The Sales Mistake That Almost Bankrupt IBM
and how Louis Gerstner turned the company around
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In today’s Follow Up:
IBM’s biggest sales mistake 😵
A word from Beehiiv 🍯
How to respond to “just send me info” 💡
Sales on the internet 💻️
LinkedIn, sales meme, & review 😂
The Sales Mistake That Almost Killed IBM
IBM is like your Grandpa’s wealthy friend.
They’ve been around forever, and make a ton of money. But you’re not totally sure what they do.
The International Business Machines Corporation (IBM) was founded in 1911 by Charles Flint and was originally created through a merger of 3 manufacturing businesses going by the name of Computing-Tabulating-Recording Company (or C-T-R for short… they’ve never been known for their brand creativity).
C-T-R manufactured and sold Tabulating Machines, which were used to count large data sets like city populations or product inventory.
Before the machine, you’d have to manually tally up your findings and hope that by the time you were done counting, you didn’t mess up anything.
With the machine, you could count an entire data set with the use of a hole-punched note card that held someone’s city of residence, age, nationality, and job.
The IBM 100
This was revolutionary for its time.
In 1914, Flint hired Thomas Watson Sr., who ultimately changed the name to IBM, and grew it to be one of the biggest players in the technology industry.
Fast forward to today, and IBM does over $15 billion in yearly revenue and has a market cap of more than $128 billion.
Side note: If you held 1 share of IBM from 1914 till now, it would be worth $1.67M.
Anyways… even though IBM became a massive success, it wasn’t always smooth sailing.
In the early 90’s, IBM started seeing sales declines as they began losing their share of the PC market. They were in desperate need of a turnaround and went on the hunt for a new CEO who could save them.
That’s when they came across Louis Gerstner.
Even though Louis most recently served as the CEO of Nabisco (the brand behind Saltines and Oreos) and he had no software industry experience, he took control of the sinking ship and made history.
Before taking over as CEO, Louis had the opportunity to interact with the IBM sales team as a buyer at his previous companies in the ‘60s & ‘70s.
"IBM's extraordinary success in the '60s and '70s was built on one of the most dynamic sales cultures in the world. They were very good, very relentless, very focused. And very individualistic."
But when he saw the inside of IBM’s sales team in the 90’s, he realized what was wrong.
Sales teams within different organizations of the company were competing with each other. Since they were only tasked with hitting their team’s quota, the sales teams were fighting to sell different products to the same customers.
So the first thing Louis changed was how IBM sales reps sold.
Instead of sales teams selling one specific product or service, each rep was now responsible for helping customers with their entire tech stack. In some cases, this even meant recommending a competitor’s product if it best served their customer.
If you’re someone who’s experienced a massive change in a sales organization like this, you know how hard it can be. This change came with backlash and turnover but ultimately was one of the key moves that saved IBM from bankruptcy.
Fired 80+ marketing agencies to exclusively work with Ogilvy & Mather.
Got rid of IBM’s formal dress code.
Tied employee pay to the company’s performance.
And most importantly… he got rid of the “no alcohol on the premises” policy (possibly the biggest win for the IBM sales team at the time). 😂
When Louis originally took over IBM, they were losing roughly $8 billion per year. By the time he handed it over to the new CEO in 2002, the company was making over $7 billion per year.
Internal teams need to be aligned on outcomes.
Example: Marketing is tasked with delivering a specific number of leads instead of leads that convert to new business.
Big changes to your sales structure are overwhelming.
But in most cases they’re necessary to save the future of the business (and your bank account).
Do you recommend a competitor's product if you know it's better for your customer?
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