Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change by Jr. Louis V. Gerstner Read Free Book Online Page B

innovation would be aimed at helping people solve real, and pressing, problems.
    There was applause, but I wasn’t sure what they were thinking.
    The Shareholders’ Meeting
    Perhaps the most traumatic event of my first month at IBM was the annual shareholders’ meeting. It had been scheduled, I’m sure, several years in advance for April 26 in Tampa, Florida. Needless to
    WHO SAYS ELEPHANTS CAN’T DANCE? / 39
    say, it was a daunting challenge to chair my first shareholders’
    meeting when the company had such major and visible problems.
    I had been there for only three weeks, could barely identify the products, let alone explain what they did, or, God forbid, describe the technologies inside them. Moreover, it was clear IBM’s shareholders were angry and out for blood—perhaps deservedly so. IBM stock had dropped from a high of $43 a share in 1987 to $12 a share the day of the shareholders’ meeting. That was less than half its price at the previous year’s meeting.
    There were 2,300 shareholders waiting impatiently for the show to start when I walked out onto the stage at 10 A.M. that day—in the biggest convention hall I had ever seen. You couldn’t help but notice a sea of white hair—obviously, a lot of retirees in Florida owned IBM
    stock. I made a brief speech in which I asked for some patience, but I made it clear that I was going to move quickly, make all changes necessary, and return the company’s focus to the customer.
    I got polite applause, and then the fireworks started. Shareholder after shareholder stood up and blasted the company, and frequently the Board of Directors, all of whom were sitting in front of me in the first row of the auditorium. It was a massacre. The directors took direct hit after direct hit. The shareholders were reasonably kind to me in terms of not holding me accountable for the problems, but they also showed little patience for anything other than a fast recovery. It was a long, exhausting meeting—for everyone, I think.
    I remember flying back to New York alone that evening on an IBM
    corporate airplane. My thoughts turned to the Board of Directors.
    It was clear from the annual meeting that board changes would be necessary—and sooner rather than later. I turned to the flight attendant and said, “This has been a really tough day. I think I’d like to have a drink.”
    She said, “You don’t mean an alcoholic drink, do you?”
    “I certainly do!” I replied. “What kind of vodka do you have?”
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    “We have no alcohol on IBM airplanes. It is prohibited to serve alcohol.”
    I said, “Can you think of anyone who could change that rule?”
    “Well, perhaps you could, sir.”
    “It’s changed, effective immediately.”
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    Out to the Field
    I t was crucial that I get out into the field. I didn’t want my understanding of the company to be based on the impres-sions of headquarters employees. Moreover, the local IBM princes and barons were eager to view the new leader. So the day after the annual meeting, I flew to France to meet with the mightiest of all nobles—IBM Europe, Middle East, and Africa (we call it “EMEA”). I visited France, Italy, Germany, and the United Kingdom, all in one week. It was dawn-to-midnight business reviews with senior executives, employee “town hall” meetings, and customer visits.
    IBM EMEA was a giant organization operating in 44 countries with more than 90,000 employees. Revenue had peaked at $27 billion in 1990 and had declined since. Gross profit margin on hardware had dropped from 56 percent in 1990 to 38 percent in 1992. Very important was the fact that in the face of this huge decline in gross profits, total expenses had dropped only $700 million. Pretax profit margin had declined from 18 percent in 1990 to 6 percent in 1992.
    Wherever I went, the business message was the same: rapidly declining mainframe sales, much higher prices than those of our competitors, a lack of participation in the