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kicked in the marketplace. People are taking our business away. So I want us to start kicking some butts—namely, of our competitors.
This is not a game we’re playing. We’ve got to start getting out in the marketplace and hitting back hard. I can assure you, our competitors are focused maniacally on these charts, and they talk us down constantly.”
I showed photos of the CEOs of some of our top competitors. The usual suspects—Gates, McNealy, Ellison, and the like. I then read direct quotes from them belittling IBM, gloating over our fall from grace, and questioning our importance in the industry. For example, this from Larry Ellison: “IBM? We don’t even think about those guys anymore. They’re not dead, but they’re irrelevant.”
“What do you think happened to all those points of market share?”
I asked. “These guys ripped them away from us. And I don’t know about you, but I don’t like it. And it makes me angry to hear people say things like that about our company. Every time Visa used to run an ad attacking American Express, I knew what was going to happen the next day. The roof was going to come off the building. The general counsel would send for reinforcements to come into the building to keep people from doing things they shouldn’t do. I didn’t have to pump up the troops. My job was to keep them from overreacting.
“You know, I have received literally thousands and thousands of e-mail messages since I’ve been in this company, and I’ve read every one. I want you to know that I cannot—I cannot—remember a single one that talked with passion about a competitor. Many thousands of them talked with passion about other parts of IBM. We’ve got to generate some collective anger here about what our competitors say about us, about what they’re doing to us in the marketplace. This competitive focus has to be visceral, not cerebral. It’s got to be in our guts, not our heads. They’re coming into our house and taking our children’s and our grandchildren’s college money. That’s what they’re doing.
“One hundred and twenty-five thousand IBMers are gone. They lost their jobs. Who did it to them? Was it an act of God? These guys
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came in and beat us. They took that market share away and caused this pain in this company. It wasn’t caused by anybody but people plotting very carefully to rip away our business.”
I expressed my frustration and my bewilderment about the recurring failure to execute and the company’s apparently endless tolerance of it.
“We don’t demand implementation and follow-up. We don’t set deadlines. Or when they’re missed, we don’t raise some questions.
But we do create task forces; and then they create task forces. We don’t execute, because, again, we don’t have the perspective that what counts outside [the company] is more important than what counts inside. Too many IBMers fight change if it’s not in their personal interest. There’s a very powerful word in the IBM vocabulary.
I’ve never heard it in any other company. The word is ‘pushback.’
It’s as if decisions are meant to be suggestions. Since I’ve been here, I’ve discovered people who are fighting decisions that were made years ago, while our market share continues to decline.
“When you have market share like that and a customer satisfaction record like that, there isn’t a lot of time for debate. We’ve got to get out and start winning in the marketplace,” I said. “This is going to be a performance-based culture. I am personally involved in filling all the new key jobs in this company, because I’m looking for people who make things happen, not who watch and debate things happening.”
I shared my feelings about our opportunities and our prospects.
I said I considered the people in the room to be the finest collection of talent assembled in any institution in any industry, and that after one year into the job I was convinced that IBM had virtually unlimited potential—but only if we were willing to make the changes I’d laid out. I then outlined the behavioral changes we needed to make in our culture (see next page).
“There are no ifs in my vernacular,” I said. “We are going to do it. We’re going to do it together. This is going to be a group of change agents—people who are imbued with the feeling of empowerment
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and opportunity, for ourselves and all our colleagues. Those of you who are uncomfortable with it, you should think about doing something else. Those of you who are excited about it, I welcome you to the team, because I sure can’t do it alone.”
REQUIRED BEHAVIORAL CHANGE
FROM
TO
Product Out (I tell you)
Customer In (in the shoes of the
customer)
Do It My Way
Do it the Customers’ Way
(provide real service)
Manage to Morale
Manage to Success
Decisions Based on Anecdotes & Decisions Based on Facts & Data Myths
Relationship-Driven
Performance-Driven & Measured
Conformity (politically correct) Diversity of Ideas & Opinions Attack the People
Attack the Process (ask why not
who)
Looking Good Is Equal to or Accountability (always move the More Important Than Doing rocks)
Good
United States (Armonk) Domin- Global Sharing ance
Rule-Driven
Principle-Driven
Value Me (the silo)
Value Us (the whole)
Analysis Paralysis (100+%)
Make Decisions & Move Forward
with Urgency (80%/20%)
Not Invented Here
Learning Organization
Fund Everything
Prioritize
WHO SAYS ELEPHANTS CAN’T DANCE? / 207
It was an emotional talk for me, and I hoped my audience received it that way. I could tell that for many in attendance it had been a good meeting—certainly for those who wanted to create change.
For the others? Well, everyone at least expressed agreement. But transforming stated intentions into actual results was another matter.
