I am not surprised this book is one of the top ten business books that are recommended reading for management professionals. It is an amazing story of a turnaround of a behemoth that had all but ossified itself right out of the market place. Written by Loius V Gerstener , who joined as CEO at IBM and was the change agent who brought about the transformation.
Consider some of these statistics/ traits / problems when he joined -
- 128 CIO's across the company !!! Everyone of them managed their own local architecture & home grown applications.
- 3 different budgets allocations due to which accountability was difficult to determine.
- 266 different general ledger systems.
- A very rigid HR system - an IBMer actually had to be fired from one division to work in another !!!
- Decisions were made by committees, a type of centralized control that led to diluted responsibility and leadership.
- Archaic IT systems which could not communicate with each other.
- A business model that entailed having to start a fresh relationship with the local IBM office regardless of how big a customer you were anywhere else geographically. [ What a nightmare this would have been for customers !! ]. These were due to the geographical strong-holds or rather strangle-holds ! :)
- 339 different satisfaction surveys with disparate methodologies.- Scant information on customers and IBM's offerings viz-a-viz that of competitors.
- No pan enterprise ad agency, multiple ad agencies employed with differing sometimes conflicting ads.
- Loss of customer trust
- Business alliances that made no sense
- Inability to to bring its scientific inventions to the market place - like the relational database, Network hardware and software, Operating system ( which it sold to Microsoft ), Micro-processor ( to Intel ) , Unix processors ( I did not know this ! )
- Sales that were focused on products rather than the customer needs and different IBM sales people disparaged their own products and different divisions would bid against one another with the same company.
- Internal Turf wars - an appalling example is where IBM hardware made a deal with Oracle ( its arch rival ) without telling its software division !
- A culture where everyone could say "No" and no one would clearly say "Yes" to company wide initiatives. Almost like veto power !! Imagine if you can just decide to ignore what your boss tells you .. simply because you do not concur !! :) Yes - they actually had a "Nonconcur" process and management system ! :)
And so on and on ......
What IBM had though was a sound R&D , Product development , a sense of responsibility , integrity , and a can-do attitude that helped. Ultimately management can only create conditions for transformation and provide incentives. Management does not change the behavior of thousands of people - it invites the employees themselves to change.
Critical decisions to bring around the company included -
- Keeping the company together - When the CEO joined the company there was an ongoing clamour to break the company into many small companies with different offerings. Going against the tide - the CEO made the tough decision to keep IBM together. He forecast that the IT industry would be services led and not technology led. He considered the size of IBM a strength that would help IBM in the ability to apply complex end-to-end technologies to solve business challenges and integration issues.
- Changing the business model of IBM from a product company to an Integration Services enterprise.
- Change of culture - easily the most difficult aspect of the turn-around. IBMer's were internal-focused. Internal processes and politicking took all time and people had settled into a sense of entitlement. IBM's basic beliefs had morphed beyond recognition. For eg. 'Excellence in everything we do' credo had become an obsession with perfection. aided by rigid bureaucracy wherein it was said IBM did not launch products - they escaped !! :) 'Superior customer service' meant servicing IBM machines on customer sites !
- Changing management philosophy - so IBM was market driven and customer focused. The apathy towards customer needs was replaced with customer focused quality strategies that were also competitive. Change in the internal processes in almost all areas to shake off the petrification that had settled in.
- Change in compensation and incentives to reflect the new philosophies of marketplace driven strategies, business performance and individual contribution. Teamwork was rewarded.
- A multi-year effort to re-write all of IBM's critical software to not only be network enabled but to work on HP, Sun , Microsoft and other platforms. This was the step towards embracing of open standards.
- Creating a Brand IBM with one ad agency. Re-Positioning of the mainframe value in the PC world.
- Integration of the company into a whole and breaking up of the geographical fiefdoms - by shifting the power and measuring the performance.
Other key decisions
- Services/Integration unit IBMers - They were instructed to suggest even Sun, HP products if this suited the particular customer problem that IBM had been consulted for ! :)
- Strategic acquisitions without getting into the acquisition heat/fever !!! E.g - Lotus Notes, Tivoli , Siebel.
- Protecting the R&D budget - Reducing the price of S/390 even though it was their main cash flow generator. They did this by changing the underlying technology from bi-polar to CMOS - even though at that time this task was time consuming plus expensive.
- Getting out of the OS/2 vs Microsoft Windows war
- Licensing and Patents royalties - this is the custom defined micro-electronics which ensures IBM benefits from growth of business outside the IT industry
Win , Execute , Team - was the new leadership competencies - focus to win, mobilizing resources to execute and sustaining momentum with teamwork to accomplish goals.
After the turn-around when danger was behind them - they decided to focus on e-business.This is a psychological understanding that once the crisis was past , the company needed a new motivator.
Some personal learning's of the CEO mentioned in the book
- Chasing revenue at the expense of real earnings ( profit ) is the surest sign of a weak management.
- Underpromise and Outperform.
- CEO's should tackle problems personally and not delegate or preside over the work of others.- Strategy is quantitative , risky and is actionable - on a day to day basis. Vision is aspirational.
- There should be no compromise on corporate principles no matter how highly placed the executive is.
- Management has to identify new growth centers and fund them .
- Credit should be given to people building arks not those who predicted rain !
- Passion is the cornerstone of leadership.
Every single page of this book endorses the fact that it is an eminently penetrating look at the handling of the crisis at IBM. Most of the decisions taken were bold, decisive and futuristic with a high chance of failure. Down-to-earth with an admission that any of the changes could have dove-tailed - it is a lesson in organizational behavior too. Mention of the relevant people who were crucial to the turn around means the CEO gave credit where it was due.
I know this review seems long but I felt there were just too many things to mention and I feel I have not been able to capture the essence of the knowledge in the book. Of course that is why it is a good idea to suggest to read the book ! :)
