Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change (32 page)

Then I reread the speeches.

It was like staring into a large and unforgiving mirror. We got a lot of it right and accurately called more than our fair share of shots.

But with the benefit of several years’ distance from those speeches, it was just as clear that we missed a few predictions and trends, and some of what we thought would be important at the time turned out to be nothing more than the kind of experimentation and trial runs that are always the harbingers of true, sustained, technology-driven transformation. So be it. I’ll stand by our record.

Instead of presenting a retrospective, I’ll outline here how I anticipate e-business (and the progression of information technologies in general) will evolve. Following that, I’ll present some observations on the potential impact on institutions, individuals, and all of society.

I have to ground this forward-looking discussion with a few statistical points of reference and acknowledge that three, four, or five years hence what will follow may seem more quaint than pres-cient.

There’s a school of thought that says the world has a new mass 262 / LOUIS V. GERSTNER, JR.

medium when a technology is being used by at least 50 million people. Radio hit that threshold in about thirty years; it took television thirteen years; it took cable TV ten years. The Internet set a new standard. Less than five years after the birth of the World Wide Web, some 90 million people were connected.

By the summer of 2002 that number exceeded 500 million people.

More than half of them were accessing the Web in languages other than English. While the estimates vary, several organizations that track this kind of thing said that worldwide Internet commerce would reach $4 trillion by 2005.

Without overstating the obvious, suffice it to say that the Net is more than a communications medium or a marketplace. Its exploitation is, and will be, the single most important driver of change in business, health care, government, education, and society. It is the transformational technology of our lifetimes, and that transformation is in the very early stages. I expect that the application of networking technologies will lead the agenda for at least another ten years before being replaced by biological sciences as the dominant technology in the world.

But let’s remember that this amazing technology wasn’t always seen that way, which, as I noted in Chapter 18, is what compelled us to create a new vocabulary around the term “e-business,” in order to describe the broader, more powerful aspects of this change.

Like a lot of other world-altering technologies, the Net was ushered in amid a swirl of confusion and misinformation, and a very heavy concentration on what it was all going to mean for
individuals
.

Perhaps you recall it: a celebration of the ultimate in the empowerment of every man, woman, and child with a Web browser accessing online magazines, downloading movies to their wristwatches, or buying pet food and flowers with a couple of clicks or keystrokes.

So, of course, when we at IBM said we believed there was something bigger happening than chat, browsing, or even online retail, a lot of people had a good time pointing out that, once again, plod-ding

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old IBM just didn’t get it. And given the mood of those heady, early dot-com days, what we were saying
was
pretty boring.

We certainly agreed that the Net was going to change the world.

But our perspective started with what was going to have to happen inside all of the world’s existing
institutions
—banks, hospitals, universities, retailers, government agencies—to change the way they work, transform physical processes into digital processes, and extend their enterprises to the Net. Only then were
individuals
going to be able to do things—pay a bill, move money around, buy a stock, renew a driver’s license—in fundamentally different ways.

Our message was essentially this: There is a new technology here that is going to transform every kind of enterprise and every kind of interaction. But please understand that this technology—like any other technology—is a tool. It is not a secret weapon or a panacea.

It has not suspended the basics of marketplace economics or consumer behavior. And the winners will be found among the institutions that skip the shortcuts and understand that e-business is just business. It is about real, disciplined, serious work. And for those willing to do the unglamorous labor of transforming a process, unifying a supply chain, or building a knowledge-based corporate culture, it will deliver tangible and sustainable benefits.

In meetings that IBM hosted globally for hundreds of the world’s leading CEOs, I liked to draw a comparison between e-business and the advent of electric power. Before people had the ability to generate electricity, a lot of what got transported in the world was moved by mules or horses. Then, over time, the activity of transporting things was taken over by electric-powered machinery. The industries didn’t change. The basic activity of pulling and lifting didn’t change. But the people who made the swiftest transition from the old technology (animals) to the new technology (machines) became the dominant players inside their industries. It was almost the same proposition with e-business.

That first experimental and speculative chapter in the evolution 264 / LOUIS V. GERSTNER, JR.

of e-business is fading from view. A second chapter—a far more serious and pragmatic period—is under way. Leaders in all industries see the benefits as well as the practical issues of implementation that they will face as they cross into the networked world, and they are seriously charting their individual strategic directions.

This coming phase of e-business will be characterized both by the technical implications, as well as a set of management and leadership challenges.

Bringing Down Barriers to Access

If you think about the proliferation of information technology, it took a remarkably brief period of time, less than forty years, for it to spread from the hands of a select number of centralized technicians—the high priests of the mainframe era—to tens of millions and then hundreds of millions of PC users.

The rise of the Net has made terms like “connected world” and

“universal access” permanent additions to the lexicon of the twenty-first century. Yet the fact remains that more than half of the world’s people have yet to make a phone call. The half billion Internet users I mentioned earlier is impressive for a technology that’s still in its in-fancy, yet that represents less than 10 percent of the people on the planet. We’re still a long way from the day when even a narrow majority of the world’s population is firing up a browser and joining the community of people with access to the infrastructure of computing and communications. For the immediate future, then, we don’t have to debate the existence of a digital divide between the world’s information haves and have-nots. It’s real. Its permanence, however, is another matter entirely.

