Former IBM Chairman and CEO Lou Gerstner Addresses Georgetown MBAs

August 31, 2008 Lou Gerstner

Cynthia S. Shaw
(202) 687-4080

Former IBM Chairman and CEO Lou Gerstner Addresses Georgetown MBAs

Lou V. Gerstner, Jr., the former CEO of IBM credited with the astonishing turnaround of the computing giant, visited Georgetown University's McDonough School of Business on Tuesday, August 31. The event, part of the MBA Distinguished Speaker Series, marked the beginning of the academic year for Georgetown MBA students.

"Leaders create excellence where average performance might have been, in the absence of that person," Gerstner told a capacity crowd of Georgetown MBA students.

When industry outsider Gerstner accepted the top position at IBM, the company was in crisis. This, he told students in the packed auditorium, made it possible for him to make the sweeping changes necessary to resurrect the company - and for his employees to see the necessity. In 1993, "Big Blue" reported an $8.1 billion dollar net loss. When Gerstner stepped down in March 2002, IBM had re-established itself as a computing powerhouse.

Gerstner's address centered on three fundamentals of business - focus, execution, and personal leadership - which he illustrated using examples from his personal experience at IBM.

"I have seen so many companies that when the going gets tough in their base business, they decide to try their luck in new industries. You have to be selective in the business you choose," Gerstner advised. "I have learned that this problem is the most common cause of corporate mediocrity."

Gerstner told students most business strategies are similar because all industries are defined by basics known by all the players. Therefore, "execution is the most unappreciated skill in business leaders."

Personal leadership was emphasized to the audience. "Great CEOs," he suggested, "roll up their sleeves and tackle problems personally."

According to Gerstner, the most important decision he has made in his career was to defy the current wisdom to break IBM into pieces and sell the parts. Instead, Gerstner identified four immediate actions to undertake: to stop the bleeding, identify new growth areas, erase the ideology within the company that IBM was all-knowing, and to deliver on the integration of total solutions for customers. "Too many executives don't want to fight the tough battles of resurrecting and strengthening their main business," he said.

The most critical element of corporate transformation, Gerstner proposed, is the role of corporate culture. He discussed the necessity of integrating IBM business units into a unified company, rewarding behavior, and carrying forward past cultural strengths while eliminating rules that had lost their connection. "Management can only create the environment and then invite the workforce to change its culture."

First-year Georgetown MBA student Tamuna Loladze from the Republic of Georgia was particularly interested in Gerstner's opinions on corporate culture. "The most important thing I took away from the lecture was that the reasoning for decisions made at the top must be communicated to the people responsible for implementation. And, while basic cultural goals may be transferred across borders, countries must adapt the remainder to their respective cultures."

Following the 30-minute talk, Gerstner answered questions from students in the audience for 40 minutes. Among the issues Gerstner was asked to address were outsourcing of U.S. jobs to foreign countries, company size as a competitive advantage, and affecting cultural changes in an organization as a junior employee.

"I never thought that, before classes even started, I would have the opportunity to ask questions of an important CEO and to be involved in one-on-one interaction. I didn't realize how quickly I would be immersed," said Shahed Amanullah, first-year Georgetown MBA student.

"It was a fantastic talk as well as a great way to welcome the first-year class and kick-off the school year in a unique way," said Dan Hargett, a second-year Georgetown MBA student. Hargett and former governor of Oklahoma Frank Keating (C '66) were instrumental in arranging the event.

When asked if he regretted any mistakes or failures, Gerstner replied, "There were many. The important thing is none of them were fatal. I never got protective and risk averse. If you learn from your mistakes and don't allow them to change how you do business, it's terrific."