Gerstner says Internet saved IBM

Former IBM Chief Executive Officer (CEO) Louis V. Gerstner Jr., who is widely credited for rescuing the technology titan from its downward spiral in the early 1990s, said that the Internet literally saved IBM by giving it a new market to conquer.

"Along came the Internet and it just saved me," Gerstner said, speaking at Harvard University's John F. Kennedy School of Government recently.

Gerstner, who was in Boston promoting his new book "Who Says Elephants Can't Dance?", said that after IBM lost the race to dominate the desktop PC market the company needed a "moon shot" to gather around or it faced crumbling apart.

Gerstner was named CEO of IBM in 1993 after he turned down the job three times. He is still chairman of the company's board. The former McKinsey & Co. Inc. executive and RJR Nabisco Inc. head was tapped to overhaul Big Blue during a crisis period when the company, faced with mounting competition from players like Microsoft Corp., began to hemorrhage cash.

In his first few months at the helm he made a crucial decision to keep IBM together as one company, contrary to his predecessor's plan to break it into pieces. He then set the company's sights on becoming a technology integrator, with e-commerce and services as main areas of focus.

"In 1995 we announced 'network-centric computing' and it became a galvanizing force. We had a chance to be a leader again," Gerstner said.

Although Gerstner stepped down from his post of IBM CEO last March, handing the reins to Samuel Palmisano, he has left a legacy of leadership that is garnering even more attention given the current rash of corporate scandals that have tarnished the image of the U.S. CEO.

Gerstner talked about his first few days at IBM and the problems it was facing in the rapidly changing technology market. Although he admitted that he had virtually no technical knowledge when he took the job and that that aspect scared him, Gerstner said that the company needed strong management more than anything else.

"I had to grab hold of IBM and shake it. It was a deer caught in headlights," he said.

Gerstner decided to "build the company from the market back," and heeded customers' requests to offer more affordable mainframes. The former CEO said that he cut mainframe prices every year he was at IBM, leading the company to sell more mainframes this year than any year in its history.

"It was an extraordinary piece of mythology created in the '80s, that PCs would take over for mainframes," he said.

But while Gerstner retooled the company's hardware strategy, he put a lot of focus on becoming an integrator.

"As an IBM customer myself, I wanted someone to put it all together," he said. "We were going to be the company that helped them integrate ... not throw hardware and software over the wall and tell people they want it because it's faster."

And while the Internet and e-commerce gave the company a new world to conquer with integrated hardware and software offerings, one of the biggest obstacles that stood in the company's way was its own culture, Gerstner said.

"Culture is the crucible everything sits in and if it isn't right, nothing get's done," Gerstner said. He added that companies that have been successful are the ones that are hardest to change because their culture has been codified.

At IBM, Gerstner set about changing the culture by shifting the compensation plan, making managers' pay primarily based on the overall company's performance and not just that of their division, changing the dress code and unifying the company's marketing and advertising campaigns.

But despite Gerstner's strong leadership, the former CEO admitted that part of his success stemmed from pure luck.

"I got lucky," Gerstner said. But he also pointed out that luck without skill doesn't go very far.

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