Introduction
"Who Says Elephants Can't Dance?" is the storyplot of ancient turnaround of IBM authored by Louis Gerstner, who served as the chairman and CEO of IBM from Apr 1993 to March 2002. Gerstner was a well-educated and accomplished student and graduate with strong family and honest values. He worked well in McKinsey as a consultant where IBM was one of is own clients. Lou Gerstner accepted the challenge of leading IBM and became a member of IBM. Lou Gerstner had a huge consulting and business experience which made up for his lack of knowledge of the IT industry. Lou Gerstner modified IBM's lot of money from the threshold of personal bankruptcy and mainframe shadows to a innovator in the technology business.
In the first nineties, IBM was facing a huge challenge. The challenge was how to change a worldwide computer large IBM that was a innovator in every market it served, but it was constantly shedding its market show to its rivals. Gerstner handled the severe financial meltdown of IBM and maintained IBM financial health solvent. In the first '90s, budget of IBM was precarious. Gerstner repositioned corporate and business strategy of IBM to keep IBM together and taken off an effective turnaround for IBM.
Gerstner shipped results for IBM. Many insiders and Industry expert criticized IBM for selecting a CEO with non-technology background. On analyzing performance of IBM during Gerstner's reign, Gerstner was definitely a good choice for the work. Gerstner's transformation of IBM was one of the most successful commercial turnarounds history of the century.
Strategy
Gerstner believed that the main element to mending IBM's problem was "About execution". Gerstner decided to analyze the patterns of company's employees and customers and apply his own interpretation of the company's inherent durability. In doing so he turned the business enterprise of IBM around from the brink of bankruptcy. By the end of Gerstner's reign as the Chairman and CEO, the business hired 65, 000 more people and the US$13 billion in deficits notched up in both years prior to his introduction turned into huge profits.
The turnaround process at IBM commenced with a thorough analysis of profiles and needs of IBM's customer. The mainframe business of IBM accounted for more than 90% of IBM's revenue was fast deteriorating. Gerstner analyzed and came up to a conclusion that mainframes are indispensable in critical businesses like airlines and credit cards. Mainframe business includes huge data handling and security and it cannot count on desktops and business needed mainframes for this. Hence, Gerstner figured it was the price and not the product that really mattered to the client. Gerstner recommended a price-reduction arrange for its customer, which he thought was most essential way to stay competitive in the mainframe market. Before this IBM got maintained an extremely shortsighted view reflecting that with the bringing down of prices IBM will collect less earnings and earnings.
Gerstner recognized that IBM possessed a unique and expert capacity to "genuine problem dealing with, the capability to apply complex solutions to resolve business obstacles and integration. " These lasting value proposition allowed Lou Gerstner to bring IBM again from the verge of in close proximity to extinction. Gerstner understood that IBM needed not just a commercial makeover. Gerstner provided an entire facelift to IBM. Gerstner became aware a difficult, painful and considerable reengineering effort was necessary to get IBM to dedicate resources in having value to the client in the competitive market. Gerstner developed the theme of the "new" IBM. Many Senior executive described Reengineering process in a humorous way. One of Senior Executive rates "Reengineering is like starting a fire on your head and putting it out with a hammer. " IBM needed a top-to-bottom overhaul of its basic business functions, which Gerstner applied.
Gerstner appointed as Chairman and CEO of IBM lay out a vision for IBM which led to the major cultural changes and subsequent financial turnaround of the organization. As summarized in "Who Says Elephants Can't Dance?", the major eight key points that Louis Gerstner set out:
- The market place is the driving a vehicle push behind everything we do
- At our center, we have been a technology company with an overriding commitment to quality
- Our major methods of success are client satisfaction and shareholder value
- We operate as an entrepreneurial company with at the least bureaucracy and a never ending concentrate on productivity
- We never lose look of our proper vision
- We think and act with a sense of urgency
- Outstanding, dedicated people make everything happen, particularly if they interact as a team
- We are hypersensitive to the needs of most employees also to the community where we operate.
