Welcome to the Resilient Business Series. In this series, we examine businesses and organisations that have gone through events like recessions, pandemics and world wars, who not only survived, but thrived. We find out how they did it and the lessons you can apply to your business.

This week we examine IBM, a 108-year-old company that nearly didn’t make it past 100 years in business…

IMB started in the early 1900s to track employee attendance via punch card machines. The business grew and became a world-wide technological player responsible for inventions like the barcode, floppy disk, hard drive and the magnetic strip on your bank card.

Regardless of their technological prowess and reputation, IBM was heading towards extinction in the early 90s. They were slashing dividends and suffered the biggest corporate loss in American history – losing over USD$5 billion in a single year.

What was causing such a loss was IBM’s inability to capitalise on the personal computer market. They specialised in large main frames but weren’t agile enough to compete with the smaller home PC.

IBM was in serious trouble and needed a way out.

Enter Lou Gerstner, the first outside CEO since IBM’s inception who had zero experience running a technology company.

The first thing Lou did was enact a cultural change. He laid off over 100,000 employees, ditched the corporate dress code and removed the no-alcohol policy in the office. Before Lou, the business was famous for having an employed for life attitude and a dress code largely unchanged since the 60’s.

It was time to shake things up.

Lou’s next step was to get an ‘outside-in’ perspective of the business. The first people he talked to were the customers. Lou wanted to know what they thought IBM’s strengths were and why they used the business.

Lou learnt that while IBM couldn’t compete in the personal computer market, they could compete by offering integrated services. When a customer chose to use IBM, they could get hardware, software and services in the one place and at a level not many other competitors could offer (let alone beat).

Lou finished his turn-around by humanising the business and showing exactly how they helped. He was a big believer in case studies and rather than saying, ‘IBM worked with a large energy client’ he would name the client and show step-by-step how IBM helped.

To top it all off, Lou could see the influence that the Internet was going to have on marketing and invested heavily in digital and online promotion early.

Now, IBM is approaching USD$100 billion in revenue and looks forward to another 100 years in business.

What we can learn from Lou:

Culture is just as important as technical ability.

It is very easy to get inside your own mind. By getting an outside perspective, Lou was able to better see how the business was perceived.

Show not tell. A lot of marketing uses buzzwords and hype to sell the product/service. Lou knew he had a good product and simply showed the market.

Leave a Reply