I have been impacted by a host of books, many of which were written by CEOs or about CEOs because they provide a glimpse behind the strategy, insights into organizational change, and a picture of executive style. One such book, “Who Says Elephants Can’t Dance?” by Lou Gerstner stands out because of the insights into both business and brand strategy that it provided.
In early 1993, Lou Gerstner took over a financially troubled IBM that was threatened with bankruptcy and posed to break itself up into seven companies. The firm was ruled by 24 product fiefdoms and geographic silos organized around regional groupings of some 160 countries and areas with the US. These units had the budgets and power and focused on developing and promoting products rather than the IBM brand or customer needs.
These silos groups often had their own ad agencies—there were over 70 agencies and there was virtually no cooperation between them. There would be a major trade magazine with 15 IBM ads each with its own message, look and feel and even logo in one month and no IBM presence in the next. There was little communication or cooperation across the firm. A financial services client in Atlanta would have no access to the IBM banking experts in NY A global customer in Singapore would start fresh with IBM Singapore and the IBM experience servicing that client in other countries would not be accessed.
One of Gerstner’s first moves was operation bear hug. After only three weeks on the job, he had each of the fifty members of his executive team plus their direct reports visit five customers during the next three months and write a one to two page report on each. Among the findings was that customers loved IBM, but wanted to buy total solutions from a firm that could integrate all the pieces. IBM was perceived to have the potential to be that firm, but not with its current operating style. In part because of this research, the decision was made to keep the company together, to change the value proposition to emphasize integrated systems solutions, to reorganize around customers instead of products, and to build and leverage the IBM brand.
Four dramatic and vision changing decisions and all affecting the brand. During the first year, a CMO was hired in the form of Abby Kohnstamm — a seasoned marketing executive with 14 years at American Express. She got the attention of the worldwide management council, which had been formed in part to move forward worldwide initiatives, by blanketing a wall with examples of ads, packaging, and collateral material. It was a mess—it was hard to argue that IBM could not do better.
She then replaced the 70 some ad agencies with a single agency, namely Ogilvy and Mather. A year later the company was in the field with an ad campaign showing that IBM was global and delivering integrated solutions to clients (the tagline was “Solutions for a Small Planet”).
There was a dramatic change in the control and allocation of the communications budget—from the silos which had controlled 90% of the some $800 million budget to the central marketing group. Further, the percentage that went to support the corporate brand went from 10% to 50%. Imagine the pain that this change created and the change in the culture it precipitated.
Two years after Gerstner arrived, the product/country organization was replaced with an industry-oriented organization with 11 industries (such as banking, government, insurance) plus a small and medium business unit. This reorganization, which changed the way the firm thought and went to market, was highly disruptive and, according to Gerstner, took three years to gain real acceptance in the firm.
This book influenced my decision to research the silo problem which resulted in the book, Spanning Silos. The end conclusion was that the IBM centralization strategy was possible because of a unique set of conditions including a financial crisis at IBM and the appearance of a strong, gifted CEO. In most circumstances, the more prudent course is to rather foster silo cooperation and communication. A lot of strategy and branding lessons to be learned through the IBM story.
Customer research about the brand and the strategy can deliver useful strategic insights. The business strategy and the brand value proposition are intertwined. A brand strategy and execution, if not coordinated across silos, will be inefficient and even dysfunctional. The tendency to be product focused, a problem especially in high-tech firms, can be resisted. Control of the budget for the corporate brand does not have to be decentralized. An impressive book about an impressive decade for an impressive company.