IBM’s Business Transformation

In 1993, IBM posted the biggest loss ever-recorded in corporate history, 8 billion USD. To survive, it needed to be restructured and undergo a full-fledged transformation.

Bridget van Kralingen, general manager for IBM North America, explained:

We had missed a number of key technology shifts. Customers who had previously said “no one ever got fired for buying IBM” were abandoning us for faster, more nimble competitors. One major business publication labeled us a dinosaur. Another said our era had passed.

Three weeks into his job as the newly installed chairman and CEO in 1993, Louis Gerstner Jr. was presiding over his first meeting at the company on the topic of strategy. Everyone in the room was actively sharing ideas.

Gerstner recalled, in a talk for MBA students at Harvard Business School:

After eight hours I didn’t understand a thing. I was very depressed. Transformation of an enterprise begins with a sense of crisis or urgency. No institution will go through fundamental change unless it believes it is in deep trouble and needs to do something different to survive.

In his talk on November 20, titled ‘IBM’s Transformation,’ Gerstner Jr. made clear that he did not see himself as the white knight in IBM’s subsequent transition and return to viability. He had the advantage of being an outsider when he joined the company after working at McKinsey & Co., American Express Company, and RJR Nabisco. Beyond that, however, change came to IBM in large part due to the pride and energy of the employees themselves, he said. His role was to kick-start the process.

As an outsider, they let him.

TIP: Interview in Forbes, following his book ‘Who say’s Elephants can’t Dance?’

We needed to integrate as a team inside the company so that we could integrate for the customers on their premises.