IBM Under Gerstner

In 1993, IBM posted roughly $8 billion in losses, the largest single-year corporate loss in American history to that point. Wall Street's prescription was amputation: break the lumbering giant into focused pieces and let the parts find their own value. The board was ready. Then Lou Gerstner, a newcomer with no technology background, arrived from American Express and RJR Nabisco, spent his first months listening to IBM's biggest customers, and heard something that pointed the opposite way.

This is a case about asking what business you are actually in, and the discipline to act on an answer that contradicts both the analysts and your own history. For founders and operators, it sharpens the gap between what you think you sell and what customers actually hire you to do, and what it costs to let go of the thing that once made you great.