Gerstner

I read a lot of books, but not many about business. After a twelve-hour day at the office, who would want to go home and read about someone else’s career at the office?

Thus began a lifelong process of trying to build organizations that allow for hierarchy but at the same time bring people together for problem solving, regardless of where they are positioned within the organization.

That was a difficult time for me. I love building businesses, not disassembling them. However, we all have an opportunity to learn in everything we do. I came away from this experience with a profound appreciation of the importance of cash in corporate performance—“free cash flow” as the single most important measure of corporate soundness and performance.

I had learned a hard lesson at RJR Nabisco: A company facing too many challenges can run out of cash very quickly.

The discussion that ensued was very sobering. IBM’s sales and profits were declining at an alarming rate. More important, its cash position was getting scary.

It is not helpful to feel sorry for ourselves. I’m sure our employees don’t need any rah-rah speeches. We need leadership and a sense of direction and momentum, not just from me but from all of us. I don’t want to see a lot of prophets of doom around here. I want can-do people looking for short-term victories and long-term excitement.” I told them there was no time to focus on who created our problems. I had no interest in that. “We have little time to spend on problem definition. We must focus our efforts on solutions and actions.

I look for people who work to solve problems and help colleagues. I sack politicians… Solve problems laterally; don’t keep bringing them up the line.

I then proposed that, based on my reading, we had five ninety-day priorities:

• Stop hemorrhaging cash. We were precariously close to running out of money.

• Make sure we would be profitable in 1994 to send a message to the world—and to the IBM workforce—that we had stabilized the company.

• Develop and implement a key customer strategy for 1993 and 1994—one that would convince customers that we were back serving their interests, not just pushing “iron” (mainframes) down their throats to ease our short-term financial pressures.

• Finish right-sizing by the beginning of the third quarter.

• Develop an intermediate-term business strategy.

Finally, I laid out an assignment for the next thirty days. I asked for a ten-page report from each business unit leader covering customer needs, product line, competitive analysis, technical outlook, economics, both long- and short-term key issues, and the 1993-94 outlook.

I also asked all attendees to describe for me their view of IBM in total: What short-term steps could we take to get aggressive on customer relationships, sales, and competitive attacks?

What should we be thinking about in our long-term and short-term business strategies?

If the directors felt there was a crisis, they were politely hiding it from me.

He said the basic research unit was not affordable and needed to be downsized. He was quite concerned about IBM’s software business, mainframe business, and midrange products. As I look back at my notes, it is clear he understood most, if not all, of the business issues we tackled over the ensuing years. What’s striking from my notes is the absence of any mention of culture, teamwork, customers, or leadership—the elements that turned

out to be the toughest challenges at IBM…

I went home with a deepening sense of fear. Could I pull this off? Who was going to help me?

In fact, after his departure, someone gave me the one of the most remarkable documents I have ever seen. Roughly sixty pages long, it is entitled “On Being the Administrative Assistant to W. E. Burdick, Vice President, Personnel, Plans, and Programs.

Parachuting into a $65 billion company that was hemorrhaging cash and trying to turn it around is a daunting enough task. Trying to do it without a good CFO and HR director is impossible.

We should cut the price of hardware ASAP, simplify software pricing, focus development on

simplification, implement a hard-hitting communication program to reposition the mainframe and workstations, and underscore that the mainframe is an important part of the CIO’s information portfolio.

• Publicly crucify shortsighted proposals, turf battles, and backstabbing. This may seem obvious, but these are an art form in IBM.

• Expect everything you say and do to be analyzed and interpreted inside and outside the company.

• Find a private cadre of advisors who have no axes to grind.

• Call your mom.

IBM stock had dropped from a high of $43 a share in 1987 to $12 a share the day of the shareholders’ meeting.

It was clear that at all levels of the organization there was fear, uncertainty, and an extraordinary preoccupation with internal processes as the cause of our problems and, therefore, a belief that tinkering with the processes.

I returned home with a healthy appreciation of what I had been warned to expect: powerful geographic fiefdoms with duplicate infrastructure in each country. (Of the 90,000 EMEA employees, 23,000 were in support functions!)

It became clear to me at that point that the company, either consciously or unconsciously, was milking the S/390 and that the business was on a path to die. I told the team that, effective immediately, the milking strategy was over and instructed them to get back to me with an aggressive price reduction plan that we could announce two weeks later at a major customer conference.

