Chapter 4: Focus on Solutions

Overview

IBM is a solutions company. We start with a customer's business problem, and work back to the right combination of technologies and expertise.

—LOU GERSTNER, former CEO, IBM

So there was IBM, the company that had led the prior phase of computing and had invented many of the industry's most important technologies, crawling out of bed every morning to find its relevance marginalized by the darlings of desktop computing.

—LOU GERSTNER, March 2002

Thomas Watson, the founding genius of one of the largest corporate entities ever assembled, once told his colleagues to "aim high, and think in big figures."

When he referred to "big figures," Watson surely was not thinking of big losses. But that was exactly what corporate colossus IBM was facing in 1993. And it wasn't just a run-of-the-mill big loss, but the largest annual loss in corporate history to date—an eye-popping $8.1 billion.

The once-dominant computer company not only was deep in the red, but was sinking under the weight of its own ineptitude. The industry's long-time leader had failed to grasp the changes transforming the computer industry, and was thoroughly demoralized. Andy Grove of Intel said, "It's hard to describe how beaten down that company was." The IBM board, in desperate need of a new leader, put together a short list that included corporate heavyweights such as Jack Welch, Bill Gates, and Ross Perot. Ultimately, however, they zeroed in on Louis V. Gerstner, CEO of RJR Nabisco.

When the announcement came that IBM's board had named a former snack-food king to succeed John Akers (IBM's previous CEO, whom many had blamed for the company's troubles), the response was a mix of disbelief and consternation. Wall Street sneered, company insiders grumbled, and just about everyone was convinced that the board had made a huge mistake. (Even Gerstner later admitted that he, too, was afraid that the board had made a mistake.) Critics derided Gerstner for his lack of experience running a technology company, much less the world's most important computer manufacturer.

The Gerstner-bashing, spearheaded by the media, went on for weeks. The press questioned Gerstner's fitness for the position. In Q&A sessions, media representatives peppered him with questions intended to test his readiness for the top post at IBM—and perhaps even to trip him up. But Gerstner (publicly, at least) demonstrated guts and patience. For example, when asked for his vision of the future IBM, he responded:

The last thing IBM needs now is a vision.

The company was hemorrhaging, and Gerstner knew that he had to apply tourniquets before planning the patient's future. He had to pull off the greatest turnaround in corporate history—but first, he had to make sure that the company would not be torn into pieces.