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I’ve had a lot of experience turning around troubled companies, and one of the first things I learned was that whatever hard or painful things you have to do, do them quickly and make sure everyone knows what you are doing and why. Whether dwelling on a problem, hiding a problem, or dribbling out partial solutions to a problem while you wait for a high tide to raise your boat—dithering and delay almost always compound a negative situation. I believe in getting the problem behind me quickly and moving on.

I announced Operation Bear Hug. Each of the fifty members of the senior management team was to visit a minimum of five of our biggest customers during the next three months. The executives were to listen, to show the customer that we cared, and to implement holding action as appropriate. Each of their direct reports (a total of more than 200 executives) was to do the same. For each Bear Hug visit, I asked that a one- to two-page report be sent to me and anyone else who could solve that customer’s problems. I wanted these meetings to be a major step in reducing the customer perception that dealing with us was difficult. I also made it clear that there was no reason to stop at five customers. This was clearly an exam in which extra credit would be awarded.

No institutional transformation takes place, I believe, without a multi-year commitment by the CEO to put himself or herself constantly in front of employees and speak in plain, simple, compelling language that drives conviction and action throughout the organization.

The sine qua non of any successful corporate transformation is public acknowledgment of the existence of a crisis. If employees do not believe a crisis exists, they will not make the sacrifices that are necessary to change. Nobody likes change. Whether you are a senior executive or an entry-level employee, change represents uncertainty and, potentially, pain.

Using the broadest definition, sales is about fulfilling the demand that marketing generates. When it’s done well, marketing is a multi-disciplinary function that involves market segmentation and analysis of both competitors and customer preferences, corporate and product brand management, advertising, and direct mail. That’s only a partial listing. While IBM clearly had to sell more of what it made, it also had to recast its image and reestablish its relevance to the marketplace.

Abby’s job was to get control of the spending and the messages. I asked her to present a plan to the newly formed Worldwide Management Council at our conference center in Palisades, New York. It was a tough meeting, but she did a very smart thing. When the thirty-five WMC members walked into the room, they found every wall adorned with the advertising, packaging, and marketing collateral of all our agencies. It was a train wreck of brand and product positioning.

I asked Abby to bring the top three people at O&M to our corporate headquarters. We were about to bet the IBM brand on these people, so I wanted to make sure we were all clear about the stakes we were playing for—to look them in the eye and hear them commit to the success of this effort, no matter what it was going to take. Interestingly, the meeting revealed that they had a parallel objective. They were betting a big part of their future on IBM—and resigning from several of their existing accounts. So, in fact, we were looking each other in the eye.

I’ve described in detail the changes made to the stock-option program principally because I wanted to underscore my belief that you can’t transform institutions if the incentive programs are not aligned with your new strategy.

The other critical factor—one that is sometimes overlooked—is the impact of the antitrust suit filed against IBM by the United States Department of Justice on January 31, 1969, the final day of the Lyndon B. Johnson administration. The suit was ultimately dropped and classified “without merit” during Ronald Reagan’s presidency, but for thirteen years IBM lived under the specter of a federally mandated breakup. One has to imagine that years of that form of scrutiny changes business behavior in very real ways. Just consider the effect on vocabulary—an important element of any culture, including corporate culture. While IBM was subject to the suit, terms like “market,” “marketplace,” “market share,” “competitor,” “competition,” “dominate,” “lead,” “win,” and “beat” were systematically excised from written materials and banned at internal meetings. Imagine the dampening effect on a workforce that can’t even talk about selecting a market or taking share from a competitor. After a while, it goes beyond what is said to what is thought.

Despite Dennie’s view that his unit should be a stand-alone business, not a subset of the sales team, I did not break it out initially. Rather, I spent countless hours working with our teams to develop a sense of mutual dependence between the services and sales people. Services people had to learn that the sales team could get them in the door. The sales people had to realize that services specialists could develop major new avenues of revenue in their accounts.

