Review: Who Says Elephants Can't Dance?

Who Says Elephants Can't Dance? Inside IBM's Historic Turnaround
By Louis V Gerstner Jr, Harper Collins, stg£20
Reviewed by Alex Meehan, January 5th, 2003, The Sunday Business Post

When Louis Gerstner Jr took over as chief executive of International Business Machines (IBM) in 1993, the company had gone from being a world leader to an out-of-touch dinosaur losing $16 billion a year.

IBM had been speedily bypassed by both Intel and Microsoft and the so-called Wintel PC duopoly was making massive inroads into corporate IT. As a purveyor of clunky, expensive and old-fashioned mainframe computers, IBM was in big trouble when Gerstner accepted the job.

Ten years on, the company is more profitable than ever; IBM's share price has increased by more than 800 per cent, and its market value has grown by $180 billion. In Gerstner's new book, Who Says Elephants Can't Dance?, he describes the painful process of reversing IBM's fortunes, and offers his opinions on today's most pressing corporate questions.

Issues such as corporate governance, multi-region enterprise and the importance of diversity in business as well as the place of philanthropy come in for attention.

Interestingly, Gerstner admits that when he agreed to take the helm at IBM he knew next to nothing about technology or the company's products.

His gut feeling was that the firm's problems could be solved by good old-fashioned strong management, and that detailed knowledge of the product was largely irrelevant.

Gerstner believes that good business is good business, no matter what the sector, and in the ten years since he took over at IBM this belief has largely been proved right.

The key challenge facing IBM in the early 1990s was the rise of the desktop PC, and with it the widely held belief that the mainframe was dead. In addition, the company had no clear direction, huge duplication of resources and competing internal divisions that frequently sabotaged each other in an attempt to produce better figures.

Gerstner's first major decision was to reverse his predecessor's strategy of splitting IBM into small companies, each specialising in a particular area. Instead he kept the company together and set about refocusing IBM to compete in the cut-throat IT sector, where concepts such as speed to market and first mover advantage were leaving it behind.

IBM had to concentrate on delivering what its customers needed and on becoming a key player in the emerging fields of technology integration, e-commerce, services and the internet. At the same time, the mainframe issue continued to dog the company.

IBM's mainframes were older, more expensive, less powerful and harder to upgrade than anyone else's.

In order to halt the losses, Gerstner reduced the cost of IBM's mainframes in each of his ten years there, regaining massive market share and restoring confidence in mainframe technology.

But while the internet and e-commerce gave the company the chance to branch out, its business culture was holding it back. As Gerstner points out, companies that achieve success become difficult to change, lose their sense of entrepreneurial spirit and become resistant to new ideas -- and this was certainly the case with Big Blue.

In order to change his employee's outlook, Gerstner altered IBM's compensation plan, basing managers' pay primarily on the overall company performance and not just that of their own division. He also changed the dress code and unified the company's marketing and advertising campaigns.

Crucially, he insisted that senior management sink their own cash into IBM shares in order to link the company's fortunes to their own.

Unlike many of his counterparts in the industry, Gerstner largely eschewed the limelight during his time at IBM. While Microsoft's Bill Gates, Apple's Steve Jobs and Oracle's Larry Ellison give many interviews and have become pseudo-celebrities, Gerstner believed it was better to give no more than three interviews a year, and then only to journalists that met his approval.

He also banned all press releases concerning IBM's internal organisation, insisting that executives should be focused on the customer and not on promoting themselves.

Gerstner's top class corporate credentials -- prior to IBM and Nabisco, he spent 11 years at American Express -- mean that Elephants will appeal strongly to junior and not-so-junior executives hoping to learn titbits of business knowledge that they can put to use in their own offices.

There is much on offer here for the business reader, but it is not easily accessible -- Gerstner reveals in the foreword that he wrote the book without the aid of a ghostwriter, and in places this certainly shows. But while this is first and foremost a business book, it is also intimate, and for that reason presents an interesting insight into the mind of one of the United States' top chief executives.