Isaacson: ‘When Jobs returned to Apple in 1997, it was producing a random array of computers and peripherals, including a dozen different versions of the Macintosh. After a few weeks of product review sessions, he’d finally had enough. “Stop!” he shouted. “This is crazy.” He grabbed a Magic Marker, padded in his bare feet to a whiteboard, and drew a two-by-two grid. “What we need,” he declared. Atop the two columns, he wrote “Consumer” and “Pro.” He labeled the two rows “Desktop” and “Portable.” Their job, he told his team members, was to focus on four great products, one for each quadrant. All other products should be canceled. There was a stunned silence. But by getting Apple to focus on making just four computers, he saved the company.  “Deciding what not to do is as important as deciding what to do,” he told me. “That’s true for companies, and it’s true for products.” ‘

Back to me, Gideon: Here’s what I learned from the paragraph above, but relating to startup companies rather than Apple & other relatively large tech firms: startups and innovators should not produce an ‘all over the map’ business plan for their first year or two… the complexities should increase relatively slowly over time rather than virtually all at once or within a brief time period! Frankly, I’ve always been inclined to push fast at the start.

Of course the  paragraph above suggests that Job’s ‘quadrant’ had  no relation to Gartner Inc.’s ‘Magic Quadrants’  which are actually not so magic but rather disseminated to clients with lots of text to try and support the validity of the ‘quadrant’, rather than simply to stimulate conversation or to make a point to subordinates as Steve Jobs did!   Yes, and I include the above paragraph to suggest that quadrants ‘in general’ are quite useful when presenting ideas or management directives!

Once finishing the quadrant subject, Isaacson continued: ‘After he righted the company, Jobs began taking his ‘top 100′ people on a retreat each year. On the last day, he would stand in front of a whiteboard (he loved whiteboards, because they gave him complete control of a situation and they engendered focus) and he asked, “What are the 10 things we should be doing next?” People would fight to get their suggestions on the list. Jobs would write them down—and then cross off the ones he decreed dumb. After much jockeying, the group would come up with a list of 10. Then Jobs would slash the bottom seven…’

‘Focus was ingrained in Jobs’s personality and had been honed by his Zen training. He relentlessly filtered out what he considered distractions. Colleagues and family members would at times be exasperated as they tried to get him to deal with issues—a legal problem, a medical diagnosis—they considered important. But he would give a cold stare and refuse to shift his laser-like focus until he was ready.’

What  an experience!  Kaufman is undoubtedly one of today’s great vocalists; his voice may not be  as distinctive as tenor Richard Tucker’s or Jussi Björling’s but I must address what makes Kaufman  awesome: he has incredible voice control, is able to sing with complete flexibility from loud to incredibly soft, always with distinctive phrasing, emphasis, and ‘rubato’ ( applying flexible rhythm within musical phrases).

The concert was more than graced by Kaufman’s awesome piano accompanist, Austrian Helmut Deutsch .

The packed audience erupted in bravos at the formal program’s end .  Virtually nobody left until after Kaufman completed his fifth encore; people who finally began to leave, stopped in their tracks as soon as they heard him  again singing with amazing stamina, his  sixth  encore.

Kaufman is certainly terrific when singing opera, but  even better when singing songs. My one concern was that since voice projects directionally (forward), a soloist should rotate somewhat  while singing,  enabling most of the audience to at least occasionally savor the full glory of great singing.

This dance company was founded over thirty years ago, and while other ballet company’s talents might seem smoother (with quite a few having specialty features of one sort or another), this one seemed different to me. It had certainly tapped a large field of choreographers, not only from Brazil, but from all over the world (even including Israel). I guess most of them appreciated Brazil’s folk emphasis, and this company’s eclectic style, including seemingly impossible body positions (angles) as well as unusual and rapid motion both rhythmically and spatially.

My wife and I also noticed many examples of small subgroups of the on-stage cast, dancing at odds with one another but inevitably consolidating beautifully and meaningfully! In other words, while Cisne Negro seemed much less classical and ordered than I had been used to, the choreography was unique and entertaining, and likely meaningful when (and if) fully digested by the audience.

We have been lucky this summer to attend two of the very great companies, the Royal Danish Ballet (in NYC) and the Bejart Ballet (performing at Switzerland’s Verbier Festival). I feel for the career difficulties of dancers due to the physical strains they must endure, but for the audience, dance performance can be a significant treat.

As we moved forward, our responsibility was to continue analyzing the IT industry objectively for all our clients, and not about IBM in particular or for its benefit. Throughout the decade our company’s mission continued the education of all players in the IT marketplace, including those vendors who were meaningful, the large users and investors, and even the press itself.