On more than one occasion I found one of these people in my office, railing against the renegades from services. My answer was always the same: “You need to invest the resources necessary to work with the services team to ensure they understand the competitive advantages of your products. View them as a distribution channel for your products. Your competitors do!”

We were expert at managing factories and developing technologies. We understood cost of goods and inventory turns and manufacturing. But a human-intensive services business is entirely different. In services you don’t make a product and then sell it. You sell a capability. You sell knowledge. You create it at the same time you deliver it. The business model is different. The economics are entirely different.

That’s a bet on a couple of things, starting with your willingness to use your balance sheet. You can’t get into that kind of business without making the commitment to carry the infrastructure and loss until a contract that could extend over five or ten years becomes profitable. There’s no such thing as a toe in the water. When you take this plunge, it’s full-body immersion. It’s a bet on your ability to drive economies of scale—to consolidate lots of customer data centers into megaplexes (what the industry calls “server farms”) or the ability to do with 750 people what two or three customers once did with 1,000. We had to bet that we could build the recruitment, training, compensation, and HR processes to bring in 1,000 or more people a month—even though we’d never attempted anything remotely close to that. In fact, in the mid- to late 1990s, when services was consistently growing 20-plus-percent a quarter, we knew we could do even better if we had more people. But we capped our hiring at about these levels simply because we thought we’d overextend our ability to hire and train qualified people. Finally, we had to learn how to be disciplined—how to negotiate profitable contracts, price our skills, assess risk, and walk away from bad contracts and bad deals.

To set up the software bet we were about to make, think about software doing its work on three levels: At the base, there are the operating systems that tell the hardware what to do. At the top, there is all the application software, like a spreadsheet, a program for calculating your income tax, or a graphic design program. This is what an end user sees on the screen. In between, there is a collection of software products that connect the two.

It was the complex, largely invisible layer (aptly named “middleware”) about which only the most hardcore techies could get excited. Yet the more we considered what was going to matter if client/server computing gave way to networked computing, middleware started to look less like a backwater and more like the key strategic battleground. We couldn’t see the entire picture at the time, but we could see enough.

We moved on from simple licensing to actually selling technology components to other companies. Initially, we sold fairly standard products that were broadly available in the marketplace but that, nevertheless, IBM chose to make for itself. Here we were competing with many other technology suppliers, such as Motorola, Toshiba, and Korean semiconductor manufacturers. The principal product we offered in the market was simple memory chips called DRAMs (pronounced D-RAMS).

Consequently, riding the DRAM wave was the price of admission for us to enter the technology component marketplace. We had essentially exited the DRAM market by 1999, but by then DRAMs had given us an entry point. Now potential customers worried less about our reliability as a supplier or whether we had a serious commitment to this business.

As I’ve discussed, the action was going to be driven by the proliferation of Internet access devices, exploding data and transaction volumes, and the continued build-out of communications infrastructure. All that was driving demand for chips—and, to our great delight, chips that would have fundamentally different characteristics from the lookalike processors that powered lookalike personal computers. In this new model, value would shift to chips that powered the big, behind-the-scenes processors. At the other end of the spectrum there would be demand for specially designed chips that would go inside millions, if not billions, of access devices and digital appliances. And in between would be chips in the networking and communications gear. This is the kind of sophisticated development activity that not only allows great technology companies to shine, but it also generates margins that support the underlying investment necessary to lead. Over the next four years, IBM’s Technology Group went from nowhere to number one in custom-designed microelectronics. I’m happy to say that PowerPC has experienced its own renaissance here, quietly reemerging as a simpler, cheaper, more efficient processor used in a wide range of custom applications, including game consoles. Just consider that IBM’s contracts with Sony and Nintendo in 2001 hold the potential to produce more intelligent devices than the entire PC industry produced in 2000.