I laid out my expectations:

• We would redefine IBM and its priorities starting with the customer. We would give our laboratories free rein and deliver open, distributed, user-based solutions.

• We would recommit to quality, be easier to work with, and reestablish a leadership position (but not the old dominance) in the industry.

• Everything at IBM would begin with listening to our customers and delivering the performance they expected.

The price of a unit of mainframe processing moved from $63,000 that month to less than $2,500 seven years later, an incredible 96-percent decline. Mainframe software price/performance improved, on average, 20 percent a year for each of the next six years.

6: STOP THE BLEEDING (AND HOLD THE VISION)

“I was indeed ready to make four critical decisions:

• Keep the company together.

• Change our fundamental economic model.

• Reengineer how we did business.

• Sell underproductive assets in order to raise cash.

Now, I must tell you, I am not sure that in 1993 I or anyone else would have started out to create an IBM. But, given IBM’s scale and broad-based capabilities, and the trajectories of the information technology industry, it would have been insane to destroy its unique competitive advantage and turn IBM into a group of individual component suppliers—more minnows in an ocean.

On average, our competitors were spending 31 cents to produce $1 of revenue, while we were spending 42 cents for the same end… So we made the decision to launch a massive program of expense reduction—$8.9 billion in total.

Reengineering is difficult, boring, and painful. One of my senior executives at the time said:

“Reengineering is like starting a fire on your head and putting it out with a hammer.” But IBM truly needed a top-to-bottom overhaul of its basic business operations.

I’ve had a lot of experience turning around troubled companies, and one of the first things I learned was that whatever hard or painful things you have to do, do them quickly and make sure everyone knows what you are doing and why.

However, what was also clear was that IBM was paralyzed, unable to act on any predictions, and there were no easy solutions to its problems. The IBM organization, so full of brilliant, insightful people, would have loved to receive a bold recipe for success—the more sophisticated, the more complicated the recipe, the better everyone would have liked it.

It wasn’t going to work that way. The real issue was going out and making things happen every day in the marketplace.

[The key strategic decisions] were:

• Keep the company together and not spin off the pieces.

• Reinvest in the mainframe.

• Remain in the core semiconductor technology business.

• Protect the fundamental R&D budget.

• Drive all we did from the customer back and turn IBM into a market-driven rather than an internally focused, process-driven enterprise.

I think it would have been absolutely naïve—as well as dangerous—if I had come into a company as complex as IBM with a plan to import a band of outsiders somehow magically to run the place better than the people who were there in the first place. I’ve entered other companies from the outside, and based on my experience, you might be able to pull that off at a small company in a relatively simple industry and under optimal conditions.

I just had to find the teammates who were ready to try to do things a different way.

I created a Worldwide Management Council (WMC) to encourage communication among our businesses. The WMC had thirty-five members and was to meet four or five times a year in two-day sessions to discuss operating unit results and company-wide initiatives. In my mind, however, its primary purpose was to get the executive team working together as a group with common goals—and not to act as some United Nations of sovereign countries.

The sine qua non of any successful corporate transformation is public acknowledgment of the existence of a crisis. If employees do not believe a crisis exists, they will not make the sacrifices that are necessary to change. Nobody likes change. Whether you are a senior executive or an entry-level employee, change represents uncertainty and, potentially, pain.

All of this takes enormous commitment from the CEO to communicate, communicate, and communicate some more. No institutional transformation takes place, I believe, without a multi-year commitment by the CEO to put himself or herself constantly in front of employees and speak in plain, simple, compelling language that drives conviction and action throughout the organization.

We needed to do a massive shift of resources, systems, and processes to make the new system work. Building an organizational plan was easy. It took three years of hard work to implement the plan, and implement it well.

I have always believed a successful company must have a customer/marketplace orientation and a strong marketing organization. That’s why my second step in creating a global enterprise had to be to fix and focus IBM’s marketing efforts.

We got there in stages because, while you can force anything down the throat of an organization, if people don’t buy into the logic, the change won’t stick.

Abby’s job was to get control of the spending and the messages. I asked her to present a plan to the newly formed Worldwide Management Council at our conference center in Palisades, New York. It was a tough meeting, but she did a very smart thing. When the thirty-five WMC members walked into the room, they found every wall adorned with the advertising, packaging, and marketing collateral of all our agencies. It was a train wreck of brand and product positioning.

This is part of my management philosophy. Executives should know they don’t accumulate wealth unless the long-term shareholders do the same.

