Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change (25 page)

I have always been an advocate for use of plain language that one’s customers easily understand, whether it be for invoices, contracts, or simple correspondence. So I decided to begin the end of widespread in-house terms. In an internal memo in 1993, I wrote: “We are also going to take this opportunity to rename some of our organization units to make the nomenclature more understandable, or more transparent, to our customers (call it customer-friendly). Also, we will no longer use the term ‘LOB.’ Our product units will now be called ‘divisions.’”

Presiders Over Process

Soon after I’d joined the company, I asked one of the most senior executives to provide me with a detailed analysis of a major money-losing business at IBM. I did this not only because I wanted the insight from the analysis but also to test this highly rated executive.

Three days later I asked him how the work was progressing. He said, “I’ll check with the team and get back to you.” At the end of the week, I got the same response: “I’ll check with the team leader and let you know” (he later did). When this little scene played out a third time, I finally said, “Why don’t you just give me the name of the person doing the work, and from now on I’ll speak directly with him or her.”

What I discovered was that senior executives often presided. They organized work, then waited to review it when it was done. You WHO SAYS ELEPHANTS CAN’T DANCE? / 199

were a worker early in your career, but once you climbed to the top, your role was to
preside
over a
process
. Well, my kind of executives dig into the details, work the problems day to day, and lead by example, not title. They take personal ownership of and responsibility for the end result. They see themselves as drivers rather than as a box high on the organization chart.

When I told this senior executive that I expected him to be a direct and active participant in the problem-solving work I asked him to undertake, he was stunned. That was not how he was trained, nor was that expected corporate behavior at the time. The incident was an eye-opener for me. I had an enormous team of executives. I would need to develop a cadre of leaders.

I do not think IBM senior executives would have described their activities quite the way I did. They were simply acting the roles that the long-established interior culture asked them to perform. This is how things were done. It did not mean they were not bright or committed. It was part of a huge, complicated mosaic that had come to define action and behavior. This same situation also extended to the ever-present and powerful administrative assistants, the nonconcur system, and the role of the “corporate officer.” (IBM had a practice of electing senior people to the title of “corporate officers.” Once you were so recognized, this title stayed with you for life, like tenure at a university. Your performance post-election was not a factor in your continuation in this role.)

22

Leading by Principles

I
n an organization in which procedures had become un-tethered from their origins and intent, and where codification had replaced personal responsibility, the first task was to erad-icate process itself. I had to send a breath of fresh air through the whole system. So I took a 180-degree turn and insisted there would be few rules, codes, or books of procedures.

We started with a statement of principles. Why principles? Because I believe all high-performance companies are led and managed by principles, not by process. Decisions need to be made by leaders who understand the key drivers of success in the enterprise and then apply those principles to a given situation with practical wisdom, skill, and a sense of relevancy to the current environment.

“But what about the Basic Beliefs?” you may ask. “Couldn’t they have been revived and turned into the sorts of principles you’re describing?” The answer is, unfortunately, no. The Basic Beliefs had certainly functioned that way in Watson’s day, then for many decades after that. But they had morphed from wonderfully sound principles into something virtually unrecognizable. At best, they were now homilies. We needed something more, something pre-scriptive.

In September 1993 I wrote out eight principles that I thought WHO SAYS ELEPHANTS CAN’T DANCE? / 201

ought to be the underpinnings of IBM’s new culture and sent them to all IBM employees worldwide in a special mailing. In reading them over now, I am struck by how much of the culture change of the following ten years they describe.

Here are the principles and an abbreviated version of how I described each:

1. The marketplace is the driving force behind
everything we do.

IBM is too preoccupied with our own notions of what businesses we should be in and how they should work. In fact, the entire industry faces this problem. We are all guilty of producing confusing technology and then making it instantly obsolete. IBM has to focus on serving our customers and, in the process, beating the competition.

Success in a company comes foremost from success with the customer, nothing else.

2. At our core, we are a technology company with an
overriding commitment to quality.

There is a lot of debate about what kind of company we are and should be. No need, because the answer is easy: Technology has always been our greatest strength. We just need to funnel that knowledge into developing products that serve our customers’ needs above all else. The benefits will flow into all other areas of the company, including hardware, software, and services.

3. Our primary measures of success are customer
satisfaction and shareholder value.

This is another way to emphasize that we need to look outside the company. During my first year, many people, especially Wall Street analysts, asked me how they could measure IBM’s success going forward—operating margins, revenue growth, something else. The best measure I know is increased shareholder value. And no company is a success, financially or otherwise, without satisfied customers.

202 / LOUIS V. GERSTNER, JR.

4. We operate as an entrepreneurial organization with
a minimum of bureaucracy and a never-ending focus on
productivity.

This will be hard for us, but the new, warp-speed marketplace demands that we change our ways. The best entrepreneurial companies accept innovation, take prudent risks, and pursue growth, by both expanding old businesses and finding new ones. That’s exactly the mindset we need. IBM has to move faster, work more efficiently, and spend wisely.

5. We never lose sight of our strategic vision.

Every business, if it is to succeed, must have a sense of direction and mission, so that no matter who you are and what you are doing, you know how you fit in and that what you are doing is important.

6. We think and act with a sense of urgency.

I like to call this “constructive impatience.” We are good at research, studies, committees, and debates. But in this industry, at this time, it’s often better to be fast than insightful. Not that planning and analysis are wrong—just not at the expense of getting the job done
now
.

