Leader - Bob Moffat

The personal-computer business used to be fast growing and glamorous. Now it's ruled by price wars, vanishing stock prices, consolidation, and layoffs. So why is Bob Moffat, who runs IBM's PC group, having such a good time at work?

Bob Moffat is well past his twelfth hour at the office, but he shows no sign of flagging. 96 on this Thursday afternoon in late summer, he is presiding over his fifth meeting of the day in a windowless conference room just three steps from his office. Moffat has one of the more thankless big jobs of the moment -- not just at his company, IBM, but in the larger world of technology.

Moffat runs IBM's personal-computer business. Although his group -- which also includes printers and point-of-sale terminals -- accounts for $1 of every $6 in IBM's revenue, it generates not a penny of the $22 million in profits that the company brings in daily.

The economic slowdown has turned the competition in the PC business from fierce to brutal, a cutting-edge sector with profit margins that are similar to those of the grocery business -- and with about the same glamour quotient. What's more, inside the PC industry, a business that IBM helped invent, the company is considered to be an aging warrior -- one that might at any moment simply bow out. IBM doesn't make typewriters anymore either.

But for this final meeting of the day, Bob Moffat isn't imagining his own surrender. Just the opposite: He's imagining the surrender of one of his most vigorous competitors -- and the dramatic strengthening of another.

Moffat has asked six lieutenants to spend an hour figuring out what would happen to IBM if Compaq were to attempt to sell its PC business to Dell. (The session, it turns out, takes place a month before Compaq does attempt to sell out -- its entire business -- to Hewlett-Packard.) The exercise should be a refreshing, mind-clearing way to end the day, except that all six people at the meeting -- four in person, two on speakerphone -- are so pessimistic. All six think that if such a deal were to happen, Dell would so dominate the PC world that the company would have the strength of Intel or Microsoft -- dominating suppliers, slowing down and possibly stifling innovation. IBM would be left to pick up scraps. The only bright spot, offered by a senior marketing manager: "There is some opportunity if IBM is going to be the number-two PC maker in the world. Some people want to go with number two."

Moffat -- who imagined the mind-bending scenario based on what he's been reading and hearing, and who wanted to tease out the implications -- closes by looking around the table with satisfaction. "Well, I got out of this what I wanted. If we were to wake up one morning three weeks from now and read that this had just happened, we certainly would not have had a conversation as rational as this."

After the room clears, Moffat waves away the gloom. He has spent far too many years in the battle -- and has seen technology leadership change hands far too many times -- to think that IBM can't hold its own. "If Dell buys Compaq's PC business -- and I have no special knowledge of what might happen, but there will be a shakeout -- there will be plenty of opportunity for us."

He's grinning.

The Power of Purpose

You have to have the stubborn confidence of Bob Moffat to survey his business and see opportunity. When Moffat took over IBM's personal-computer division in July 2000, his group had lost $1.5 billion in the past three years -- a time when, in contrast, Dell had made $4.8 billion. It had been four years since IBM's PC group had managed to put together two profitable quarters in a row. All this as the industry was exploding.

Since then, the PC business has been almost all downhill. "If we thought about getting into the PC business today," says Moffat, "we wouldn't do it. The economic returns suck. But we're in it, and we can't get out."

The first insane thing that Moffat did was promise profits for his first quarter in charge. Inspired, his division delivered $99 million in profits for the first two quarters of his reign. Moffat did so well so quickly that his bosses, chairman and CEO Lou Gerstner and president and COO Sam Palmisano, added two more businesses to his portfolio: printers and point-of-sale machines. During the first half of 2001, as the market shrank and competition intensified, Moffat's group lost just $66 million. Besides Dell, only IBM reported increased shipments of computers in both of the first two quarters.

But more than stabilizing the financials of the business, Moffat has reinvigorated the 15,000 people who work for him. "When I took this job, the place was in disarray. People had their heads down. No one cared. There was no leadership," he says. "There was a strategy for the business, but no one knew it. It was buried in white papers" -- an IBM staple. "I didn't change the strategy. I just articulated it. That's what people needed: a sense of purpose."

