computer industry

On Who Says Elephants Can’t Dance

I recently read Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround by Louis V. Gerstner, Jr.

Below are key excerpts that I found particularly insightful in this book, detailing the turnaround that Louis Gerstner engineered at IBM in the 1990s:

1- “Thus began a lifelong process of trying to build organizations that allows for hierarchy but at he same time bring people together for problem solving, regardless of where they are positioned within the organization.”

2- “I went on to summarize my management philosophy and practice: I manage by principle, not procedure. The marketplace dictates everything we should do. I’m a big believer in quality, strong competitive strategies and plans, teamwork, payoff for performance, and ethical responsibility. I look for people who work to solve problems and help colleagues. I sack politicians. I am heavily involved in strategy; the rest is yours to implement. Just keep me informed in an informal way. Don’t hide bad information—1 hate surprises. Don’t try to blow things by me. Solve problems laterally; don’t keep bringing them up the line. Move fast. If we make mistakes, let them be because we are too fast rather than too slow. Hierarchy means very little to me. Let’s put together in meetings the people who can help solve a problem, regardless of position. Reduce committees and meetings to a minimum. No committee decision making. Let’s have lots of candid, straightforward communications. I don’t completely understand the technology. I’ll need to learn it. but don’t expect me to master it. The unit leaders must be the translators into business terms for me.”

3- “After all the customer and employee and industry meetings, as well as weekend and air travel reflection, I was indeed ready to make four critical decisions: Keep the company together. Change our fundamental economic model. Reengineer how we did business. Sell underproductive assets in order to raise cash.”

4- “I’ve had a lot of experience turning around troubled companies, and one of the first things I learned was that whatever hard or painful things you have to do, do them quickly and make sure everyone knows what you are doing and why.”

5- “The sine qua non of any successful corporate transformation is public acknowledgment of the existence of a crisis. If e So there must be a crisis, and it is the job of the CEO to define and communicate that crisis, its magnitude, its severity, and its impact. Just as important, the CEO must also be able to communicate how to end the crisis—the new strategy, the new company model, the new culture. All of this takes enormous commitment from the CEO to communicate, communicate, and communicate some more.”

6- “What drives IBM’s unique complexity is twofold. First, every institution and almost every individual is an actual or potential customer of IBM. In The second complexity factor is the rate and pace of the underlying technology.”

7- “All of our efforts to save IBM—through right-sizing i and reengineering and creating strategy and boosting morale and all the rest—would have been for naught if, while we were hard at work on the other things, the IBM brand fell apart. I have always believed a successful company must have a customer/market•lace orientation and a strong marketing organization. That’s why my second step in creating a global enterprise had to be to fix and focus IBM’s marketing efforts.”

8- “We made four major changes to our compensation system…This was all about pay for performance, not loyalty or tenure. It was all about differentiation: Differentiate our overall pay based on the marketplace; differentiate our increases based on individual performance and pay in the marketplace; differentiate our bonuses based business performance and individual contributions; and differentiate our stock-option awards based on the critical skills of the individual and our risk of loss to competition.”

9- “I wanted IBMers to think and act like long-term shareholders to feel the pressure from the marketplace to deploy assets and forge strategies that create competitive advantage. The market, over time, represents a brutally honest evaluator of relative performance, and what I needed was a strong incentive for IBMers to look at their company from the outside in.”

10- “The skills required in managing services processes are very different from those that drive successful product companies. We had no experience building a labor-based business inside an asset-intensive company. We were expert at managing factories and developing technologies. We understood cost of goods and inventory turns and manufacturing. But a human-intensive services business is entirely different. In services you don’t make a product and then sell it. You sell a capability. You sell knowledge. You create it at the same time you deliver it. The business model is different. The economics are entirely different.”

11- “My point is that all of the assets that the company needed to succeed were in place. But in every case—hardware, technology, software, even services—all of these capabilities were part of a business model that had fallen wildly out of step with marketplace realities…The implications of this kind of leap to a company’s economic model can be devastating. In IBM’s case it meant the collapse of gross profit margins and the attendant changes we had to engineer to lower our cost structure without compromising our effectiveness. Yet the hardest part of these decisions was neither the technological nor economic transformations required. It was changing the culture—the mindset and instincts of hundreds of thousands of people who had grown up in an undeniably successful company, but one that had tor decades been immune to normal competitive and economic forces. The challenge was making that workforce live, compete, and win in the real world. It was like taking a lion raised for all of its life in captivity and suddenly teaching it to survive in the jungle.”

12- “You’ve probably found, as I have, that most companies say their cultures are about the same things—outstanding customer service. excellence, teamwork, shareholder value, responsible corporate behavior, and integrity. But, of course, these kinds of values don’t necessarily translate into the same kind of behavior in all companies—how people actually go about their work, how they interact with one another, what motivates them. That’s because, as with national cultures. most of the really important rules aren’t written down anywhere.”

