ChapterTwo® Blog

Insights from Lou Gerstner

Friday, October 24, 2014

I will always be a fan of Lou Gerstner for what he did for IBM, and our stock.  He truly saved the company, more than most realize.  Since leaving IBM, he has continued to lead a “portfolio” life in education, healthcare and private equity.  A recent interview published in the McKinsey & Company Quarterly (PDF / URL) shares his thoughts on the DNA of companies that keep on creating value.

One of those is his answer to “Is there something in the DNA of those firms that have endured?”  “Longevity is the capacity to change, not to stay with what you’ve got.”  He goes on to share that American Express resisted creating a credit card because they were afraid that it would impact their travelers check business, and IBM resisted other markets because mainframe computers were the major revenue source.  Where are travelers checks and mainframes today, and what would those companies be if they waited too long?  Perhaps like Kodak, which was afraid to impact their profitable film business despite owning all of the patents on digital cameras. 

After discussing the natural inertia against change, he says “Rather than changing, they find it easier to just keep on doing the same things that brought them success.  Remember that the enduring companies we see are not really companies that have lasted for 100 years.  They’ve changed 25 times or 5 times or 4 times over that 100 years, and they aren’t the same companies as they were.”

It is an insightful article, which you are encouraged to read.  But think about these points on a personal level as well.  As I talk with successful leaders about their own career inertia against change, the same things apply.  It is hard, and takes courage, to change what has worked.  Yet it is more apparent every day that twenty or more years of senior executive success does not guarantee another ten.  Failing to become proactive, and think in new paradigms, is a greater and greater risk.  And those who wait too long find their career in a turn-around situation — not because of any lack of ability, but because of market changes that were not anticipated far enough ahead.  Not many of you like turn-around situations, and certainly not for your own career.  The formula that creates sustainable companies also creates sustainable and satisfying careers.  Change ahead of the curve, before you are forced to!  Because if you lead the change, you have choice, about timing and the path you take. 

– Jim Deupree

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