Lou Gerstner faced several challenges in changing IBM's company culture and values. One of the major challenges was the company's complacency due to its past success, which led to a lack of focus on evolving customer needs and competitors. Another significant challenge was the company's financial instability, which Gerstner addressed by slashing expenses, selling high-value items, and implementing layoffs. However, the toughest challenges were the "soft" problems like morale, company culture, and values. Changing these required a shift in mindset from internal politics to a customer and competitor focus.
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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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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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