Reorganization to me is shuffling boxes, moving boxes around. Transformation means that you're really fundamentally changing the way the organization thinks, the way it responds, the way it leads. It's a lot more than just playing with boxes.
Source: CNN: In Focus: Lou Gerstner: http://edition.cnn.com/2004/BUSINESS/07/02/gerstner.interview/index.html
Contributed by: ~C4Chaos