Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change

by Louis V. Gerstner, Jr.

  So, of course, when we at IBM said we believed there was something bigger happening than chat, browsing, or even online retail, a lot of people had a good time pointing out that, once again, plod-ding

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  old IBM just didn’t get it. And given the mood of those heady, early dot-com days, what we were saying was pretty boring.

  We certainly agreed that the Net was going to change the world.

  But our perspective started with what was going to have to happen inside all of the world’s existing institutions—banks, hospitals, universities, retailers, government agencies—to change the way they work, transform physical processes into digital processes, and extend their enterprises to the Net. Only then were individuals going to be able to do things—pay a bill, move money around, buy a stock, renew a driver’s license—in fundamentally different ways.

  Our message was essentially this: There is a new technology here that is going to transform every kind of enterprise and every kind of interaction. But please understand that this technology—like any other technology—is a tool. It is not a secret weapon or a panacea.

  It has not suspended the basics of marketplace economics or consumer behavior. And the winners will be found among the institutions that skip the shortcuts and understand that e-business is just business. It is about real, disciplined, serious work. And for those willing to do the unglamorous labor of transforming a process, unifying a supply chain, or building a knowledge-based corporate culture, it will deliver tangible and sustainable benefits.

  In meetings that IBM hosted globally for hundreds of the world’s leading CEOs, I liked to draw a comparison between e-business and the advent of electric power. Before people had the ability to generate electricity, a lot of what got transported in the world was moved by mules or horses. Then, over time, the activity of transporting things was taken over by electric-powered machinery. The industries didn’t change. The basic activity of pulling and lifting didn’t change. But the people who made the swiftest transition from the old technology (animals) to the new technology (machines) became the dominant players inside their industries. It was almost the same proposition with e-business.

  That first experimental and speculative chapter in the evolution

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  of e-business is fading from view. A second chapter—a far more serious and pragmatic period—is under way. Leaders in all industries see the benefits as well as the practical issues of implementation that they will face as they cross into the networked world, and they are seriously charting their individual strategic directions.

  This coming phase of e-business will be characterized both by the technical implications, as well as a set of management and leadership challenges.

  Bringing Down Barriers to Access

  If you think about the proliferation of information technology, it took a remarkably brief period of time, less than forty years, for it to spread from the hands of a select number of centralized technicians—the high priests of the mainframe era—to tens of millions and then hundreds of millions of PC users.

  The rise of the Net has made terms like “connected world” and

  “universal access” permanent additions to the lexicon of the twenty-first century. Yet the fact remains that more than half of the world’s people have yet to make a phone call. The half billion Internet users I mentioned earlier is impressive for a technology that’s still in its in-fancy, yet that represents less than 10 percent of the people on the planet. We’re still a long way from the day when even a narrow majority of the world’s population is firing up a browser and joining the community of people with access to the infrastructure of computing and communications. For the immediate future, then, we don’t have to debate the existence of a digital divide between the world’s information haves and have-nots. It’s real. Its permanence, however, is another matter entirely.

  Multiple factors contribute to this divide: disparities in education and literacy, telephone penetration, and access to electricity. In terms of computing and communications barriers, there are two:

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  telecommunications rates, and the cost of the access device itself.

  Both are coming down, one faster than the other.

  Outside the G8 nations, world governments are taking steps to end monopolistic telecommunications practices, encourage competition, and open their markets to network operators and service providers. Most nations, nearly 80 percent, have opened their cellular markets to competition, though a majority of countries still retain monopolies (either state-run or privatized) in fixed-line services for local and long-distance service. Some citizens of the world can make a local three-minute call for I cent. Others pay fifty times that.

  The second barrier—the expense of the access device itself—is rapidly being reduced. When the one and only access device was a full-blown personal computer, surfing the Web was an activity for the rich. But the world’s entire inventory of hundreds of millions of PCs has already been eclipsed by an explosion of other kinds of low-cost access devices, from Net-enabled cell phones to personal digital assistants, game consoles, or even kiosks in marketplaces or government facilities. Within the next few years there will be billions of mobile devices (not counting personal computers) connected to the Net.

  All of a sudden the price of entry is no longer an insurmountable barrier. Yet there are plenty of thoughtful people who assert that information technology will unavoidably and permanently separate the world into two camps: those with access, and those locked outside looking in. I do not accept the inevitability of their argument.

  It seems just as reasonable to me that with greater telecommunications competition, continued innovation by the IT industry, and thoughtful leadership at all levels of society, there is more than a chance—there is a magnificent opportunity—to shrink this gulf and spread unprecedented levels of service and information to people regardless of their social or political standing or personal buying power.

