Gerstner Photo by Shauna Valeska

IBM chairman Louis V. Gerstner, Jr. (MBA ’65) discussed the importance of strategy, execution, and culture when transforming an institution, as part of the MBA Program’s Distinguished Speaker Series in November.

“Institutional transformation is hardest in successful enterprises,” Gerstner told the large crowd of students in Burden Auditorium and those who watched a simulcast in the overflow area in Spangler. What successful enterprises have done in the past has worked, he noted, using IBM as an example, so it’s difficult for such organizations to change.

Gerstner, who is credited with transforming IBM, talked about the key strategic decisions he made when he took the helm of the struggling company in 1993. Initially reluctant to take the top post, Gerstner, an outsider, determined that it was important to keep the organization together, to open up standards, and to concentrate on the application of technology.

“We were able to define a strategic path that made sense,” said Gerstner, who then added a caveat: “You don’t win with strategy. Execution is a hell of a lot harder than strategy. How do you get people to go in a direction that is different from the past?” It is easier, he continued, to get an organization on the right track if there is a sense of crisis. “You must convey the urgency of the current situation and the requirement of doing something different.”

Gerstner admitted that earlier in his career, he didn’t realize the importance of understanding organizational culture. As a student at HBS, for example, he didn’t take his courses in human behavior seriously. Now, he said, he understands that “culture is everything.” Culture, in fact, was IBM’s problem. “The behavior, values, and systems were created for another age,” he said, recalling how decentralized the company was in 1993. “This culture of decentralization didn’t fit what we needed to do — to keep IBM integrated.”

Answering questions from students, Gerstner offered advice such as “Never lose touch with customers,” “You don’t understand a company until you get inside,” and “Great enterprises are always in transformation.” He then shared some moments of doubt he had at IBM when he first started (“I didn’t even know what a client server was,” he admitted) and said that he planned to work on public education and cancer research after stepping down from IBM in December 2002.

“Ultimately, success and rewards will come from leading transformation,” he told the audience. “Be somebody who brings about fundamental change in an institution. Do not be satisfied with managing, with continuing, with extending. Go for transformation — it will be the best thing you’ve ever done.”

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