Notes About "Who Says Elephants Can't Dance?" by Lou Gerstner

I finished reading “Who Says Elephants Can’t Dance?” an autobiography of Lou Gerstner, CEO of IBM from 1993 to 2002, and I can say without hesitation that it’s one of the best business books I’ve read in decades.

First, a quote that quite faithfully illustrates the spirit of the book:

“People who aren’t forced to deal with technology rarely make the effort to understand either its possibilities or its limitations. In the nuclear era, maybe that was all right. But for technologies as pervasive as the ones we’re dealing wich today, I believe we’ll need leaders in government, business, and policy-making roles who commit themselves to the challenge of lifelong learning in order to bring society into sync with the science.”

Here are some notes (quite a few actually!) I took while reading it.

1. Grabbing Hold

• Page 4: meeting “old IBM” and its arrogance as a customer when at AMEX during the 1970s
• Page 5: at Nabisco, learning that “free cash flow” is the single most important measure of business performance
• Page 23: first board meeting
• Page 24: management philosophy principles and five 90-day priorities at the bottom of the page
• Page 32: about his personal assistant Isabelle Cummins becoming a manager of a team of 9 people
• Page 35: meeting with his brother, “brotherly advice”. Also: the mainframe business must not be dismantled
• Page 37: Thomas J. Watson Jr. in the back seat of his car
• Page 40: alcohol policy change in the corporate airplane
• Page 47: switch to customer focus in first meeting with CIOs (mainframe customers) in Chantilly, Virginia (May 1993)
• Page 52: meetings with Andy Grove and Bill Gates
• Page 59: view about the computer industry and need of an integrator
• Page 62: basics of business management
• Page 65: savings
• Page 71: sense of urgency
• Page 72: going back to Watson’s vision but not telling anyone about it
• Page 77: communicate the existence of a crisis to employees
• Page 80: e-mail from a know-it-all
• Page 84: “every institution & individual is a potential IBM customer”
• Page 85: “tech divisions built what could be built without regard for customer needs”
• Page 86: building a customer-oriented organization
• Page 87: manager blocking his emails in EMEA
• Page 89: sales fulfills demand generated by marketing
  • marketing research
  • centralized marketing team
• Page 91: “solutions for a small planet”
• Page 94: compensation & benefits
• Page 96: company should be owned by those working in it
• Page 97: role of stock options in building a sense of ownership
  • 3 reasons in page 98
  • stock ownership mandatory!
• Page 104: “people didn’t mind rebooting their PCs 3 times a day”
• Page 107: “in an industry run by mad scientists, we had to succeed”

2. Strategy

• Page 116: growth of IBM research unit: databases, Fortran, memory chips
• Page 117: culture in an environment without competitive threats
• Page 121: cycles every 10-15 years
  • 1950 (computers) - 1965 (System/360) - 1980 (PC) - 1995 (Internet) - 2010 (mobile & cloud) - 2025 (AI)
• Page 125: role of open standards in a networked world
  • open computing is a threat to companies offering closed architectures
• Page 126: “Post-PC” world
• Page 130: economics of a service business
• Page 132: customers need integration
• Page 133: managing services businesses vs product businesses
• Page 137: what is the biggest software company in the world? Microsoft IBM!
• Page 138: OS/2 is a problem
• Page 141-142: the middleware strategy: databases, message queues, transaction management
• Page 142: acquisition of Lotus
• Page 145: acquisition of Tivoli Systems
  • 2001: IBM 2nd biggest software company in the world
• Page 146-152: licensing technology to other companies => IBM research
• Page 156: software strategy, relationship with other ERP vendors, impact on hardware sales
• Page 157: how to make partnerships => contracts, targets
• Page 158: turning competitors into partners
• Page 160: “focus over breadth” => selling the IBM network to AT&T
• Page 163: “the role of an IT partner cannot be fulfilled by companies that support only one technology or one stack”
• Page 167: “The Cloud” => excellent predictions on page 168
• Page 172: “e-business” => Ogilvy’s ad campaign
• Page 174: “the new economy” => dot-com boom
• Page 177: “The challenge was making that workforce live, compete, and win in the real world” with competition

3. Culture

Chapter 20 is by far the most important chapter in the book.

• Page 182: “Culture is the game”
• Page 183: Description of IBM culture, including “corny” aspects
• Page 184: “Basic beliefs”
  • Excellence
  • Superior customer service
  • Respect for the individual
  • => Dress code changes: abolished in 1995 (page 185)
• Page 185: “We basically acted as if what customers needed had been settled long ago”
• Page 186: Joke: “products aren’t launched at IBM. They escape.”
• Page 187: “Management doesn’t change culture”
• Page 189: “Because IBM was so deeply inbred & ingrown, it had lost its robustness”
• Page 190: “what we could make” was more important than “what the customer needs”
• Page 192: “nonconcurring” option
  • “no one would say yes, but everyone could say no” (page 193)
• Page 195: Four-way matrix at IBM:
  • Geography
  • Product
  • Customer
  • Solutions
  • => Bureaucracy
• Page 199: I had executives, I needed leaders
• Page 200: “high-performance companies are led and managed by principles, not process”
  • Something that would Ray Dalio very happy…
• Page 201: List of Principles:
  1. Marketplace-driven
  2. Commitment to quality
  3. Measure of success is customer satisfaction
  4. Focus on productivity
  5. Strategic vision
  6. Sense of urgency
  7. Teamwork
  8. Sensitive to people & communities
• Page 203: “most people can be roused by the threat of extinction”
• Page 204: “Competitive focus must be visceral, not cerebral”
• Page 206: required behavioral changes
• Page 208: “nothing can stop a cultural transformation quicker than a CEO who permits an executive to disregard the new behavior model”
• Page 210: IBM Leadership Competencies
• Page 211: “win, execute, and team”
  • win: business is competitive
  • execute: speed and discipline
  • team: act as one IBM
• Page 214: “the counterintuitive corporation”

4. Learnings

• Page 220: “company’s focus too narrow in their segment and misses changes in their marketplaces”
• Page 221: IBM proposing to buy Compaq
• Page 222: acquisitions must fit a strategy to succeed
• Page 223: vision ≠ strategy
  • Strategies are based on data
• Page 225: traits of good strategies
  • “believable & executable”
  • “long on detail and short on vision”
• Page 230: Execution is the critical part of strategy
• Page 231: “people do what you inspect, not what you expect”
  • “Accountability must be demanded”
• Page 231: “no credit can be given for predicting rain, only for building arks”
• Page 235: The best leaders create high-performance cultures
• Page 236: Personal leadership => passion
• Page 238: What it takes to run IBM
• Page 239: on integrity: “cultures in which it is easier to ask forgiveness than permission disintegrate over time”
• Page 245: Decentralization or not?
• Page 258: perspective on tech industry: lack of humanity
• Page 260: toxic role of investment bankers in industry & economy
• Page 267: “I’ve always believed that less is more when it comes to the press”
• Page 269: “Chasing revenue at the expense of real earnings is one of the most telling signs of a weak management team”
• Page 270: “cash flow, not revenue, sustains corporate success”
  • globalization => overcapacity => commoditization and price deflation
  • success => execution
    • + revenue
    • - costs

Appendix B

• A full prediction of the cloud business that was about to start a few years later!