IBM Case I

Topics: IBM, Strategic management, Innovation Pages: 40 (2066 words) Published: March 2, 2015
IBM's Decade of Transformation:
Turnaround to Growth

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

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.

03/03/15

任維廉教授 Professor William Jen

2

HW: Assignment Questions
1. 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? ……
03/03/15

任維廉教授 Professor William Jen

3

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

03/03/15

任維廉教授 Professor William Jen

4

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
03/03/15

任維廉教授 Professor William Jen

5

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.
03/03/15

任維廉教授 Professor William Jen

6

Capabilities Innovations







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

03/03/15

任維廉教授 Professor William Jen

7

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

03/03/15

任維廉教授 Professor William Jen

8

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.
03/03/15

任維廉教授 Professor William Jen

9

HW: Assignment Questions
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?

03/03/15

任維廉教授 Professor William Jen

10

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?
03/03/15

任維廉教授 Professor William Jen

11

What did Gerstner do?
•...
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