First, the buyers were individual consumers, not senior technology officers. Consumers didn’t care much about advanced, but arcane, technical capability. They wanted a PC that was easy to use, with a lot of handy applications. And, as with any consumer product—from automobiles to bubble gum to credit cards or cookies—marketing and merchandising mattered. Second, Microsoft had all the software developers locked up, so all the best applications ran on Windows. Microsoft’s terms and conditions with the PC manufacturers made it impossible for them to do anything but deliver Windows—ready to go, preloaded on every PC they sold. (Even IBM’s own PCs came preloaded with OS/2 and Windows!) And in the mid-1980s, the Windows marketing and PR machine alone had more people than IBM had working with software partners or distributors. Our wonderful technology was whipped by a product that was merely okay, but supported by a company that truly understood what the customer wanted. For a “solutions” company like IBM, it was a bitter but vital lesson.

Based on nothing more than a Web site, companies with no earnings and no prospects of ever operating in the black were awarded market valuations that exceeded many of the world’s most respected companies. If you weren’t a dot-com, prevailing wisdom said you would be dot-toast.

What were the real lessons, after all the meteoric ascents and equally rapid flameouts? For customers I think the overriding lesson was that those who didn’t get distracted and were willing to do the hard work had a once-in-a-lifetime opportunity—not just to do things better and faster, but to do things that, in fact, they’d never been able to do before.

For investors as well as customers, the lesson was: no shortcuts. I think for a lot of people, the “e” in e-business came to stand for “easy.” Easy money. Easy success. Easy life. When you strip it down to bare metal, e-business is just business. And real business is serious work.

My point is that all of the assets that the company needed to succeed were in place. But in every case—hardware, technology, software, even services—all of these capabilities were part of a business model that had fallen wildly out of step with marketplace realities.

Yet the hardest part of these decisions was neither the technological nor economic transformations required. It was changing the culture—the mindset and instincts of hundreds of thousands of people who had grown up in an undeniably successful company, but one that had for decades been immune to normal competitive and economic forces. The challenge was making that workforce live, compete, and win in the real world. It was like taking a lion raised for all of its life in captivity and suddenly teaching it to survive in the jungle.

Most companies say their cultures are about the same things—outstanding customer service, excellence, teamwork, shareholder value, responsible corporate behavior, and integrity. But, of course, these kinds of values don’t necessarily translate into the same kind of behavior in all companies—how people actually go about their work, how they interact with one another, what motivates them. That’s because, as with national cultures, most of the really important rules aren’t written down anywhere.

you can quickly figure out, sometimes within hours of being in a place, what the culture encourages and discourages, rewards and punishes. Is it a culture that rewards individual achievement or team play? Does it value risk taking or consensus building?

It’s been said that every institution is nothing but the extended shadow of one person.

Institutionalizing these beliefs wasn’t just a matter of displaying signs in every office (although they were everywhere). The Beliefs were reflected in the compensation and benefits systems, in the management schools, in employee educational and training programs, in marketing, and in customer support.

I suspect that many successful companies that have fallen on hard times in the past—including IBM, Sears, General Motors, Kodak, Xerox, and many others—saw perhaps quite clearly the changes in their environment. They were probably able to conceptualize and articulate the need for change and perhaps even develop strategies for it. What I think hurt the most was their inability to change highly structured, sophisticated cultures that had been born in a different world.

Take the Basic Beliefs. There is no arguing with these. They should be the standard tenets of any company in any industry, in any country, at any period in history. But what the Beliefs had come to mean—or, at least, the way they were being used—was very different in 1993 than in 1962, when Tom Watson had introduced them.

You can’t simply give a couple of speeches or write a new credo for the company and declare that the new culture has taken hold. You can’t mandate it, can’t engineer it. What you can do is create the conditions for transformation. You can provide incentives. You can define the marketplace realities and goals. But then you have to trust. In fact, in the end, management doesn’t change culture. Management invites the workforce itself to change the culture.

