I just ran across a post in Fortune’s Postcards blog about a speech that Lou Gerstner gave at the Yale CEO Summit in New York in last month. Here’s a summary of his advice for how to transform a Fortune 500 company:

  1. Distinguish between transformation and turnaround. A turnaround is about management execution, but a transformation is about a fundamental change to the business. Transformation is much harder.
  2. You can’t transform a dodo.  Gerstner quoted Warren Buffet’s rule: “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.”
  3. It’s all about the culture. I love what he says on this topic: “You have to transform the culture, not just the strategy. Culture is what people do when no one is watching.”
  4. Integrate as a team. He notes a major inconsistency within IBM: there were “Team” signs all around, but people were paid based on individual performance.
  5. You have to understand what people do everyday — the processes, the values, the rewards. This requires a great deal of involvement by the CEO

My take: Gerstner is a great leader; his turnaround of IBM will be remembered as one of the greatest management accomplishments of our time. So I was thrilled to see that his advice matches a lot of the advice that I’ve written in my (mini) book “The 6 Laws Of Customer Experience.”

The bottom line: Get the business model right and focus on the people.

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