As companies grapple with leadership issues, one of the most critical responsibilities of the board is to identify the rainmakers, unfettered by conventional wisdom
Remember the famous book by Lou Gerstner Who Says Elephants Can’t Dance? that talked about how he turned around IBM? The book starts with IBM’s Board Member and Executive Search Committee Chairman, Jim Burke, pursuing Gerstner, who happened to be his neighbour, to interview for the big job. Gerstner was initially reluctant because he perceived himself to be unqualified given his 100 per cent non-technology background. But, thankfully, Burke persisted and the rest is history. IBM came back from the brink (it was very close to running out of cash in ’93 when Gerstner took over), to become what it is today – the second most valuable technology company, ahead of Microsoft. It seems the Board had considered John Sculley and many others before zeroing in on Gerstner. But IBM’s stars were aligned and it got what it needed.
What better time than now to reminisce, and marvel, at the sagacity of the IBM Board that moved boldly to make a very unconventional hire?! How did they get it right when we see so many technology companies struggling today, unable to fix their leadership issue? HP has tried Carly Fiorina, Mark Hurd , Leo Apothekar, and now, Meg Whitman – 4 CEOs in six years! Dell eased out Kevin Rollins,though he was groomed for the role by Michael Dell himself. Bringing back Michael Dell hasn’t exactly put the company on the right track either. Yahoo, another icon of the internet world has had an infamously revolving door with Terry Semel, Jerry Yang and Carol Bartz, all failing so miserably that today there is talk of Alibaba acquiring Yahoo! Right here in India, we have seen Wipro struggle with its leadership question ever since Vivek Paul quit the company six years ago. And there’s been the revolving door of founder CEOs at Infosys until the recent appointment of KV Kamath, even that only as its Chairman. The situation is grim, with even long lasting CEOs like Steve Ballmer at Microsoft and John chambers at CISCO feeling the heat. Something is definitely wrong with hiring when iconic, well-managed companies like HP are suffering from a leadership deficit. And it can surely be called a trend when we have not one but several of them going through similar woes. Is this a reflection of where the technology industry is today? Are we at yet another inflection point where the old companies are going to go the Digital, Compaq, Sun way?Or can they fight back to regain their place like IBM and Apple did with the right leader at the top? What are the big issues facing the HP’s, Dells and Yahoos today?
The last decade has been among the most exciting times in Silicon Valley and the global information world that it dominates. Several billion dollar enterprises like Google, Facebook, Zynga, Twitter, Amazon have sprung up even as the older companies like Microsoft, HP and Cisco are struggling to stay relevant. Apple has decisively changed the playing field by redefining the entire business model; it does not sell just devices, but the entire customer experience - whether it is listening to music,watching shows, or playing games. This has enabled Apple to take charge of the relationship with customers, and thereby reduced telecom companies like AT&T to mere bandwidth providers. Amazon is THE online mega super store. It has bankrupted electronic retailers like Circuit City, closed down Borders, and is marching forward to take on the likes of Walmart next. Electronic Arts, which looked unbeatable just a few years ago, has been blind-sided by tech upstarts like Zynga and Angry Birds. Looks like 2010 has finally delivered on the promise that we dreamt of in 2000 – the Internet has transformed technology companies to become mainstreambusinesses on their own. They are no longer just enablers. Skype and Vonage are the new telecom companies, Twitter is the new world’s newspaper, and Square is all set to become the payment gateway of the future. The new leaders who are redefining the business world, like a Larry Page, a Mark Zuckerberg, or a Jack Dorsey, are all technology geeks who also seem to “get” consumers, very much a la Steve Jobs– figuring what consumers need even before they know it! Is this the kind of leadership that is missing in the companies that are getting knocked off their pedestals?
Consumerisation of IT, as this trend is called, is clearly one issue that technology companies are grappling with, but it’s not the only one. Unfortunately, the enterprise market, that has been the gravy train for the older tech companies, has also been impacted by the economic downturn in the developed worldthat now seems to be worsening further. The emerging economies that are growing are highly price sensitive, and competitive, and in no way a ready substitute for the markets lost in US and Europe. The Banks and Financial Services companies, which form a large chunk of the enterprise market, are no longer willing to change hardware and software at the rate they did earlier. In fact, enterprises are widely expected to soon accelerate their move to the cloud, so that they can curtail their IT infrastructure investments and leverage the cloud’s “pay as you use” model. So at the same time that the PC market is slipping away, the enterprise market is also churning. The old enterprise-centric CXO’s are at a loss to deliver as they did before, by selling more of the same and slashing costs.
No wonder Boards are struggling to figure out the right answer, as to who they should pick to lead their companies at this time. Some are getting back founders and failing, as visionary founders do not always transform into leaders (see Jerry Yang). Well-planned successions, like Dell’s, have flopped because the environment turned hostile too fast. The net result is that several of these tech giants look so similar to what IBM was in the ‘90s - struggling to find their place in a changing world. Can they find their Lou Gerstner?
In many ways what Lou Gerstner did, as a complete outsider at IBM, was to provide classical leadership. He went in and realised soon that IBM had great people and great products. However, the sum of the parts was not adding up to a great whole, as the culture had become very individualistic and each division was pushing its own agenda. He did not try to convert IBM into a Compaq (which had just beaten it in PC sales), or into an HP or a SUN, companies which were taking away its market in other product lines and markets). He refused to bow to the conventional wisdom of the time and break up IBM into several smaller units, or abandon its mainframe computer business. He famously stated, “The last thing IBM needs is Vision”! Instead, he focused inwards to identify the true DNA of IBM, its value and identity that was responsible for making it the great, mighty, behemoth that the corporate world had learned to rely upon for over half a century. Gerstner realized that he needed to clearly articulate and reinforce what IBM stood for - the greatest solution provider to enterprises across the world. He didn’t import too many outside executives; instead he supported the people who were already there and keen to turn things around, to charge forward. He inspired his team by leading from the front. But as he himself asserts, the people themselves brought about the real change – they knew the answers and they had the passion to make it work. All he did was provide a clear direction and stand behind them.
Today as we watch HP trying to become an IBM, Dell trying to become an HP and Microsoft trying to become a Google, perhaps their leaders would do well to take a look at Gerstner’s legacy at IBM. Or what Steve Jobs did for Apple in the last ten years. It is easy to forget that often, the true genius of a company lies within it. It is that genius that helped a company fight mighty odds and succeed brilliantly in the past. The right leader is one who can appreciate this and knows how to find and re-ignite that inner genius of the company. He or She could be a rank outsider like Gerstner, an ousted founder like Jobs, or a passionate insider like Larry Page…there is clearly no one formula. Identifying such leaders from wherever they are, unfettered by conventional wisdom that ties them to a shortlist of usual suspects, and bringing them onboard, is among the most critical responsibilities that boards need to perform today.