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Leading by Values

In: Business and Management

Submitted By zbayruti
Words 3253
Pages 14
9-411-097
REV: JULY 21, 2011

WILLIAM W. GEORGE

Leading by Values: Sam Palmisano and IBM
In 2002 Sam Palmisano became chairman and CE O of IBM, succeeding the legendary Lou
E
Gerstner. Gerstner, coming from RJR Nabisco and before that American Express, was sought out by the IBM board to replace John Akers as CEO when the c ompany was facing the greatest crisis in its s history; Gerstner took over IBM’s helm in 1994. IBM w as on the brink of bankruptcy, with many r shareholders pressuring management to capture near-ter m value by divesting pieces of IBM. At the time, Gerstner was viewed as one of the few executives w ho could save the compan . ny When Gerstner arrived on the scene, internal IBM te ams were considering splitting IBM into as many as 13 smaller companies, each of which could com pete as an independent en y. Ironically, in ntit the 1980s under the leadership of former CEO John Opel , IBM had fought off an anti-trust suit from the U.S. government seeking to break up IBM into mult iple companies because of its dominance of t the mainframe computer business. In this same time fram AT&T was ordered to separate its longme distance service, local telephone service, manufacturing a nd R&D into independent companies.
Gerstner quickly concluded that breaking up IBM wo uld be a mistake of historic proportions. He l recognized that IBM had drifted from its roots of provid ing superior customer service and offering complete systems to its customers (often criticized as “bundling”). He also realized the company’s management had become very insular and internally focu sed. At that time IBM was primarily run by a series of large committees. The organization had many l ayers and very high corporate overhead.1
Gerstner decided to restore the company to its cu stomer-focused roots. To reduce internal orientation, he simplified its

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