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1. Adaptability: Gerstner recognized the need for IBM to adapt to the changing market conditions, particularly the increased competition and the end of premium pricing for their mainframe product. This is relevant today as businesses must be able to adapt to rapidly changing market conditions.
2. Innovation: IBM's billion-dollar investment in a new technical architecture for its mainframe product is a testament to Gerstner's commitment to innovation. In today's business environment, continuous innovation is key to staying competitive.
3. Strategic Decision Making: Gerstner's decision to participate in the price war, despite the business losing money, shows his strategic thinking. Today's businesses also need leaders who can make tough, strategic decisions.
Question was asked on:
IBM had been a pioneer and the dominant player in the "mainframe" world for years. Come 1992, however, the space was much more competitive and IBM was struggling. It seemed unthinkable to lower prices at a time when the business was already losing so much money. But Gerstner was convinced this was the only way. What he saw that others did not was that IBM was "milking" a dying product line. The days of premium pricing on their mainframe were dwindling, and it was a matter of time before competitors inched them out. The only way to stay in the game was to participate in the price war. Luckily, IBM also had a trick up its sleeve to maintain profitability through the price changes. Several years prior, IBM had made a billion-dollar investment in new "technical architecture" for its mainframe product. IBM's size and many years in the business enabled them to make this crucial investment that greatly increased the product's profitability relative to competitors.
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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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