Book review: <I>Who says elephants can't dance?</i> by Louis V. Gerstner

 

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By Alun Williams

Posted on 13 Jan 2003 at 16:17

The book is sub-titled 'Inside IBM's historic turnaround' and it describes Louis V. Gerstner's encounter with the failing IBM empire.

He emphasises that in the early nineties the company was facing financial extinction, something easily forgotten today, and the story of the book is how he tried to turn around the bloated and uncompetitive dinosaur that IBM was becoming.

It should be noted that in this age of vastly overpaid business executives, Gerstner is one of the few CEOs who can legitimately point to billions of dollars of increased revenue under his stewardship (IBM reached sales of $86bn in 2001 with 300,000 employees). Something of a turnaround from the pre-Gerstner IBM, which suffered from collapsing mainframe sales and posted pretax losses of $400m.

This is what makes his story an interesting read - how exactly did he tackle the task? He says it is the question he is constantly asked, 'What did you do to IBM?' and it is this that provoked the book.

Gerstner's best steps
Reducing the story of IBM over the past decade to its essentials, Gerstner says that the saga would pivot on two big bets: one on the industry's direction and one on IBM's own strategy.

On the first, IBM helped coin the phrase e-business and positioned itself well for the enterprise-scale middleware required by Internet-based network computing (as opposed to continuing fighting in the PC arena).

On the second big bet, Gerstner addressed what he saw as the anti-competitive nature of IBM culture. He reorganised the company - taking on the various geographic fiefdoms that had emerged - to make it more flexible and customer-focused. Particularly, he takes credit for developing computing services and making the most of IBM's existing software business.

'Re-engineering is difficult, boring and painful. One of my senior executives at the time said: "Re-engineering is like starting a fire on your head and putting it out with a hammer." But IBM truly needed a top-to-bottom overhaul of its basic business operations,' writes Gerstner.

One key Gerstner decision was to keep the company together - conventional wisdom at the time was to split IBM into smaller competitive units - to take full advantage of global scale computing. He correctly believed that IBM's size could still be made to work in its favour. This was an easy cost-cutting exercise: 'We threw out the investment bankers who were arranging IPOs of all the pieces of the enterprise. We threw out the accountants who were creating official financial statements required in order to sell off the individual components. We threw out the naming consultants who had decided that the printer division could be called "Pennant" and the storage division "AdStar"....For example, even in the midst of financial chaos, we had managed to hire more than 70 different advertising agencies in the United States alone.'

His five key strategic decisions for IBM were (1) keep the company together and not spin off the pieces (2) reinvest in the mainframe (3) remain in the core semiconductor technology business (4) protect the fundamental R&D budget (5) drive everything it did from the customer and turn IBM into a market-driven rather internally focused, process-driven enterprise

A work in five movements
The book is in five main sections. The first covers his first year in the job and provides a day-by-day inside view of a multinational's CEO as he desperately fights fires, visits far-flung company outposts and tries to handle the media as he adapts strategy as he learns about the business. The second section is more reflective as it moves away from a time-line and considers the strategic changes within IBM. The final, shorter sections look at IBM's corporate culture, the lessons he learned about corporate leadership and general observations on the industry.