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Small businesses can use Gerstner's focus on free cash flow to stabilize their finances by prioritizing it as the most important measure of their business. This can be done by reducing expenses, consolidating functions, and selling high-value items if necessary. They should also focus on customer needs and market trends rather than internal politics or executive whims. This approach can help small businesses to avoid unnecessary debts and maintain financial stability.
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According to Gerstner, free cash flow is the most important measure of a business. He learned this as the head of RJR Nabisco, when billions in assets were offloaded to pay debts. He applied the same to IBM to stabilize finances. IBM had been so successful that it felt like a bubble: there was little focus on how customer needs or competitors were evolving. To change this dynamic, Gerstner became a microphone for customer complaints and let the marketplace – instead of the whims of executives – dictate all activities. Gerstner initially saw IBM's financials and thought the company's chance of survival was no more than 20%. To prevent demise, he slashed expenses through consolidation of functions, sold high-value items like real estate and fine art, and ultimately layoffs. Gerstner's toughest challenges were "soft" problems like morale, company culture, and values. A culture without internal politics frees up employees to focus more on customers and competitors rather than their colleag...
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Learn from one of the best turnaround leaders of our time, Lou Gerstner of IBM. Take a page from Gerstner’s playbook on how to reinvigorate a quickly...
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