  This proliferation of low-cost access devices is one dimension of the much more pervasive reach of information technology. But it

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  doesn’t stop there. Besides all the gizmos that people will actually use, the technology is literally vanishing into the fabric of our lives: the clothes we wear, the appliances in our homes, the cars we drive, and even the roads we travel—plus a thousand other things that we’d never think of as “computers.” It’s easy to envision a day when everything worth more than a few dollars will be outfitted with tiny chips, some storage, and communications capability. The applications are life-enriching, convenient, fun, practical, and powerful.

  As just one example, when every product you own is continuously reporting its location, and “knows” whether or not it’s where it’s supposed to be, theft becomes a lot harder to pull off. For manufacturers and retailers, this all points to the next-generation in market analysis and customer service. Imagine the power of instantaneous information on every product they have in the marketplace—how it’s being used, how much it’s being used, and how it’s performing.

  It’s like getting Nielsen ratings on anything and everything—without the overnight wait. And for people and societies, consider the benefits of clothing that might warn the wearer of environmental hazards; of buildings whose architectures can adapt in the event of an earth-quake; or water supplies capable of repelling attempts at sabotage.

  It’s all scientifically possible. When we’ll see it, I wouldn’t hazard a guess. Do I doubt that we will see it all, and more? Not for a second.

  Just look at what’s already happened.

  When I learned to drive, a car was a mode of transportation. Today some cars are a node on the Net. Many include a feature that reports the vehicle’s location to emergency services anytime the air bags deploy. The world’s leading manufacturer of pacemakers now equips them with Internet addresses
that will one day contact your physician if anything starts to go wrong. If all kinds of appliances and heavy equipment sense that a part within them is failing, they can “phone home” to dispatch their own repair technician or to get the appropriate software download to fix the problem. IBM scientists are researching an “intelligent” kitchen counter, which would “read”

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  medicine bottles placed side by side and issue a verbal warning if that combination of drugs could produce an adverse reaction. One Japanese company is even making pint-size beer glasses that would alert the bar staff when the mug is empty!

  At each of these intersections—of the technology with devices, with people, and with the routines of everyday life—the role of the technology in our lives becomes more pervasive, and more invisible.

  It fades from view even as our expectations for what it can do increase.

  On the other hand, what’s happening behind the scenes to enable all these networked applications is dependent on a secure, global computing infrastructure. At that end of the computing continuum, things are taking on unprecedented levels of both sophistication and complexity. If we’re going to keep moving forward—extending the reach and impact of the technology by making it easy to use—then masking its complexity becomes paramount.

  Uncomplicating Computing

  Enterprises of all kinds increasingly recognize the importance of entering the world of e-business. It’s either that or consign themselves to the fate of those turn-of-the-century institutions that decided mule power suited them just fine. But as customers look down the road to digital nirvana, they see a road littered with potholes.

  As we’ve seen, the ubiquity of computing becomes more real every day. Increasing numbers and kinds of devices are generating additional transactions, increasing data flows and network traffic, and all of it is happening with much greater unpredictability in usage and volumes. At the same time, threats to the security of systems and data are escalating far beyond what was predicted even a few years ago.

  Leaders in the public and private sectors, in businesses large and small all over the world, know that e-business demands a fundamentally new kind of information infrastructure. It will be more secure,

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  more capable, and more reliable than what is in place today. The dilemma (for them and for the people who make and sell the technology) is that the infrastructure has become almost impossible for customers to implement or manage.

  The traditional remedy—throwing more people at the problem—simply won’t work, not in the long term. Complexity is spiraling upward faster than the capability of humans to deal with it. Around the world, unfilled IT jobs already number in the hundreds of thousands, and demand is expected to increase more than 100

  percent before the end of this decade. At this rate there simply won’t be enough skilled people to keep the systems running.

  Therefore, the infrastructure itself—from end to end—will have to be reengineered to have the ability to perform many tasks that require human intervention today. What is coming is a kind of computing that will take its cue from the human autonomic nervous system.

  IBM’s research scientists draw many parallels between the way the human body manages itself—everything from heartbeat to the immune system—and what is needed in computing systems. Think of it as a kind of self-awareness that will allow systems to defeat viruses, protect themselves from attack, isolate and repair failed components, see a breakdown coming and head it off, and reconfig-ure themselves on the fly to take full advantage of all of their component parts.