Logic and my own experience dictated a straightforward set of priorities: Invest in new sources of growth, build a strong cash position, and do a more rigorous assessment of our competitive position.

What happened, however, is that we did neither. We saw two forces emerging in the industry that allowed us to chart a very different course. At the time, it was fraught with risk. But perhaps because the other alternatives were so unpalatable, we decided to stake the company’s future on a totally different view of the industry.

So we made a bet—one that, had we articulated it loudly at the time, would have left our colleagues in the industry rolling in the aisles.

Our bet was this: Over the next decade, customers would increasingly value companies that could provide solutions—solutions that integrated technology from various suppliers and, more important, integrated technology into the processes of an enterprise.

Fortunately, by the 1980s there were pockets of radical thought inside IBM that were already agitating for the company to join the open movement. And by the mid-1990s, we’d mounted the massive technical and cultural effort required to repudiate closed computing at IBM and open up our products to interoperate with other industry-leading platforms.

Here was a man [Dennie Welsh] who understood what customers were willing to spend money on, and he knew what that meant—not just the business potential for IBM, but the coming restructuring of the industry around solutions rather than piece parts.

Finally he pointed out that the economics of a services business were very different from those of a product-based business. A major services contract might last six to twelve years. An outsourcing contract for, say, seven years might lose money in the first year. All of this was foreign to the traditional world of product sales and would create problems for our sales compensation system and the financial management system.

I was depressed to realize that despite the powerful logic—that this services-led model was IBM’s unique competitive advantage—the culture of IBM would fight it.

I have worked in services companies (McKinsey and American Express) and product companies (RJR Nabisco and IBM). I will state unequivocally that services businesses are much more difficult to manage.

But a human-intensive services business is entirely different. In services you don’t make a product and then sell it. You sell a capability. You sell knowledge. You create it at the same time you deliver it. The business model is different. The economics is entirely different.

15: BUILDING THE WORLD’S ALREADY BIGGEST SOFTWARE BUSINESS

“... the fight for desktop superiority, pitting IBM’s OS/2 operating system against Microsoft’s Windows. It was draining tens of millions of dollars, absorbing huge chunks of senior management’s time, and making a mockery of our image. And in the finest IBM fashion, we were going to fight to the bitter end.

I think you know the decision a former customer made, and IBM today is providing support for customers who still depend on OS/2.

Anyone will tell you that software acquisitions are risky. The asset you’re acquiring is human. If the critical people decide to walk (and a lot of them would certainly have the financial wherewithal to do that once the deal closed), then you’ve spent a lot of money for some buildings, office equipment, and access to a customer-installed base.

In the end we gained more than a software company. Culturally we proved that we could keep some organizational distance and allow a fast-moving team to thrive. Perhaps most important, the hostile acquisition sent a clear signal inside and outside IBM that we were out of survival-mode status and serious about reclaiming a position of influence in the industry.

One of the obvious but puzzling causes of IBM’s decline was an inability to bring its scientific discoveries into the marketplace effectively. The relational database, network hardware, network software, UNIX processors, and more—all were invented in IBM’s laboratories, but they were exploited far more successfully by companies like Oracle, Sun, Seagate, EMC, and Cisco.

Just consider that IBM’s contracts with Sony and Nintendo in 2001 hold the potential to produce more intelligent devices than the entire PC industry produced in 2000.

As a result—and here’s the important point—IBM, for the first time in its history, is now positioned to benefit from the growth of businesses outside the computer industry. This diversification does not take us away from our core skills; we have simply extended them to entirely new markets.

But there is no doubt that a strategy built around providing fundamental building blocks of the computing infrastructure has proven to be extremely successful in this industry.

One example: The segment of IBM that produced applications for distribution and manufacturing customers set a stretch goal to increase sales by $50 million (from a base of about $100 million). It ran ads and promotions and sales contests, and it hit its target. In the process, it alienated every software company in that segment of the market. Those companies, in turn, stopped recommending our hardware and contributed directly to a $1 billion decline in sales in one of our most popular products.

And rather than just having lunch with them and saying “Let’s be partners,” we structured detailed commitments, revenue and share targets, and measurements by which both parties agreed to abide.

There were times when we lost money on every PC we sold, and so we were conflicted—if sales were down, was that bad news or good news?

And, as with any consumer product—from automobiles to bubble gum to credit cards or cookies—marketing and merchandising mattered.

Our wonderful technology was whipped by a product that was merely okay, but supported by a company that truly understood what the customer wanted. For a “solutions” company like IBM, it was a bitter but vital lesson.

