Sometimes doing nothing is the best strategy. Simply, not doing.
When he became CEO in 1993, former McKinsey consultant and turnaround master, Lou Gerstner, decided not to split IBM – even though this was something which previous CEO, John Akers had prepared for. All or nothing was Gerstner’s refrain. Gerstner reflected that IBM had been through “an economic shock the equivalent of an earthquake”; another earthquake was the last thing it needed. Indeed, a vision was the last thing it needed. Nothing high falutin; just get on and manage was Gerstner’s message.
And, under Gerstner, IBM made a surprisingly strong recovery. It got back in touch with reality and with its existing and potential customers. Take its role in Internet development. In 1993, long-serving IBM-er, John Patrick was arguing that everyone at the company should have their own e-mail address and that the company needed a web site. “Connect with other people. If you become externally focused, you can change the whole company,” said Patrick. What is interesting is that Patrick’s call to arms was basically a return to the company’s first principles — get in touch with customers and communicate internally. The only difference was that Patrick was championing the latest technology to do so.
As proof that IBM’s culture had changed, forces were mobilized in a way the slow moving monolith of the past never even contemplated. In 1995 only two of the company’s 220,000 employees were working on Java. By 1997, 2,400 scientists and engineers throughout the world were doing so. Indeed, such is the cultural change that there was talk of breaking rules, using small eccentric groups to tackle problems from different angles, to bring fresh thinking, rather than the over-confidence of the past.
Lou Gerstner stalked in the background, pulling the strings, exerting pressure when needed. In fact, his behavior appeared to be a textbook example of modern leadership — empowering and coaching rather than controlling. At the same time, his feet appeared firmly planted in commercial reality. Said Gerstner: “My view is you perpetuate success by continuing to run scared, not by looking back at what made you great, but looking forward at what is going to make you ungreat, so that you are constantly focusing on the challenges that keep you humble, hungry and nimble.”
Typically, when Gerstner was shown the Internet for the first time his reaction was “This is great, this is a new channel for business. How do we make it real for customers? How do we make money on it?” The order of these priorities — customers and then profit — is perhaps the vital lesson from IBM’s renaissance and the rise, fall and rise of the IBM brand.
And the strategic wisdom from the IBM story?
First, get in touch with customers and with reality. IBM had grown distant from the marketplace. Gerstner threw it back into the lion’s den.
Second, togetherness may be strength. IBM could have been broken down into 100 significant organizations with 100 bright, new names. Gerstner’s realization was that though this would have had some advantages, the continuing strength and resonance of the IBM brand name offset them.