Big Blue demonstrates lack of original zing

Lou Gerstner has saved IBM. The problem is, he doesn't have a clue what to do next. Big Blue has become Big Grey

Lou Gerstner has saved IBM. The problem is, he doesn't have a clue what to do next. Big Blue has become Big Grey

Jack Schofield


Take my advice, Lou - quit while you're ahead.

Gerstner's scorecard is impressive. When the former McKinsey & Co management consultant was headhunted from biscuit-maker RJR Nabisco to take over IBM in 1993, it was heading for a record $8bn loss.

Its stock was at an all-time low.

IBM looked as though it might go the same way as former industry giants such as Control Data, Cray, Data General, Digital, Prime, and Wang.

But it didn't. Last year, Big Blue made almost $8bn in net profits, and its shares hit an all-time high.

Gerstner has clearly earned the accolades, which now include two books: Robert Slater's Saving Big Blue, and Doug Carr's IBM Redux: Lou Gerstner and the Business Turnaround of the Decade.

Some of the turnaround was due to good housekeeping - closing factories, shedding staff, selling off the company's art collection. But more of it was due to a revolutionary change in IBM's approach to customers.

Gerstner, a former IBM customer, made IBM listen to what customers wanted and then attempted to provide it - an idea that could not have been considered revolutionary outside of IBM and, perhaps, the former Soviet Union and British Rail.

But IBM's revenues have grown only slowly, from $64.5bn in 1992 to $87.5bn in 1999 - that's 35% within seven years, in an industry where the best companies can grow by 35% a year.

Worse, almost all IBM's growth has been in services that guarantee profit. Its hardware and software businesses have been pedestrian performers.

Lots of companies have beaten the pants off Big Blue in areas where it should have been more competitive. Cisco, Dell, EMCz, Intel, Microsoft, and Sun didn't just listen to customers - they created markets.

No one wants IBM to return to the arrogant ways of old. But a little bit of originality, or vision, might be nice.

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