On a lot more practical area, Gerstner applied four basic strategies for the restoration of IBM:
- Keep the business together
- Change the fundamental economic model
- Re-engineer how exactly we do business
- Sell under-productive assets to raise cash for the company
Lou Gerstner made the organization decision to keep IBM intact, and he altered its fundamental financial model, re-engineered the way the company does business, and sold the underproductive assets. He centered on customers-and he used his potential to operate a vehicle the focus into the employees by retaining the management and management accountable. And these steps helped IBM change and go above all the targets.
Structure
The next major issue was keeping IBM intact as an individual entity. When Gerstner came up on board, the traditional advice and wisdom, from both IBM enthusiasts and skillfully developed as well as most of the IBM executives, was that the only path IBM could be preserved from eventual bankruptcy and massive disaster was to break IBM aside into smaller companies. Gerstner managed his stand not to divide IBM instead of the views of several top IBM management officials who favored the section of IBM into smaller and supposedly controllable devices. Lou Gerstner appeared beyond the advice of splitting IBM but instead opted to maintain the real durability of IBM which was to comprehend the needs of its customers. He was convinced it wasn't smart to divide IBM into smaller items. Gerstner sensed that from a customer's point of view, it might be highly cumbersome for them to go through various suppliers and zero in on a single one. Gerstner assumed that most of the customers preferred a one-stop shop that offered all of the services at an individual door. "I realized that if IBM could provide as the main integrator of systems, we'd be providing extraordinary value. , " affirms Gerstner. Gerstner needed your choice to keep carefully the company alongside one another. Gerstner rates "So keeping IBM alongside one another was the first tactical decision, and, I believe, the most crucial decision I ever made - not just at IBM, but in my entire business profession".
Gerstner experienced a pure knowledge and attention of customers' notions of success. Gerstner's single-minded focus was how IBM should respond to market needs. Gerstner's market-driven methodology to do business really helped to build up the "new" IBM culture. Gerstner helped IBM to turnaround as a dominating technology landscape player in the beginning of the current century, in the same way IBM was in the majority of the last century. Gerstner set new goals, newer course and newer priorities for IBM by starting IBM Global Services. IBM shifted its concentrate towards retailing optimized solutions rather than simply products alone. The brand new thrust in IBM was for the on-demand solutions. Gerstner helped IBM focus on the higher end of customer solutions consulting as opposed to the budget outsourcing business. Lou Gerstner initiated the on-demand strategy (or solution offering). Gerstner focused on the theory that customers always wished bundled alternatives of services, software and hardware personalized to the requirements of company and market sectors rather than a large catalog of standard products. Gerstner basis for building IBM Global services was that an integrator, acting in a service role, which integrator controls almost every other major industry. Gerstner led IBM's change from geographical organization to a worldwide, customer-oriented corporation. Lou Gerstner created a Global Enterprise based on capitalizing IBM's potential to "integrate all the parts" for the customers.
Another of the Gerstner information was that every big industry is built around open requirements. This realization by Gerstner led IBM software products to allow and also to build upon wide open requirements in a network-centric world. Gerstner led IBM to depart proprietary development also to embrace wide open software criteria (J2EE and Web Services). Lou Gerstner argues that the most effective technology and service companies are those OEM suppliers who leverage their technology wherever they find an enormous opportunity; therefore, he remodeled IBM so that it can actively license its technology to be successful in the market place. Gerstner remodeled the IBM composition so that IBM could cater to e-business requirement of its customers ( IBM IT On Demand, grid computing and autonomic initiatives).
People/HRM
IBM's individuals were one of the Gerstner's goals for change. At IBM, employee aren't not resources but the main revenue generator. A business can be referred to as a collective capacity of its employees to create value for itself and customer. Gerstner's most significant accomplishment was to determine a culture that brought employees of IBM closer to its customers. This is formulated by inspiring employees to be encouraged toward customer-defined success. Gerstner concentrate was to promote the turnaround internally for IBM's employees. The toughest challenge in the effort to change IBM's culture which Gerstner experienced were the employees and management at IBM.