In fact, in the following weeks and months I heard that while most of the executives were very supportive, some had simply been shocked. It wasn’t so much my ideas and messages that startled them. It was my delivery—my passion, my anger, my directness (“kicking butt,” for instance, and “ripping away our business”). Very un-IBM. Very un-CEO-like.
I wasn’t surprised—or sorry. I had made the conscious decision to jolt the audience. I hadn’t done anything simply for dramatic effect. Yes, IBM needed a dose of shock therapy and a gut check. But, more immediately, I needed my executive team to understand who I was and what I was like—and I knew only a handful would ever have a chance to work with me face-to-face. For all kinds of reasons that would unveil themselves in the future, I had to let them see my competitive side.
So I did. Anyone who knows me would tell you that this wasn’t an act. I like kicking competitors’ butts. And I hate, hate, hate losing.
A New Path for Leaders
Soon after the meeting things started to change. I could sense a little excitement and hope. Some executives were beginning to exhibit the sort of personal leadership and commitment to change that I sought.
I needed, though, to provide support and encouragement for these risk takers. They were still surrounded by a lot of Bolsheviks who longed for the old system. The risk takers needed both a symbol and a structure to validate their behavior.
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This was the inception of the Senior Leadership Group (SLG).
Formed in February 1995, its primary purpose was to focus attention on the topics of leadership and change. We met for several days once every year to discuss company strategy, but we spent an equal amount of time on leadership.
Given the group’s symbolic importance—and the need to infuse it continually with fresh thinking—I d
ecided it was crucial that membership not be automatic, not based on title or rank. I wanted living, breathing role models—regardless of their place on the organizational chart or the number of people underneath them. A great software designer could be a leader, or a great marketer, or a great product developer, just as well as a senior vice president.
Size mattered. The 35 or so executives with whom I met regularly was too few—but the 420 who had attended that first meeting was too many. I eventually settled on a cap of 300. No one would have tenure. Every year a triage would take place: My top executive team would meet and reconstitute the group. Individuals would be proposed for membership and would have to garner the support of the entire executive team. The presence of a new SLG member automat-ically meant that an existing member had recently retired, or someone would be told he or she was no longer performing in a manner commensurate with our expectations for SLG members. Believe it or not, many of the latter, while very disappointed, stayed on, with our encouragement.
There was high turnover, and that was constructive. Of the original members of the Senior Leadership Group, there were only seventy-one remaining at the meeting in March 2002. This lack of stasis at the top—combined with some early, visible departures of executives who could not or would not operate as team players—was important in driving home the imperative of change. Nothing can stop a cultural transformation quicker than a CEO who permits a high-level executive—even a very successful one—to disregard the new behavior model.
WHO SAYS ELEPHANTS CAN’T DANCE? / 209
I made it a high priority to promote and reward executives who embraced the new culture. It sent a message to all the up-and-coming managers that the path to success now wound through a different landscape.
Specifically, people wanted to know how they could make it into the SLG one day. Our answer was to create a set of common attributes that we wanted all of our leaders to have, and to formalize them as
“IBM Leadership Competencies.” Just as we had sought to shift from process-centric management to an approach based on general principles—permitting individuals to apply those principles in their own way, as circumstances dictated—similarly, our leadership competencies described some essential qualities but allowed for a rich, diverse leadership cadre of styles, personalities, and approaches.
The competencies (see following page) became the basis for evaluating every executive in the company. It did not take long for people to realize that this was going to be how you got ahead in the new IBM.
Moreover, all executives, including those reporting directly to me, had to “go to school” for three days to work with trained counselors to understand how they were viewed by their colleagues regarding the competencies and to develop personalized programs to improve their skills.
Making It Happen
Although I actively promulgated the principles and built our management training and evaluation around the Leadership Competencies, the new ways of doing things were much less codified than what they had replaced. That was how I wanted it to be—and it did produce a marked change in our leadership’s behavior and focus (not to mention some valuable attrition among those who found the new ways unbearable).
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IBM LEADERSHIP COMPETENCIES
Focus to Win
• Customer Insight
• Breakthrough Thinking
• Drive to Achieve
Mobilize to Execute
• Team Leadership
• Straight Talk
• Teamwork
• Decisiveness
Sustain Momentum
• Building Organizational Capability
• Coaching
• Personal Dedication
The Core
• Passion for the Business
However, after a couple of years I realized that the cultural transformation was stalling. The problem was not unexpected; it shows up in most institutional revitalizations. More IBMers were buying into the new strategies, and they said they liked the cultural behavior we needed to execute those strategies. But it all remained predominantly an intellectual exercise. People believed in the new IBM, but they were measured and compensated—and continued to work—as if they were still in the old IBM.
