How did Lou Gerstner's focus on free cash flow help to stabilize IBM's finances?

Lou Gerstner's leadership at IBM has had a significant influence on corporate strategies and business models in other companies. His focus on free cash flow as a measure of business success has been adopted by many organizations. His approach to customer-centricity, where he prioritized customer needs and market trends over executive whims, has also been widely adopted. Gerstner's cost-cutting measures, including consolidation of functions and selling high-value items, have been mirrored in many companies facing financial difficulties. Lastly, his emphasis on a company culture free of internal politics, focusing more on customers and competitors, has influenced many organizations to reassess their internal culture and values.

Lou Gerstner faced several challenges in changing IBM's company culture and values. One of the major challenges was the company's complacency due to its past success, which led to a lack of focus on evolving customer needs and competitors. Another significant challenge was the company's financial instability, which Gerstner addressed by slashing expenses, selling high-value items, and implementing layoffs. However, the toughest challenges were the "soft" problems like morale, company culture, and values. Changing these required a shift in mindset from internal politics to a customer and competitor focus.

Lou Gerstner implemented several strategies to shift IBM's focus towards customer needs and market trends. Firstly, he became a microphone for customer complaints, allowing the marketplace to dictate activities rather than the whims of executives. This helped IBM to focus more on evolving customer needs and competitors. Secondly, he stabilized IBM's finances by applying his knowledge of the importance of free cash flow, which he learned as the head of RJR Nabisco. He did this by offloading assets, consolidating functions to slash expenses, and selling high-value items. Lastly, he tackled the 'soft' problems like morale, company culture, and values, aiming to create a culture without internal politics so employees could focus more on customers and competitors.