What I discovered was that senior executives often presided. They organized work, then waited to review it when it was done. You were a worker early in your career, but once you climbed to the top, your role was to preside over a process. Well, my kind of executives dig into the details, work the problems day to day, and lead by example, not title. They take personal ownership of and responsibility for the end result. They see themselves as drivers rather than as a box high on the organization chart.

4. We operate as an entrepreneurial organization with a minimum of bureaucracy and a never-ending focus on productivity. This will be hard for us, but the new, warp-speed marketplace demands that we change our ways. The best entrepreneurial companies accept innovation, take prudent risks, and pursue growth, by both expanding old businesses and finding new ones. That’s exactly the mindset we need. IBM has to move faster, work more efficiently, and spend wisely.

6. We think and act with a sense of urgency. I like to call this “constructive impatience.” We are good at research, studies, committees, and debates. But in this industry, at this time, it’s often better to be fast than insightful. Not that planning and analysis are wrong—just not at the expense of getting the job done now.

The best way to put an end to bureaucracy and turf wars is to let everyone know that we cherish—and will reward—teamwork, especially teamwork focused on delivering value to our customers.

Different people are motivated by different things. Some by money. Some by advancement. Some by recognition. For some, the most effective motivator is fear—or anger. For others that doesn’t work; it’s learning, or the opportunity to make an impact, to see their efforts produce concrete results. Most people can be roused by the threat of extinction. And most can be inspired by a compelling vision of the future.

We’ve got to generate some collective anger here about what our competitors say about us, about what they’re doing to us in the marketplace. This competitive focus has to be visceral, not cerebral. It’s got to be in our guts, not our heads. They’re coming into our house and taking our children’s and our grandchildren’s college money.

REQUIRED BEHAVIORAL CHANGE

FROM, TO

Product Out (I tell you), Customer In (in the shoes of the customer)

Do It My Way, Do it the Customers’ Way (provide real service)

Manage to Morale, Manage to Success

Decisions Based on Anecdotes & Myths, Decisions Based on Facts & Data

Relationship-Driven, Performance-Driven & Measured

Conformity (politically correct), Diversity of Ideas & Opinions

Attack the People, Attack the Process (ask why not who)

Looking Good Is Equal to or More Important Than Doing Good, Accountability (always move the rocks)

United States (Armonk) Dominance, Global Sharing

Rule-Driven, Principle-Driven

Value Me (the silo), Value Us (the whole)

Analysis Paralysis (100+%), Make Decisions & Move Forward with Urgency (80%/20%)

Not Invented Here, Learning Organization

Fund Everything, Prioritize

The risk takers needed both a symbol and a structure to validate their behavior. This was the inception of the Senior Leadership Group (SLG). Formed in February 1995, its primary purpose was to focus attention on the topics of leadership and change. We met for several days once every year to discuss company strategy, but we spent an equal amount of time on leadership. Given the group’s symbolic importance—and the need to infuse it continually with fresh thinking—I decided it was crucial that membership not be automatic, not based on title or rank. I wanted living, breathing role models—regardless of their place on the organizational chart or the number of people underneath them. A great software designer could be a leader, or a great marketer, or a great product developer, just as well as a senior vice president.

IBM LEADERSHIP COMPETENCIES

Focus to Win

· Customer Insight

· Breakthrough Thinking

· Drive to Achieve

Mobilize to Execute

· Team Leadership

· Straight Talk

· Teamwork

· Decisiveness

Sustain Momentum

· Building Organizational Capability

· Coaching

· Personal Dedication

The Core

· Passion for the Business

I needed to take our new principles and make them come alive for all IBMers. To do that I needed to make them simpler and bake them into what people did every day. And since people don’t do what you expect but what you inspect, I needed to create a way to measure results.

