Monday, March 13, 2017

Who Says Elephants Can't Dance - Louis V. Gerstner, Jr

The one thing that stuck in my mind is a phrase that Gertsner repeats more than once. His principle that 'People do not respect what you expect but they respect what you inspect.' Gerstner should know - he was the man responsible for the historic turnaround of IBM in the \late 1990s. How the young kid from a modest background went to Harvard and then built a career in consulting before leading one of the most dramatic turnarounds is what this book written by Gerstener is about. I have heard much about the book and the man - Carol Dweck puts him in the list of great leaders who are those with a learning mindset, Jim Collins would surely put him in those Level 5 leaders.

Gerstner takes the job at IBM despite his misgivings - but he confirms later on that it was not just the challenge but also the pride and care that he was dealing with a national treasure. Lovely words. In those days it was said that IBM would fold up in 7 years and its revenue was down from 13 bn to 7 bn. Gerstner takes the job and discovers a culture that was inward facing, bureaucratic, rule-driven and split into so many decentralised parts that they were at war with one another. In his first address to the management team he says that he aspires that they would turn out to be best in class, would benchmark costs, be less bureaucratic and right sized. He tells them to focus on their unique strengths, to stop feeling sorry for themselves and that they should now focus on solutions and action. One phrase I loved was that he wanted them to seek short term victories and long term excitement.

He set a 30-day deadline with some major pointers - it would be driven by principles and not process, it would be driven by what the market place needs, it was better they make mistakes and fast, they would rely on teamwork, they would now focus on what has to be done. Gerstner writes about the sea of AAs or Administrative Assistants who pretty much ran the show from behind, of senior executives who would preside and not do any real work and layers of red tapism that had been built in.

Among the early strategic decisions Lou took was to lower mainframe prices. He told his senior team to go into this Operation Bearhug - they had to visit 50 customers in 90 days. The archaic and bureaucratic Management Committees were disbanded,.He met industry experts. In order of priority he decided to stop the bleeding, keep the company together, sell unproductive assets and reduce expenses. He also changed a rule that said that no alcohol would be served on company jets. While doing this he also had to hold the vision of turning profitable, be customer focused, be aggressive in the market place, and be a full-service provider. Gerstner was very clear that it was all about execution and not just talk. Now Jim Collins talks of the Stockdale Paradox and this seems like it.

Gerstner next focused on creating the leadership team. He made changes to the Board and began employee communications in the right earnest. He started the idea of a global Enterprise and not a geographical one which including breaking up well-entrenched fiefdoms. They started the campaign of Solutions for a Small Planet and the concept of e-business. He started the idea of pay for performance in terms of corporate compensation - the senior management team got bonuses only if the company did well. Stock options were offered too selectively.

IBM was started in the early 1990s as a business equipment enterprise and grew to encompass all business equipment and automation. An anti trust audit by the government put their growth and confidence into slowdown. He says that all companies are the shadow of one man - for IBM it was Sam Walton Sr. In his strategy Gerstner quickly looked at Services (which was a big gamble but paid off big time) and net worked models. the key was to integrate. He also gave a sharp focus to software which he felt was a diamond on the rough. He pretty much unstacked the stack portfolio and unbundled it offering each one as a service with value. This he built around the net.

On culture, Gerstner says that it is the only game because all businesses are about people. Most stuff that culture holds is stuff that's not written anywhere. 'Successful institutions almost always develop strong cultures that reinforce those elements that make it great.' Gerstner quickly understood that the basic beliefs and principles that guided the organisation were either being misinterpreted conveniently. Some of the cultural issues he disliked were - they did not invest in customers, customers came second, focused on internal politics, too bureaucratic, had a culture of saying NO, developed a complex IBM lingo that only understood. Gerstner asked them to focus on the market place, know that they were a tech company, they would be measured by customer satisfaction and shareholder value, they would work with urgency, teamwork would be rewarded. The required behavioral changes were clearly mentioned - customer focus, real service, manage to succeed, performance-driven which was measured, diversity was encouraged, attack process, accountability, principle driven.

Gerstner built a culture where leaders were doers and not presiders. Leaders came from all cadres. They were trained in leadership competencies. They were told how they were viewed by their colleagues and were clearly evaluated for progress.

IBM Leadership competencies were mapped thus:
Focus to win - Customer insights, Breakthrough thinking and Drive to achieve
Mobilise to Execute - Team leadership, Straight talk, Team work, Decisiveness
Sustain momentum - Building Organisation Capability, Coaching, Personal dedication
The Core - passion for business

The mantra was - win, execute and team. The moonshot was e-business.

Gerstner feels that the key to transformation was focus, being superb at execution and personal leadership. In focus he says - know and love your business, have steely eyed strategies. He says its intelligence that wins wars and that good strategy lies in detail. World class process, strategy, clarity, high performance culture were important. I like the way Gerstner says that leadership is personal. That passion is for everyone. Integrity is a must. Clearly he says elephants can dance with a bit of these. You must walk the talk.

I told my friend that I'd read this book. He told me that perhaps it's not relevant now. It's not as relevant as the Mahabharatha perhaps - I cannot see why we cannot learn from one great story. You may not follow the exact prescription but you will gain the broad principles. There is too much of that good stuff in Louis Gerstner's book and surely it must be a blueprint for those who wish to make elephants dance. Not for anyone who can think any less. Well worth the time if you ask me. Thanks Suresh for lending it to me. Now for the next one on your book shelf.

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