7. Outstanding, dedicated people make it all happen,
particularly when they work together as a team.

The best way to put an end to bureaucracy and turf wars is to let everyone know that we cherish—and will reward—teamwork, especially teamwork focused on delivering value to our customers.

8. We are sensitive to the needs of all employees and to
the communities in which we operate.

This isn’t just a warm statement. We want our people to have the room and the resources to grow. And we want the communities in which we do business to become better because of our presence.

WHO SAYS ELEPHANTS CAN’T DANCE? / 203

The eight principles were an important first step—not only in defining the priorities of the new IBM, but in attacking the whole idea of management by process. But that first step would be of little value if we couldn’t find a way to instill these principles into the DNA of IBM’s people. Obviously, exhortation and analysis wouldn’t be enough.

What are the levers of motivation? What can a CEO—or, for that matter, a head of state or university president—do to change the attitudes, behavior, and
thinking
of a population? Of course, different people are motivated by different things. Some by money. Some by advancement. Some by recognition. For some, the most effective motivator is fear—or anger. For others that doesn’t work; it’s learning, or the opportunity to make an impact, to see their efforts produce concrete results. Most people can be roused by the threat of extinc-tion. And most can be inspired by a compelling vision of the future.

Over the past ten years, I’ve pulled most of those levers.

Waking Up the Leadership Team

In the spring of 1994 I convened my first senior management meeting at a hotel in Westchester County, New York. We had some 420 people there from around the world, representing every part of the company (and a few reporters in the parking lot waiting—in vain—for news). I had one goal more important than anything else: to motivate this group to focus its talents and efforts outside the company, not on one another.

The centerpiece of my remarks began with two charts: one for customer satisfaction, one for market share. The share picture was startling—a loss of more than half our share since 1985 in an industry that was expanding rapidly. The customer-satisfaction chart was just as depressing. We were eleventh in the industry, trailing some companies that don’t even exist anymore! I summarized those two snapshots of our collective performance by saying, “We’re getting our butts

204 / LOUIS V. GERSTNER, JR.

kicked in the marketplace. People are taking our business away. So I want us to start kicking some butts—namely, of our competitors.

This is not a game we’re playing. We’ve got to start getting out in the marketplace and hitting back hard. I can assure you, our competitors are focused maniacally on these charts, and they talk us down constantly.”

I showed photos of the CEOs of some of our top competitors. The usual suspects—Gates, McNealy, Ellison, and the like. I then read direct quotes from them belittling IBM, gloating over our fall from grace, and questioning our importance in the industry. For example, this from Larry Ellison: “IBM? We don’t even think about those guys anymore. They’re not dead, but they’re irrelevant.”

“What do you think happened to all those points of market share?”

I asked. “These guys ripped them away from us. And I don’t know about you, but I don’t like it. And it makes me angry to hear people say things like that about our company. Every time Visa used to run an ad attacking American Express, I knew what was going to happen the next day. The roof was going to come off the building. The general counsel would send for reinforcements to come into the building to keep people from doing things they shouldn’t do. I didn’t have to pump up the troops. My job was to keep them from overreacting.

“You know, I have received literally thousands and thousands of e-mail messages since I’ve been in this company, and I’ve read every one. I want you to know that I cannot—I
cannot
—remember a single one that talked with passion about a competitor. Many thousands of them talked with passion about other parts of IBM. We’ve got to generate some collective anger here about what our competitors say about us, about what they’re doing to us in the marketplace. This competitive focus has to be visceral, not cerebral. It’s got to be in our guts, not our heads. They’re coming into our house and taking our children’s and our grandchildren’s college money. That’s what they’re doing.

“One hundred and twenty-five thousand IBMers are gone. They lost their jobs. Who did it to them? Was it an act of God? These guys WHO SAYS ELEPHANTS CAN’T DANCE? / 205

came in and beat us. They took that market share away and caused this pain in this company. It wasn’t caused by anybody but people plotting very carefully to rip away our business.”

I expressed my frustration and my bewilderment about the recurring failure to execute and the company’s apparently endless tolerance of it.

“We don’t demand implementation and follow-up. We don’t set deadlines. Or when they’re missed, we don’t raise some questions.

But we do create task forces; and then they create task forces. We don’t execute, because, again, we don’t have the perspective that what counts outside [the company] is more important than what counts inside. Too many IBMers fight change if it’s not in their personal interest. There’s a very powerful word in the IBM vocabulary.

I’ve never heard it in any other company. The word is ‘pushback.’

It’s as if decisions are meant to be suggestions. Since I’ve been here, I’ve discovered people who are fighting decisions that were made years ago, while our market share continues to decline.

“When you have market share like that and a customer satisfaction record like that, there isn’t a lot of time for debate. We’ve got to get out and start winning in the marketplace,” I said. “This is going to be a performance-based culture. I am personally involved in filling all the new key jobs in this company, because I’m looking for people who make things happen, not who watch and debate things happening.”

I shared my feelings about our opportunities and our prospects.

I said I considered the people in the room to be the finest collection of talent assembled in any institution in any industry, and that after one year into the job I was convinced that IBM had virtually unlimited potential—but only if we were willing to make the changes I’d laid out. I then outlined the behavioral changes we needed to make in our culture (see next page).

“There are no ifs in my vernacular,” I said. “We are going to do it. We’re going to do it together. This is going to be a group of change agents—people who are imbued with the feeling of empowerment 206 / LOUIS V. GERSTNER, JR.

and opportunity, for ourselves and all our colleagues. Those of you who are uncomfortable with it, you should think about doing something else. Those of you who are excited about it, I welcome you to the team, because I sure can’t do it alone.”