As I See It: The Ghost of IT Past
by Victor Rozek
I seldom read books written by ex-CEOs. They are, with rare exception, monuments to self aggrandizement. But while browsing my favorite bookstore I saw the cherubic face of outgoing IBM CEO Lou Gerstner gracing the cover of his new book Who Says Elephants Can't Dance. Here, I thought, is a guy who rode in like the corporate Lone Ranger, accomplished what many thought was impossible, and got out before the ailing economy could tarnish his achievement. He must know something. Besides, his book was 30 percent off.
Not surprisingly, the book answers the question that Gerstner claims he is most frequently asked: How did you do it? How did he turn around a company that had hemorrhaged over $8 billion, whose stock was dropping like a wounded duck, and which pundits wanted broken up into smaller, more manageable units. It's hard to imagine the scope of the challenge, especially for someone without a technology background. The audacity of even attempting to right the listing IBM had all the impudence of rowing a kayak up to an oil tanker, pressing against its prow and believing that by sheer persistence you can cause the behemoth to turn.
Although the subject of the book comes as no surprise, it does offer a number of engaging revelations. Among them, a portrait of Gerstner as a reluctant CEO, his observations on the IT industry, and his predictions for its future.
Gerstner was beseeched a total of three times before finally accepting the top post at IBM. Moving from RJR Nabisco to the technology giant made him "wary of telling others how to manage their enterprise based on my personal experience. " When he was first introduced to the company's top fifty executives, Gerstner admitted he had no preconceived notion of what was to be done, and from what he could tell, "neither did the board. " (The board, in fairness, had recently extended him a job offer, thus exhausting its creative capacity.) From the start, however, Gerstner did express his desire to make the company more customer driven.
At the time, IBM was divided into product lines and geographic fiefdoms. Each unit and region competed against all others. Turf was jealously guarded and resources were seldom shared. To Gerstner, IBM appeared to be suffering from a severe structural defect. As a former customer, he saw IBM's greatest strength as being able to provide integrated solutions across product lines. From a customer's perspective, fragmentation, was the antithesis of integration. So in spite of the pressure to break up the company, Gerstner rejected the notion that four one-legged elephants could dance any better than one four-legged elephant. His problem was getting all four legs moving in the same direction and dancing to the same tune.
To shift the focus of an institution, Gerstner writes, you must "take powers away from existing 'barons' and bestow them publicly on new barons." The inevitable management shakeout followed. But redistributing power was not enough. In order to ensure that everyone maintained an "integrated customer view" he established a system of incentives and rewards. "Executives at IBM were paid bonuses not on their unit's performance. All their pay derived from IBM's total results."
But as Gerstner became more familiar with the industry and its players, he grew appalled at the infighting, the name-calling, the cut-throat competition to become "the standard," and the endless stream of "foolish predictions" for which the industry is justly derided.
The nasty squabbling and general lack of civility among industry leaders (he names several including Larry Ellison of Oracle, Scott McNealy of Sun Microsystems, Bill Gates of Microsoft and Steve Jobs of Apple), appear to have both surprised and repulsed Gerstner. "I have never witnessed any such behavior in all the other industries where I've worked," he writes.
He notes that IT is the only major industry without a trade association. Alliances are formed without fraternity, affiliations without kinship, and that lack of connection, Gerstner believes, also manifests in the way consumers are treated. "There is," he observes, "a remarkable detachment that the industry maintains from its customers," which may account for the flood of fanciful predictions such as the paperless office or the cashless society; prophesies that ignore human needs and human nature.
To bridge the gap between the company and its customers, Gerstner ordered his executives to visit customer sites and provide him with written reports of their meetings. "People do what you inspect," he cautions, "not what you expect." What a remarkable admission: even top executives have a streak of rebellious teenager and require careful monitoring to ensure they do what they are told. Perhaps demotion is the corporate equivalent of being grounded.
Given the industry's penchant for imaginative excess, Gerstner is understandably cautious about forecasting its future. He acknowledges that rereading many of his own predictions over the past decade, was "like staring into a large and unforgiving mirror." However, it doesn't take a leap of imagination to maintain a strong faith in the promise of the World Wide Web. The exploitation of the Net, he declares, will be "the single most important driver of change in business, health care, government, education, and society." Gerstner believes that the Net will first have a profound impact on institutions as they begin to understand the power and potential of the tools at their disposal. This in turn will transform the way individuals operate when they interact with organizations such as universities, banks, hospitals, and the like.
He cautions, however, that the promise of global connectivity remains a distant goal. The digital divide widens to a chasm for much of the Third World, where electricity and telephone service are still distant aspirations. "Half the world's people have yet to make a phone call," Gerstner notes. Nonetheless, by 2005 the global Internet economy is predicted to reach $4 trillion.
The role computer technology will play in support of e-business will be more pervasive but less visible, according to Gerstner. Technology is "literally vanishing into the fabric of our lives," he writes, imbedded in appliances, cars, and even clothing.
Where pervasive computing crosses the line and becomes invasive, is less clear. Understandably, Gerstner is delighted with the galloping spread of gee-whiz technology: the pacemaker that can contact a physician at the fist sign of a malfunction; an intelligent kitchen counter that can read medicine bottles and warns of adverse reactions from drug combinations that are contraindicated; even a user-friendly beer mug that "alerts the bar staff when the mug is empty." For pill-popping beer drinkers with a bad heart in a crowded bar, the future is undeniably bright.
The rest of us, Gerstner predicts, will benefit from the advantages of autonomic computers: systems with a sophisticated degree of self awareness, able to configure, manage and repair themselves. Grid computing will allow dispersed autonomic systems to not only talk to each other, but to work together. So-called utility computing will provide services on demand, much like water or electricity. For customers, unlimited computing power and application choice will be available on the Web without the burden of expensive fixed assets and elaborate security. The systems themselves will be widely dispersed making them virtually immune to natural disasters or terrorist attack.
Finally, Gerstner foresees the marriage of IT and molecular biology. In ten years, he predicts, biological sciences will be the "dominant technology in the world." Any computer science majors pondering a second degree might well turn in that direction.
If Gerstner is optimistic about the future of IT, he is less certain about our capacity to apply it wisely and fairly. "Our institutions are running well behind the rate of technological advancement," he writes. And those who control the technology tend naturally to apply it toward limited and self-serving outcomes. Until a wider world view is adopted, Gerstner predicts increasing conflict between national interests and global interests.
Ultimately, Gerstner views IT technology more as a tool than a solution. "Never believe," he writes, "that the technologies themselves come to us as self-contained answers. They are not mystical solutions to the most difficult and most important problems--like bias, poverty, intolerance, and fear. . . "
Perhaps not coincidentally, society's more intransigent problems are often solved through education and one of Gerstner's post-retirement interests is working to solve the crisis in the public school system. And what of retirement itself? Will Gerstner be content to be the ghost of IT past? Will the glow of the spotlight draw him back to center stage, or will he find less prominent outlets for his considerable energy?
The answer may lie in something he learned about management: Gerstner discovered the value of passion. "As a student going through Harvard Business School," he recounts, "I would never have guessed that passion would be the single most important element in personal leadership. I don't recall the word ever being spoken during my classroom time at Harvard."
It was Paul Newman who said: "If you can find passion in one area of your life, it will bleed into all the others."
Good luck, Mr. Chairman.
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Last Updated: 12/08/02
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