investing, and study Chinese history and archaeology. As I recommended in a previous column, he would be an ideal candidate for leading the forthcoming Department of Homeland Security (DHS). Like IBM, the DHS is vital institution that will require a massive integration effort and cultural makeover. On the other hand, Gerstner doesn't suffer fools or politicians easily. Given his competitive nature, I wouldn't expect him to stay on the sidelines for long.


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