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Case Questions
Case: IBM's Decade of Transformation: Turnaround to
Growth
Factors which led to IBMs problems
As per Exhibit 6, IBMs internal root cause analysis of the situation resulted in the
following eight concerns.
a) The management system rewarded short-term execution, even at the behest
of foregoing long-term strategic business building.
b) The IBM employees and managers were preoccupied with selling current
products to current markets. Such narrow-minded operational was a direct
result from (a).
c) IBM focused on the search of sustainable profit, with a view to defend its
leadership position in the market. In doing so, it missed out on opportunities
of entering into higher-growth | higher price-to-earnings ratio businesses. In
fact, Bill Etherington was quoted as being shocked at the announcement of a
loss-making quarter.
d) IBMs approach towards of utilizing the gathered market insights was
inadequate in a dynamic world like what was observed. Newer technologies
with a predictive trend deduction was necessary.
e) IBM lacked established disciplines and processes for selecting, experimenting,
funding and terminating new business growth.
f) Poor execution of IBMs prospective high-growth ventures was a huge
baggage.
g) IBM, over the years, failed to develop its inventions into commercially
relevant products.
h) Although IBMs top management team successfully integrated different SBUs,
the innovations were still managed largely within the silos.
Actions taken by Gerstner when he assumed the role of CEO in April 1993
Gerstner attempted to integrate the different SBUs in IBM, which he
considered as a fatal flaw for IBM. In doing so, he reorganized the top
management and pulled divisions into larger business groups and formed a
central Corporate Executive Committee. This was termed as the One IBM
initiative. The network systems across the IT were brought under the common
TCP/IP protocol.
He changed the policy to customer-centric rather than employee-centric. As is
explained through the examples of the 1993 sales meeting involvement and
q later conference attendance with 300 CIOs of North America, Gerstner
emphasized on providing customers what they want, even at the behest of
singling out IBM executives.
The on-time launch of the IBM PC which was the most successful technology
introduction of the time, which with its monthly sales of over 240,000 units
exceeded the five-year forecast.
Defining greatness
As per Jim Collins, a company achieves greatness by two factors
1) Performance: When an investment into the company is substantially superior
to one in the general market. This is regardless of the dynamics of the
industry.
2) Unique impact: If the companys exit leaves an unfillable hole
Conclusion over IBMs prospects of becoming a great company again
While IBMs turnaround is indeed a successful one, the company is majorly market
dependent and in a developing phase in terms of establishing a stronghold with
EBOs and its revised operating strategies. In its core, the EBO strategy allows for
risks to be taken at the behest of short-term growth which may be viewed as
ineffective in the eyes of the stakeholders. in the Since the current operating
strategies focus more on the customers with a consulting model and service
provider operations, the risk IBM faces is directly related to the risks faced by each
of the industries. Hence, as per Collins definition, IBM is still a long way away from
achieving greatness though a sustainably growing future may be predicted for the
firm.