Making elephants  dance

Recently, I called Royal Nepal Airlines Corporation (RNAC). I wanted to know how many aircraft does RNAC have, how many staff it has, what the annual subsidies from the government amount to, and a few other general-interest business-related questions. To my frustration, even after playing the call-this-extension-number-or-call that-extension-number game for two days, I did not receive a single clear answer.

After hanging up, questions in my mind were: Isn’t RNAC an elephant? Will it, as variously reported in the press, keep on plodding along until it collapses under the bulk of its own weight? Or — surprise, surprise! — will it ever dance profitably to the tune of the market?

If dancing to the market tune is on the agenda, then, the RNAC bosses may want to read and re-read Lou Gerstner’s mammoth corporate memoir Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround for advice on how to nurse a sick company back to health. What Gerstner did at IBM is relevant for anyone interested in making bulky companies nimble. In 1992, International Business Machines (IBM), one of America’s major companies with a global presence, was in trouble. Languorously basking in the afterglow of bygone victories and unable to adapt quickly to changing competitive marketplace, IBM was losing long-term clients to competitors, losing market share, damaging its brand value by pursuing diverse and contradictory marketing plans, bleeding billions of dollars, laying off thousands of workers, about to let go of its previously successful mainframe computer product lines, and internally caught up in a debate about whether it should spin itself off into several smaller companies. Meantime, it had become such a figure of ridicule, such a lumbering giant past its glory days, that Wall Street analysts and computer industry professionals were doing everything short of publishing its obituary.

In this depressing situation, with some misgivings, entered Gerstner – a McKinsey alum, with senior management experiences at American Express and RJR Nabisco, and he wasted no time in getting started. Seeking feedbacks from employees, he started traveling extensively to talk to the customers. When asked early on what his vision for IBM was, he famously replied, “[T]he last thing IBM needs right now is a vision”, and added that “the number-one priority [was] to restore . . . profitability” by adopting “tough-minded, market-driven highly effective strategies . . . that deliver performance in the marketplace and [increase] shareholder value.”

To those ends, Gerstner set out to put together a top-level team composed of people from within, stressing frequent, informal and candid communications among them. He then diluted the influence of internal fiefdoms, and tried to make IBM a global company, with a single focus, set in the headquarters. He negotiated with Ogilvy & Mather to make the IBM brand communicate singularly consistent service-oriented messages, regardless of where and who the customers were. Finally, he scaled back the extent of IBM’s traditionally staid compensation system to reward performers. On matter of strategy, Gerstner sought to transform IBM from a product-centric company to a service-led one, the one that serviced even competitor’s products. And in terms of culture, he tried to lop the fat off the IBM bureaucracy, devising plans to change the behaviors of his employees to be customer-focused above all else. In anecdotal details, and with numbers and charts on IBM’s financial performances from 1992 to 2001, Gerstner demonstrates that “elephants can dance” indeed.

It’s been more than a year since Gerstner retired as the CEO of IBM. Businessweek recently ran a cover story saying that his successor Sam Palmisano, an IBM lifer who helped the revenue of IBM Services grow from $15 billion in 1992 to $35 billion in 2001, has already started introducing some major changes to the Gerstner model to make it more egalitarian and closer to the old IBM model of taking care of its employees. To be sure, as times change, some of Gerstner’s work will come undone in the newly fortified IBM. Still, there’s no denying that Gerstner, an executive with little previous technical background, injected, when it was needed the most, a solid dose of market-based, customer-centric realism to IBM. And a solid dose of market-based customer-centric realism is the remedy Gerstner would surely recommend to make the RNAC, our own home-grown elephant, dance to the music of the marketplace.

(Ashutosh Tiwari is with Business Service Aadhar-GTZ at Heritage Plaza, Kamaladi, Kathmandu.)