Gerstner's approach to reorganization has significantly influenced corporate strategies and business models. He introduced a global industry team-based structure at IBM, moving away from the traditional geographic-based organization. This involved segmenting customers into thirteen industry groups and reallocating all current customer accounts from geographic heads to global industry heads. This ensured each group had an adequate budget and personnel. Despite resistance from the 'old guard', this reorganization was successfully implemented over three years. This approach has influenced businesses to consider a more global and industry-focused model, breaking away from traditional geographic limitations.

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Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change

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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Gerstner set out to organize IBM instead according to global industry teams. First, they segmented customers into thirteen industry groups. Then, Gerstner reallocated all current customer accounts away from geographic heads and to the global industry heads, ensuring each group had adequate budget and personnel. This did not go over with the "old guard" without a hitch. Many refused to relinquish control and directed their staff to do the same. In all, the geographic reorganization took about three years to implement successfully.

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Potential obstacles companies might face when applying Gerstner's reorganization strategy include resistance from the old guard who may refuse to relinquish control and direct their staff to do the same. This resistance can slow down the reorganization process and create conflicts within the company. To overcome these obstacles, companies can ensure clear communication about the benefits and necessity of the reorganization, provide adequate support and resources to the new global industry heads, and foster a culture of adaptability and openness to change. It's also important to be patient as such a reorganization can take several years to implement successfully.

The concept of "global industry teams" was a key part of Gerstner's reorganization of IBM. Instead of organizing the company geographically, Gerstner decided to organize it according to global industry teams. He segmented customers into thirteen industry groups and reallocated all current customer accounts away from geographic heads and to the global industry heads. This ensured that each group had an adequate budget and personnel. The transition was not smooth, with many of the "old guard" refusing to relinquish control. However, after about three years, the reorganization was successfully implemented.

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