13- “In comparison, changing the attitude and behavior of hundreds of thousands of people is very, very hard to accomplish. Business schools don’t teach you how to do it. You can’t lead the revolution from the splendid isolation of corporate headquarters. You can’t simply give a couple of speeches or write a new credo for the company and declare that the new culture has taken hold. You can’t mandate it, :an’t engineer it. What you can do is create the conditions for transformation. You can provide incentives. You can define the marketplace realities and goals. But then you have to trust. In fact, in the end, management doesn’t change culture. Management invites the workforce itself to change the culture.”

14- “Thee work-a-day world of business isn’t about fads or miracles. There are fundamentals that characterize successful enterprises anc successful executives. They are focused. They are superb at execution. They abound with personal leadership.”

15- “At the end of the day a successful, focused enterprise is one that has developed a deep understanding of its customers’ needs, its competitive environment, and its economic realities. This comprehensive analysis must then form the basis for specific strategies :hat are translated into day-to-day execution.”

16- “Earlier in this section I mentioned that in every industry it is possible to identify the five or six key success factors that drive leadership performance. The best companies in an industry build processes that allow them to outperform their competitors vis-a-vis these success factors.”

17- “This next generation of leaders—in both the public and private sectors—will have to expand its thinking around a set of economic, political, and social considerations. These leaders will be: Much more able to deal with the relentless, discontinuous change that this technology is creating. Much more global in outlook and practice. Much more able to strike an appropriate balance between the instinct for cultural preservation and the promise of regional or global cooperation. Much more able to embrace the fact that the world is moving to a model in which the “default” in every endeavor will be openness and integration, not isolation.”

Regards,

Omar Halabieh

Who Says Elephants Can’t Dance?

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On Only The Paranoid Survive

I recently finished reading Only The Paranoid Survive by Andrew S. Grove.

Below are excerpts from the book that summarize the key points presented by the author:

1- “Business success contains the seeds of its own destruction. The more successful you are, the more people want a chunk of your business and then another chunk and then another until there is nothing left. I believe that the prime responsibility of a manager is to guard constantly against other people’s attacks and to inculcate this guardian attitude in the people under his or her management.”

2- “We all need to expose ourselves to the winds of change. We need to expose ourselves to our customers, both the ones who are staying with us as well as those that we may lose by sticking to the past. We need to expose ourselves to lower-level employees, who, when encouraged, will tell us a lot that we need to know. We must invite comments even from people whose job it is to constantly evaluate us and critique us, such as journalist and members of the financial community. Turn the tables and ask them some questions: about competitors, trends in the industry and what they think we should be most concerned with. As we throw ourselves into raw action, our senses and instincts will rapidly be honed again.”

3- “A strategic inflection point is when the balance of forces shifts from the old structure, from the old ways of doing business and the old ways of competing, to the new. Before the strategic inflection point, the industry simply was more like the old. After it, it is more like the new. It is a point where the curve has subtly but profoundly changed, never to change back again.”

4- “Of all the changes in the forces of competition, the most difficult one to deal with is when one of the forces become so strong that it transforms the very essence of how business is conducted in an industry.”

5- “When an industry goes through a strategic inflection point, the practitioners of the old art may have trouble. On the other hand, the new landscape provides an opportunity for people, some of whom may not even be participants in the industry in question, to join and become part of the action.”

6- “When a strategic infection point sweeps through the industry, the more successful a participant was in the old industry structure, the more threatened it is by change and the more reluctant it is to adapt to it. Second, whereas the cost to enter a given industry in the face of well-entrenched participants can be very high, when the structure breaks, the cost to enter may become trivially small.”

7- “I suspect that the people coming in are probably no better managers or leaders than the people they are replacing. they have only one advantage…the new managers come unencumbered by such emotional involvement and therefore are capable of applying an impersonal logic to the situation.”

8- “As these questions to attempt to distinguish signal from noise: 1) Is your key competitor about to change? 2) Is your key complementor about to change? 3) Do people seem to be “losing it” around you?”

9- “I call the divergence between actions and statements strategic dissonance. It is one of the surest indications that a company is struggling with a strategic inflection point.”

10- “Ideally, the fear of a new environment sneaking up on us should keep us on our toes. Our sense of urgency should be aided by our judgement, instincts and observations that have been honed by decades spent in the business world. The fact is, because of our experience, very often we managers know that we need to do something. We even know what we should be doing. But we don’t trust our instincts or don’t act on them early enough to take advantage of the benign business bubble. We must discipline ourselves to overcome our tendency to do too little too late.”

Regards,

Omar Halabieh

Only The Paranoid Survive