Louis V. Gerstner Jr.
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Louis Vincent "Lou" Gerstner Jr. (born March 1, 1942) is an American businessman, best known for his tenure as chairman of the board and chief executive officer of IBM from April 1993 until 2002, when he retired as CEO in March and chairman in December. He is largely credited with turning IBM's fortunes around. Gerstner was formerly CEO of RJR Nabisco, and also held senior positions at American Express and McKinsey & Company. He is a graduate of
Chaminade High School Chaminade High School is a Roman Catholic Marianist college preparatory high school for boys in Mineola, New York, United States. Chaminade’s main campus is also home to Saragossa Retreat Center, one of their three retreat houses. Athletics T ...
(1959),
Dartmouth College Dartmouth College (; ) is a private research university in Hanover, New Hampshire. Established in 1769 by Eleazar Wheelock, it is one of the nine colonial colleges chartered before the American Revolution. Although founded to educate Native ...
(1963) and holds an
MBA A Master of Business Administration (MBA; also Master's in Business Administration) is a postgraduate degree focused on business administration. The core courses in an MBA program cover various areas of business administration such as accounti ...
from the Harvard Business School. Currently, Gerstner is the chairman of the board of directors of the Broad Institute of MIT and Harvard and chairman of the board of the Gerstner Sloan Kettering Graduate School of Biomedical Sciences. Gerstner is the author of ''Who Says Elephants Can't Dance'', the best-selling account of IBM's transformation; and he is the co-author of the book ''Reinventing Education: Entrepreneurship in America's Public Schools''.


American Express

Gerstner joined American Express in 1978 as the
executive vice president A vice president, also director in British English, is an officer in government or business who is below the president (chief executive officer) in rank. It can also refer to executive vice presidents, signifying that the vice president is on ...
of its charge card division. A year later he was named
president President most commonly refers to: *President (corporate title) * President (education), a leader of a college or university * President (government title) President may also refer to: Automobiles * Nissan President, a 1966–2010 Japanese ...
of the Travel Related Services group, which was responsible for American Express cards,
traveler's cheque A traveller's cheque is a medium of exchange that can be used in place of hard currency. They can be denominated in one of a number of major world currencies and are preprinted, fixed-amount cheques designed to allow the person signing it to ma ...
s, and travel-service offices. At this time, MasterCard and
Visa Visa most commonly refers to: *Visa Inc., a US multinational financial and payment cards company ** Visa Debit card issued by the above company ** Visa Electron, a debit card ** Visa Plus, an interbank network *Travel visa, a document that allows ...
had begun to compete for the company's market share. Gerstner found new uses and users for the card. In 1980, most department stores did not accept American Express cards — by 1985 retail sales were second only to airline tickets in card purchases. College students, physicians, and women were singled out in various marketing pushes. Corporations were persuaded to adopt the card as a more effective way of tracking business expenses. Gerstner also created exclusive versions appealing to higher-end clients, such as the Gold Card, which carried an annual fee of $65 and came with a $2,000 line of credit, and the Platinum Card, which had a $250 annual fee, a $10,000 check-cashing benefit, and private club memberships for traveling executives. As sales and profits rebounded, Gerstner was promoted to chairman and
chief executive officer A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of corporate executives charged with the management of an organization especial ...
of AmEx's Travel Related Services in 1982, and president of the parent company in 1985. Although he claimed the position at the age of 43, Gerstner dismissed the speculation that his success was the product of being a
workaholic A workaholic is a person who works compulsively. A workaholic experiences an inability to limit the amount of time they spend on work despite negative consequences such as damage to their relationships or health. There is no generally accepted ...
. Gerstner told Leslie Wayne, "I hear that and I can't accept that. A workaholic can't take vacations and I take four weeks a year." As chairman and chief executive officer of the Travel Related Services division, Gerstner spearheaded its successful "membership has its privileges" promotion. Not only was the division continually the most profitable in the company, but it also led the entire financial services industry. Despite these successes, Gerstner hit a ceiling at American Express, as chief executive James D. Robinson III was not expected to retire for another 12 years. During Gerstner's 11-year tenure at American Express, membership had increased from 8.6 million to 30.7 million. He left AmEx in 1989 to succeed Ross Johnson as chairman and chief executive officer of RJR Nabisco following its $25 billion
leveraged buyout A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money ( leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loa ...
by
Kohlberg Kravis Roberts KKR & Co. Inc., also known as Kohlberg Kravis Roberts & Co., is an American global investment company that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, credit, and, through its strate ...
.


