LOUIS VINCENT GERSTNER JR. (born March 1, 1942 in
Mineola, New York
Mineola, New York )
is an American businessman, best known for his tenure as chairman of
the board and chief executive officer of
IBM from April 1993 until
2002 when he retired as CEO in March and chairman in December. He is
largely credited with turning around IBM's fortunes.
He was formerly CEO of
RJR Nabisco , and also held senior positions
American Express and McKinsey ">
As chairman and chief executive officer of the Travel Related
Services division, Gerstner spearheaded its successful "membership has
its privileges" promotion. Not only was the division continually the
most profitable in the company, it led the entire financial services
industry. Despite these successes, Gerstner hit a ceiling at American
Express, as chief executive
James D. Robinson III was not expected to
retire for another 12 years. The analyst Perrin Long at Lipper
Analytical told the
Los Angeles Times
Los Angeles Times : "Lou is a very personable guy.
But more than anything else, he is a leader more than a follower"
(March 14, 1989). During Gerstner's 11-year tenure at American
Express, membership had increased from 8.6 million to 30.7 million. He
left AmEx in 1989 to succeed Ross Johnson as chairman and chief
executive officer of
RJR Nabisco following its $25 billion leveraged
Kohlberg Kravis Roberts & Co .
Gerstner was hired as chairman and CEO of
IBM in April 1993. The
company's board had forced his predecessor John Akers to resign,
looking first within the computer industry for his successor. However
John Sculley ,
Motorola chairman George Fisher , and Bill
Microsoft were not interested (other rumored candidates
Eckhard Pfeiffer of
Scott McNealy of Sun
IBM then turned to Gerstner, an outsider with a record
that suggested success whose older brother Richard had run the
company's PC division until retiring due to health issues four years
earlier. Gerstner was the first
IBM CEO who was hired from outside
Upon becoming chief executive of IBM, Gerstner declared: "the last
IBM needs right now is a vision", as he instead focused on
execution, decisiveness, simplifying the organization for speed, and
breaking the gridlock. Many expected heads to roll, yet Gerstner
initially changed only the CFO, the HR chief, and three key line
In his memoir, Who Says Elephants Can\'t Dance?, he describes his
arrival at the company in April 1993, when an active plan was in place
to dis-aggregate the company. The prevailing wisdom of the time held
that IBM's core mainframe business was headed for obsolescence. The
company's own management was in the process of allowing its various
divisions to rebrand and manage themselves — the so-called "Baby
Blues." Then-CEO John Akers decided that the logical and rational
solution was to split
IBM into autonomous business units (such as
processors, storage, software, services, printers,) that could compete
more effectively with competitors that were more focused and agile and
had lower cost structures. Gerstner reversed this plan, realizing
from his previous experiences at RJR and
American Express that there
remained a vital need for a broad-based information technology
integrator. He discovered that the biggest problem that all major
companies faced in 1993 was integrating all the separate computing
technologies that were emerging at the time, and saw that IBM’s
unique competitive advantage was its ability to provide integrated
solutions for customers – a company that could represent more than
piece parts or components—something he only learned by going beyond
just listening to the proponents of different technologies within IBM.
His choice to keep the company together was the defining decision of
his tenure, as these gave
IBM the capabilities to deliver complete IT
solutions to customers. Services could be sold as an add-on to
companies that had already bought
IBM computers, while barely
profitable pieces of hardware were used to open the door to more
IBM had been credited with turning the personal computer (PC)
into a mainstream product, the company could no longer monopolize its
market. A proliferation of cheaper IBM-compatible PC clones that used
the same Intel chips and
Microsoft operating system software simply
undercut it and eroded market share. Outgoing
IBM chairman and CEO
Akers, a company lifer, was excessively immersed in its corporate
culture, remaining loyal to traditional ways that masked the real
threats. As an outsider, Gerstner had no emotional attachment to
IBM had developed to try to regain control of
the PC market. Gerstner wrote that in spite of
OS/2 's technical
superiority to the dominant
Windows 3.0 , his colleagues
were "unwilling or unable to accept" that it was a "resounding defeat"
as it "was draining tens of millions of dollars, absorbing huge chunks
of senior management's time, and making a mockery of our image". By
the end of 1994,
IBM ceased new development of
OS/2 software. IBM
withdrew from the retail desktop PC market entirely, which had become
unprofitable due to price pressures in the early 2000s. Three years
after Gerstner's 2002 retirement,
IBM sold the PC division to
In his memoir, Gerstner described the turnaround as difficult and
often wrenching for an
IBM culture that had become insular and
balkanized . After he arrived, over 100,000 employees were laid off
from a company that had maintained a lifetime employment practice from
its inception. Long allowed by their managers to believe that
employment security had little reference to performance, thousands of
IBM employees had grown lax, while the top-performing employees
complained bitterly in attitude surveys. In the goal to create one
common brand message for all
IBM products and services around the
world, under Gerstner's leadership the company consolidated its many
advertising agencies down to just Ogilvy -webkit-column-width: 30em;
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* ^ A B C D DiCarlo, Lisa (November 11, 2002). "How Lou Gerstner
IBM To Dance". Forbes. Retrieved April 26, 2012.
* ^ A B C "
IBM Corp. Turnaround". HBR.org. Retrieved April 26,
* ^ "Forbes.com: Forbes 400 Richest in America 2002". Forbes.
Archived from the original on 2011-05-24.
* ^ "Former Steering Committee Members". bilderbergmeetings.org.
Bilderberg Group . Archived from the original on 2014-02-02. Retrieved
* ^ Wayne, Leslie, "American Express's Ace in the Hole," New York
Times , June 30, 1985
* ^ A B Cornwell, Rupert (August 1, 1993). "Profile: The iconoclast
at IBM: Lou Gerstner enacted unprecedented cuts at the giant computer
firm last week, but he will need to do more than wield the axe to
revive it.". The Independent. London.
* ^ Black, Larry (January 27, 1993). "
IBM fires Akers and slashes
dividend". The Independent. London.
* ^ Cornwell, Rupert (August 1, 1993). "Profile: The iconoclast at
IBM: Lou Gerstner enacted unprecedented cuts at the giant computer
firm last week, but he will need to do more than wield the axe to
revive it. Rupert Cornwell reports". The Independent. London.
* ^ Charan, Ram; Colvin, Geoffrey (June 21, 1999). "Why CEOs Fail
It\'s rarely for lack of smarts or vision. Most unsuccessful CEOs
stumble because of one simple, fatal shortcoming". CNN.
* ^ A B C
* ^ A B Denning, Steve. "Why Did
IBM Survive?". Forbes.
* ^ A B
* ^ Berger, Joseph (December 22, 1993). "The Pain of Layoffs for
Ex-Senior I.B.M. Workers; In Dutchess County, a Disorienting Time for
Employees Less Hardened to Job Loss". The New York Times.
* ^ "Louis Gerstner III, Son of Celebrated
IBM Chairman, Dies at