- IBM was struggling with bad press, losing money, angry customers, and too many competitors. Lou Gerstner was hired as CEO to turn the company around. - Gerstner implemented immediate changes like hiring a new CFO and focusing the culture. He cut waste, reengineered processes, and sold unproductive assets to raise cash. - Over time, Gerstner shifted IBM's focus to services, software, and licensing through acquisitions and divestitures. He changed compensation to focus on performance and led the company with principles of customer orientation and urgency.

1. Who says elephants can’t
dance
Presented by Thirumeninathan
…grabbing hold
…strategy
…culture
…lessons
Learned
…observations

2. …evaluate
…in a fish bowl
…important
decisions
…hold the vision
…reengineer
…revive the brand
…pay for
performance
. . . Grabbing

3. • IBM
– Bad press
– Too many competitors
– Angry customers
– Bureaucratic approach
– Losing money and negative
cash flows
• Lou Gerstner
– Management consultancy in
McKinsey
– Experience in highly charged
corporate environments
– Has experience as an IBM
customer
. . . evaluate – Proven change agent

4. – Symbolized American technology might and R & D prowess
– Leader in the industry and too many customers had a stake in
survival
– “National treasure”
– many competitors in the hardware, software, middleware
markets watching every move
. . . in a fish bowl

5. • First Impressions
• Immediate steps
– CFO & HR hiring
. . . important
– Culture reset

6. • Stop the spin-offs
• Change the economic model – cut waste
• Reengineer – from milking the cow to growing
market share
• Sell underproductive assets to raise cash
. . . important

7. • Bringing the “B” back into focus
• Tough market minded strategies
for every business instead of a
grand over-arching vision
• More integrated solutions (rather
than less)
• Improve customer
responsiveness, time to market
. . . hold the vision

8. • Phase out Management Council
– push power to CEC / WMC
• Build a new board
• Employee Communications
• Creating a global enterprise
– Power bases and fiefdoms
– Focus on global relationship
. . . reengineer

9. • Revitalize the brand
– Centralize branding efforts
– One agency for unified messaging
– Coherence in brand building across
geographies
– more bang for the buck
• Some successful campaigns
– Solutions for the small planet
– eBusiness
. . . branding

10. • Old rewards – common, fixed
rewards, internal benchmarks,
entitlement
• New rewards – variable rewards,
differentiation, external
benchmarks and based on
performance
• Stock options as rewards rather
than aligning the executives with
share holders.
. . . pay for

11. …making the bets
…services business
…software business
…research and
licensing
…fallacies and myths
. . .

12. • Emerging trends
– Services based
– Network computing oriented
– A post PC world
. . . making the bets

13. • The key to integration – services
• Building the organization
– Ability to recommend competitor’s products
– Lending the balance-sheet
– Recruitment, training, compensation and HR processes
– Negotiate profitable contracts, price skills, assess risks and walk away from bad
contracts and bad deals
. . . services business

14. • OS/2 vs Windows
• 4000 software products
• Reduction of 30 labs to 8
• Consolidated 60 brands to 6
• Focus on middleware (blue ocean)
• Lotus acquisition
. . . software business

15. • Inability to convert inventions into products for the market place
• Licensing gives the capability to set standards
• R & D expenses recouped with new revenue streams
• Exiting businesses which does not make sense
– DRAM business
– Application software business – partnership with Siebel
– Telco – IBM network – AT & T
–
. . . research and
Challenges to exit the PC market

16. • The fallacy that the best technology always wins – a bitter but vital
lesson
– OS/2
• Myth of account control and the efforts to maintain it
– Application software
. . . fallacies and

17. …basic beliefs
…culture of “no”
…leading by principles
…IBM’s moonshot
. . . culture

18. • Excellence in everything we do – quest for perfection, led to checks and
balances, bureaucracy
• Superior customer service – became more administrative – did not look at
what customers needed and their businesses needed
• Respect for the individual – reflected in the compensation and evaluation
system – not in sync with the times
• Dress code – the why
• Following basic beliefs as a ritual without understanding the why
. . . basic beliefs

19. • Non-concurr management system
• Soft request – I did not agree with you
• Dysfunctional bureaucracy and jockeying
• IBM-isms
• Presiders over process
. . . the culture of “no”

20. • More customer oriented rather than IBM focussed
• More passionate about competition and loss of market
share, leadership position and downsizing
• Customer satisfaction and shareholder value are the driving factors
• Sense of urgency
• Senior leadership Group to focus on leadership and change
. . . leading by

21. • Keeping the crisis as the focus of attention
• Market place based mission
• eBusiness – the whole organization focussed on winning customer
mind share as the moonshot
. . . the moonshot

22. …know and love your business
…all about execution
…leadership is personal
…and elephants can dance
. . . lessons learned

23. • Focus on core business
• Growth through acquisition – only when there is value for both and
not for acquiring new market position or new markets
• Market intelligence wins wars
• Good strategy – long on details, allocate resources and zero sum
planning every few years to weed out (sunk costs / survival of the
fattest)
. . . know and love thy
business

24. • Inspection not expectation – translation of strategy to results
• Solid processes to achieve key success factors – for e.g. product
design
• Feeling a high performance culture
. . . t’is all about

25. • Prerequisites of the next CEO
– High Energy
– Strong bias for action
– Strategic sense
– Ability to motivate others
– Strong team builder
– Org culture which tends to ask for forgiveness rather than permission destroys
. . . Leadership is
soon

26. • Decentralization for faster decision making was meant for another era
– Org wide changes lead to turf battles and become costly affairs
– Overheads are high without real value adds
– Scale of economies
• For true integration and clustering resources around the needs of the
customers – shift power
• Measure and reward the future – not the past
. . . and elephants can
• Walk the talk

27. …the industry
…corporations and the
community
. . . observations

28. • Industry
– No common industry associations for IT – hyper competitive
– Annihilation of competitors, increasing returns and networking effect
– Constant hunt for the next big wave
• System
– Too focused on short term gains
– Board only of external directors
– High taxation on speculative trading and bring back ownership based economy
. . . the industry

29. • The media – trolls, rumor mongers, biased – ignore
• Under promise and outperform – talk to reporters with an insightful
story line on the industry
• Analysts and the 90 day myopia
• Beyond check book philanthropy – engage in real change
. . . corporations and the
community

30. . . . legacy

31. . . . Thank you!!!