Opening up our stack (and our minds) to others had many positive effects on IBM. It cut our losses and improved our integrated offerings to customers. And it freed up resources to invest in the future. Huge sums of money and huge quantities of brainpower have been redeployed from wall-banging futility to exciting new work in areas such as storage systems, self-directing computers, bioinformatics, and nanotechnology.

Irving was the ideal executive to take on this task. He had come up through the technical side of IBM—through the IBM Research Division and the high-end computing businesses. So he had rock-solid technical credentials. But he also had the ability—in his endearing Cuban accent—to translate very complex technologies into understandable ideas that got people excited. This was important not only because many people in the business units did not fully understand our strategy, but also because Irving would be very effective in influencing people who did not report to him.

SHAPING THE CONVERSATION

We needed a vocabulary to help the industry, our customers, and even IBM employees understand that what we saw transcended access to digital information and online commerce. It would reshape every important kind of relationship and interaction among businesses and people…

It was more important to build an awareness and an understanding around our point of view. Creating that environment would require massive investments, both financial and intellectual.

For investors as well as customers, the lesson was: no shortcuts. I think for a lot of people, the “e” in e-business came to stand for “easy.” Easy money. Easy success. Easy life. When you strip it down to bare metal, e-business is just business. And real business is serious work.

Our messaging allowed our customers to see benefits and value that were not being articulated by our competitors. The concept of e-business galvanized our workforce and created a coherent context for our hundreds of products and services.

Many IT companies that have built their businesses on some proprietary product have tried to leap across that chasm. Few have made it across successfully.

For IBM, breaking with our proprietary past meant walking away from all the historic architectural control points.

The implications of this kind of leap to a company’s economic model can be devastating. In IBM’s case it meant the collapse of gross profit margins and the attendant changes we had to engineer to lower our cost structure without compromising our effectiveness.

Yet the hardest part of these decisions was neither the technological nor economic transformations required. It was changing the culture—the mindset and instincts of hundreds of thousands of people who had grown up in an undeniably successful company, but one that had for decades been immune to normal competitive and economic forces.

This kind of wrenching cultural change doesn’t happen by executive fiat. As I found, I couldn’t flip a switch and alter behaviors. It was, by any measure, the hardest part of IBM’s transformation, and at times I thought it couldn’t be done.

I came to see, in my time at IBM, that culture isn’t just one aspect of the game—it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value. Vision, strategy, marketing, financial management—any management system, in fact—can set you on the right path and can carry you for a while. But no enterprise—whether in business, government, education, health care, or any area of human endeavor—will succeed over the long haul if those elements aren’t part of its DNA.

Successful institutions almost always develop strong cultures that reinforce those elements that make the institution great. They reflect the environment from which they emerged. When that environment shifts,it is very hard for the culture to change. In fact, it becomes an enormous impediment to the institution’s ability to adapt.

This is doubly true when a company is the creation of a visionary leader. A company’s initial culture is usually determined by its founder’s mindset—that person’s values, beliefs, preferences, and also idiosyncrasies. It’s been said that every institution is nothing but the extended shadow of one person.

The more successful an enterprise becomes, the more it wants to codify what makes it great—and that can be a good thing. It creates institutional learning, effective transfer of knowledge, and a clear sense of “how we do things.

Watson’s eminently sensible direction was: Respect your customer, and dress accordingly.

However, Watson’s sensible connection to the customer was forgotten, and the dress code marched on. When I abolished IBM’s dress code in 1995, it got an extraordinary amount of attention in the press. Some thought it was an action of great portent. In fact, it was one of the easiest decisions I made—or, rather, didn’t make; it wasn’t really a “decision.” We didn’t replace one dress code with another. I simply returned to the wisdom of Mr. Watson and decided: Dress according to the circumstances of your day and recognize who you will be with (customers, government leaders, or just your colleagues in the labs).

I suspect that many successful companies that have fallen on hard times in the past—including IBM, Sears, General Motors, Kodak, Xerox, and many others—saw perhaps quite clearly the changes in their environment. They were probably able to conceptualize and articulate the need for change and perhaps even develop strategies for it. What I think hurt the most was their inability to change highly structured, sophisticated cultures that had been born in a different world.

I can understand the joke that was going around IBM in the early 1990s: “Products aren’t launched at IBM. They escape.

