Who Says Elephants Can't Dance Paperback – December 16, 2003

Though written more than a decade ago, this is hands-down one of the best business books on the planet and is relevant to leaders of both large and small organizations.Here is how Lou Gerstner (LG) Saved IBM:1. Overarching strategy: At the time LG arrived, IBM was proprietary hardware- (mainframe) and software-led. However, an explosion of niche competitors were undercutting IBM’s pricing in its most profitable segments. The prior leadership and Board of Directors were planning to break the company up to make it more nimble, but LG chose instead to tightly integrate the company by making it the services-led, network-centric, open-source, integrator of choice.2. Product breadth: When LG arrived, IBM tried to be all things to all people. LG divested underperforming areas (ex: most application software) and focused on leading/emerging areas (ex: middleware).3. Customer focus: When LG arrived, IBM pushed product to serve IBM’s financial interest. LG shifted to serving customers’ interests and business processes.4. Culture: IBM was founded on strong values including: hard work, decent working conditions, fairness, honesty, respect, impeccable customer service, jobs for life. However, when LG arrived, many of these had been taken to the extreme with an obsession for perfection. In addition, morale was in the dumps and employees felt defeated. LG revitalized many attributes and removed the promise of jobs-for-life.5. Organization: At the time LG arrived, IBM was controlled by autonomous geographic (country) leaders who presided from on-high by organizing work and delegating problem solving. LG centralized strategic planning, budgeting, marketing, competitive analysis, and sales operations. LG shifted to global industry team leaders who engaged in problem solving and dug into details by constantly meeting with customers, suppliers, and employees. He retained decentralized decision making for innovation (once funded) and for engagement of customers, suppliers, and business partners.6. Business performance measurement: When LG arrived, IBM was overly focused on the income statement. LG shifted the focus to shareholder value creation by means of increasing free-cash-flow and improving customer satisfaction.7. Cost structure: Prior to LG’s arrive, IBM had made a series of modest cuts to protect its people and its income statement. LG decided to right-size quickly and completely to become best-in-class based on competitive benchmarks.8. Execution: When LG arrived, IBM was have on strategy and contemplation. LG called for bold, precise action plans deeply inspected month by month.9. Collaboration: When LG arrived, IBM was rampant with in-fighting; businesses would even bid against each other for customer orders. LG fostered collaboration through strategy and organization as well as identifying shared outside enemies.10. Leadership development: When LG arrived, high-potential leaders learned by watching. LG ensured they learned by doing. He maintained IBM’s strong practice of promoting experienced leaders from within.11. Compensation: When LG arrived, compensation was based on tenured entitlement with little stock-ownership and little pay variation for top- and bottom-performers. LG switched to a performance-based meritocracy and aligned incentives with the core strategy and desired culture.12. Mergers, acquisitions, and alliances: When LG arrived, IBM acquired and partnered with a bewildering number of companies for purposes of diversification. LG limited activity to focus on acceleration of the core strategy.13. Branding & Advertising: When LG arrived, IBM had a fractured and stogy brand image. LG centralized marketing and focused the company’s considerable resources on defining e-business.14. Technical Excellence: LG retained IBM’s commitment to technical excellence.

