Competitors snickered when they heard the name that IBM (IBM) Chairman John F. Akers gave to 1987: “Year of the Customer.” Isn’t every year the year of the customer? Was the computer colossus losing touch with the market? In a word, yes. While IBM salespeople kept pitching newer, faster, more reliable gear, potential customers really wanted good advice and software to solve specific business problems. Fast-growing rivals began nibbling away at Big Blue’s market share. Since Akers, 53, took charge three years ago, domestic revenues have dipped 5% and worldwide earnings have dropped 25%.
As the calendar pages turned, bemused competitors were wondering what Akers would call 1988. His answer came in April. At IBM’s annual meeting in Richmond, Virginia, he used the word turnaround. In the first quarter of this year, earnings were up 16% and revenues climbed 10%. Driving that growth is a redeployment of workers so huge as to be unprecedented in U.S. corporate history. It demonstrates how IBM really is catering to customers again.
Rather than respond to the declining earnings of the past three years with companywide layoffs, Akers has shifted 21,500 employees from such areas as manufacturing, development, and administration—where they are not needed—into marketing and programming. Some of the programmers have joined a new division that develops applications software to make computers perform specific tasks for specific customers, with the users coming in to tell IBM what they need. Another 11,800 redeployed IBMers have landed in the field as salespeople, whom the company calls “marketing reps,” and systems engineers, who also sell but act primarily as the customers’ technical consultants. Redeployment has increased the size of IBM’s marketing force by 20% in two years.
The man directing IBM’s new marketing charge is Edward E. Lucente, a vice president whose impatience and tendency to cut through clutter have prompted some coworkers to nickname him “Neutron Eddie” after GE’s short-fused chairman, Jack Welch. Given his job in 1986, Lucente, 48, swiftly revamped IBM’s network of sales offices in response to customers who complained that many marketing representatives did not understand their businesses. Now most branches in large metropolitan areas specialize in specific industries—for example, the office in downtown Philadelphia handles finance and insurance customers.
The company is dealing with a daunting challenge: How do you teach a plant employee, a lab technician, or a manager to sell? The way it is solving this problem offers lessons for any concern that must adapt to a changing business climate.
IBM does start with a couple of advantages. For one thing, the company has handled this job before. It shifted a few thousand workers from production and development into sales in the early 1970s. F. G. “Buck” Rodgers, who headed marketing back then and retired in 1984, describes the company’s happy discovery: “The redeployed people were just as successful in the field as new hires, if not more so.” In addition, company policy calls for IBM employees to be shuttled around frequently—the hoary joke about the corporate initials standing for “I’ve Been Moved” still gets a sardonic laugh—and workers are accustomed to building careers from diverse assignments.
J. William Titus, a 58-year-old grandfather, is one fellow who has been moved. He is now in the field force after 32 years at the company, where he acquired a background in marketing and product planning from 15 jobs in the U.S. and Britain. He is IBM’s marketing rep at Universal Corp., a Richmond tobacco company where his client is Sterling T. Baldwin, vice president in charge of management information systems. Baldwin says he didn’t want a new marketing rep and “was concerned that this guy was coming to Richmond just to retire.” Instead, Titus’s various IBM assignments gave him an instinctive understanding of how Universal’s top management thinks. Now he often helps Baldwin prepare presentations on the use of computer systems. Says Baldwin: “Experience breeds wisdom and maturity, and Bill brings a lot of integrity to the table when I’m dealing with senior management.”
To make that magic happen, IBM devotes substantial resources to training. It already spends over $1 billion a year educating its work force and customers—a bigger budget than Harvard University’s. The company offers the most rigorous and comprehensive sales education in the computer industry, with the initial training period lasting an average 13 months. Before they are admitted to it, the “redeploys,” as the company calls them, have passed aptitude tests and endured several interviews at branch offices, where local managers do the hiring.
