Chapter 11 Section 4 He also makes (chip) chips
If you do a public opinion survey in IBM, who is the person who has contributed the most to IBM, then besides Watson and his son, it must be Louis Gerstner (Louis Gerstner). In 1993, Gerstner, who had never worked in IBM, was ordered to be the CEO of IBM.He successfully completed the transformation of IBM from a computer hardware manufacturing company to a service company with service and software as the core, revived this century-old store, and initiated IBM's ten-year continuous development.Gerstner was originally the president of a food company, and he worked for the American credit card company American Express before, and he didn't understand computers at all.In English, computer chips and potato chips are the same word—chip, so everyone joked that he also made (chip) chips, but potato chips (He also made chips, but potato chips) The sentence was originally a ridicule of him, and later became a symbol of his legend.Gerstner, who has no working experience in high-tech companies, has created a myth in the world's largest high-tech company.
The first thing Gerstner did after he came to power was to conduct a large-scale reorganization of IBM. Because IBM has been in a monopoly position in the computer industry for a long time, everyone from top to bottom is used to a comfortable environment with high benefits.Huge organization, bureaucracy, overstaffed and serious internal conflicts, etc., in short, behind the prosperity there are many crises.Therefore, once entering the era of the information revolution, in which all heroes compete, IBM, a company that Gerstner compared to an elephant, cannot keep up with its opponents.
People in IBM often tell such a story. In IBM, how long would it take to move a cardboard box from the second floor to the third floor.This thing that could have been done in a few minutes took months at IBM.The reason is that to move a box, you have to make a report first, and then go through layers of approval; after the approval, the approval report is implemented layer by layer, and finally handed over to the moving company that moves for IBM.On the task list of the moving company, the task of last month may not be completed yet. It would be good if the task list submitted now can be completed in one month.In this way, it is not surprising that it takes several months to move a cardboard box.
Gerstner, like a brilliant doctor, started IBM, which has been riddled with holes.His first move is to use his own words to dissolve IBM. In layman's terms, it is to increase revenue and reduce expenditure.He started by cutting some redundant departments and some dead-end projects.Including items for the operating system OS/2 we mentioned earlier.In this way, the staff is reduced accordingly, and the cost is naturally reduced.However, increasing your income in a short period of time is not an easy task.Gerstner's approach was to sell some assets.Anyone who has been to the IBM Almaden laboratory will find that the very luxurious building is very asymmetrical and seems to be only half built.In fact, this is indeed the case. IBM built half of it and ran out of money, so it left this unfinished building (see attached photo).Moreover, Gerstner also wanted to sell the half of the building, but the building was too expensive. When the US economy was in recession in the early 1990s, no company could afford it, so it was able to stay at IBM.Gerstner said afterwards that these decisions to abolish departments and sell assets were not only his at IBM, but also the most difficult decisions in his life.
Next, he reformed some of the company's institutions and systems.First, he quietly bought back some of the service companies that had been split out (IBM was about to go bankrupt at that time, and the US government did not object to it buying back the service companies), and then integrated IBM's hardware manufacturing, software development and services .Compared with almost contemporary AT&T's practice of splitting the company, Gerstner is completely in the opposite direction.His purpose is to build an aircraft carrier for the IT service industry.Within the company, it introduces a competition mechanism, and a project may have multiple teams developing back-to-back.In order to prevent mutual dismantling and strengthen cooperation, Gerstner linked everyone's pension to the benefits of the whole company, rather than the previous departments.
In research, Gerstner reduced R&D spending from 9% of turnover to 6%.The previous IBM lab was very similar to Bell Labs, with a lot of theoretical research. Gerstner cut off some research that was more theoretical and not beneficial, and combined research and development.Once a research project is practical, he moves the entire research group from the laboratory to the product department.In the later stage, he even required all IBM researchers to earn a certain salary from product projects.This approach undoubtedly translates research into products very quickly.But doing so will undoubtedly affect IBM's long-term research and basic research. In order to make up for this loss, IBM has strengthened its cooperation with universities, and has carried out scientific research cooperation or established scholarships in dozens of universities.