  Autonomic computing won’t be invented or created by one company alone. That’s why IBM’s technical community proposed in 2001

  that this new realm would become the next great technical challenge for the entire IT industry.

  Joining the Grid

  So far the Internet and its communications protocols have enabled computing systems that were once self-standing—whether

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  you’re talking about PCs or data centers—to share information and conduct transactions. In effect, the first stage of the Internet revolution allowed computers to talk to one another. What’s going to happen next (based on yet another set of gorpy protocols) will allow networks of computers actually to work with one another—to combine their processing power, storage capacities, and other resources to solve common problems.

  This kind of massive, secure infrastructure of shared resources goes by the name “grid computing.” Like many of the mainstream commercial aspects of information technology, such as the Internet itself, grids are taking off first in the scientific, engineering, and aca-demic communities in areas such as high-energy physics, life sciences, and engineering design.

  One of IBM’s first grid projects was done with the University of Pennsylvania. It’s designed to allow breast cancer researchers all over the world to collaborate on applications that will compare mammograms of the same woman over many years, leading to much more reliable detection and diagnosis.

  The Next Utility

  Put all of this together—the emergence of large-scale computing grids, the development of autonomic technologies that will allow these systems to be more self-managing, and the proliferation of computing devices into the very fabric of life and business—and it suggests one more major development in the history of the IT industry. This one will change the way IT companies take their products to market. It will change who they sell to and who the customer considers its “supplier.” This development is what some have called “utility” computing.

  The essential idea is that very soon enterprises will get their information technology in much the same way they get water or electric

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  power. They don’t now own a waterworks or power plant, and soon they’ll no longer have to buy, house, and maintain any aspect of a traditional computing environment: The processing, the storage, the applications, the systems management, and the security will all be provided over the Net as a service— on demand.

  The value proposition to customers is compelling: fewer assets; converting fixed costs to variable costs; access to unlimited computing resources on an as-needed basis; and the chance to shed the headaches of technology cycles, upgrades, maintenance, integration, and management.

  Also, in a post-September 11, 2001, world in which there’s much greater urgency about the security of information and systems, on-demand computing would provide access to an ultra-secure infrastructure and the ability to draw on systems that are dispersed—creating a new level of immunity from a natural disaster or an event that could wipe out a traditional, centralized data center.

  Where will this take hold first? I think we’re going to see something very similar to what we saw when customers started to embrace the Net. Many of the first implementations were for internal, or intranet, applications. In the case of on-demand computing, the ability to draw on a lot of existing resources plays directly to customers’ questions about how to utilize fully all of their existing IT investments. Rather than rolling in another piece of hardware, buying a bigger database or more storage, customers could have a new way to leverage their existing resources.

  The Outer Limits

  It’s almost always the case that any particular generation of people will be forced to deal with at least one game-changing technology—to understand it, apply it, and regulate it responsibly. In the middle of the last century, nuclear energy was the best example. The

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  current generation, on the other hand, will deal with not one but two game-changing scientific developments. Everything I’ve described so far relates to the first—the implications for institutions and individuals associated with networking technologies. The second is what is happening around the marriage of information technologies with molecular biology.

  The
watershed event was the mapping of the human genome.

  That project created a data set equal to 10 million pages of information. Yet the really hard work is ahead of us. One researcher described it as having a book but not understanding the language in which it’s written. Deciphering it is expected to require analysis of data sets at least 1,000 times larger than the mapping project itself—another 10 billion pages of information.

  It will be worth the effort. What we’ll learn will lead us to better, more effective, more personalized drugs, new protocols and treat-ments (and possibly cures) for the most intractable diseases, and new generations of more resilient, higher-yielding seeds and crops.

  The point is, there is huge potential here to limit human suffering and do with scourges like heart disease or AIDS what we’ve already done with polio and smallpox.

  Eighty years ago, antibiotics ushered in the last great advance in the human life span—about twenty additional years over normal life expectancies in 1920. We’re on the brink of discoveries that could deliver another twenty-year expansion, so younger readers of this book just might be looking at having a lot more time on planet Earth than their parents have had. And who wouldn’t want it, since we’re not talking about prolonging an existence already diminished by what we know today as “old age.” We’re talking about twenty more productive, healthy years.

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  The Real Issues Are Not Technical

  Before we get carried away by what the technologies are making possible—at the networked level or at the cellular level—let’s not forget that the potential societal good is always counterbalanced by an equally important list of societal concerns. And now that we have created the potential for both, it is my fervent hope that industry, customers, governments, and policy makers think through the implications of what is ahead.