Book Review of IBM's turn around story by Lou Gerstner

1. Who says elephants can’t
dance
Presented by Thirumeninathan
…grabbing hold
…strategy
…culture
…lessons
Learned
…observations

2. …evaluate
…in a fish bowl
…important
decisions
…hold the vision
…reengineer
…revive the brand
…pay for
performance
. . . Grabbing

3. • IBM
– Bad press
– Too many competitors
– Angry customers
– Bureaucratic approach
– Losing money and negative
cash flows
• Lou Gerstner
– Management consultancy in
McKinsey
– Experience in highly charged
corporate environments
– Has experience as an IBM
customer
. . . evaluate – Proven change agent

4. – Symbolized American technology might and R & D prowess
– Leader in the industry and too many customers had a stake in
survival
– “National treasure”
– many competitors in the hardware, software, middleware
markets watching every move
. . . in a fish bowl

5. • First Impressions
• Immediate steps
– CFO & HR hiring
. . . important
– Culture reset

6. • Stop the spin-offs
• Change the economic model – cut waste
• Reengineer – from milking the cow to growing
market share
• Sell underproductive assets to raise cash
. . . important

7. • Bringing the “B” back into focus
• Tough market minded strategies
for every business instead of a
grand over-arching vision
• More integrated solutions (rather
than less)
• Improve customer
responsiveness, time to market
. . . hold the vision

8. • Phase out Management Council
– push power to CEC / WMC
• Build a new board
• Employee Communications
• Creating a global enterprise
– Power bases and fiefdoms
– Focus on global relationship
. . . reengineer

9. • Revitalize the brand
– Centralize branding efforts
– One agency for unified messaging
– Coherence in brand building across
geographies
– more bang for the buck
• Some successful campaigns
– Solutions for the small planet
– eBusiness
. . . branding

10. • Old rewards – common, fixed
rewards, internal benchmarks,
entitlement
• New rewards – variable rewards,
differentiation, external
benchmarks and based on
performance
• Stock options as rewards rather
than aligning the executives with
share holders.
. . . pay for

11. …making the bets
…services business
…software business
…research and
licensing
…fallacies and myths
. . .

12. • Emerging trends
– Services based
– Network computing oriented
– A post PC world
. . . making the bets

13. • The key to integration – services
• Building the organization
– Ability to recommend competitor’s products
– Lending the balance-sheet
– Recruitment, training, compensation and HR processes
– Negotiate profitable contracts, price skills, assess risks and walk away from bad
contracts and bad deals
. . . services business

14. • OS/2 vs Windows
• 4000 software products
• Reduction of 30 labs to 8
• Consolidated 60 brands to 6
• Focus on middleware (blue ocean)
• Lotus acquisition
. . . software business

15. • Inability to convert inventions into products for the market place
• Licensing gives the capability to set standards
• R & D expenses recouped with new revenue streams
• Exiting businesses which does not make sense
– DRAM business
– Application software business – partnership with Siebel
– Telco – IBM network – AT & T
–
. . . research and
Challenges to exit the PC market

16. • The fallacy that the best technology always wins – a bitter but vital
lesson
– OS/2
• Myth of account control and the efforts to maintain it
– Application software
. . . fallacies and

17. …basic beliefs
…culture of “no”
…leading by principles
…IBM’s moonshot
. . . culture

18. • Excellence in everything we do – quest for perfection, led to checks and
balances, bureaucracy
• Superior customer service – became more administrative – did not look at
what customers needed and their businesses needed
• Respect for the individual – reflected in the compensation and evaluation
system – not in sync with the times
• Dress code – the why
• Following basic beliefs as a ritual without understanding the why
. . . basic beliefs

19. • Non-concurr management system
• Soft request – I did not agree with you
• Dysfunctional bureaucracy and jockeying
• IBM-isms
• Presiders over process
. . . the culture of “no”

20. • More customer oriented rather than IBM focussed
• More passionate about competition and loss of market
share, leadership position and downsizing
• Customer satisfaction and shareholder value are the driving factors
• Sense of urgency
• Senior leadership Group to focus on leadership and change
. . . leading by

21. • Keeping the crisis as the focus of attention
• Market place based mission
• eBusiness – the whole organization focussed on winning customer
mind share as the moonshot
. . . the moonshot

22. …know and love your business
…all about execution
…leadership is personal
…and elephants can dance
. . . lessons learned

23. • Focus on core business
• Growth through acquisition – only when there is value for both and
not for acquiring new market position or new markets
• Market intelligence wins wars
• Good strategy – long on details, allocate resources and zero sum
planning every few years to weed out (sunk costs / survival of the
fattest)
. . . know and love thy
business

24. • Inspection not expectation – translation of strategy to results
• Solid processes to achieve key success factors – for e.g. product
design
• Feeling a high performance culture
. . . t’is all about

25. • Prerequisites of the next CEO
– High Energy
– Strong bias for action
– Strategic sense
– Ability to motivate others
– Strong team builder
– Org culture which tends to ask for forgiveness rather than permission destroys
. . . Leadership is
soon

26. • Decentralization for faster decision making was meant for another era
– Org wide changes lead to turf battles and become costly affairs
– Overheads are high without real value adds
– Scale of economies
• For true integration and clustering resources around the needs of the
customers – shift power
• Measure and reward the future – not the past
. . . and elephants can
• Walk the talk

27. …the industry
…corporations and the
community
. . . observations

28. • Industry
– No common industry associations for IT – hyper competitive
– Annihilation of competitors, increasing returns and networking effect
– Constant hunt for the next big wave
• System
– Too focused on short term gains
– Board only of external directors
– High taxation on speculative trading and bring back ownership based economy
. . . the industry

29. • The media – trolls, rumor mongers, biased – ignore
• Under promise and outperform – talk to reporters with an insightful
story line on the industry
• Analysts and the 90 day myopia
• Beyond check book philanthropy – engage in real change
. . . corporations and the
community

30. . . . legacy

31. . . . Thank you!!!