And, most challenging of all, they were almost inextricably interwoven with all that was good, smart, and creative about the company and its people—all the things it would have been madness to destroy, or even to tamper with. We couldn’t throw the baby out with the bathwater.

You can’t mandate it, can’t engineer it.

What you can do is create the conditions for transformation. You can provide incentives. You can define the marketplace realities and goals. But then you have to trust. In fact, in the end, management doesn’t change culture. Management invites the workforce itself to change the culture.

Tough as that was, we had to suck it up and take on the task of changing the culture, given what was at stake. I knew it would take at least five years. (In that I underestimated.) And I knew the leader of the revolution had to be me—I had to commit to thousands of hours of personal activity to pull off the change. I would have to be up-front and outspoken about what I was doing. I needed to get my leadership team to join me. We all had to talk openly and directly about culture, behavior, and beliefs—we could not be subtle.

And yet I was shocked to find so little customer and competitive information when I arrived. There was no disciplined marketing intelligence capability.

Years later I heard it described as a culture in which no one would say yes, but everyone could say no.

In IBM’s culture of “no”—a multiphased conflict in which units competed with one another, hid things from one another, and wanted to control access to their territory from other IBMers—the foot soldiers were IBM staff people. Instead of facilitating coordination, they manned the barricades and protected the borders.

I’m a strong believer in the power of language. The way an organization speaks to its various audiences says a lot about how it sees itself. Everywhere I’ve worked I’ve devoted a good deal of personal attention to the organization’s “voice”—to the conversations it maintains with all of its important constituencies, both inside and outside the company. And I have chosen my own words—whether in written, electronic, or face-to-face communications—very carefully.

The truth is, you can learn a great deal about a place simply by listening to how it talks.

I have always been an advocate for use of plain language that one’s customers easily understand, whether it be for invoices, contracts, or simple correspondence. So I decided to begin the end of widespread in-house terms.

... my kind of executives dig into the details, work the problems day to day, and lead by example, not title. They take personal ownership of and responsibility for the end result. They see themselves as drivers rather than as a box high on the organization chart.

In an organization in which procedures had become un-tethered from their origins and intent, and where codification had replaced personal responsibility, the first task was to eradicate process itself. I had to send a breath of fresh air through the whole system. So I

took a 180-degree turn and insisted there would be few rules, codes, or books of procedures…

I believe all high-performance companies are led and managed by principles, not by process. Decisions need to be made by leaders who understand the key drivers of success in the enterprise and then apply those principles to a given situation with practical wisdom, skill, and a sense of relevancy to the current environment.

We think and act with a sense of urgency. I like to call this “constructive impatience.

Some executives were beginning to exhibit the sort of personal leadership and commitment to change that I sought.

I needed, though, to provide support and encouragement for these risk takers. They were still surrounded by a lot of Bolsheviks who longed for the old system.

Nothing can stop a cultural transformation quicker than a CEO who permits a high-level executive—even a very successful one—to disregard the new behavior model.

IBM LEADERSHIP COMPETENCIES

Focus to Win

• Customer Insight

• Breakthrough Thinking

• Drive to Achieve

Mobilize to Execute

• Team Leadership

• Straight Talk

• Teamwork

• Decisiveness

Sustain Momentum

• Building Organizational Capacity

• Coaching

• Personal Dedication

The Core

• Passion for the Business

IBM over the past ten years has begun to develop the ability to handle a very high level of internal complexity and even apparent contradiction. Rather than hiding from conflict or suppressing it, we’re learning how to manage it, even benefit from it. This equilibrium can be achieved only when an enterprise has a very sure sense of self.

There are fundamentals that characterize successful enterprises and successful executives.

• They are focused.

• They are superb at execution.

• They abound with personal leadership.

23: FOCUS - YOU HAVE TO KNOW (AND LOVE) YOUR BUSINESS

“History shows that truly great and successful companies go through constant and sometimes difficult self-renewal of the base business. They don’t jump into new pools where they have no sense of the depth or temperature of the water.

In other words, acquisitions that fit within an existing strategy have the most likely probability of success. Those that represent attempts to buy new positions in new marketplaces or that involve smashing together two very similar companies are fraught with risk.

... good strategies start with massive amounts of quantitative analysis—hard, difficult analysis that is blended with wisdom, insight, and risk taking.