In a normal year 80% of marketing trainees are recruits straight out of college. This year 2,100—or 60% of the 3,500 expected to graduate in the U.S.—are people who have been redeployed, some in their 40s and 50s. Much of their schooling takes place in Atlanta, where the older workers share apartments, usually four to a suite, with the young college graduates. Their instructors, standout performers from the field who are typically around age 30, are supposed to be their role models.
Yes, there are difficulties. Engineers do look at things differently from salespeople, says Cindy L. Murphy, 29, an instructor and former marketing rep out of Birmingham, Alabama. “They tend to think things are right or they’re wrong, and the first time we say, ‘It depends,’ they get a little frustrated,” she says. That’s a serious problem because selling “business solutions” requires more negotiating, coddling, and long-term advising of customers than hawking hardware ever did. The training program attacks the problem with a vast amount of role playing.
Technology comes to the company’s aid here. IBM has developed a self-study system called InfoWindow that combines a personal computer and a laser videodisc so that the computer becomes an interactive TV. Even before attending class in Atlanta, a trainee in a branch office can use a particular InfoWindow program—in finance or hospital administration, say—to practice sales calls with an on-screen actor who portrays a manager in one of these industries. IBM programs the system so that the actor responds differently depending on what the salesperson does.
Students can film themselves talking to the actors on a VCR linked to InfoWindow. Every IBM marketing rep is trained to handle objections in a sales call: Probe to clarify, verify understanding, empathize, then secure the agreement. On InfoWindow the interplay might go like this:
Actor/customer: I don’t think the system is right for us.
Trainee: Would you elaborate on your concern for me, Ms. Lewis?
Actor: Well, I have a concern about the cost of the system. I don’t think we are big enough to justify it.
Trainee: If I understand you correctly, Ms. Lewis, your concern is cost of the system, more precisely the cost justification. Is that correct? Actor:
Yes, that’s correct.
Trainee: I can understand your concern, Ms. Lewis. Many of our customers have felt the same way, but on a review of the cost justification … they have found that the system is fully justified …
Studies show that the trainee is his own toughest critic. He can play back the film and watch how he deals with a resistant customer. Ursula F. Fairbairn, 45, IBM’s director of education worldwide, says she used to think trainees couldn’t learn customer interaction via technology, but not anymore. “We’ll always need real classrooms,” she says. “I don’t see education going to total technology, but we are learning to expand the limits.”
In the classroom, sales training is intense. John H. Barron, 52, director of marketing education, says, “There are times when trainees are close to tears because of stress.” But they never cry in class. The group cheers and claps each time one of them is called on to act out a sales call with the teacher as customer. “There’s lots of bell ringing,” says Robert J. Keseley, 26, a redeployed electrical engineer from an IBM plant in Rochester, Minnesota. Keseley says his classmates are surprisingly open with one another. “Everyone tells his grades,” he says. “There’s so much camaraderie.”
The toughest adjustment for older redeployed IBMers is learning to study again. Anthony M. Sarge, 44, was an engineering manager overseeing production of semiconductor chips at an IBM facility in San Jose, California. When the company shut down his operation in 1986, he decided to become a marketing rep. He began sales training, he says, only to find that “my study skills had atrophied.” Written tests have been tough for him.
On the other hand, he and the other redeployed managers bring real-world business experience into the classroom. IBM recently added a competitive strategy course because customers said that sales reps did not know enough about the products other manufacturers had to offer. In that class IBMers who have switched from engineering sometimes provide information about Apple computers or Hewlett-Packard systems that even the instructors don’t know.
The redeployed IBMers also get to call on their real-world backgrounds in recently added industry specialization courses that last two weeks. With his branch manager’s help, a trainee chooses a line of business in which to develop expertise. He learns how people in those kinds of companies deal with problems in areas like operations, distribution, or personnel. This knowledge is basic for training marketing reps who might later work with customers in IBM’s new information systems investment strategies (ISIS) program, designed to increase software sales.
