Not the same old waltz

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=90 BGCOLOR="#006699" TEXT="#080000" background="3a1fd5a3.jpg"> <div> <FONT SIZE="5" COLOR="#000000" FACE="Arial" ><B>Eclicktick Consulting</B></FONT><B>    </B><B> |     </B><A HREF="index.htm" TARGET="_top" TITLE="Eclicktick Consulting"><U><B>home</B></U></A></div> <div> <A HREF="books.htm" TARGET="_top" TITLE="Eclicktick Recommended Books"><U>Eclicktick Recommended Books</U></A>   |   <A HREF="interview_with_bob_sutton.htm" TARGET="_top" TITLE="Interview with Bob Sutton"><U>Interview with Bob Sutton</U></A>   |   <A HREF="weird_ideas_that_work_.htm" TARGET="_top" TITLE="Weird Ideas That Work "><U>Weird Ideas That Work </U></A>   |   <B>Not the same old waltz</B>   |   <A HREF="id67.htm" TARGET="_top" TITLE="Managing The Ecosystem For Innovation"><U>Managing The Ecosystem For Innovation</U></A></div> <div> </div> </td> </tr><tr> <td valign="top" width=210 BGCOLOR="#FFCC66" TEXT="#080000" background="3a2d2b03.jpg"> <div> <IMG SRC="2859e760.jpg" border=0 width="158" height="118" ALIGN="BOTTOM" HSPACE="0" VSPACE="0">Latest white papers:</div> <div> <A HREF="http://www.eclicktick.com/StrategyEthics.pdf" TARGET="_top" TITLE="http://www.eclicktick.com/StrategyEthics"><U>"Ethics and Strategy:</U></A></div> <div> <A HREF="http://www.eclicktick.com/StrategyEthics.pdf" TARGET="_top" TITLE="http://www.eclicktick.com/StrategyEthics"><U>How strategy, ethics and corporate governance connect"</U></A></div> <bR> <div> <A HREF="http://www.eclicktick.com/EclicktickTelecomWhitePaper2.pdf" TARGET="_top" TITLE="http://www.eclicktick.com/EclicktickTele"><U>Selling to network services providers and their customers using business cases</U></A></div> <bR> <div> Free e-book</div> <div> <A HREF="http://www.eclicktick.com/turnaround.pdf" TARGET="_top" TITLE="http://www.eclicktick.com/turnaround.pdf"><U>"Turn Around! 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Copyright Alistair Davidson, 2002. All rights reserved. Reproduced by permission from Strategy and Leadership magazine.</div> <bR> <div> <B>Who Says Elephants Can't Dance? </B></div> <div> Louis V. Gerstner, Jr.</div> <div> HarperBusiness, New York, 2002</div> <bR> <bR> <div> Some companies and the impresarios who run them are beloved of journalists. Everything they do is the subject of cover articles. IBM is one of those companies and Louis Gerstner, former McKinsey partner, former head of Travel Services for Amex, former CEO of the LBO buy-out RJR Nabisco, is a headliner in his own right. Now, to wide acclaim, he has published his story of turning around IBM. </div> <bR> <div> Gerstner comes across as a down-to-earth practical leader with a keen sense of the importance of business basics and business strategy. There are no dramatic new theories of management in this book, no major bolstering of theories of excellence or a promotion of the McKinsey 7-S model. There is, in contrast, a refreshingly simple emphasis upon the basics of business strategy, management practices and execution.</div> <bR> <div> Gerstner brought three important experiences to his turnaround of IBM. From McKinsey, he brought the understanding that companies can't successfully compete in all businesses and markets. From American Express, he brought a seminal experience of IBM's lack of customer focused when he experienced being threatened by IBM for bringing in a competitor's mainframe computer product. From RJR Nabisco, he brought in an appreciation of the importance of solid processes and management controls for controlling performance and cash flow.</div> <bR> <div> And these three pieces of background turned out to be exactly what IBM needed. IBM was a troubled but arrogant company when he took over. Its employees were more concerned about internal politics than customers and market share. IBM was struggling in practically every business it was competing in and losing market share to more nimble competitors. And, IBM's financial position had deteriorated badly as a result of rapid loss of market share to lower priced mainframe vendors, which was the market responsible for the vast majority of IBM's profits.</div> <bR> <div> The litany of IBM's problems is hard to imagine in today's more competitive world, but they included:</div> <bR> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">A company reluctant to tackle difficult pricing problems and take a longer view of the business.</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">An entitlement culture rather than a culture oriented to performance.</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">A political culture with little emphasis upon actual execution (the example memo included in the book on the management of “non-concurrence” by IBM decision makers is a wonderful piece of evidence; as CEO, he found that when he issued a direct order, his subordinates would often not implement, because they disagreed and this culture of non-concurrence had made IBM the slow-poke company that it was when he took charge).