IBM

Gerstner was hired as chairman and CEO of IBM in April 1993. The company's board had forced his predecessor
John Akers John Fellows Akers (December 28, 1934 – August 22, 2014) was an American businessman. He was president (1983-1989), chief executive officer (1985-1993) and chairman (1986-1993) of IBM. Education Akers attended Yale, and while there became a bro ...
to resign, looking first within the computer industry for his successor. However Apple's
John Sculley John Sculley III (born April 6, 1939) is an American businessman, entrepreneur and investor in high-tech startups. Sculley was vice-president (1970–1977) and president of PepsiCo (1977–1983), until he became chief executive officer (CEO) ...
,
Motorola Motorola, Inc. () was an American multinational telecommunications company based in Schaumburg, Illinois, United States. After having lost $4.3 billion from 2007 to 2009, the company split into two independent public companies, Motorol ...
chairman George Fisher, and
Bill Gates William Henry Gates III (born October 28, 1955) is an American business magnate and philanthropist. He is a co-founder of Microsoft, along with his late childhood friend Paul Allen. During his career at Microsoft, Gates held the positions ...
of
Microsoft Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washin ...
were not interested (other rumored candidates included
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of Compaq and Scott McNealy of Sun Microsystems). IBM then turned to Gerstner, an outsider with a record that suggested success whose older brother Richard had run the company's PC division until retiring due to health issues four years earlier. Gerstner was the first IBM CEO who was hired from outside the company. Upon becoming chief executive of IBM, Gerstner declared: "the last thing IBM needs right now is a vision", as he instead focused on execution, decisiveness, simplifying the organization for speed, and breaking the gridlock. Many expected heads to roll, yet Gerstner initially changed only the CFO, the HR chief, and three key line executives. In his memoir, ''Who Says Elephants Can't Dance?'', he describes his arrival at the company in April 1993, when an active plan was in place to dis-aggregate the company. The prevailing wisdom of the time held that IBM's core mainframe business was headed for obsolescence. The company's own management was in the process of allowing its various divisions to rebrand and manage themselves — the so-called "Baby Blues." Then-CEO John Akers decided that the logical and rational solution was to split IBM into autonomous business units (such as processors, storage, software, services, printers,) that could compete more effectively with competitors that were more focused and agile and had lower cost structures. Gerstner reversed this plan, realizing from his previous experiences at RJR and American Express that there remained a vital need for a broad-based information technology integrator. He discovered that the biggest problem that all major companies faced in 1993 was integrating all the separate computing technologies that were emerging at the time, and saw that IBM's unique competitive advantage was its ability to provide integrated solutions for customers – a company that could represent more than piece parts or components—something he only learned by going beyond just listening to the proponents of different technologies within IBM. His choice to keep the company together was the defining decision of his tenure, as these gave IBM the capabilities to deliver complete IT solutions to customers. Services could be sold as an add-on to companies that had already bought IBM computers, while barely profitable pieces of hardware were used to open the door to more profitable deals. One of the strategic visions that Gerstner set for IBM in 1993 was to make
e-business Electronic business (or "Online Business" or "e-business") is any kind of business or commercial transaction that includes sharing information across the internet. Commerce constitutes the exchange of products and services between businesses, grou ...
its heart and soul. He believed in the potential of B2B e-commerce and wanted to expand the application of the internet to more than just web-page browsing and consumer marketing. He argued that a network-centric approach would shift the workload from personal computers to larger enterprise-systems and allow the internet to be embedded into all aspects of business operations.IBM100 - e-business - Overview
Retrieved June 7, 2020 IBM's initial vision for how e-business could transform the world included electronic debit services that would allow customers to place orders online and eventually shop at virtual stores, creating virtual databases of movies, books, and music that would be available from anywhere in the world, and more. Soon after, Gerstner announced e-business as IBM's growth strategy and formed the IBM Internet Division, led by Irving Wladawsky-Berger. In 1996, IBM's marketing department established the term e-business for any kind of business or commercial transaction conducted over the internet. Under Gerstner, e-business transformed IBM and within six years, they became the market leader in providing the products and services needed to transform any of their customers businesses into a network-centric e-business. While IBM had been credited with turning the
