2. reorganize as “one ibm”

IBM's Decade of Transformation: IBM's Decade of Transformation: Turnaround to GrowthTurnaround to Growth

任維廉任維廉 (William) 2011/12(William) 2011/12個人網頁：個人網頁： http://140.113.119.160//

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Overview• IBM’s 100 years history, 2 classic innovation stories: – Launch of the S/360 computer in the 1960s– IBM PC in the early 1980s

• Gerstner’s leadership turnarounds completes the trilogy.

• Subsequent CEO, Palmisano, attempts to jumpstart innovation change.

112/05/03 2任維廉教授 Professor William Jen

HW: Assignment Questions1. What factors led to IBM’s success during the 1960s~70s

and its problems during the late 1980s and early 1990s?

2. What did Gerstner do when he assumed the role of CEO in April 1993? Evaluate Gerstner’s approach ……

3. Why do large established companies find it so difficult to build successful and sustainable new businesses?

4. Evaluate IBM’s approach to leading mature, high growth, and emerging business opportunities (EBOs) ……

5. What challenges did Palmisano face as he assumed control of IBM in March 2002? ……


1. What factors led to IBM’s success during the 1960s and 1970s and its problems during the late 1980s and early 1990s?

HW: Assignment Questions


What Factors Led to IBM’s Dominance in the 1960s and 1970s? “IBM and the Seven Dwarfs”

Business Model Components: 1. Strategy Innovations: Top Line Growth – Context– Market Positioning– Product Positioning– Role in the Value Chain

2. Capabilities Innovations: Bottom Line Profitability, Asset Efficiency , Execute– Processes– People and Partners– Organization and Culture– Leadership and Governance


Strategy Innovations

• Product Positioning: The disruptive nature of the S/360 technology, a big bet, “technology push”

• Market Positioning: AA’s SABRE reservation system, using IT to drive competitive advantage, AA, its customers, and “partners” to do business electronically, “market need “

• By the 1970s, the Department of Justice was monitoring (and limiting) its competitive actions. Anti-trust.


Capabilities Innovations

• Well-managed Firm• Strong Culture• Slogan, “THINK” • Customer-driven Company• Strong R&D & Salespeople• ……


What Metrics Would You Use to Measure IBM’s Value at That Time?

• Operating Performance• Customer Loyalty• Financials• Investor Loyalty • Market Share and Competition• Brand and Reputation• ……• BSC, SBSC


What Factors Led IBM to “Fall off a Cliff” So Spectacularly?

• Failed to Address the Successful Entry of Competitors – Small PC Competitors (Compaq, Dell, and H-P) – Network Competitors (Sun Microsystems)

• IBM shifted its mainframe revenue model, requiring CIOs who had previously leased computers to either buy them or buy new models available from IBM.

• Well-aligned business model is necessary for success, but tight alignment can also make it difficult to change. If business models fail to successfully evolve over time, misalignment with the environment can occur.


2. What did Gerstner do when he assumed the role of CEO in April 1993?– Evaluate Gerstner’s approach to crisis management. – How well did he perform as a turnaround manager? – What challenges did he face as he attempted to position

the company for growth?



Rate Gerstner as a Turnaround Leader

• ★, , , , ★★ ★★★ ★★★★ ★★★★★

• No technology background, break it up for sale.

• learned from customers, analysts, and employees that IBM’s value was not in its pieces.

• Reversing direction, he rallied support for saving IBM.

• 組織文化？走動管理？培育人才？112/05/03 11任維廉教授 Professor William Jen

What did Gerstner do?• Phase 1:

Key Objective - Solve the problem while positioning the company for growth in the future

• Phase 2: Reorganize as “One IBM” and creating the foundation for growth

• Phase 3: Shifting to high growth and the search for “The Next Big Thing”

• Phase 4: Creating capabilities for sustained innovation and the “Return to Greatness”


1. Solve the Problem While Positioning the Company for Growth in the Future• Cost down with benchmarking, layoff.

• Communicate clearly and often (internal and external) e.g., email

• Restructure quickly, organization charts: – Simplicity– Chose his executive team– Key positions filled by people from the outside

(finance, strategy, marketing) – Appointed executives as key account managers, – Assigned executives responsibility for centralizing and streamlining

back-office processes, – BU managers were charged with “fixing, closing, or selling”

underperforming parts of the business.