Despite our unfortunate experience with Big Blue, we did recognize its strong points; but we also felt our continuing responsibility to impart confidence to our clients with regard to asserting their independence from IBM “Big Blue”, compared with how they previously followed Blue’s every whim and message!

We stopped ‘loving’ the firm, to say the least, and some of our analysts developed an extreme dislike, while we retained our influence. How could IBM alienate the firm which already had achieved the strongest influence with the largest IBM clients and their Data Centers across the country? Regardless, this was the beginning of an IBM downtrend which lasted for many years!

Our multiple relationships with large user organizations such as the Society for Information Management (made up largely of CIOs) helped to tell our customer base of special IBM deals which others were obtaining, which often resulted in such deals becoming general practice. Previously in the 1970s, IBM had been a fixed-price no-deal vendor.

We were present to give IBM’s customers confidence and security when they considered switching to other vendors such as the midrange Digital Equipment Corporation, the plug-compatible manufacturers (PCMs) Amdahl, Hitachi, Fujitsu, Memorex, Telex, Calcomp, and many others. The Japanese copy-cats especially thrived at IBM’s expense. Our Wall Street operation, “Gartner Securities” covered these PCMs, recognized their functions and viability, and documented and/or recommended them as stock market ‘buys’.

Justified by the normal journalists’ (and analysts’) responsibility to combine our knowledge and analysis, we developed a broad relationship with each of IBM’s competitors in every sector. All of them themselves did try to educate and impress us, perhaps improving our forecasting abilities. We were also able to pretty accurately forecast (on our own and with no inside information) IBM’s impending product announcements. This often led to cool its market for soon-to-be-obsolete platforms, though only temporarily.

One day IBM’s Corporate CFO in Armonk searched and found me in Paris; the phone rang and he complained, “Gideon, do you realize what you’ve done to the IBM company’s quarter?”

Our IBM-related conclusions continuing to be in great demand resulted from our formalized (and unique in our industry) “research process”, to be discussed elsewhere. And as IBM continued to be concerned and vigilant itself, it retained a sense of humor. I’m told that at IBM’s Armonk NY corporate HQ, a repeated joke at lunch was, “Have you spoken to Gideon lately?”

But IBM itself had also blundered in the face of both market and internal complexities. Its marketing ploys, overselling by its Data Processing Division sales force, development delays in its plants, and over-reliance on financial officers, together with its high prices and huge market share encouraged the Japanese and other copycats. Finally, it was hurt by its financial decision to sell off a large part of its huge rental base to boost earnings. The sale of IBM’s rental base led to longer term cyclicality compared with its prior financial predictability.

Despite IBM’s clear ‘invincibility’ during the early 1980s, Gartner Group (now called Gartner Inc.) was the first and most explicit documenter of many of its down trends…But after years of downward spiral, our readers know that IBM has had several strong rebounds!

IBM climbed from $10.43 in September 1993, up to $137.38 in June 1999 = 1217% growth in less than 6 years…and although it fell to 58.31 in July of 2002, IBM again has risen, gaining 214% to $183.65 in July of 2011 — 25% above its 1999 peak.

Read Part 1: “Know the Most About a Little”
 
Read Part 2: Trade-Secret Witch Hunt?
 
Read Part 3: Who Ever Sues the Press?
 

Here’s how the drama continued to unfold:

In early March 1993 I was shocked to receive a call followed by a personal visit in my office by two people associated with IBM: Tom Barr and Nicholas Katzenback. Tom Barr was Cravath Swaine & Moore’s most famous lawyer and was handling the entire IBM account. Nicholas Katzenbach is a Rhodes Scholar, former professor at Yale and the U. of Chicago, a former U.S. Attorney General, and now General Counsel for IBM!

Imagine how nervous I felt as Mr. Barr calmly and respectfully told me that copies of Gartner presentation charts were found stapled to IBM “Confidential-Do Not Copy” documents during discovery proceedings in the IBM vs. National Semiconductor Corp. lawsuit! This was one of two major lawsuits which IBM initiated in its efforts to control its Japanese competitors and their U.S. Partners. IBM apparently wished them to “cease and desist” from the design and production of “IBM Compatible” mainframes, since those lower-cost copies which were penetrating IBM’s major revenue source: its huge installed-base of large systems.

After some idle chatter, Tom said that we were not the subject of an investigation or the target of litigation, and “of course” IBM was skeptical that we were necessarily the source of this material. BUT, he asked me respectfully to look into this matter, and within 20 minutes, the two left to return to Armonk, IBM’s corporate HQ. I recall wondering why Mr. Katzenbach had come along; he had hardly said a word.