personal computer A personal computer (PC) is a multi-purpose microcomputer whose size, capabilities, and price make it feasible for individual use. Personal computers are intended to be operated directly by an end user, rather than by a computer expert or tec ...
(PC) into a mainstream product, the company could no longer monopolize its market. A proliferation of cheaper IBM-compatible
PC clone IBM PC compatible computers are similar to the original IBM PC, XT, and AT, all from computer giant IBM, that are able to use the same software and expansion cards. Such computers were referred to as PC clones, IBM clones or IBM PC clones. ...
s that used the same Intel chips and Microsoft operating system software simply undercut it and eroded market share. Outgoing IBM chairman and CEO Akers, a company lifer, was excessively immersed in its corporate culture, remaining loyal to traditional ways that masked the real threats. As an outsider, Gerstner had no emotional attachment to long-suffering products IBM had developed to try to regain control of the PC market. Gerstner wrote that in spite of
OS/2 OS/2 (Operating System/2) is a series of computer operating systems, initially created by Microsoft and IBM under the leadership of IBM software designer Ed Iacobucci. As a result of a feud between the two companies over how to position OS/2 r ...
's technical superiority to the dominant Microsoft
Windows 3.0 Windows 3.0 is the third major release of Microsoft Windows, launched in 1990. It features a new graphical user interface (GUI) where applications are represented as clickable icons, as opposed to the list of file names seen in its predeces ...
, his colleagues were "unwilling or unable to accept" that it was a "resounding defeat" as it "was draining tens of millions of dollars, absorbing huge chunks of senior management's time, and making a mockery of our image". By the end of 1994, IBM ceased new development of OS/2 software. IBM withdrew from the retail desktop PC market entirely, which had become unprofitable due to price pressures in the early 2000s. Three years after Gerstner's 2002 retirement, IBM sold the PC division to Lenovo. In his memoir, Gerstner described the turnaround as difficult and often wrenching for an IBM culture that had become insular and balkanized. After he arrived, over 100,000 employees were laid off from a company that had maintained a lifetime employment practice from its inception. Long allowed by their managers to believe that employment security had little reference to performance, thousands of IBM employees had grown lax, while the top-performing employees complained bitterly in attitude surveys. In the goal to create one common brand message for all IBM products and services around the world, under Gerstner's leadership the company consolidated its many advertising agencies down to just
Ogilvy & Mather Ogilvy is a New York City-based British advertising, marketing, and public relations agency. It was founded in 1850 by Edmund Mather as a London-based advertising agency, agency. In 1964, the firm became known as Ogilvy & Mather after merging wit ...
. Layoffs and other tough management measures continued in the first two years of his tenure, but the company was saved, and business success has continued to grow steadily since then. From 1993 to Gerstner's retirement in 2002, IBM's market capitalization rose from $29 billion to $168 billion. Despite his success Gerstner also presided over the company's decline, relative to newer rivals, as it lost its once-dominant position in the IT industry. Microsoft grew beyond just PC software in the 1990s, hardware companies
Apple An apple is an edible fruit produced by an apple tree (''Malus domestica''). Apple trees are cultivated worldwide and are the most widely grown species in the genus ''Malus''. The tree originated in Central Asia, where its wild ancestor, ' ...
and Dell expanded their market share, and entirely new entities such as the
Google Google LLC () is an American Multinational corporation, multinational technology company focusing on Search Engine, search engine technology, online advertising, cloud computing, software, computer software, quantum computing, e-commerce, ar ...
search engine emerged and created new computer-based business empires. Gerstner was also the first highly-paid IBM CEO relative to his home-grown predecessors, earning a personal fortune of hundreds of millions in his role. His philosophy, quoted as "The importance of managers being aligned with shareholders—not through risk-free instruments like stock options, but through the process of putting their own money on the line through direct ownership of the company—became a critical part of the management philosophy I brought to IBM" has been criticized for IBM's management in the late 2000s becoming "fully isolated and immune from the long-term consequences of their decisions".


