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In Focus: Lou Gerstner


Lou Gerstner
Gerstner: "You can never be comfortable with your success, you've got to be paranoid you're going to lose it."
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LONDON, England (CNN) -- When Lou Gerstner was named as IBM's CEO in March 1993, the company which had virtually invented business computing in the 1960s had just 100 days left before the cash ran out.

When Gerstner stepped down in 2002, IBM were once again the biggest name in their industry. CNN's Richard Quest talked to the man credited with saving Big Blue for Global Office.

CNN: You say in the book, how could truly talented people allow themselves to get into such a morass. Are you any wiser now about how IBM got into that morass?

LG: Yes, I think I am. I say in my book I thought it was initially a substantive technical problem and therefore I wasn't the person to come into IBM. And I was told by the board it was a leadership issue so I sort of accepted that when I made the decision to come. But what I discovered when I got here was that it was a cultural issue; it was an IBM that was created for another time, a great IBM, arguably the most successful business organization ever created in the 50s, 60s and 70s. But somehow it got stuck, it got stuck in the old way of thinking. And the world changed and IBM didn't change.

CNN: That somehow, that somehow it got stuck, that's really the key isn't it?

LG: It is and it got stuck because it fell victim to what I call the success syndrome. The more successful enterprises are the more they try to replicate, duplicate, codify what makes us great. And suddenly they're inward thinking. They're thinking how can we continue to do what we've done in the past without understanding that what made them successful is to take risks, to change and to adapt and to be responsive. And so in a sense success breeds its own failure. And I think it's true of a lot of successful businesses.

CNN: Is it inevitable?

LG: The tendency is inevitable, absolutely. It's in the genes. I don't think it has to happen. You think about the wonderful expression that Andy Grove used: It's only the paranoid that survive. What Andy's saying is you can never be comfortable with your success, you've got to be paranoid you're going to lose it.

National treasure syndrome

CNN: When you took over IBM you talked a lot about the "national treasure syndrome." Did you feel you were taking over to some extent an arm of the United States? Maybe not the government per se but you didn't have to go too far from this company to find the government lurking somewhere.

LG: Well, No I didn't feel it was an arm of the government. Remember that I say in my book that one of the directors of the search committee said to me after I turned them down a third time, "If you don't take this job I'm going to call President Clinton and tell him you've got to take it because IBM is a national treasure." That really didn't have a lot of influence on me because I knew the President probably wouldn't call and it didn't mean anything anyway. What I came to understand is that IBM has a pervasive impact on all forms of society; medical research, education, national security -- but not just US national security, we work for a lot of governments around the world. The well being of banks, insurance companies, automobile companies, it's a pervasive influence on a lot of enterprises. That, I came to understand, made this a very special institution.

CNN: You obviously didn't turn this giant around on your own. You gave the leadership that enabled other people to do that which they could do best. But were you aware as it was taking place that IBM was playing its traditional role of redefining corporate life.

LG: Not in the beginning. In the beginning I was just baling the boat. I mean we were just hoping to stay alive and I was trying to find and identify that team because, you're absolutely right, I could not have done any of this without a group of incredibly talented people. So early on I had fairly humble objectives which was just to stay ahead of the debt collectors. But as we moved into it, yes, it became very apparent to me that this company could be great again, that it could be incredibly influential in defining not just the technology of computing but defining new ways by which business, industry, financial services companies could approach their business and be more successful. I mean it is the engine of transformation. It allows other institutions to transform themselves.

CNN: So just as IBM in the 60s and 70s had been the barometer of management standards, in the 90s it could be the barometer of reorganization standards.

LG: Of transformation standards. I don't want to use the word reorganization. Reorganization to me is shuffling boxes, moving boxes around. Transformation means that you're really fundamentally changing the way the organization thinks, the way it responds, the way it leads. It's a lot more than just playing with boxes.

Focus, execution, leadership

CNN: Every single person that's sat in front of you and done one of these interviews has asked the same damn question: is there an easy Gerstner theory to management speak, to management theory? I'm asking it and I'm hoping you've got an answer.

LG: The answer's no, there is none, there is no easy. But I do suggest in my book that three things really drove what we did. The first is focus. Too many companies give up on their base business, too many companies see their future in diversification, let's just go buy another company, that's the way to be successful. No, focus, pick something and be very good at it. You know when I got here people said large scale computing is dead. And everything's going to be done on the personal computer, that's what everybody said. IBM was great on large scale computing, sophisticated, difficult. We almost gave that up. So we went back to the things we were really good at. Secondly, execution. I mean, let's face it there aren't too many secrets in business. It's the people who out-execute their competitors every day that win. And then I think the third thing that I talk about is personal leadership. It's got to be visceral. You've got to want this, you've got to want to win, you've got to get your team feel like it wants to win.