Multiple factors contribute to this divide: disparities in education and literacy, telephone penetration, and access to electricity. In terms of computing and communications barriers, there are two: WHO SAYS ELEPHANTS CAN’T DANCE? / 265

telecommunications rates, and the cost of the access device itself.

Both are coming down, one faster than the other.

Outside the G8 nations, world governments are taking steps to end monopolistic telecommunications practices, encourage competition, and open their markets to network operators and service providers. Most nations, nearly 80 percent, have opened their cellular markets to competition, though a majority of countries still retain monopolies (either state-run or privatized) in fixed-line services for local and long-distance service. Some citizens of the world can make a local three-minute call for I cent. Others pay fifty times that.

The second barrier—the expense of the access device itself—is rapidly being reduced. When the one and only access device was a full-blown personal computer, surfing the Web was an activity for the rich. But the world’s entire inventory of hundreds of millions of PCs has already been eclipsed by an explosion of other kinds of low-cost access devices, from Net-enabled cell phones to personal digital assistants, game consoles, or even kiosks in marketplaces or government facilities. Within the next few years there will be billions of mobile devices (not counting personal computers) connected to the Net.

All of a sudden the price of entry is no longer an insurmountable barrier. Yet there are plenty of thoughtful people who assert that information technology will unavoidably and permanently separate the world into two camps: those with access, and those locked outside looking in. I do not accept the inevitability of their argument.

It seems just as reasonable to me that with greater telecommunications competition, continued innovation by the IT industry, and thoughtful leadership at all levels of society, there is more than a chance—there is a magnificent opportunity—to shrink this gulf and spread unprecedented levels of service and information to people regardless of their social or political standing or personal buying power.

This proliferation of low-cost access devices is one dimension of the much more pervasive reach of information technology. But it 266 / LOUIS V. GERSTNER, JR.

doesn’t stop there. Besides all the gizmos that people will actually use, the technology is literally vanishing into the fabric of our lives: the clothes we wear, the appliances in our homes, the cars we drive, and even the roads we travel—plus a thousand other things that we’d never think of as “computers.” It’s easy to envision a day when everything worth more than a few dollars will be outfitted with tiny chips, some storage, and communications capability. The applications are life-enriching, convenient, fun, practical, and powerful.

As just one example, when every product you own is continuously reporting its location, and “knows” whether or not it’s where it’s supposed to be, theft becomes a lot harder to pull off. For manufacturers and retailers, this all points to the next-generation in market analysis and customer service. Imagine the power of instantaneous information on every product they have in the marketplace—how it’s being used, how much it’s being used, and how it’s performing.

It’s like getting Nielsen ratings on anything and everything—without the overnight wait. And for people and societies, consider the benefits of clothing that might warn the wearer of environmental hazards; of buildings whose architectures can adapt in the event of an earth-quake; or water supplies capable of repelling attempts at sabotage.

It’s all scientifically possible. When we’ll see it, I wouldn’t hazard a guess. Do I doubt that we
will
see it all, and more? Not for a second.

Just look at what’s already happened.

When I learned to drive, a car was a mode of transportation. Today some cars are a node on the Net. Many include a feature that reports the vehicle’s location to emergency services anytime the air bags deploy. The world’s leading manufacturer of pacemakers now equips them with Internet addresses that will one day contact your physician if anything starts to go wrong. If all kinds of appliances and heavy equipment sense that a part within them is failing, they can “phone home” to dispatch their own repair technician or to get the appropriate software download to fix the problem. IBM scientists are researching an “intelligent” kitchen counter, which would “read”

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medicine bottles placed side by side and issue a verbal warning if that combination of drugs could produce an adverse reaction. One Japanese company is even making pint-size beer glasses that would alert the bar staff when the mug is empty!

At each of these intersections—of the technology with devices, with people, and with the routines of everyday life—the role of the technology in our lives becomes more pervasive, and more invisible.

It fades from view even as our expectations for what it can do increase.

On the other hand, what’s happening behind the scenes to enable all these networked applications is dependent on a secure, global computing infrastructure. At that end of the computing continuum, things are taking on unprecedented levels of both sophistication and complexity. If we’re going to keep moving forward—extending the reach and impact of the technology by making it easy to use—then masking its complexity becomes paramount.

Uncomplicating Computing

Enterprises of all kinds increasingly recognize the importance of entering the world of e-business. It’s either that or consign themselves to the fate of those turn-of-the-century institutions that decided mule power suited them just fine. But as customers look down the road to digital nirvana, they see a road littered with potholes.

As we’ve seen, the ubiquity of computing becomes more real every day. Increasing numbers and kinds of devices are generating additional transactions, increasing data flows and network traffic, and all of it is happening with much greater unpredictability in usage and volumes. At the same time, threats to the security of systems and data are escalating far beyond what was predicted even a few years ago.

Leaders in the public and private sectors, in businesses large and small all over the world, know that e-business demands a fundamentally new kind of information infrastructure. It will be more secure,

268 / LOUIS V. GERSTNER, JR.

more capable, and more reliable than what is in place today. The dilemma (for them and for the people who make and sell the technology) is that the infrastructure has become almost impossible for customers to implement or manage.

The traditional remedy—throwing more people at the problem—simply won’t work, not in the long term. Complexity is spiraling upward faster than the capability of humans to deal with it. Around the world, unfilled IT jobs already number in the hundreds of thousands, and demand is expected to increase more than 100

percent before the end of this decade. At this rate there simply won’t be enough skilled people to keep the systems running.