Wow! As soon as they left I huddled with David Stein my partner, and we instantly and simultaneously concluded what had transpired: The Gartner analyst who led our ILCM service (IBM Large Computer Machines) would more than sometimes entertain our Japanese clients from Fujitsu and Hitachi, the  primary manufacturers of these huge IBM clones, and National Semi was their major semiconductor supplier. One of our conference rooms was near my office and David’s, I recalled I had been casually surprised by the size of each Japanese group, but most important,  I knew that our analyst had a girlfriend who worked at in one of IBM’s major laboratories, in its education department! Q.E.D.?

We immediately walked into our analyst’s office and confronted him with the situation. He did not even attempt to refute our suspicions, and agreed to pack up at once and leave our offices, permanently! I should note that somewhat later we determined that “IBM Confidential” and “Do Not Copy” were the lowest forms of security control within the firm, compared with “IBM Secret”, “IBM Top Secret” (I don’t recall the other security terms), and that the source of the document was an IBM classroom where dozens of these documents were exchanged with few further security controls.

We watched our analyst leave, and of course notified IBM of our finding and the his firing. But still, IBM continued to harass us. We believed we were at the boundary of being sued despite IBM’s initial representations, as we suffered through constant negotiations and cost, with our new major attorneys who had been recommended by our board. Weil Gotshal’s Dick Gruenberger, with the active assistance of his firm’s famous chairman Ira Milstein, who would have to deal with  the extremely tough Tom Barr. I believed we had a strong case that these were not trade secrets  but with no trial we were nevertheless soon forced to a ‘consent settlement’ with IBM, a better result than being sued which would likely have bankrupted us. Yet, we did suffer what I considered a forced punishment, as follows:

We were given a detailed document as to IBM’s version of what it believed should be our rules of behavior which we had to distribute annually to all staff who had to read and sign it! Also, our lawyers Weil Gotshal had to commit to visiting us at the same time annually in order to review,  face to face with all analysts, our various obligations with regard to IBM’s rights.

Third, the major item for me, was IBM’s applying what has been called in the trade a “snitch clause” whereby any offer by any outsider to provide information which might possibly be considered confidential, would have to be reported immediately to IBM counsel. This seemed ridiculous, if not onerous, but that was that. I assumed it was primarily to keep us on our toes.

In retrospect, this legal nightmare had caused us much agony, wasted time which hurt our productivity, and incurred huge legal expenses. In my view it was an unnecessary and vindictive action on IBM’s part, and which it should have known in the long-term might ironically hurt it more than helped!  After all, we were a form of “the press”, which digs for protected content all the time, and who ever sues the press?

Read Part 1: “Know the Most About a Little”
 
Read Part 2: Trade-Secret Witch Hunt?
 
Read Part 4: Have You Spoken to Gideon Lately?
 
 

Several months passed  after having spoken to IBM’s Don Otis I received another critical phone call, this time an indirect call from Ron Rolfe of Cravath Swaine and Moore, IBM’s counsel and the acknowledged heavy hitter of the entire U.S.’s legal profession! So once again the lawyers were getting into the act, always persistent, always a serious development.

Ron and I had crossed paths before, but positively. Now, he confided that the O.A. issue with Dean Witter was about to blow, and that we might end up finding ourselves in the middle of IBM’s overall investigation despite our past, and still constructive relationship. IBM was clearly narrowing the focus of its search for “deep throats” and perhaps we were doing it a disservice by not cooperating more aggressively. He concluded by casually reminding me that after all, as O.A.’s past boss I could be implicated by former association!

Ron then offered the following syllogism:

1. IBM  assumes that we somehow have some squirreled some IBM documents into our files (where was that assumption born, and was IBM assuming we had them, or guessing?)
2. IBM is concerned about the employee privacy issue and does not wish to go on a witch-hunt, but…
3. Document evidence would be of great assistance, thus…
4. The only way for us to put distance between us and O.A. was to cooperate; turn over all IBM documents, and if not, we would be under suspicion!

Nice of him to alert us, he sounded pretty sure of himself, and of course this made me much more nervous. Our lawyer Marty Mushkin, was concerned that some of the material we were disseminating might in fact be be considered ‘trade secrets’ “because there would be an economic advantage to competitors if they had it”. I almost simultaneously learned that Tom Crotty, who ran our Wall Street investment business, inserted himself in the growing crisis by speaking with an IBM senior executive Watts Humphrey! What was that about? Had the witch hunt begun? Where was this all heading?

In those days I naïvely felt that truth was an absolute defense, and while our models were partly fed by the rumor-mill, nothing specific was transmitted to clients. It was just speculation. Despite Rolfe’s visit, the tension soon softened, even as our analyst team (including ex-IBMers like me) watched. Our respect and admiration towards the IBM company began to erode.

