On April 1, 1993, Lou Gerstner became the first outsider to run IBM. The board had forced out John Akers in January, just as the company was reporting its largest annual loss. IBM, as Bloomberg’s obituary of Gerstner later put it, was “facing a choice of bankruptcy or dismemberment.”
Dismemberment was already under way. The plan was to break the company into a dozen or more semi-autonomous units, nicknamed the “Baby Blues.” And the man now in charge had come from American Express and RJR Nabisco, not from computers. In picking him, Bloomberg wrote, the board “chose managerial experience over computer expertise.”
The fifty executives
That spring, Gerstner launched something he called Operation Bear Hug. In his memoir he describes it this way: “Each of the fifty members of the senior management team was to visit a minimum of five of our biggest customers during the next three months.”
The press conference
By July, as Robert Slater’s history of the period quotes Gerstner, there had been “a lot of speculation” about when he would deliver a vision. At a press conference that month, he gave his answer: “The last thing IBM needs right now is a vision.”
“You could almost hear the reporters blink,” he wrote years later.
Jim Collins, writing in 2009, read it as an order of operations: by “right now,” Gerstner did not mean IBM should never have a vision.
Together
The breakup didn’t happen. Gerstner wrote that he couldn’t say exactly when he decided to keep IBM together, and didn’t remember a formal announcement. The Economist, he recalled, called his intention “short-sighted.”
He stayed nine years. According to Bloomberg, IBM’s services revenue went from $7.4 billion in 1992 to $30 billion in 2001, and from his first day until he announced in January 2002 that he was stepping down, IBM’s shares rose ninefold while the S&P 500 gained 154%.
Much of the inside detail here comes from Gerstner’s own book. The chapter that follows Operation Bear Hug in it has a title that answers his own famous line: “Stop the Bleeding (and Hold the Vision).”