Below are key excerpts that I found particularly insightful in this book, detailing the turnaround that Louis Gerstner engineered at IBM in the 1990s:1- "Thus began a lifelong process of trying to build organizations that allows for hierarchy but at he same time bring people together for problem solving, regardless of where they are positioned within the organization."2- "I went on to summarize my management philosophy and practice: I manage by principle, not procedure. The marketplace dictates everything we should do. I'm a big believer in quality, strong competitive strategies and plans, teamwork, payoff for performance, and ethical responsibility. I look for people who work to solve problems and help colleagues. I sack politicians. I am heavily involved in strategy; the rest is yours to implement. Just keep me informed in an informal way. Don't hide bad information--1 hate surprises. Don't try to blow things by me. Solve problems laterally; don't keep bringing them up the line. Move fast. If we make mistakes, let them be because we are too fast rather than too slow. Hierarchy means very little to me. Let's put together in meetings the people who can help solve a problem, regardless of position. Reduce committees and meetings to a minimum. No committee decision making. Let's have lots of candid, straightforward communications. I don't completely understand the technology. I'll need to learn it. but don't expect me to master it. The unit leaders must be the translators into business terms for me."3- "After all the customer and employee and industry meetings, as well as weekend and air travel reflection, I was indeed ready to make four critical decisions: Keep the company together. Change our fundamental economic model. Reengineer how we did business. Sell underproductive assets in order to raise cash."4- "I've had a lot of experience turning around troubled companies, and one of the first things I learned was that whatever hard or painful things you have to do, do them quickly and make sure everyone knows what you are doing and why."5- "The sine qua non of any successful corporate transformation is public acknowledgment of the existence of a crisis. If e So there must be a crisis, and it is the job of the CEO to define and communicate that crisis, its magnitude, its severity, and its impact. Just as important, the CEO must also be able to communicate how to end the crisis--the new strategy, the new company model, the new culture. All of this takes enormous commitment from the CEO to communicate, communicate, and communicate some more."6- "What drives IBM's unique complexity is twofold. First, every institution and almost every individual is an actual or potential customer of IBM. In The second complexity factor is the rate and pace of the underlying technology."7- "All of our efforts to save IBM--through right-sizing i and reengineering and creating strategy and boosting morale and all the rest--would have been for naught if, while we were hard at work on the other things, the IBM brand fell apart. I have always believed a successful company must have a customer/market*lace orientation and a strong marketing organization. That's why my second step in creating a global enterprise had to be to fix and focus IBM's marketing efforts."8- "We made four major changes to our compensation system...This was all about pay for performance, not loyalty or tenure. It was all about differentiation: Differentiate our overall pay based on the marketplace; differentiate our increases based on individual performance and pay in the marketplace; differentiate our bonuses based business performance and individual contributions; and differentiate our stock-option awards based on the critical skills of the individual and our risk of loss to competition."9- "I wanted IBMers to think and act like long-term shareholders to feel the pressure from the marketplace to deploy assets and forge strategies that create competitive advantage. The market, over time, represents a brutally honest evaluator of relative performance, and what I needed was a strong incentive for IBMers to look at their company from the outside in."10- "The skills required in managing services processes are very different from those that drive successful product companies. We had no experience building a labor-based business inside an asset-intensive company. We were expert at managing factories and developing technologies. We understood cost of goods and inventory turns and manufacturing. But a human-intensive services business is entirely different. In services you don't make a product and then sell it. You sell a capability. You sell knowledge. You create it at the same time you deliver it. The business model is different. The economics are entirely different."11- "My point is that all of the assets that the company needed to succeed were in place. But in every case--hardware, technology, software, even services--all of these capabilities were part of a business model that had fallen wildly out of step with marketplace realities...The implications of this kind of leap to a company's economic model can be devastating. In IBM's case it meant the collapse of gross profit margins and the attendant changes we had to engineer to lower our cost structure without compromising our effectiveness. Yet the hardest part of these decisions was neither the technological nor economic transformations required. It was changing the culture--the mindset and instincts of hundreds of thousands of people who had grown up in an undeniably successful company, but one that had tor decades been immune to normal competitive and economic forces. The challenge was making that workforce live, compete, and win in the real world. It was like taking a lion raised for all of its life in captivity and suddenly teaching it to survive in the jungle."12- "You've probably found, as I have, that most companies say their cultures are about the same things--outstanding customer service. excellence, teamwork, shareholder value, responsible corporate behavior, and integrity. But, of course, these kinds of values don't necessarily translate into the same kind of behavior in all companies--how people actually go about their work, how they interact with one another, what motivates them. That's because, as with national cultures. most of the really important rules aren't written down anywhere."13- "In comparison, changing the attitude and behavior of hundreds of thousands of people is very, very hard to accomplish. Business schools don't teach you how to do it. You can't lead the revolution from the splendid isolation of corporate headquarters. You can't simply give a couple of speeches or write a new credo for the company and declare that the new culture has taken hold. You can't mandate it, :an't engineer it. What you can do is create the conditions for transformation. You can provide incentives. You can define the marketplace realities and goals. But then you have to trust. In fact, in the end, management doesn't change culture. Management invites the workforce itself to change the culture."14- "Thee work-a-day world of business isn't about fads or miracles. There are fundamentals that characterize successful enterprises anc successful executives. They are focused. They are superb at execution. They abound with personal leadership."15- "At the end of the day a successful, focused enterprise is one that has developed a deep understanding of its customers' needs, its competitive environment, and its economic realities. This comprehensive analysis must then form the basis for specific strategies :hat are translated into day-to-day execution."16- "Earlier in this section I mentioned that in every industry it is possible to identify the five or six key success factors that drive leadership performance. The best companies in an industry build processes that allow them to outperform their competitors vis-a-vis these success factors."17- "This next generation of leaders--in both the public and private sectors--will have to expand its thinking around a set of economic, political, and social considerations. These leaders will be: Much more able to deal with the relentless, discontinuous change that this technology is creating. Much more global in outlook and practice. Much more able to strike an appropriate balance between the instinct for cultural preservation and the promise of regional or global cooperation. Much more able to embrace the fact that the world is moving to a model in which the "default" in every endeavor will be openness and integration, not isolation."

This book was just what I was looking for. Perfect for my and my departments needs.

Who was the best manager of the latter part of the 20th century? Jack Welch lost about $200 billion for his shareholders from 1995 until he retired, while Louis Gerstner turned around and undoubtedly saved IBM. Today IBM's market cap exceeds GE's and the company did not need a federal government bailout to survive the financial meltdown of 2007/2008, the way GE did. Of these two Gerstner seems to me to be a true managerial success, as opposed to a media fed phenomenon.IBM shareholder have been rewarded while GE shareholders have seen a steady decline in the value of their shares. In this book Gerstner lays out his thinking and strategy and the actions he took upon being named CEO at IBM in the early 1990s. Even though he had little expertise in computer technology, he had the customer perspective as well as decades of managerial experience and training. The result is a book that is clear and understandable without the bravado and acronyms. This is a refreshing description of a major turnaround by the man who led it.For experienced managers this is a great read.