On the cover of the May 1993 issue of Fortune magazine, three colossi of American business were depicted as lumbering, robotic dinosaurs. IBM, Sears, and GM were once “the biggest, most fearsome companies on earth,” the magazine declared. “Here’s how earnest executives managed them into historic decline.”
The word “dinosaur” might have been a stretch, the revered business writer Carol Loomis conceded in the piece: “The three are not extinct, only painfully and wheezingly gasping for breath.” IBM was perhaps gasping the most: It had fallen from being the world’s most valuable company in 1982 to the 26th most valuable in 1992, a year in which it recorded a $5 billion loss. Loomis told a sad tale of IBM’s missed opportunities and bad decisions (such as selling its stake in the chipmaker Intel), and of a bureaucratic culture that one business partner described as like swimming through “giant pools of peanut butter.”
What Loomis could not know at the time was that IBM was at the dawn of a remarkable turnaround that would be studied for years to come in business schools. Its newly appointed CEO, Lou Gerstner, went on to undertake an aggressive program of cost-cutting, restructuring, and refocusing on services and customers. In his memoir, Who Says Elephants Can’t Dance?, Gerstner describes dismantling the company’s stiff internal culture—abolishing its white-shirt-and-tie dress code and creating transparency around strategy, compensation, and promotions.
“Changing the attitude and behavior of thousands of people is very, very hard to accomplish,” Gerstner wrote. “You can’t simply give a couple of speeches or write a new credo for the company and declare that a new culture has taken hold. You can’t mandate it, can’t engineer it. What you can do is create the conditions for transformation, provide incentives.”
A similar challenge now faces IBM’s current CEO, Arvind Krishna, as Sharon Goldman writes in the June/July issue of Fortune. By 2021, a year into Krishna’s tenure, she explains, “[t]he venerable company had barely half the revenue it generated at its 2011 high-water mark. In recent decades, it had ceded the personal computer market to Microsoft while becoming, for many, a symbol of rigid management and bloat. Even more famously, IBM had face-planted in artificial intelligence, as the much-hyped Watson platform failed to live up to its initial promise.”
The company’s first-ever CEO with an engineering background, Krishna appears to be pulling off yet another vibe shift at IBM, energizing Big Blue by investing in specialized uses of AI and the infrastructure to support it; updating its hybrid cloud platform; and making what Goldman calls “a bold, multi-decade bet on quantum technology.”
It remains to be seen whether IBM will eventually go the way of the dinosaurs, but for now, Goldman writes, Wall Street likes what it sees, and employees are said to be feeling optimistic. “Today,” she writes, “some would argue that Krishna has the IBM pachyderm prancing with more agility than it has in decades.”