CNN: You talk about communication and you print some of the emails you've sent to your staff. Isn't there a real danger that CEOs pay lip service to communication but real communication's very different?

LG: Oh, absolutely. The world is full of CEOs that think that just because they write a memo or they write a letter inside an annual report or they give a little video speech that gets sent around the company, they think that's what's really going to effect employees. No, you can't assume anything but very smart. They understand when you're really communicating with them, they understand when you're treating them as adults, as equals. And it takes a lot of effort to go out. You've got to be candid, you've got to be fair, you've got to give the bad news as well as the good news. Communicating with your employees is a very sophisticated and very time-consuming activity.

CNN: Likewise the design and implementation of a strategy. Many chief executives, top management misunderstand strategy for what?

LG: For vision. They think if they point and say that's where we're going to go and then they sit back and say, I guess we're going to go there. And nobody knows in effect how to get there. Vision is easy. It's so easy to just point to the bleachers and say I'm going to hit one over there. What's hard is saying, OK, how do I do that? What are the specific programs, what are the commitments, what are the resources, what are the processes we need in play to go implement the vision, turn it into a working model that people follow every day in the enterprise. That's hard work.

CNN: Your board of directors: you basically cleaned them out. You got rid of them.

LG: No, they reconstituted themselves.

CNN: Well, you can put it as politely as you like. Was that necessary?

LG: It was helpful, it was very helpful. Look, a lot of them were ready to go. A lot of them really had seen enough of this and had come under a lot of pressure and so the head of our directors, we had a governance committee back then even when it wasn't as fashionable as it is now, he and I basically decided that we ought to give all the directors an opportunity to step off if they chose and then we reconstituted the board. We made it smaller, we got rid of insiders, it was all outsiders except me. So you're right there was a big process of change on the board.

CNN: You say leadership is personal, leadership is passion. Was IBM the job that was waiting for you?

LG: I think so, I mean I don't want to put it in such Calvinistic terms, I mean I'm not sure if it was preordained. It just sort of happened but there's no question that this came along at the right time, that I was ready for it. I was prepared to take the risk and I loved every minute of it. Well that's not true, there were times when I didn't love it but for the most part I loved every minute of it.

Personal belief

CNN: When I was asked to interview you I thought, good grief, what sort of ego have I got to have to think that I can ask you questions that you haven't been asked before to get something new out of you. Did you have to have an ego that allowed you in 1993 to think, "Good grief, what can I bring to IBM that other great people or other people haven't thought about?"

LG: Well I don't know if you'd call it an ego. I said that to myself repeatedly over about three months and I kept coming up with the same answer. No, I don't have it. So I kept telling the search committee, "You've got the wrong guy, you need a techie here, someone who understands this industry." Eventually they convinced me that they didn't need such a person. But yes, I had to have enough personal belief, enough guts and risk taking to say I want to do this, I want to take a shot at this. Everybody said they didn't want to, so it came along at a time, I guess, when I was willing to take it on.

CNN: Did you fear failure?

LG: Of course. I mean if you don't fear failure then you are kind of out of it. If you don't understand in a situation that the risks are very real then you are out of touch. There were nights when I went home and I said to my wife, "I don't think we're going to make it. This is crazy. I can't figure out how we're going to get this thing turned around before we run out of money."

CNN: At what point did you realize, A. You'd made it; B. That the company had turned around; and C. That you would now go down in the annals as one of the greatest business leaders this country has probably seen.

LG: Well first of all I've never realized the last point. But in the first two I would tell you that after a year I felt we had stabilized the company. I finally believed -- it was after a little more than a year, about 18 months -- we were in the clear but I wasn't sure if that meant we were just going to stumble along like a lot of US companies that just went up and went down and maintained a mediocre consistency from that point on. I think what I tried to do from year two was not just to survive but to get IBM back. There aren't a lot of companies that have been there, gone down and gone back to leadership again. It took me to year five to realize that.

CNN: And that was the harder part. The first part was putting out the fire. The next bit was rebuilding the house.

LG: Absolutely. There were so many resources here, this was such a strong company that quite frankly putting out the fire wasn't that hard. It required a few very critical decisions like keeping the company together rather than breaking it up, but in a sense I don't take a lot of credit for turning it around and getting it stable again. What I feel good about is what a group of IBMers did to take a company back to leadership in a very important industry, a very competitive industry where lots of people were really hoping that we would not come back to leadership.

CNN: Do you recognize the description of yourself as the man who saved IBM?

LG: I'd like that to say the man who led the team who saved IBM. Because I didn't save IBM. A lot of people saved IBM. Yes, I was the leader of that team but I could never have done it without a group of IBMers helping me.

CNN: When I was growing up I wanted to be an ice cream salesman. What did you want to be when you were growing up?

LG: I initially wanted to be a teacher and then I was going to become an engineer and build bridges and highways but pretty soon I went into the business world. I never did get to be a teacher except in a different way.


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