• “Bear hug” key customers, partners, and employees.112/05/03 13任維廉教授 Professor William Jen

2. Reorganize as “One IBM” and Creating the Foundation for Growth • By 1995, the company was back on solid financial

footing and Gerstner’s focus shifted from simply survival to becoming “One IBM.”

• “Y2K problem”, newly-emerging Internet– emerging business opportunity (EBO) sponsored by IBM

Global Services.

• Outsourced many of its back-office management to industry leaders, partners: SAP, PeopleSoft, and Siebel.

• Outsourced the physical activity, and kept the strategy, planning and management.


Turnaround• 面對顧客需要，整合公司資源與人才，提出新方向

– Resource Integrator: 創造新價值– Opportunity: 找出機會（觀察力）– Confidence: 信心（勇氣）– Teaming: 組成一個有競爭力的團隊（減少風險，提高獲利）

• 在龐大的組織中運用既有優勢，注入行動敏捷，創業精神，彈性整合，顧客導向要素，從製造轉型為服務的公司，賣掉DRAM, PC 部門，買進顧問與軟體公司。

• 未來，管理合作伙伴的重要性，不亞於如何擊敗競爭對手。• 轉型是痛苦的：換血，工作者要學習新技能，組織要有新文化，領導著要自我突破。


3. Shifting to High Growth and the Search for “The Next Big Thing”

• Catalyzed by the Internet boom and the massive technology spending needed to ready businesses for the new millennium, IBM began growing again.

• Initially the task of actualizing the “One IBM” brand fell to Kohnstamm, newly-appointed head of marketing. IBM’s sponsorship of the 1994 Winter Olympics was used the launch the company’s first website.

• Shift from cost-cutting to growth, from e-Business to Network Computing to On-Demand.


4. Creating Capabilities for Sustained Innovation and “Return to Greatness”

• Palmisano and the senior executive team were committed to, not just surviving, but also to returning the company to greatness.

• Collins: 從 A 到 A+ （ Good to Great, 2001)


What is a Great Company?

• PerformanceNot just relative to your past but such that an investment in your company is substantially superior to an investment in the general market.

And, no discounts for being in a tough industry.

• Unique Impact.


What Makes a Great Company?

• The ability to innovate and continually solve compelling business problems on behalf of customers is often listed as a key to becoming and maintaining a position as a great company.


3. Why do large established companies, like IBM, find it so difficult to build successful and sustainable new businesses?



規模不是罪惡，重點是大象能跳舞• 規模帶來官僚，顧客忠誠導致自大，不再聽顧客的聲音，反而教導顧客他們應該要什麼。遲緩了前進的靈活度。• 生物在逆境中，必須靠彈性、變化，才能生存下去。• 日本相撲選手：健康，動作靈活。• 企業也應：以流程取代部門，以專案取代單位。去除本位主義、隧道視線。


Why Was Radical/Transformative Innovation So Hard for IBM in the Late 1990s? • Innovators recognize that challenging environment provides

opportunities. To exploit these opportunities, be able to identify and respond to disruptors. This requires that they build capabilities to innovate while still protecting the core business.

• Examine emerging technologies and their impact on a firm’s strategy and the organizational capabilities required to execute the strategy.

• Entrepreneurial innovation process: identifying and analyzing opportunities to launching, growing, and evolving the business over time.


Innovation or Die! (Drucker)

• Christensen, The Innovator’s Dilemma, 1997.

• Current Product/Service Evolutionary Trajectory. Disruptive Trajectory.

• Innovator / New Entrant

• Why large companies (established player) in an industry often don’t notice new entrants (threat)?

• 危機：威脅？機會？112/05/03 23任維廉教授 Professor William Jen

Dealing with Disruption

112/05/03

Today T1 T2 Time

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Current Product / Service Evolutionary Trajectory

Innovator / New Entrant

Has your firm either missed or led a disruptive industry transformation?

What determines how quickly customers switch?

Key idea: Benchmark the rate of change － not a single point in time

25任維廉教授 Professor William Jen

4. Evaluate IBM’s approach to leading mature, high growth, and emerging business opportunities (EBOs)

– What are the organization design and leadership models required to manage each type of business?

– How should a company like IBM manage the innovation process?



New Strategy• Requires a major shift from marketing and selling specific

products and services to marketing and selling solutions to problems that have yet to be fully defined.

• Trying to create new categories, three different types of business: Mature, High Growth, and Emerging Opportunities.

• Difficulty changing internal and external company identity.