I accelerated our need for analysts to document their honestly obtained evidence about IBM, certainly when there was even a hint of their ‘bashing’ the firm. We nevertheless continued to “call a spade a spade,” whenever right. My internal Gartner Inc. problem was that the aftermath of IBM’s threats had resulted in too many of our analysts developing a negative bias towards it. As Gartner was becoming an even stronger name and force in the industry, if our analysis looked biased, that would likely be noticed by our public!
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Read Part 1: “Know the Most About a Little”
 
Read Part 3: Who Ever Sues the Press?
 
Read Part 4: Have You Spoken to Gideon Lately?
 

After leaving Oppenheimer to create, launch and manage Gartner Group in 1979, I continued to personally write and publish about the IBM Corporation — just as I had done previously for my financial buy-side clients (banks, insurance companies, et al.).

Forbes quoted me in 1972: “there is nothing IBM does that fails to impact every aspect of the industry…I prefer to know the most about a little, rather than a little about most”.

Other analysts at Gartner also commented on IBM because it influenced the entire IT space, and more than a few of our clients came to believe that we knew more about this firm than all the other Wall Street analysts put together. Those of us who were ex-IBMers respected it, while understanding that our obligation was to observe and document a neutral view, while inserting subjective comments and suggestions. This actually contributed to our rapidly growing marketplace impact.

This era’s large IBM computer systems dominated, and by socializing with couple of Leasing Company firms, I outlined the parameters of a possibly useful forecasting model. Dave Stein and Michael McFarlane developed it and ran the business in the early 1980s we called RAVIS (RAV=Residual Asset Values), which turned out to be of incremental value to our firm’s early growth. The model developed probabilities of how IBM’s planned program might evolve, including product cycles, possible price cuts, and more. We guessed well, strengthened our credibility, but soon learned that IBM was concerned and was ‘watching’ us. The model provided value for our clients, but as we later learned, it also increased IBM’s neuroses.

My former Oppenheimer (Opco) assistant who I’ll call O.A. had left Opco soon before I did to form his own intelligence operation at Wall Street brokerage firm Dean Witter, and because he was somehow suspected to be directly privy to confidential information from European sources, IBM’s focus on leaks shifted to him. On August 28, 1980, Watts Humphrey from IBM called me to say that Dean Witter (that is, O.A.) had likely broken the law re privileged information, that IBM was not ready to sue, that it would take its lumps, but it would like our support to convince Dean Witter to cease and desist running its “intelligence” (G2) business given the SEC implications.

I did not know anyone at Dean Witter except for O.A., and did not call the firm, never finding out why IBM had not complained directly to that Wall Street brokerage. But within a few days Hank Herrmann, IT analyst at the giant investment firm Waddell & Reed and one of my brightest Wall Street clients when I was at Opco, (and now CEO of that huge firm) called to tell me O.A. was already talking to other Wall Street firms about employment! I wondered why.

On September 20 another IBM executive, Don Otis, called me. He said IBM was watching O.A. “like a hawk”, and we had to watch our step as well! Don also criticized one of our recent client communications “suggesting” certain specifics of IBM’s build plan and its backlog. I didn’t know what Don was talking about, and responded that he must know that leaks from IBM salespeople were rampant, often “shooting their mouths off to IBM’s large accounts”.

I added that we wished to be kept out of all IBM/O.A. matters, we did not want to be sucked into a general Wall Street purge. But I did agree to avoid the Leasing crowd which was disseminating hearsay, to maintain an ethical stance towards all interested parties, and to definitely not compete with O.A.’s “proprietary methods”. (He was reputed to invite knowledgeable IBMers alcohol-rich parties he hosted in Europe!)

Within a week or so I spoke with a contact at National Semiconductor (NSC), Alan Baumgartner, who had a good mix of skills (mostly telecom market research, but was strong on inside dope, as he was a true networker and knew lots of people). Alan had actually once hoped to hire O.A., but he had reversed fields and was now dumping on O.A. despite his having just recently closed an arms-length deal with Alan’s firm:

“O.A. responds to all our requests, is often right-on with his G2, was right on about IBM’s Newport at 3.6 MIPs, new cache memory at 16K, and 4X interleaving [note: such IBM leaks rarely found us!], …and you [e.g. me and my staff] should develop an equivalent source!”

Alan had also found out that Duane, O.A.’s new boss at Dean Witter, “was nervous about him”. He concluded the conversation by indicating that National Semiconductor would likely approve becoming a Gartner client by year-end! Luckily, my O.A. issue dissipated when he left Oppenheimer and he was soon to be pushed out of Dean Witter together with the new CIO clients he had accumulated. We rarely heard about him, let alone from him, again.
 
Read Part 2: Trade-Secret Witch Hunt?
 
Read Part 3: Who Ever Sues the Press?
 
Read Part 4: Have You Spoken to Gideon Lately?