Although he has spent his entire career -- 23 years -- at IBM, Moffat's success owes much to an anti-IBM style in things both big and small. He wears slacks and a golf shirt to work -- and requested that his boss do the same when Palmisano addressed Moffat's troops last year. Moffat always shows up on time for meetings, a sign of accountability and respect for his colleagues that is almost unheard of at his level. Says one senior manager: "We have a phrase for it here. It's called 'calendar integrity.' No one that high up has it."

Moffat works out of Raleigh, North Carolina, where part of his division designs and makes personal computers, rather than in Armonk, New York at IBM headquarters. He is the first IBM group leader to run a business from the field (indeed, even his secretary works out of New York).

Moffat makes no show of doing his job with ease or grace. Shaking up a business this big is sweaty, demanding work. By his own reckoning, Moffat usually spends 15 or 16 hours a day at the office -- arriving between 5 AM and 6 AM and not leaving for home until between 8 PM and 9 PM. The early mornings, he says, are a great time to think. "Lots of people who have jobs like this are so concerned with doing that they never spend time thinking."

Moffat has a "reverse mentor." Every six weeks, he sits down for an hour with Inhi Cho, a rising mid-level manager who is 26 years old and has only been at IBM for four years. Moffat wants to know how the PC group looks from her perspective. Says Cho: "It has to be tough for him to listen to someone who's half his age telling him what she thinks. But he's a good listener. Very good."

And there is nothing of the stereotypical Big Blue Organization Man about Moffat. His criticism, his questions, and his praise are all equally blunt. Indeed, he routinely barks at subordinates and suppliers. Says Fran O'Sullivan, general manager of IBM's desktop and laptop business: "If he's yelling at you, he's trying to help you. If he's quiet after you talk, you'd better start to look for work, because you're dead."

"Look at the Tombstones of Your Predecessors"

Moffat is sitting at a small conference table in his office, a dozen sheets of paper before him that detail the performance of his groups during the past month. His laptop -- cordless but fully connected through IBM's wireless network -- is at his elbow, so he can send and receive instant messages during a two-hour global conference call with his senior managers in cities as diverse as Lima, Paris, and Tokyo. If he didn't have a visitor, Moffat would be alone with his data and his speakerphone. His remote location does nothing to dilute his commanding personality.

This "weekly operations meeting" among managers is a global conference call that has been an institution in the PC division. But Moffat's predecessor, Dave Thomas, never bothered to participate. Moffat opens the meeting by saying, "I wouldn't call it a terrible July, but a mixed one. The question is, How do we get it done in August? Because if we don't, we'll never make it up in September." Characteristically, he asks for an explanation not only of weak desktop sales, but also of unexpectedly strong ThinkPad sales. "Let's talk about why that's happening. How do we capitalize on it?"

Moffat doesn't talk much, but he also doesn't let someone else's bluster pass without a challenge. In fact, one of Moffat's signature phrases is, "Let's not perfume the pig." He is known as a consummate straight talker: He tells people what he thinks, he wants the truth back in return, and he prefers to receive bad news early.

That attitude pays dividends in efficiency and in changing culture: Insight Enterprises Inc., an IBM reseller, recently complained that its original contract was hobbling its growing relationship with Big Blue. In the old days, says Insight CEO Tim Crown, "We wouldn't even have gotten a call back." Moffat and a deputy personally went through Insight's list of 15 concerns and updated the contract. The result is better for both Insight and IBM.

At this meeting, after listening to his European sales chief, Moffat is so put out that he rises to pace and shouts, "You guys are rallying around the lower sales number, the must-make number. That's a failure number. You need to shoot higher, damn it! You need to change that."

What distinguishes Moffat's leadership, of course, isn't his ability to raise his voice. What's notable about Moffat is that he does a remarkable job of keeping opposing forces in balance. He knows that strategy is critical, but he also knows that it takes more than that. "The people who win are the people who execute," he says. "They have milestones for what they are going to do and metrics to measure if they are reaching those milestones. Many managers stop after the strategy. They expect people to just get it."

