Lou Gerstner

Lou Gerstner - I start with the view that the customer drives everything the enterprise does. A lot of people say, “We put customers first,” but it’s a slogan for many companies. In my view, it is absolutely the thing you live by every day in a successful enterprise”. After Gerstner took charge in April 1993, IBM’S senior executives, employees and customers quickly realised that “putting the customer first was no mere slogan for Gerstner.

During his first few months on the job, Gerstner logged thousands of miles visiting customers, analysts, and industry experts. He summarized the message he heard from customers in this way: “They said repeatedly, ‘We don’t need one more disk drive company, we don’t need one more database company or one more PC company. The one thing that you guys do that no one else can do is help us integrate and create solutions.’ They also saw the global nature of the company. . . . ‘I use you guys all over the world.’”

Then by late 1993, Gerstner made a very crucial decision of no the break up the company, but by going to the market as “One IBM”. He then called on each of the senior executives at the company to go out to a group of customers and “bear hug them”, these executives were therefore personally responsible for their assigned customer accounts and accountable for any problems that arose.

Also he decided to hire Jerry York, who was a former Chrysler CFO, whose role was to be in charge of getting costs under control. York then launched a benchmarking study to determine how IBM’s costs in each of its businesses compared with those of their competitors. The results were daunting; showing that the company was too expensive by at least $7 million. Gerstner and York then decided that it would be better to ...

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...eliver on the business design.

• Structure: This are the organisations metrics, and rewards required to direct, control, and motivate individuals and groups to perform the unit’s critical tasks.

• People and Skills: These are the required human resource characteristics, capabilities, and competencies needed to execute the critical tasks.

• Culture: This is the expectation about how people in the company would need to behave to support the accomplishment of the critical tasks.

The successful execution of strategy critically depends on the alignment of these 4 elements with the strategy. What is sometimes overlooked, however, is that whenever a strategy is changed, it is almost always the case that the existing organizational alignment will also need to be changed. Unless management actively realigns their business to reflect the new strategy, execution will suffer.