Win: It was vital that all IBMers understand that business is a competitive activity. There are winners and losers. In the new IBM, there would be no place for anyone who lacked zeal for the contest. Most crucially, the opponent is out there, not across the Armonk campus. We needed to make the marketplace the driving criterion for all of our actions and all of our behavior. Execute: This was all about speed and discipline. There would be no more of the obsessive perfectionism that had caused us to miss market opportunities and let others capitalize on our discoveries. No more studying things to death. In the new IBM, successful people would commit to getting things done—fast and effectively. Team: This was a commitment to acting as one IBM, plain and simple.

…Big but fast; entrepreneurial and disciplined; at once scientific and market-driven; able to create intellectual capital on a worldwide scale, and to deliver it to a customer of one. This new breed continually learns, changes, and renews itself. It is tough and focused—but open to new ideas. It abhors bureaucracy, dissembling, and politicking. It rewards results. Above all, it covets talent and passion for everything it does.

The work-a-day world of business isn’t about fads or miracles. There are fundamentals that characterize successful enterprises and successful executives. They are focused. They are superb at execution. They abound with personal leadership.

Good strategies start with massive amounts of quantitative analysis—hard, difficult analysis that is blended with wisdom, insight, and risk taking.

Today we conduct fourteen comprehensive customer surveys, administered by an independent research firm. Names are sourced from external lists (not the sales force) and we interview almost 100,000 customers and noncustomers every year. Surveys are conducted in thirty languages in fifty-five countries, and they compare our performance against those of all our major competitors. Most important, the data are incorporated into our tactical and strategic plans on a semiweekly basis.

Companies that leap into new businesses and chase acquisitions willy-nilly are those that really don’t have a conviction about their existing strategy. They don’t have a clear understanding of the five or six critical things they need to do in their base business to be successful. Those five or six things are the prime elements that the organization should be preoccupied with every day, then measuring, adjusting, and reallocating resources as necessary.

Good strategies are long on detail and short on vision. They lay out multi-year plans in great quantitative detail: the market segments the company will pursue, market share numbers that must be achieved, expense levels that must be managed, and resources that must be applied. These plans are then reviewed regularly and become, in a sense, the driving force behind everything the company does.

if a company hears about an attractive acquisition candidate first from an investment banker, it almost always means the company hasn’t done a good job on its strategy. A good strategy will always identify critical holes, competitive weaknesses, and the potential to fill them with tactical acquisitions.

Execution is really the critical part of a successful strategy. Getting it done, getting it done right, getting it done better than the next person is far more important than dreaming up new visions of the future.

Proper execution involves building measurable targets and holding people accountable for them. But, most of all, it usually requires that the organization do something different, value something more than it has in the past, acquire skills it doesn’t have, and move more quickly and effectively in day-to-day relationships with customers, suppliers, and distributors. All of this spells change, and companies don’t like to change because individuals don’t like to change.

I believe effective execution is built on three attributes of an institution: world-class processes, strategic clarity, and a high-performance culture.

Mixed signals can be pervasive and difficult. For example, IBM, I’m sure, always preached the importance of teamwork, yet everyone’s pay was based on individual unit performance. We said we value customers above all else, but no one in the field could make a pricing decision without a sign-off from the finance staff. If you want to out-execute your competitors, you must communicate clear strategies and values, reinforce those values in everything the company does, and allow people the freedom to act, trusting they will execute consistent with the values.

I mentioned in the chapters on culture that at the end of the day great institutions are the length and shadow of individuals. Great institutions are not managed; they are led. They are not administered; they are driven to ever-increasing levels of accomplishment by individuals who are passionate about winning.

The best leaders create high-performance cultures. They set demanding goals, measure results, and hold people accountable. They are change agents, constantly driving their institutions to adapt and advance faster than their competitors do.

Personal leadership is about visibility—with all members of the institution. Great CEOs roll up their sleeves and tackle problems personally. They don’t hide behind staff. They never simply preside over the work of others. They are visible every day with customers, suppliers, and business partners.