Moffat's managers have not only a strategy, but also what Moffat calls a "playbook" -- a binder that details the steps for executing the strategy. Of a recent meeting that he called to review progress on outside partnerships, Moffat said, "Did I need to listen to what was said at the meeting? Not really. I was forcing people to do what they promised."

At the same time, Moffat strongly believes in thinking beyond the horizon to what might happen next. And he also believes that kind of thinking is everyone's job, not just his. Hence the brainstorming session on what to do if the PC business consolidates in a particular direction. Moffat's group designs and sells personal computers -- just like Dell, the market leader, does. But Moffat says that it is critical to his success to understand the differences there too. "Michael Dell and I look at the business differently," he says. "Dell is in the PC business. IBM is not in the PC business. We must fit the PC business into the strategy of the larger IBM."

PCs are something that IBM must offer business customers who are buying a full suite of services and who don't want, in the end, to have to shop elsewhere for hardware. In developing markets -- China, India -- the IBM nameplate is a way of establishing credibility until the markets mature in the direction of IBM's more-profitable services.

Moffat appreciates the depth and gravity of IBM's experience -- he has put 23 years in, and he's only 45 -- but he also appreciates just as vividly the limits and pitfalls of the established IBM worldview. When he took over as head of the PC division in July 2000, Moffat quickly formed a team to answer the question, Why is IBM in the PC business? That was the Blue Team -- it had upwards of 20 people with decades of experience in the PC business.

Then, inspired by his reverse mentor, Inhi Cho, who had just graduated from Duke University in 1997, Moffat secretly formed a second team -- the Red Team -- to tackle the same question. The Red Team had only five members, none of whom had been at IBM for more than five years. Blue produced pragmatic but predictable results. Red produced two intriguing ideas that Moffat has quietly seeded back into the organization.

Finally, Moffat sees IBM's century of history not as an exercise in the company's inevitability, but as a continuing lesson in humility. On the unadorned walls of his office hang two laminated stories from the Wall Street Journal. One, from last winter, celebrates Moffat's first six months in charge: "IBM Turns Around Its PC Unit, Though Skeptics Still Call It a Drag." The other is from exactly three years earlier, just before the division commenced to lose $1.5 billion: "How IBM Turned Around Its Ailing PC Division."

"Before I took this job," says Moffat, "both Sam and Lou said to me, 'Look at the tombstones of your predecessors. Visit the graveyard.' "

Moffat is not afraid to visit -- but he is never whistling when he does.

Charles Fishman (cnfish@mindspring.com) is a Fast Company senior editor based in Raleigh, North Carolina. Contact Bob Moffat by email (moffat@us.ibm.com).

Sidebar: What's Fast

What does it take to help a sprawling company such as IBM step lively in the fast-moving, take-no-prisoners world of personal computing? Here are some Bob Moffat principles.

There's nothing wrong with a pinch of micromanagement. Moffat is a big-picture guy with a mastery of the details. He doesn't tell his subordinates how to do their jobs -- but he's never afraid to show how well he knows what's going on. Being able to ask pointed questions from deep inside someone's area builds accountability and reduces bluffing.

What do you think? "As smart as Bob is," says Ralph Martino, the personal-computing division's vice president of global marketing and strategy, "what I like is that he recognizes his weaknesses. Rather than being too proud to ask for help, he's the opposite. He's confident enough to augment his skills with those of others."

Morale Matters. Goals, milestones, and metrics are all vital. But nothing gets done with enthusiasm if people are dour about the future. When Moffat took over the PC division, he publicly promised his bosses profits. But he promised staff members in Raleigh, North Carolina something else: a beer party for all 5,000 of them. "People kept telling me that we couldn't have a beer party at IBM," Moffat says. "I just kept asking, Why can't we?" The result: a beer party in the quadrangle behind Moffat's building -- and a symbol of the boss's determination to change things in a way that everyone remembers.

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