When Gerstner took up the task of Chairman and CEO of IBM, he discovered that IBM got an unclear culture. Employees were perplexed whether it was their teamwork or their individual aspirations that will help them get top management's appreciation. Employees were apprehensive rather than familiar about issues such as consensus building, corporate and business process and risk taking. Another important feature that figured on the worker list of IBM was the dress code at the job. In another of his first meetings at IBM, Gerstner found that participant employees were putting on stark white-collared shirts except him. Lou Gerstner unveiled versatility in dress at the work, providing employees the flexibility to choice to wear what made them preferred provided they adhered to decency. Gerstner looked at the gown code at the job as a severe cultural problem that the IBM employee faced.
IBM was obsessed with conflicts and inside rules, each staff looking to be overpower the other. Lou Gerstner seen that there was a great amount of jealousy among employees, each staff fiercely safeguarding his own privileges. There was unhealthy competition among teams which resulted in lost efficiency. The teams spent more time debating on the transfer-pricing conditions rather than making use of a clean product transfer system because of its employees. Gerstner dealt with to resolve these problems by fostering more collaboration among clubs and employees.
Processes
Before Gerstner, in IBM there was internal resistance in form of internal division ego clashes, process driven culture and increased decentralization which leads to slow decision making which was resulting in strategy becoming non-implementable. Gerstner discovered that the employees working in the European geographical region used to get only preferred communication from Gerstner. The main reason behind this was that the IBM brain in Western region intercepted his e-mails. Gerstner immediately confronted him and made him aware that employees weren't his personal property, they belonged to IBM.
Gerstner transformed the "we are the best" attitude which the employees mirrored despite IBM's faltering health. The reason behind this was IBM's software was compatible only with IBM hardware. Customers were compelled to buy IBM's products. With an increase of competition in the marketplace, there were better deals that customers were consistently getting without having to count on IBM. Gerstner founded the process of setting specifications that allowed IBM's solutions to be compatible with competitor's products. This helped work at home opportunities to increase. Gerstner opened up programs of communication and send regular e-mails to employees throughout the world keeping them alert to the process changes.
Gerstner's insurance quotes, "mending IBM was about execution" and " IBM needed - an enormous sense of urgency. " Gerstner's strategy which is quoted as " Drive all we does from the customer back and flip IBM into a market-driven somewhat than an internally centered, process-driven enterprise. " IBM turnaround was all about execution and after that it was maximum ways to measure its effectiveness. Before Gerstner became a member of, IBM experienced a tendency to work with data and indices (subjective product milestones and client satisfaction figures), but Gerstner changed all these techniques of measurements.
Rewards
The settlement system at IBM was revamped. The concentration of reimbursement shifted to a complete corporate and business performance from a unit performance. The criteria's for marketing promotions were vastly reformulated. Gerstner modified the attitude of these in older management at IBM who were more used for you to get work done alternatively than getting to work. The pay composition was made performance based mostly and variable component was introduced in the pay composition. Stock-based settlement was also provided and the extra was associated with overall IBM's performance
Conclusion
Lou Gerstner was a pragmatic innovator who took action based on good quality information and who confirmed great respect for the collective knowledge that existed in an company on the brink of collapse. The major key to survival are adapting to one's environment and ongoing progression. Many American corporations that have didn't adjust with the changing business environment have perished before. IBM is one of the business that recognized the changing environment and survived. I believe IBM is a success testimonies of business change and progression.
Lou Gerstner commentary - "The most important value-added function of any corporate management team is to ensure that the strategies produced by the operating devices are steeped in tough-minded evaluation, and that they are insightful and actionable. " Gerstner is convinced that demanding reviews are had a need to review the critical assumptions such as industry development rates and charges. He believes that whenever strategies are developed for employees and customers, the new strategies should be believable and implementable. Lou Gerstner is of the view that "Good Strategy is long on details" and therefore his ability to do the strategy is commendable. He dismisses the normal word "Small is Beautiful, Big is Bad" and comments "focus combined with good authority can allow an elephant to be nimble and versatile. "
