Strategy's Limits: A chat with Ernest von Simson

The longtime IT consultant and industry observer talks about his new book

As co-founder of The Research Board, an exclusive, IT-focused think tank established in 1970, Ernest von Simson watched time and again as corporate leaders took their companies through change and crises over three decades. During those years, he came to believe that steadfastness is the most vital leadership characteristic for success, as he demonstrates in his new book, "The Limits of Strategy: Lessons in Leadership from the Computer Industry".

"It's too easy for a leader to be distracted from a bold new strategy by his underlings or his customers," von Simson says in a rare interview, citing Tom Watson Jr. The IBM chief had to fend off being told "there's not a market for tape, not to do the 360, when it took out everybody else ultimately," von Simson says, referring to the competition after the company released its System/360 mainframe system in mid-1965. System/360 models brought a major turn in enterprise computing, allowing businesses of all sizes to run all manner of applications and to upgrade without losing compatibility. Customers embraced the change, pushed by Watson Jr., who as IBM's second president, led Big Blue out of the punch-card era.

The intertwined story of IBM and the Watsons is part of "a highly compressed synopsis of the computer industry's self-immolating and resurrecting history to set the book's timeline and a few overarching trends," von Simon writes in the book's first chapter, which ends with a look at the results of consolidation and PC hardware commoditization.

The "magnitude of the implosion" brought by those changes became obvious on June 16, 1992, when DEC founder and CEO Ken Olsen was forced out of his job and Hewlett-Packard CEO John Young announced his retirement, ousted by Bill Hewlett and Dave Packard. Wang Labs declared bankruptcy in August that year and IBM reported a quarterly loss for the first time ever in October. That led CEO John Akers to lose his bonus and then his job.

"In the end," von Simson writes of those times, "the minicomputer establishment was immolated by five young men." He goes on to list Larry Ellison, Scott McNealy, Bill Gates, Steve Jobs and Michael Dell, citing industry-changing accomplishments of each of them at their companies.

While ostensibly classified as a business book, "The Limits of Strategy" is equal parts memoir, history, case study and entertaining yarn, told in lively prose with a deft touch. As Irving Wladawsky Berger says in his endorsement: "It is rare to find a business book that is as well written and actually fun to read as 'Limits of Strategy.' "

Von Simson, who took two years to write the book, used the nearly 100 research reports produced by his company, artfully weaving information from those with his memories to create case studies whose "intention is to show how many barriers to change there are that you don't even think of," von Simson says. How leaders navigate those barriers is of keen interest to von Simson.

The book at times gives a behind-the-scenes view of what came to be major IT news events -- von Simson recalls visiting Microsoft headquarters the morning after Gates knew that the U.S. Department of Justice was "entirely serious" in its threats to file an antitrust suit against the company. "One unshaven and unwashed executive after another came into our meeting room," he writes. "The management team looked as if it had been closeted all night trying to frame a suitable response. Most rushed out after a few minutes. Chief scientist Nathan Myhrvold had apparently been asked to spend more time than usual with the visitors, so he distracted us with future technology, answering our questions with what seemed to us amazing civility and patience.

"Finally, Bill arrived, looking equally unkempt, and launched a nonstop, breathless rant. We decided not to take notes in deference to his disheveled state of mind. But I recollected angry, high-pitched diatribes against Joel Klein, the assistant attorney general who headed the Justice Department's antitrust division; the technological ignorance displayed by the government; and the popular resentment against successful people who have made lots of money."

That he continues to be witness to moments akin to those is why von Simson remains circumspect when it comes to whom he talks to about his work. The Research Board's mission required the discretion of von Simson and co-founder Naomi Seligman, who is also von Simson's wife -- they fell in love, he explains in the book's preface, as opposed to waging "all-out war" after she became his boss (against von Simson's objections) when she was named to head the Diebold Research Program. Seligman had worked at IBM. They left Diebold in 1970 to start their own company, bouncing business ideas off a group of friends "who'd become legendary in the information technology field," he writes in the book's introduction.

Those five friends were at Equitable Life, Johnson & Johnson, Southern Railway, Inland Steel and Sanders Associates, and "they judged the ideas we proposed uniformly terrible," von Simson writes, so in 1973 "enough was enough" and that group suggested that von Simson and Seligman conduct research funded by their companies. The result was The Research Board, whose membership was restricted to the top IT executives of large companies, excluding IT vendors. Members voted on what research should be done and had to commit to read the reports and attend meetings to discuss the research. Anyone who missed more than two meetings was booted out.

The research the group wanted done sent von Simson and Seligman into the orbit of the upper echelon of IT companies, generating nearly 100 reports by the time they sold their company to Gartner in 1999. Along the way, as the book's public relations describes it, The Research Board became "the quietly powerful think tank that observed, shaped, and guided the development of the computer industry."

Von Simson laughs at the suggestion that such a description sounds shadowy. The business model was always for a "selective view," he says. "It wasn't that we were so snotty," he says of the built-in exclusivity. But from the outset, they decreed "no vendors" and they "tried to stay away from CIOs who were figureheads in organizations," seeking out instead those who actually are change agents, charged with steering their companies through the turbulent, white-water ways of the IT stream. "Very large companies had a lot to say to each other because of scale rather than sector. ... Our model always was that you had to be able to sit around a table -- that's a real size limiter," he says.

He and Seligman came to know -- and admire, as is clear from the book -- the leadership "giants" of that era. Besides the "big five" who emerged in the 1990s, the book's preface lists many others, including Eric Schmidt, although the years spanned by the book are when he was at Sun, Novell and other companies, before becoming Google CEO in March 2001.

Von Simson is most interested in Google from an enterprise perspective, which in addition to cloud computing now includes Android. The recent flap over Google's operation in China was of more interest to von Simson from the cybersecurity perspective, a current top-priority research topic. That's not an area von Simson would have gotten into, he says, but the business model at Ostriker von Simson, where he and Seligman are the senior partners, continues that of The Research Board's so that the companies they advise guide the research choices.

His current research is reminding him that "technology is so complicated and clever. Secondly, it's really forcing me to ask what is secret." The work takes him around a circle within his career -- he was a U.S. Navy crypto officer just before Vietnam exploded.

Although von Simson writes eloquently of the havoc disruptive technologies can wreak and the need for companies to be prepared and willing to change, he isn't much interested in social networking.

"No, I hate it," he says when asked if he likes Facebook. "I just find the whole thing so banal." He does have a Facebook page he set up a couple of years ago because he wanted to experience it. He logs on every couple of months and jokes that his "friends" -- including his granddaughter, who is keen on Facebook -- are likely to get the sorts of messages from Facebook telling them, "do you know that Ernest von Simson has too few friends."

Media interviews also have not traditionally been high on his list of likes, though he has done them, and has written pieces for the business and IT trade press, including the Harvard Business Review. "It never really helped me very much," he says of interviews, although "it could have hurt" to have done them. Von Simson had "the unspoken commitment" that he wouldn't leak information, so there were questions he wasn't about to answer. Besides, he says, "the usual reason people do a lot of press is so ... people can see who they are. We never needed that."

In fact, he agrees, that wouldn't have been (and still is not) desirable. "The book is something different," von Simson adds, with a laugh. "Be sure to mention 'The Limits of Strategy' -- that's why we're doing this interview."

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Tags antitrustIrving Wladawsky BergerOstriker von SimsonJohn AkersThe Research BoardJoel Kleincloud computingbill gatesBill HewlettNaomi SeligmanJohn YoungErnest von SimsonDave PackardNathan Myhrvold

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