IBM Case Study
In the mid sass, IBM started to run Into trouble when Its returns and market share began to slide. Customer needs were changing and emerging technologies led to the demise of Vim’s main product focus?the mainframe.
Customers were looking for interconnected mainframes and mobile personal computers with distributed data sources and applications. Instead of devising a strategy to satisfy customer demands and set Itself apart from competitors, IBM chose to transition from a lease oriented business to a sales oriented business.
This lack of customer focus was coupled with an inefficiently designed workforce that would rather fight with each other than work together. Additionally, the company was so successful in the past that no attempt was made to cut costs/expenses and identify/correct inefficiencies. Adding more salt to the wound was the fact that top level executives were so far removed from daily operations that they were unaware of the severity of Vim’s growing list of problems.
2. What did Greener do when he assumed the role of CEO In 1993?
Evaluate Greeter’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? Instead of running the company at arm’s length Eke some Coos, Greener chose to immerse himself in every aspect of the business. Although he did not have an IT background, he spent hours learning from customers, analysts and Industry experts and then used his business acumen to develop a strategy to take IBM In a new direction.
He developed a new marketing strategy?one IBM?that would place the customer first.
Greener reorganized the company from the top down and hired key executives to help manage the turnaround. He examined and reengineering everything from costs and organizational structure to businesses processes including procurement, manufacturing, product development, information technology and human resource management. These changes resulted in a much leaner, more streamlined and efficient organization that was ready to give competitors a run for their money.
His efforts were so successful that after less than a year at the helm, the company posted a profit of $382 million. Although Greeter’s idea to go to market as ‘One IBM’ was genius, he soon realized that it’s easier said than done.
As with most organizations, especially a large one like IBM that had been around a long time, changing the culture Is extremely difficult. IBM was Initially set up with 20 separate business units and so many layers of management Tanat sensor leaders Ana valuably no Idea want was unappealing on ten ground level.
Dismantling and reorganizing such a complex organizational design was a difficult task Just on paper. Getting the team to come together and embrace the ewe changes proved to be even more challenging. Senior leaders and lower level employees were ready to take IBM to the next level, but a lot of mid-level employees wanted no part of it.
Although there was a lot of opposition initially, the company managed to come together as a somewhat unified team. 3. Why do large established companies, like MUM, find it so difficult to build successful and sustainable new businesses?
The biggest problems in Vim’s case are that the company’s infrastructure is not designed for easy collaboration among the different business units and the rotational culture does not encourage employees to think ‘outside the box’. Most large established businesses have similar setups which make them rather inflexible and slow to respond to quickly changing industries like IT. Smaller companies tend to have younger employees, more open structures and cultures that favor creativity thus making them more flexible and better equipped to respond to industry changes.
Another problem is that most established businesses tend to focus only on its current markets and product lines as opposed to finding and developing new venue streams. 4. Evaluate Vim’s approach to leading mature, high growth, and emerging business opportunities. What are the organization design and leadership models required to manage each type of business? How should a company like IBM (or AT, for example) manage the innovation process? I think that IBM is on the right track given its prior unsuccessful attempts at developing new ideas and transforming them into steady, long term revenue streams.
The biggest barriers to Vim’s success in these new ventures was the lack of talent needed to manage them properly and the tiff and traditional culture that still did not promote the ‘one team, one fight’ mentality that senior leaders wanted to establish. By splitting Vim’s business ventures into three different pots?HI, H2O and HE?the company would address the problem of having Just one approach to managing its different businesses.
However, large grey areas still exist between the different levels. The structure still seems a bit too inflexible and does not promote collaboration among the different business units.
There would be a lot of turbulence during the transition from HE to HI, so there must e employee buy-in at every level. The talent approach for HI businesses states that you will be punished for underperforming and that there will be “no excuses”. So if I am the new manager of a business that Just transitioned from H2O to HI and things are a bit shaky in the beginning, I will be punished. This will not help create the kind of culture that IBM needs for long term success and will only lead to the same problems they experienced in the past.
5. What challenges did Sam Palominos face as he assumed control of IBM in March 2002?
Can a company like IBM (or an organization like the Army) be organized for both innovation and efficient operation? can it be both “big” and “small”? What advice would you give Palominos at the end of the case? Palominos took control of the ship Just as the waters of the IT industry got much harder to navigate due to the dot. Com fiasco and the economic recession that followed. The culture and operating environment were still not promoting creative thinking and giving employees the motivation they needed to really invest in the company’s long term success. Big companies like IBM can absolutely be positioned
Tort Innovation Ana inclement operation so long all employees In ten company present a united front and are fully invested in the company’s success.
IBM and other companies must create a free thinking environment much like that of Google and have teams with employees at different levels?from interns to senior leaders? whose eclectic mix of experience, education and technical background will create a mix of ideas so powerful it could take the company to a whole new level. IBM should focus more on recruiting and retaining new talent, dismantling the current traditional culture and taking on more risk.