Peter Duncan reviews:

Who Says Elephants Can't Dance?
By Louis V. Gerstner, Jr.
HarperBusiness, 2002, 384 pages, $27.95

"The last thing IBM needs is a vision" is perhaps the most remembered sound bite from Lou Gerstner as he announced what needed to be done to turn around the decline at IBM in the early 1990's. This phrase, actually a misquoting of his full sentence ("the last thing IBM needs right now is a vision"), grabbed headlines as many wondered how the strategy consultant from McKinsey and Company could say that a vision for IBM was not the starting point of the turn around. But what follows in his book is a road map for turning around any business large or small.

IBM lost over 50% of the revenue from its major product line and was running dangerously short of cash as margins and volume fell in tandem. Initially, what Gerstner recognized is that a long formal vision statement is not what is needed to launch a turn around. In the depth of crisis, identifying and resolving a few key strategic issues is what is critical for stabilizing a company. For Gerstner, there were four immediate strategic issues:

  • Whether or not to break IBM into many freestanding businesses?
  • How to change the economic model of expenses and margin to generate cash?
  • How to re-engineer IBM for efficiency and profits?
  • What unproductive assets could be sold to raise cash?

Deciding how to resolve each of these formed the initial outline of a vision for what IBM would become. It took years to actually achieve the resolution to these key questions, but with the critical decisions made, there was no more debate. The answers to these key issues formed the backbone of the vision that would later be developed and ultimately lead to the saving of IBM.

In parallel with resolving the key issues in his first months at IBM, Gerstner grabbed hold of other key problems facing the company — getting the right leadership team, breaking up fiefdoms, aligning compensation with performance and creating a pay-for-performance compensation structure, establishing effective internal communications, and effective external (brand) communications.

It was only in the second year of the turn around that Gerstner turned his attention to formal strategy. His description of the strategy process parallels much of the Simplified Strategic Planning process. There is the recognition of a coming change in the industry scenario as personal computing was expected to give way to network computing. IBM developed assumptions about what it would take to win. The key insight was seeing that the future value must come from integration of various open standard components in a "solution" rather than selling the proprietary system hardware that had built IBM in the preceding decades. This understanding led managers to develop growth strategies in each of their core business segments (services, software and components) and to recognize that, unlike the "do it all" business model for the mainframe, they would have to focus on segments where they could win.

Strategy is fine, but nothing without the ability to implement the plan. The most interesting chapters of the book deal with how Gerstner was able to revamp the IBM culture to support and implement the chosen strategies. He clearly understood how culture is created in the first place, how it is valuable, how it can become an impediment to change, and how to go about changing it. For those who struggle to implement strategy only to find the organization "snap back" to its old ways, these chapters may provide some ideas of how to achieve the necessary organizational change.

Finally, the "lessons learned" chapter is full of advice that practitioners of Simplified Strategic Planning can take to heart.

  • "Lack of focus is the most common cause of mediocrity"
  • "A successful, focused enterprise is one that has developed a deep understanding of its customer's needs, its competitive environment, and its economic realities. This comprehensive analysis must form the basis for specific strategies that are translated into day-to-day execution."
  • "Good strategies start with massive amounts of quantitative analysis...blended with wisdom, insight and risk taking."
  • True intelligence (not biased or wishful thinking) wins wars
  • "Good strategy is long on detail and short on vision"
  • allocating resources is where strategy becomes action
  • strategy can only take you so far...in the end it comes down to leadership and execution to achieve results
  • superb execution comes when strategy is simple and crystal clear and the organization has its values and commitments aligned with that strategy.
  • Leadership is critical and it takes passion and integrity to do it well.

More than the story of "what I did at IBM" Gerstner is able to lay out the elements of what it takes to turn around a failing company as he provides insight as to how to tackle the tough jobs of changing culture to get results from strategy.

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