Top positive review
A year-after-year Must Read
on July 18, 2015
Though written more than a decade ago, this is hands-down one of the best business books on the planet and is relevant to leaders of both large and small organizations.
Here is how Lou Gerstner (LG) Saved IBM:
1. Overarching strategy: At the time LG arrived, IBM was proprietary hardware- (mainframe) and software-led. However, an explosion of niche competitors were undercutting IBM’s pricing in its most profitable segments. The prior leadership and Board of Directors were planning to break the company up to make it more nimble, but LG chose instead to tightly integrate the company by making it the services-led, network-centric, open-source, integrator of choice.
2. Product breadth: When LG arrived, IBM tried to be all things to all people. LG divested underperforming areas (ex: most application software) and focused on leading/emerging areas (ex: middleware).
3. Customer focus: When LG arrived, IBM pushed product to serve IBM’s financial interest. LG shifted to serving customers’ interests and business processes.
4. Culture: IBM was founded on strong values including: hard work, decent working conditions, fairness, honesty, respect, impeccable customer service, jobs for life. However, when LG arrived, many of these had been taken to the extreme with an obsession for perfection. In addition, morale was in the dumps and employees felt defeated. LG revitalized many attributes and removed the promise of jobs-for-life.
5. Organization: At the time LG arrived, IBM was controlled by autonomous geographic (country) leaders who presided from on-high by organizing work and delegating problem solving. LG centralized strategic planning, budgeting, marketing, competitive analysis, and sales operations. LG shifted to global industry team leaders who engaged in problem solving and dug into details by constantly meeting with customers, suppliers, and employees. He retained decentralized decision making for innovation (once funded) and for engagement of customers, suppliers, and business partners.
6. Business performance measurement: When LG arrived, IBM was overly focused on the income statement. LG shifted the focus to shareholder value creation by means of increasing free-cash-flow and improving customer satisfaction.
7. Cost structure: Prior to LG’s arrive, IBM had made a series of modest cuts to protect its people and its income statement. LG decided to right-size quickly and completely to become best-in-class based on competitive benchmarks.
8. Execution: When LG arrived, IBM was have on strategy and contemplation. LG called for bold, precise action plans deeply inspected month by month.
9. Collaboration: When LG arrived, IBM was rampant with in-fighting; businesses would even bid against each other for customer orders. LG fostered collaboration through strategy and organization as well as identifying shared outside enemies.
10. Leadership development: When LG arrived, high-potential leaders learned by watching. LG ensured they learned by doing. He maintained IBM’s strong practice of promoting experienced leaders from within.
11. Compensation: When LG arrived, compensation was based on tenured entitlement with little stock-ownership and little pay variation for top- and bottom-performers. LG switched to a performance-based meritocracy and aligned incentives with the core strategy and desired culture.
12. Mergers, acquisitions, and alliances: When LG arrived, IBM acquired and partnered with a bewildering number of companies for purposes of diversification. LG limited activity to focus on acceleration of the core strategy.
13. Branding & Advertising: When LG arrived, IBM had a fractured and stogy brand image. LG centralized marketing and focused the company’s considerable resources on defining e-business.
14. Technical Excellence: LG retained IBM’s commitment to technical excellence.