How Lou Gerstner Saved IBM

Do You Know How to Create Change That Lasts?

Greg Satel, the author of the book Cascades, publishes a newsletter called “Digital Tonto.” I look forward to his well-researched, authoritative articles appearing in my inbox each week. I believe you will find value from this one that Greg published on February 23, 2020.

Greg writes, “When Lou Gerstner took over at IBM in 1993, the century-old tech giant was in dire straits. Overtaken by nimbler upstarts, like Microsoft in software, Compaq in hardware, and Intel in microprocessors, it was hemorrhaging money. Many believed that it needed to be broken up into smaller, more focused units in order to compete.

Yet Gerstner saw it differently and kept the company intact, which led to one of the most dramatic turnarounds in corporate history. Today, more than a quarter-century later, while many of its formal rivals have long since disappeared IBM is still profitable and on the cutting edge of many of the most exciting technologies.”

That success was no accident. In researching his book, Cascades, Greg studied not only business transformations, but many social and political movements as well. What he found is that while most change efforts fail, the relatively few that succeed follow a pattern that is amazingly consistent. If you want to create change that lasts, here are three things you need to do.

1. Build Trust Through Shared Values
One of the key tenets of transformation is that you can’t change fundamental behaviors without changing fundamental beliefs. Gerstner first set out to change the culture within his organization. He saw that IBM had lost sight of its values. For example, the company had always valued competitiveness, but by the time he arrived much of that competitive energy was directed at fighting internal battles rather than in the marketplace.

2. Create A Clear Vision For The Future
Every change effort begins with a list of grievances. Sales are down, your industry is being disrupted or technology is passing you by. But until you are able to articulate a clear vision for how you want things to look in the future, any change is bound to be fleeting. For Gerstner at IBM, that vision was to put customers, rather than technology, at the center.

In his research, Greg found that every successful transformation, whether it was a political movement, a social movement, or a business transformation, was able to identify a keystone change that paved the way for a larger vision. So, if you want to bring about lasting transformation, that’s a great place to start.

3. Treat Transformation As A Journey, Not A Destination
Probably the most impressive thing about IBM’s turnaround in the 90s is how it has endured. Gerstner left the firm in 2002, and it has had ups and downs since then, but still rakes in billions in profit every year and continues to innovate in cutting edge areas such as blockchain and quantum computing.
The Gerstner revolution wasn’t about technology or strategy, it was about transforming their values and culture to be in greater harmony with the market. The transformation was about values first and technology second. Learn more about how Gerstner did it in his book, Who Says Elephants Can’t Dance.

Greg continues by saying, “You can’t bet your future on a particular strategy, program or tactic, because the future will always surprise us. [Note, Greg wrote this article before the chaos created by COVID-19 struck.] It is how you align people behind a strategy, through forging shared values and building trust, that will determine whether change endures.

Greg concludes by saying, “Perhaps most of all, you need to understand that transformation is always a journey, never a destination. Successfully implementing change is never a straight line. There will be ups and downs. But if you keep fighting for a better tomorrow, you will not only be able to bring about the change you seek, but the next ones after that as well.”

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