Post-IBM

In January 2003, Gerstner assumed the position of chairman of
The Carlyle Group The Carlyle Group is a multinational private equity, alternative asset management and financial services corporation based in the United States with $376 billion of assets under management. It specializes in private equity, real assets, and ...
, a
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global
private equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a t ...
firm. He served as chairman from January 2003 until October 2008 and upon retiring from that position, he continued as a senior advisor to Carlyle through September 2016. Gerstner held the position of chairman of the Broad Institute of MIT and Harvard from January 2013 - through May 2021. Gerstner established the Gerstner Family Foundation in 1989 and serves as the chairman. The Foundation primarily makes grants in Biomedical Research, Education, and Helping Hands. Gerstner Philanthropies, which encompasses all of Gerstner's philanthropic giving, has made over $180 million in grants to date. Most recently, in 2021, over $48 million was granted across all program areas.


Honors

In 1991, Gerstner received the Golden Plate Award of the
American Academy of Achievement The American Academy of Achievement, colloquially known as the Academy of Achievement, is a non-profit educational organization that recognizes some of the highest achieving individuals in diverse fields and gives them the opportunity to meet ...
. Gerstner was elected a member of the
National Academy of Engineering The National Academy of Engineering (NAE) is an American nonprofit, non-governmental organization. The National Academy of Engineering is part of the National Academies of Sciences, Engineering, and Medicine, along with the National Academy of ...
in 1999 for technical leadership in enhancing the competitiveness of U.S. industry. In recognition of his work on behalf of public education, as well as his business accomplishments, Gerstner was awarded the designation of honorary Knight of the British Empire by Queen Elizabeth II in June 2001. He has received numerous awards for his work in education, among them the Cleveland E. Dodge Medal for Distinguished Service to Education - Teachers College, Columbia University, and the Distinguished Service to Science and Education award from the American Museum of Natural History. In 2008, Gerstner received the Legend in Leadership Award from the
Yale School of Management The Yale School of Management (also known as Yale SOM) is the graduate business school of Yale University, a private research university in New Haven, Connecticut. The school awards the Master of Business Administration (MBA), MBA for Executiv ...
.


References

* * Gerstner, Jr., Louis V. (2002). ''Who Says Elephants Can't Dance?'' HarperCollins. . * *


External links


Official biography of Louis V. Gerstner, Jr.

Full Biographical Profile of Louis V. Gerstner, Jr.IBM's biography of GerstnerWebsite for the Gerstner Family Foundation
* {{DEFAULTSORT:Gerstner, Louis 1942 births American chief executives of Fortune 500 companies American Express people 20th-century American Jews American technology chief executives Chaminade High School alumni Dartmouth College alumni Harvard Business School alumni Honorary Knights Commander of the Order of the British Empire IBM employees Living people McKinsey & Company people Members of the Steering Committee of the Bilderberg Group Members of the United States National Academy of Engineering People from Mineola, New York 21st-century American Jews