</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">A lack of passion in the leaders of the company which he compared unfavorably with smaller competitors</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">A lack of coordination within the baronies of the geographically organized IBM.</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Massive duplication of administrative staff and processes. He was responsible for centralizing IBM's advertising message, which we as outsiders first got our glimpse of in IBM's early and unified message about e-business.</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">A lack of focus on serving and listening to customers.</div> <bR> <div> Although not directly stated in the book as criticism of the previous CEO, IBM was also headed down the wrong road strategically. John Akers, Gerstner's predecessor, whose background had been in sales, had drawn the wrong conclusions about how to fix IBM. He had decided to maintain IBM's pricing umbrella over its competitors in the core mainframe space and to divide IBM up into a group of over a dozen companies that could be more entrepreneurial. As with many large organizations, the proposed reorganization was a substitute for actual strategy change.</div> <bR> <div> Gerstner's key insight, one that was eventually recognized by other hardware vendors, is one born of his experiences as an IBM customer. Gerstner understood that IBM's ability to create, deliver and support solutions for customers was far more important than the individual components of the solution. As a strategist, he clearly understood that a “core competence” - the ability to bring together key capabilities and manage across them - has genuine value. And the notion of solution and services selling could be supported by IBM's large size, global geographic presence, economies of scale in components and superb R&D - provided that its culture, processes and focus could be changed. </div> <bR> <div> Not a high tech insider, Gerstner's most important insights were learned from being a customer.  (This suggests that companies and venture capitalists should broaden their criteria for the selection of leaders.) His predecessor, Akers, was a highly personable leader, incapable of making the hard decisions that IBM needed. Gerstner was a brusque performance oriented manager, who as an outsider had not been socialized by IBM's peculiar culture of foils, “non-concurrence” and internal rivalries.</div> <bR> <div> IBM's success today is clearly based upon this insight. Gerstner's successor, Sam Palmisano, places his emphasis upon offering computing capability as a utility. This approach clearly reflects the increased importance of using high tech to solve problems for customers and the recognition that there is less value in the commoditized aspects of technology. The acquisition of the respected consulting firm of PriceWaterhouseCoopers moves the new IBM even more in this direction.</div> <bR> <div> What can we learn from this book? Perhaps we should accept it as evidence that understanding strategy, understanding the customer, focusing upon activities and processes that solve customer problems and create value for customers represents the new frontier in high technology, something often badly understood by those competing with IBM (and Dell, another company for whom technology is a tool not the end). Those who feel that strategy has been downplayed in recent years will feel vindicated because Gerstner's book is a practical demonstration of the value of strategic management. </div> <bR> <div> For those in Silicon Valley and elsewhere, whose emphasis is upon selling technology, instead of solutions that are needed and valued by customers, the book should be a wake-up call.</div> <bR> <bR> <div>   <script> var page_name = ''; var invisible = ''; function sE(){return true;}window.onError=sE;var lp=0; function clr(){lp++;if(lp==1){document.ctr.src="http://64.49.222.57/0.gif";} else {clearTimeout(myT);return true;}} var myT=setTimeout('clr()',120000);var rn=Math.random(); document.write('<a href="http://www.web-stat.com/stats.shtml?alistairdavidson"'); document.write(' target="new"><img name="ctr"'); document.write(' src="http://www.web-stat.com/count.cgi?'); document.write('alistairdavidson::'+top.document.referrer); if (window.screen){ document.write('::'+screen.width+'x'+screen.height+'::'); document.write(screen.colorDepth+'::'+page_name+'::'+invisible+'::'+rn); }else{document.write('::::::page_name::'+invisible+'::'+rn);} document.write('" onError="clr();" onAbort="clr();"'); document.write(' onLoad="clearTimeout(myT);"'); document.write('border=0 alt="Web-Stat hit counter"></a>'); </script><noscript> <a href="http://www.web-stat.com/stats.shtml?alistairdavidson" target="new"> <img src="http://www.web-stat.com/count.cgi?alistairdavidson::NoJavaScript" border=0> </a> </noscript>   </div> <bR> </td> </tr></table></body>