Foils and Fiefdoms

By Stan Gibson  |  Posted 2003-01-09 Print this article Print

Foils and Fiefdoms Upon arriving at IBM in early 1993, Gerstner had to cut quickly through the corporate b.s. in order to stem the companys cascading losses. He reports he found a set of fiefdoms that resisted management from above. The company was gearing itself up for a spin-off of different units and the general manager of, say, desktop PCs, imagined himself as a soon-to-be corporate CEO. Putting these petty nobles in their place and pulling back from the spin-off strategy was Gerstners first major accomplishment.
Another practice that grated on him was the tradition of presentations accompanied by "foils" or projected transparencies. While remarking wryly that he had never heard the expression "foils" to describe these illuminated illustrations, he noted that no IBMer ever gave a presentation without them. At one of his first briefings, Gerstner approached Nicholas Donofrio, who was then running the System/390 business, and in mid-foil, switched off the projector, saying, "Lets just talk about your business." The action made a statement that was heard around the world in a subsequent flurry of e-mail among IBMers recounting the event.
If there is one key to Gerstners approach to saving IBM it is his own experience as an IBM customer. As such, he had been on the receiving end of IBMs often-arrogant behavior first hand. Upon trading places, he insisted that mainframe prices be cut and that above all, IBM remain a single company, rather than be broken up into, for example, hardware, software and services. The single source IT in each of these categories was something he desperately wanted as a customer, and presumably, so did other CEOs of large corporations. By now, we can assume that Gerstner was right on this point. However, the company has morphed tremendously from the one he found in 1993. Although he did not spin off units en masse, he has sold off or outsourced huge segments of hardware manufacturing, including disk drives, small mainframes and desktop PCs. In a continuation of this trend, IBM handed over manufacturing of Intel-based servers to Sanmina-SCI Corp. of San Jose, Calif., the same company that took over manufacturing of most IBM desktop systems a year ago. While some units disappeared, others were acquired, including Lotus, Tivoli, Informix, PriceWaterhouseCoopers Consulting and late last year, Rational Software. It has all been in transforming IBM from a manufacturing company to an integration company. "Who Says Elephants Cant Dance," is essential reading for anyone seeking to understand the IBM of today or how any company can successfully undergo a fundamental and sustained turnaround. Other than the digs at the now extinct IBM corporate culture, you wont find much gossip. Theres little about Gerstners personal life—this book is not an autobiography—and he tap dances around such juicy issues as the compensation package that lured him from American Express to IBM. He refrains from scapegoating departed executives by name and does generously bestow credit on executives he calls "heroes of IBMs transformation." A partial list of these includes: Donofrio; Dennie Welsh, creator of IBM Global Services; Palmisano; John Thompson, creator of IBMs software group; and Abby Kohnstamm, IBMs senior vice-president of marketing. Kohnstamm was responsible for paring down the number of advertising agencies used by IBM, amazingly, from seventy to one. The reader ought not to believe that the turnaround began the moment Gerstner set foot in Armonk. Just as Ronald Reagan took credit for beating inflation, it was Jimmy Carter who appointed Paul Volcker—the man whose policies really killed inflation—to be federal reserve chairman, some IBM reforms—including an embrace of open systems—began during John Akers ill-starred watch. Gerstner latched onto and accelerated such initiatives, but did not in all cases start them. Since Gerstner insisted on being an author, he must bear a writers critique. Certain expressions from the lexicon of contemporary executive-speak such as, "At the end of the day," crop up with annoying frequency. Executives like Gerstner are also fond of using the verb "drive," to describe any action undertaken by a business. Perhaps in his retirement, Gerstner can do some vocabulary building in his spare time. Still, the book is a good read, and it will certainly find its way into the hands of the many people with an interest in IBM, particularly because Gerstner got to do what hundreds of IBMers, exIBMers and IBM watchers desperately wanted to do: fix the company. The irony is, Gerstner didnt want to, but according to his account had to be coaxed repeatedly into accepting the challenge. Looking ahead, Gerstner says the battle for the future of IBM is not over. A self-destructive IBM could re-emerge and take over once again, and he frankly admits that, "We never reached the level of performance I would have liked," raising the question of what is left to be done and whether Gerstners successor Samuel Palmisano will prove equal to the task of realizing IBMs complete potential.
  • Title: Who Says Elephants Cant Dance?
  • Author: Louis V. Gerstner, Jr.
  • Publisher: HarperBusiness
  • Length: 384 pages

    Stan Gibson is Executive Editor of eWEEK. In addition to taking part in Ziff Davis eSeminars and taking charge of special editorial projects, his columns and editorials appear regularly in both the print and online editions of eWEEK. He is chairman of eWEEK's Editorial Board, which received the 1999 Jesse H. Neal Award of the American Business Press. In ten years at eWEEK, Gibson has served eWEEK (formerly PC Week) as Executive Editor/eBiz Strategies, Deputy News Editor, Networking Editor, Assignment Editor and Department Editor. His Webcast program, 'Take Down,' appeared on He has appeared on many radio and television programs including TechTV, CNBC, PBS, WBZ-Boston, WEVD New York and New England Cable News. Gibson has appeared as keynoter at many conferences, including CAMP Expo, Society for Information Management, and the Technology Managers Forum. A 19-year veteran covering information technology, he was previously News Editor at Communications Week and was Software Editor and Systems Editor at Computerworld.

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