A marketing rep is part of an ISIS team that plays consultant to such customers as G. Heileman Brewing or Gulfstream Aerospace. The team spends several months interviewing management, touring facilities, analyzing operations, and looking at the customer’s information systems. Then it builds financial models of the company six years out, with and without various new investments in computer software.
With more salespeople on the field pitching new IBM services, some customers feel overwhelmed. One refers to the onslaught as “the attack of the locusts.” But most report that they are pleased so far. Gordon Searle, vice president of information systems at Heileman, says ISIS turned complicated decisions about investing in computer systems “into terms that senior management can understand.” Dean Redfern, a vice president at McCormick & Dodge in Natick, Massachusetts, says: “I want to hear how IBM can lower my cost of doing business. They’re making healthy strides toward it.”
Most of the redeploys are still in training or have just started selling, and Lucente says he has no good data yet on how well they have been performing. He is encouraged, though, by the fact that fewer than 100 of them failed to complete sales training—slightly lower than the usual dropout rate of less than 5%. Competitors are watching intently. Jerry Ungerman heads U.S. marketing operations of National Advanced Systems, a National Semiconductor unit that sells Hitachi computers and has chipped away at IBM’s dominance in mainframes. He says, “The key is putting people in slots where they want to go. IBM hires such competent people that the challenge is not their capability to sell, but their desire to do it.”
Desire does not appear to be the problem. D. Quinn Mills, a professor of business administration at Harvard business school, interviewed and surveyed hundreds of redeploys for a book on the subject to be published in June and found that 90% consider their job changes voluntary. Some 70% perceive their new assignments as career advances, even though most moves were lateral. “It’s remarkable that IBM could convert a business downturn into personal career opportunities for thousands of employees,” he says.
Lucente and his managers in IBM’s 263 branch sales offices have tried hard to place the new members of the sales force in jobs where they can apply their industry backgrounds. For example, Jan T. Burford, 29, is the new marketing rep for Lehigh University in Bethlehem, Pennsylvania. Burford received a master’s degree in management science from Lehigh in 1985 and then worked at IBM’s Endicott, New York, plant as an engineer developing the technology used to make midrange computers. When IBM announced the redeployment in 1986, Burford applied for a sales job because he thought that broadening his background would help advance his career.
Burford thinks his industrial engineering experience gives him an advantage with the people he deals with at Lehigh, who include the faculty and staff in the engineering and computer departments. “I already spoke their language,” he says. He began selling last summer and made the 100% Club for achieving his sales quota. Since IBM likes its employees to feel like winners, about 70% of the sales force make the 100% Club. Their rewards: a three-day trip that includes a recognition dinner, a blue and gold lapel pin that IBMers really do wear proudly, and perhaps their names posted on the branch office wall.
Dan Mancinelli, 44, who manages IBM’s branch in Sacramento, says all five of his eligible redeployed sales reps made the 100% Club last year. One member of his marketing team is Tony Sarge, the former semiconductor line manager whom Mancinelli has assigned to Intel, one of the branch’s largest accounts. Sarge is a little worried that he knows too much about his customer’s business and might start second-guessing him, but he says, “Knowing a lot is much better than knowing a little.”
IBM’s recruitment policy used to be hire-the-best-athlete because the company places a high value on such qualities as initiative, leadership, and a positive attitude. But now that it wants a sales force of business consultants rather than hardware drummers, the company finds that older workers with industry experience are often better prospects than recent college grads. Lucente says he expects to recruit more of his field corps from industry.
Every retrained IBMer will not slip neatly into marketing. But several members of IBM’s field force who initially viewed redeployment skeptically are optimistic now. “As it’s turning out, some of our best people are redeploys,” says a veteran. “They are, in effect, like our customers, and they know their needs.” Which is, of course, why the whole program got started.
A version of this article originally appeared in the June 6, 1988 issue of Fortune with the headline “How IBM Teaches Techies to Sell.”