Inve

st

Mature Businesses (Leader = Operators)

Managing the Business LifecycleC

reat

e V

alue

Growth Businesses (Leader = Business Builder)

Emerging Opportunities (Leader = Entrepreneur)

1

2

3

Time

Managing the Business Lifecycle: H3, H2, H1, 先降再升

New Capabilities• Need for new strategic planning processes that deal with

emergent opportunities with different risk and resourcing profiles.

• Need for cross-business collaboration, cooperation, and resources.

• Need for an investment model instead of a budgeting model for project financing.

• Harreld, SVP of Strategy, summarized the issue by highlighting the different leadership and organizational models needed to support three different types of business.


5. What challenges did Sam Palmisano face as he assumed control of IBM in March 2002?

– Can a company like IBM be organized for both innovation and efficient operation—can it be both “big” and “small”?

– What advice would you give Palmisano at the end of the case?



Why Did IBM Have Such a Hard Time Shifting from a Vague Vision (One IBM) to a More Focused Strategy?

• Value and Culture

1. Basic Beliefs, IBM’s initial values, set by Watson.

2. Through the turnaround, new values developed by Gerstner sitting at his kitchen table. similar or different?

3. Palmisano recognized that values handed down from Gerstner would not unite IBM’s people, new values statement developed by 300,000+ employees during a ValuesJam in 2003. 成就客戶，創新為要，誠信負責


What Actions should Executives at IBM Take to Embed the Vision and Values in How Employees Around the World and at Different Levels Make Decisions and Take Action?

• ValuesJam

• IBM Code of Conduct

• Initiative to formalize innovation

• 收（控制）與放（彈性）的考驗：價值觀凝聚共同方向，權力下放以提供客戶更好的服務。


Systems View of Innovation


Innovation Variables


How Successful has IBM been in Its Efforts to Organize for Innovation?

1. 當面臨困境時，因應之道是先刪減成本，提昇效率。2. 變化的經濟環境，迫使企業加速變革與創新，連續不斷的創新。 IBM’s efforts to become one IBM, the search for strategic

direction, and the launch of its Emerging Business Opportunities (EBOs): 7, 18, 15 EBOs

3. 明智地停止行不通的計畫，衰退的事業，把資源轉釋給有前景的創新，改造新流程，以驅動新成長。4. 進行策略性實驗，加強與客戶，競爭者，供應商之結盟關係，以降低風險。


Lessons from IBM • 那些曾經被推崇、模仿的優秀企業，最終卻在市場和技術發生突破性變化時，喪失了產業領先地位。可見良好的管理，提昇產品性能，不一定能提振市場需求。• IBM 創造新事業的能力，新事業的發展有一套制度，從創業的提出，到如何管理創意，評估新事業達到的里程碑，在不同類別新事業發展階段有不同管理才能、組織程序。112/05/03 36任維廉教授 Professor William Jen

Gerstner, 致股東函 (2001)

• 規模龐大但行動敏捷，富創業精神且自律甚嚴，科技與市場並重，能合全球之力創造智慧財產，且同心協力提供顧客。• 這個新品種不斷學習，求新、求變。• 她堅韌不屈、專心致志，但願意接納新觀念。• 她憎惡官僚氣息、矯揉做作、政治角力。• 她獎勵成果。• 最重要的是：她求才若渴，且對她做的每件事都充滿熱忱。 (Ch.22)


Takeaways: Integration, Extension, Implications

1. Organizational life cycle, 大企業為何、如何由盛而衰？2. Innovation, 創新者的兩難3. Leadership, 領導者的角色4. Change, 組織變革5. Communication, 實務問題


What is the Next Step? is the Next• Palmisano 今年 60歲了，他已挑選 Virginia Rometty 2012/1/1 起任 IBM 新 CEO. • 與 HP 屢屢啟用空降部隊不同 (Carly Fiorina, Meg

Whitman), Rometty 在 IBM 已 30年，從系統工程師做起，很快晉升到管理階層，她有卓越的執行能力，在每一個領導崗位上，都加強了 IBM 為客戶服務的能力。• Rometty 從 Palmisano 學習到：絕不聽天由命。 Be first

and be lonely. 你必須打破常規，致力於技術創新，從而使 IBM 能夠保持技術創新活力。專注在智慧地球、新興市場、雲端計算、商業分析市場， Focus!

112/05/03 任維廉教授 Professor William Jen 39

Q & A

E-Mail ： [email protected]


2. reorganize as “one ibm”

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