Business Transformation: It's Not Just a Vision
By
Keith Glover
Senior Consultant
“The last thing IBM needs right now is a vision.”
That now-famous quote was uttered at a press conference when new CEO Lou
Gerstner was being pressed for an outline of his plans for the
beleaguered company.
IBM, the venerable giant of the computer industry, was being assailed on
every front by upstart competitors like Microsoft and Apple and had
become a ponderous, slow-moving bureaucracy. Plans were underway to
break up the company when Gerstner, an industry outsider, was hired to
turn things around.
What did Gerstner do? Within 16 weeks of his arrival, he reversed the
decision to break up the company. He cut IBM’s dividend in half and
began to slash costs, laying off thousands of workers at a company where
lifetime employment was the norm. He disbanded the five-man executive
committee responsible for every major policy decision made at the
company. He revamped the senior management compensation plan to reward
executives for overall company performance rather than for the success
of their respective divisions. He jettisoned OS/2, an operating platform
in which IBM had invested hundreds of millions and which was the
centerpiece of IBM’s efforts to compete with Windows. The battle for the
desktop was over, and the financial and resource drain was distracting
IBM from efforts where the outcome was still in doubt.
The results were dramatic and immediate. Under Gerstner’s leadership,
IBM achieved one of the most remarkable business transformations in
history, regaining its position among the world’s most successful and
admired companies.
Why did Gerstner succeed at IBM while so many others have failed at
other companies? What message was he trying to send with his now-famous
comment?
Let’s be clear. It’s not that Gerstner did not have a vision or a plan
for how to achieve it. Rather, he understood that IBM’s success
hinged on the organization’s ability to execute its plan swiftly and
effectively. At Nolan, we believe that paying attention to the
following principles can help leaders do just that:
 | Not all issues are created equal. Three or four outcomes
will usually make or break a plan. Understanding what they are and
concentrating resources and attention on them to the deliberate
exclusion of other things are vital. Smart people can always think
of one more task that will add incrementally to a result, but
returns diminish quickly. |
| Time is of the essence. If you have the key outcomes
right, delivering an essential part of the answer quickly is almost
always worth more than going for a big bang. Early success creates
momentum and gives others confidence that your plan is the right
one. |
| Get the message right. There should be no doubt as to
where you stand on the main issues. Gerstner was unequivocal about
the need for change at IBM and what he expected from others. You
must be, too. |
| Reward the right behavior. People will always act in
their own best interest. Make sure the outcomes you are seeking are
aligned with that reality. |
| Dare to be bold. Slashing IBM’s dividend was positively
heretical when Gerstner did it, but he knew he had to get costs
under control. Incremental change is often unlikely to produce the
necessary results. |
| Look from the outside in. It’s easy to get too close to a
problem or too committed to an answer. Find a way to add an
impartial, independent point of view to your team. |
Not every leader will be confronted with as precipitous a moment
as Lou Gerstner faced at IBM. However, being tapped to lead a
transformation effort is not uncommon and can be a career-defining
experience. Today, the margin for error is smaller than ever, events
move swiftly and unexpectedly, the rate and pace of change are
accelerating, and the consequences of failure have never been as
stark.
In these challenging economic times, many of our clients are
asking Nolan to perform a quick, independent assessment of their
plans and strategies. They are finding that an external perspective
is helping them to crystallize their action plans around essential
outcomes and ensure that the right actions are chosen to drive
immediate results. As a result, they are achieving the early success
that creates momentum and instills confidence.
Whether or not you choose to involve outside help, the ability to
execute effectively is as important as your vision of where you want
to go. Keep these important principles in mind and get moving!