Personal leadership is about being both strategic and operational. Show me a business executive who doesn’t completely understand the financial underpinnings of his or her business and I’ll show you a company whose stock you ought to sell short.

Personal leadership is about communication, openness, and a willingness to speak often and honestly, and with respect for the intelligence of the reader or listener. Leaders don’t hide behind corporate double-speak. They don’t leave to others the delivery of bad news. They treat every employee as someone who deserves to understand what’s going on in the enterprise.

Most of all, personal leadership is about passion. When I think about all the great CEOs I have known—among them Sam Walton of Wal-Mart, Jack Welch of General Electric, Juergen Schrempp of DaimlerChrysler, and Andy Grove of Intel—I know that the common thread among them is that they were or are all passionate about winning. They want to win every day, every hour. They urge their colleagues to win. They loathe losing. And they demand corrections when they don’t win. It’s not a cold, distant, intellectual exercise. It’s personal. They care a lot about what they do, what they represent, and how they compete.

The incident took place during my last interview with a very high-level executive at P&G’s headquarters in Cincinnati, Ohio. I was an impressionable 23-year-old and had probably never met an executive as senior as this person.

As the interview progressed, I think he sensed my uncertainty (indeed, I was leaning at that time toward consulting). He said something I have never forgotten: “Lou, let’s suppose it’s Friday night and you are about to leave the office when you get the latest Nielsen report (market-share data for consumer packaged-goods companies). It indicates that you have lost two-tenths of a point of share in the last month in Kentucky. Would you cancel all of your activities for the next day, Saturday, and come to the office to work the problem?”

I remember being startled by the question, and though I didn’t give him a definitive answer at the time, the response running through my head was no. I wound up at McKinsey, convincing myself perhaps that I was better off in an environment where the requirements were more “intellectual” and that I would perhaps find it hard to get excited about decimal-point market-share loss of a toothpaste brand. How wrong I was. As I’ve stated earlier, a decade later I was frustrated with the detachment and lack of accountability of a consultant. I longed for the opportunity to be responsible for making things happen and winning, winning, winning. That senior executive at Procter & Gamble was describing the passion that drives successful executives.

Remember my description of personal leadership. It starts with the hard work of strategy, culture, and communications. It includes measurement, accountability, visibility, and active participation in all aspects of the enterprise. Without that, passion is simply a cheerleader doing flips on the sideline while the team gets crushed, 63-0 (maybe 8-0 for those of you who follow soccer).

Exhibiting this kind of passion is a part of every top-notch executive’s management style. Who wants to work for a pessimist? Who wants to work for a manager who always sees the glass as half empty? Who wants to work for a manager who is always pointing out the weaknesses in your company or institution? Who wants to work for someone who criticizes and finds fault much quicker than finding excitement or promise? We all love to work for winners and be part of winning. I believe managers at all levels of a company should strive to develop the emotional side of their leadership skills.

Fairness or even-handedness is critical for successful leadership. Playing favorites, excusing some while others hang for the same offense, destroys the morale and respect of colleagues.

Cumulatively, however, if an executive demonstrates that exceptions are part of the game, then his or her leadership will erode as the trust of colleagues evaporates. Cultures in which it is easier to ask forgiveness than permission disintegrate over time. Leaders who don’t demand uniform and fair adherence to good principles and policies lose their effectiveness.

No one should be entrusted to lead any business or institution unless he or she has impeccable personal integrity. What’s more, top-rung executives have to ensure that the organizations they lead are committed to a strict code of conduct. This is not merely good corporate hygiene. It requires management discipline and putting in place checks and balances to ensure compliance.

Decision making was, in fact, fast if the decision touched only on a single decentralized unit. However, when multiple segments of the enterprise had to be involved, the highly decentralized model led to turf battles and inadequate customer responses because of incompatible systems in the bits and pieces of the enterprise.

