What IBM saw in RJR’s Louis Gerstner: a move to generic cigarettes might have caught Big Blue’s eye

For Louis V. Gerstner, the chairman of RJR Nabisco Holdings, the declining market was cigarettes, not mainframes. And the challenge came from low-cost generics rather than computer clones.
Like IBM executives, Gerstner temporized. He spent billions supporting Reynolds’ pricier lines while hoping the generics would go away. They didn’t. So last year, Gerstner acted decisively, selling 18 billion generics and giving Reynolds a 4.1 percent share of the deep-discount segment. While he hasn’t given up on winning some of those customers back to the full-price brands, Gerstner made it clear he would no longer cede to com- petitors what has been one of the few sources of growth in the cigarette business.
That is apparently the kind of dynamism that led IBM to approach the former American Express executive in its search for a successor to recently deposed ceo John Akers. And numerous IBM watchers last week said that Gerstner’s packaged-goods background should pose no obstacle–and may prove a boon–to his performing effectively at the helm of IBM.
“They need a business architect, not someone steeped in the vertical integration of the industry,” added Robert Djurdjevic, president of Annex Research in Phoenix. Indeed, Gerstner’s skill at moving to decentralize RJR’s cigarette and food operations could prove essential at IBM.
For R JR, Gerstner’s departure would be less than convenient, as it prepares to shop a new class of stock for its food operations. Names mentioned for a possible successor include: Pepsi’s Roger Enrico, Campbell Soup’s David Johnson and Colgate’s Reuben Mark as well as RJR’s tobacco leader Jim Johnston.
Copyright Adweek L.P. (1993)