I needed to take our new principles and make them come alive for all IBMers. To do that I needed to make them simpler and bake them into what people did every day. And since people don’t do what
WHO SAYS ELEPHANTS CAN’T DANCE? / 211
you ex pect but what you in spect, I needed to create a way to measure results.
The initial formulation of the need for more simplicity came in late 1994, after a conversation with one of my colleagues. “Over the weekend, I counted them up, and there are about two dozen things that you want me to wake up in the morning and focus on,” he said to me. “I can’t do it. I’m not that good. What do you really want people to do?”
Thinking back to the senior management meeting earlier that year, my answer was quick: “Win, execute, and team.” Those three words captured the commitments I had teed up at the meeting—and they summed up the most important criteria I thought all IBMers needed to apply in setting their goals. This would, at its most basic level, define our new culture. This wasn’t empty cheerleading. I had very specific meanings in mind for each word:
• Win: It was vital that all IBMers understand that business is a competitive activity. There are winners and losers. In the new IBM, there would be no place for anyone who lacked zeal for the contest.
Most crucially, the opponent is out there, not across the Armonk campus. We needed to make the marketplace the driving criterion for all of our actions and all of our behavior.
• Execute: This was all about speed and discipline. There would be no more of the obsessive perfectionism that had caused us to miss market opportunities and let others capitalize on our discoveries.
No more studying things to death. In the new IBM, successful people would commit to getting things done—fast and effectively.
• Team: This was a commitment to acting as one IBM, plain and simple.
“Win, Execute, Team” began as a mantra—spread throughout the company via multiple media—and eventually took the form of a new performance management system. Every year as part of our annual planning, all IBMers made these three “Personal Business Com
212 / LOUIS V. GERSTNER, JR.
mitments” (PBCs), then listed the actions they were going to take in the upcoming year that would fulfill the commitments. The specifics varied by job, of course, but the broad approach was uniform. And the PBC program had teeth. Performance against those commitments was a key determinant of merit pay and variable pay.
Of course, in the end, “making it happen” came down to personal leadership—not just my own but that of hundreds of IBMers who were delighted to throw off the old rigidities and behavior patterns, and to forge a new cultural model. Many of them seemingly burst to the surface, elated to be released from a system that had been stultifying and political.
One person deserves special mention here. After my first failure at finding a new head of Human Resources, I hired Tom Bouchard, who had been the top HR person at U.S. West, Inc., and, before that, at United Technologies Corporation. “Bulldog” comes to mind when you think about Tom: a bright, savvy, practical, and hard-working businessman. He was not a traditional HR type; rather, he was a no-nonsense businessman. More than anyone else, he drove our cultural transformation and therefore deserves recognition as one of the heroes of IBM’s transformation.
Declaring Our Moon Shot
Have you ever noticed how the past keeps getting better the further into the future you go? Someone once said that the only para-dises we have are those that are lost. I think that person must have worked for a legendary business empire like IBM.
The company’s golden age—much of it reality, but at least part of it illusion—had such a powerful hold on the imaginations and the hearts of
some IBMers that every change was perceived as a change for the worse. They wanted time to stop, despite the realities of the marketplace and societal change.
WHO SAYS ELEPHANTS CAN’T DANCE? / 213
Our greatest ally in shaking loose the past, as it turned out, was IBM’s own precipitous collapse. However, I knew the memory of that wouldn’t last forever. Therefore, rather than go with the usual corporate impulse to put on a happy face, spin things optimistically, and declare the turnaround over as soon as possible, I decided to keep the crisis front and center—not irresponsibly; I didn’t shout fire in a crowded company. But I didn’t want to lose a sense of urgency prematurely.
There came a time, however, when it was clear to all that the company’s life-or-death crisis was over. The prospect of institutional death had helped IBMers break from the past. What would be the means by which we could embrace the future? The answer to that came in our e-business strategy. I have already described it as an integrating program for the company on a strategic and operational level, and it was all that. But the appeal of e-business to me was actually even greater for what it would do internally—for our people.
I decided to declare e-business as our “moon shot,” our galvaniz-ing mission, an equivalent of the System/360 for a new era. We infused it into everything—not just our advertising, product planning, research agendas, and customer meetings, but throughout our communications and operations—from my e-mails, broadcasts, and town hall visits to the way in which we measured our internal transformation. It provided a powerful context for all of our businesses. It gave us both a marketplace-based mission and a new ground for our own behaviors and operating practices—in other words, culture.
Most important, it was outward-facing. We were no longer focused on turning ourselves around. We were focused on setting the industry agenda again. We shifted the internal discussion from “What do we want to be?” to “What do we want to do?”
Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change Page 20