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?

[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 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.

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.