What every CEO has to do is decide what is going to be uniquely local (decentralized) and what is going to be common in his or her enterprise. Note the absence of the word “centralized.” It is not a question of centralization v. decentralization. Great institutions balance common shared activities with highly localized, unique activities.

Shared activities usually fall into three categories. The first and easiest category involves leveraging the size of the enterprise. Included here would be unifying functions like data processing, data and voice networks, purchasing and basic HR systems, and real estate management. For the most part these are back-office functions that yield to economies of scale. It is absolutely foolish for a CEO to accept the whining of a division president who says, “I can’t run my business successfully without running my own data center, managing my own real estate, or purchasing my own supplies.” Even a company as diverse as General Electric effectively exploits its scale economics in back-office processes.

The second category involves business processes that are more closely linked to the marketplace and the customer. Here the drive to common systems can offer powerful benefits but most often involves linkages among the parts of a business that may or may not make sense.

I’m thinking here of common customer databases, common fulfillment systems, common parts numbering systems, and common customer relationship management systems that permit your customer-service people to provide integrated information about everything a customer does with your company.

On the surface it would seem that these are logical and powerful things to do in an enterprise. Nevertheless, they usually require profit-center managers to do something very hard—relinquish some of the control they have over how they run their business. Staff executives, consultants, or reengineering teams cannot do this without active line management involvement. The CEO and top management have got to be deeply involved, reach tough-minded conclusions, then ensure that those decisions are enforced and executed across the enterprise. It takes guts, it takes time, and it takes superb execution.

CEOs should not go to this third level of integration unless it is absolutely necessary. For most enterprises the case for integration ends with category two. Category one is a no-brainer; most back-office functions can be combined with significant economics of scale. Category two (integration of “front office” functions that touch the marketplace) can produce significant benefits, but the integration must be executed superbly or the benefits will be decimated by the parochial interests of individual units. Category three is very much a bet-the-company proposition.

One of the most surprising (and depressing) things I have learned about large organizations is the extent to which individual parts of an enterprise behave in an unsupportive and competitive way toward other parts of the organization.

Consequently, if a leader wants fundamentally to shift the focus of an institution, he or she must take power away from the existing “barons” and bestow it publicly on the new barons. Admonishments of “play together, children” sometimes work on the playground; they never work in a large enterprise.

At IBM, to be a truly integrated company, we needed to organize our resources around customers, not products or geographies. However, the geographic and product chieftains “owned” all of the resources. Nothing would have changed (except polite platitudes and timely head nodding) if we didn’t redirect the levers of power. This meant making changes in who controlled the budgets, who signed off on employees’ salary increases and bonuses, and who made the final decisions on pricing and investments. We virtually ripped this power from the hands of some and gave it to others. If a CEO thinks he or she is redirecting or reintegrating an enterprise but doesn’t distribute the basic levels of power (in effect, redefining who “calls the shots”), the CEO is trying to push string up a hill. The media companies are a good example. If a CEO wants to build a truly integrated platform for digital services in the home, he or she cannot let the music division or movie division cling to its existing technology or industry structure—despite the fact that these traditional approaches maximize short-term profits.

People do what you inspect, not what you expect.

I’ve already explained that the group executives who ran IBM’s operating businesses were not paid bonuses based on their unit’s performance. All their pay was derived from IBM’s total results.

When a CEO tells me that he or she is considering a major reintegration of his or her company, I try to say, politely, “If you are not prepared to manage your compensation this way, you probably should not proceed.”

CEO leadership is mandatory before substantial changes become systemic and sustainable: They require real involvement and not exhortation, delegation, and then surprise when change doesn’t happen.

It took me more than five years of daily attention to get IBM to accept a new go-to-market model. It was a tremendous battle. If you choose to follow a similar path, you must be prepared to make it happen personally! The assignment cannot be delegated. Who would you delegate it to? The operating team that hates the loss of autonomy? Staff executives who will be ambushed and disemboweled by those fated to lose power? No. It’s a lonely battle.