Intelligence Wins Wars

Perhaps the most difficult part of good strategy is hard-nosed competitive analysis. Almost every institution develops a pride in itself; it wants to believe it’s the best…

But facts are facts, and they’ve got to be assembled on a continuous, unbiased basis. Products have to be torn down and examined for cost, features, and functionality. Each element of the income statement and balance sheet has to be examined with total objectivity vis-à-vis competitors. What are their distribution costs? How many salespeople do they have? How are their salespeople paid? What do distributors think about them v. us? There are hundreds of questions that need analytical examination and which then must be pulled together in comprehensive, deep competitive assessments.

Good Strategy: Long on Detail

The most important value-added function of a corporate management team is to ensure that the strategies developed by the operating units are steeped in tough-minded analysis, and

that they are insightful and actionable. All of the critical assumptions—things such as pricing and industry growth rates—need rigorous and tough-minded review…

… truly great companies lay out strategies that are believable and executable. Companies that leap into new businesses and chase acquisitions willy-nilly are those that really don’t have a conviction about their existing strategy.

A good strategy will always identify critical holes, competitive weaknesses, and the potential to fill them with tactical acquisitions.

It worked, but it was a reminder to me of how difficult it is to get large organizations to give meaningful resources and attention to matters that offer little or no benefit to quarterly results, but which are critical to long-term success.

Those new ventures had to be protected from the normal budgetary cycle because if things get tight, more often than not, profit-center managers would be tempted to starve the future-oriented projects.

If a management team doesn’t believe that it has identified and is seriously funding new growth opportunities, then it is likely to wander off and drink the heady brew of acquisitions and diversification—and ultimately fail.

Execution—getting the task done, making it happen—is the most unappreciated skill of an effective business leader.

Thus, it is very hard to develop a unique strategy, and even harder, should you develop one, to keep it proprietary.

So, execution is really the critical part of a successful strategy. Getting it done, getting it done right, getting it done better than the next person is far more important than dreaming up new visions of the future.

Perhaps the greatest mistake I’ve seen executives make is to confuse expectations with inspection.

But alas, too often the executive does not understand that people do what you inspect, not what you expect.

Execution is all about translating strategies into action programs and measuring their results. It’s detailed, it’s complicated, and it requires a deep understanding of where the institution is today and how far away it is from where it needs to go. Proper execution involves building measurable targets and holding people accountable for them.

Execution is the tough, difficult, daily grind of making sure the machine moves forward meter by meter, kilometer by kilometer, milestone by milestone. Accountability must be demanded, and when it is not met, changes must be made quickly. Managers must be asked to report on their performance and explain their successes and failures. Most important, no credit can be given for predicting rain—only for building arks.

Great companies cannot be built on processes alone. But believe me, if your company has antiquated, disconnected, slow-moving processes—particularly those that drive success in your industry—you will end up a loser.

The best leaders create high-performance cultures. They set demanding goals, measure results, and hold people accountable. They are change agents, constantly driving their institutions to adapt and advance faster than their competitors do.

Exhibiting this kind of passion is a part of every top-notch executive’s management style. Who wants to work for a pessimist? Who wants to work for a manager who always sees the glass as half empty? Who wants to work for a manager who is always pointing out the weaknesses in your company or institution? Who wants to work for someone who criticizes and finds fault much quicker than finding excitement or promise? We all love to work for winners and be part of winning.

26: ELEPHANTS CAN DANCE

“Too Expensive, Too Slow

I believe that in today’s highly competitive, rapidly changing world, few if any large enterprises can pursue a strategy of total decentralization. It is simply too expensive and too

slow when significant changes have to be made in the enterprise.

Shared activities usually fall into three categories. The first and easiest category involves leveraging the size of the enterprise. Included here would be unifying functions like data processing, data and voice networks, purchasing and basic HR systems, and real estate management…

The second category involves business processes that are more closely linked to the marketplace and the customer. Here the drive to common systems can offer powerful benefits but most often involves linkages among the parts of a business that may or may not make sense. I’m thinking here of common customer databases…

This is the third—and most difficult—area of common activities, involving a shared approach to winning a marketplace, usually a new or redefined marketplace.

If a CEO thinks he or she is redirecting or reintegrating an enterprise but doesn’t distribute the basic levels of power (in effect, redefining who “calls the shots”), the CEO is trying to push string up a hill.

Continuing to drive change while building on the best (and only the best) of the past is the ultimate description of the job of Chief Executive Officer, International Business Machines Corporation.

Jerry York, Rick Thoman, and John Joyce, three great financial executives who instilled a level of productivity, discipline, and probing analysis into a company that appeared to value these quite lightly when I arrived…