Under Gerstner's leadership, IBM quickly came out of the woods. IBM established itself as a service-oriented technology company and positioned its user base at the enterprise level, while giving up the end-consumer market that it was not good at.In the past, in the competition for low-end enterprise users, IBM has no advantage because its products are too expensive.In the last few years of Gerstner's tenure, IBM began to promote cheap open source Linux servers. For the first time, IBM's products are cheaper than competitors.After ten years of hard work, Gerstner completed the transformation of IBM and established IBM's dominant position in computer products and services for enterprises of all sizes.Today, IBM is the world's largest producer of Linux servers, an open source operating system.In the 1990s, IBM and AT&T took two diametrically opposed paths. AT&T broke up and sold a good company, and IBM integrated the separated companies to create an aircraft carrier from hardware to software to service.Today, it seems that IBM is undoubtedly on the right path.It can be seen from the trend chart of IBM stock below that since the second half of 1993, IBM's performance has developed by leaps and bounds.During Gerstner's ten-year tenure as CEO, IBM's stock grew tenfold. (See illustration) Today, although Gerstner is no longer the CEO of IBM, IBM is still developing in the direction he established.From the different results of IBM and AT&T, we can see the difference in the level of management between a farsighted operator and a group of greedy short-term speculators.
Next, he reformed some of the company's institutions and systems.First, he quietly bought back some of the service companies that had been split out (IBM was about to go bankrupt at that time, and the US government did not object to it buying back the service companies), and then integrated IBM's hardware manufacturing, software development and services .Compared with almost contemporary AT&T's practice of splitting the company, Gerstner is completely in the opposite direction.His purpose is to build an aircraft carrier for the IT service industry.Within the company, it introduces a competition mechanism, and a project may have multiple teams developing back-to-back.In order to prevent mutual dismantling and strengthen cooperation, Gerstner linked everyone's pension to the benefits of the whole company, rather than the previous departments.
In research, Gerstner reduced R&D spending from 9% of turnover to 6%.The previous IBM lab was very similar to Bell Labs, with a lot of theoretical research. Gerstner cut off some research that was more theoretical and not beneficial, and combined research and development.Once a research project is practical, he moves the entire research group from the laboratory to the product department.In the later stage, he even required all IBM researchers to earn a certain salary from product projects.This approach undoubtedly translates research into products very quickly.But doing so will undoubtedly affect IBM's long-term research and basic research. In order to make up for this loss, IBM has strengthened its cooperation with universities, and has carried out scientific research cooperation or established scholarships in dozens of universities.
Under Gerstner's leadership, IBM quickly came out of the woods. IBM established itself as a service-oriented technology company and positioned its user base at the enterprise level, while giving up the end-consumer market that it was not good at.In the past, in the competition for low-end enterprise users, IBM has no advantage because its products are too expensive.In the last few years of Gerstner's tenure, IBM began to promote cheap open source Linux servers. For the first time, IBM's products are cheaper than competitors.After ten years of hard work, Gerstner completed the transformation of IBM and established IBM's dominant position in computer products and services for enterprises of all sizes.Today, IBM is the world's largest producer of Linux servers, an open source operating system.In the 1990s, IBM and AT&T took two diametrically opposed paths. AT&T broke up and sold a good company, and IBM integrated the separated companies to create an aircraft carrier from hardware to software to service.Today, it seems that IBM is undoubtedly on the right path.It can be seen from the trend chart of IBM stock below that since the second half of 1993, IBM's performance has developed by leaps and bounds.During Gerstner's ten-year tenure as CEO, IBM's stock grew tenfold. (See illustration) Today, although Gerstner is no longer the CEO of IBM, IBM is still developing in the direction he established.From the different results of IBM and AT&T, we can see the difference in the level of management between a farsighted operator and a group of greedy short-term speculators.