Ibm's Decade of Transformation Turnaround to Growth

In: Business and Management

Submitted By mrezaei
Words 13417
Pages 54
9-805-130
REV: JULY 8, 2009

LYNDA M. APPLEGATE ROBERT AUSTIN ELIZABETH COLLINS

IBM's Decade of Transformation: Turnaround to Growth
This is my last annual letter to you. By the time you read this, Sam Palmisano will be our new chief executive officer, the eighth in IBM’s history. He will be responsible for shaping our strategic direction as well as leading our operations. . . . I want to use this occasion to offer my perspective on what lies ahead for our industry. To many observers today, its future is unclear, following perhaps the worst year in its history. A lot of people chalk that up to the recession and the “dot-com bubble.” They seem to believe that when the economies of the world recover, life in the information technology industry will get back to normal. In my view, nothing could be further from the truth. Lou Gerstner, IBM Annual Report, 2001 In 1990, IBM was the second-most-profitable company in the world, with net income of $6 billion on revenues of $69 billion, and it was completing a transformation designed to position it for success in the next decade. For the world leader in an industry that expected to keep growing spectacularly, the future looked promising. But all was not well within IBM, and its senior executives realized it. “In 1990, we were feeling pretty good because things seemed to be getting better,” one executive remarked. “But we weren’t feeling great because we knew there were deep structural problems.” Those structural problems revealed themselves sooner than anyone expected and more terribly than anyone feared. Beginning in the first quarter of 1991, IBM began posting substantial losses. Between 1991 and 1993, IBM lost a staggering $16 billion. In April 1992, John Akers, IBM CEO from 1985 to 1993, vented his frustrations during a company training program. His comment, “People don’t realize how much trouble we’re in,” made its…...

Similar Documents

Ge’s Two Decade Transformation

...Globalization has conducted an in depth analysis on General Electric's (GE) two decade transformation achieved by the company’s former Chief Executive Officer (CEO) Jack Welch. This report consists of a reflective examination performed by the team, incorporating perspective gained through professional experience and key concepts gleaned from selected course reading selections. As CEO of GE, Jack Welch's management skills became legendary, with little tolerance for bureaucracy and archaic business processes. Acquiring new businesses and ensuring that each business unit under the GE umbrella was one of the best in its field was a primary concern for Mr. Welch. Under his guidance, the company expanded dramatically from 1981 to 2001 (GE, 2012). The culture of innovation and learning, which included incorporation of measures related to new product development, technological leadership, and rates of improvement, aided Welch and the company in defying the critics as the company continued to profit. 3 GE’s Two Decade Transformation Introduction Surviving in today’s challenging business environment necessitates innovative thinking in terms of crafting strategies to enable the establishment and sustainment of a competitive advantage. Through an established strategy, structured options and decision making processes, organizational leaders will be able to facilitate organizational development and growth. Overcoming the odds and competitive pressures sometimes requires defying......

Words: 658 - Pages: 3

Ge’s Two Decade Transformation Jack Welch’s Leadership

...Change Management GE’s Two Decade Transformation: Jack Welch’s Leadership Answer 1 In April 1981, when Jack Welch became the CEO of GE, US was in recession. There were high interest rates. Strong dollar resulted in country’s highest unemployment rates. In this rapid changing and uncertain environment it was extremely difficult task for him to handle a conglomerate as big as GE and ensure that general confidence among the investors is not lost. His predecessor, Reg Jones, had set the bar extremely high at the company leaving a legacy for Welch to compete with as the new CEO. Also, acquiring new businesses and ensuring that each business unit under the GE umbrella was one of the best in its field was another challenge. Welch was extremely effective in taking over the GE reins. He challenged each to be ”better than the best” and planned radical changes across the company. Under his guidance, the company expanded dramatically from 1981 to 2001. * He instilled in everyone a culture of innovation and learning, and incorporated measures related to new product development, technological leadership, and rates of improvement. * He set the standard for each of business to become #1 or #2 or get out of business. * Welch categorized business in 3 circles as core, high technology and services and sold off 200 businesses which all together contributed for 25% of sales. * Even budgeting process got radically changed and evaluation started against external competition......

Words: 1336 - Pages: 6

Ibm Decades of Transformation

...Ibm Decades of Transformation 1) What factors led to IBM’s success during the 1960’s and 1970s and its problems during the late 1980 and early1990s? IBM’s success in the 1960’s and 1970’s was driven by the vision of CEO Thomas Watson Jr. as evidenced by IBM’s $5 billion development investment into the System/360, “the biggest privately financed commercial project ever”. The System/360, “transformed the industry”, along with IT innovations such as development of the FORTRAN, the hard disk, the floppy disk, IBM supermarket checkout station, and an early version of the automatic teller machine”. Mr. Watson’s vision and or innovation required acquiring talent by making IBM, “the best place to work”. The late 80’s and 90’s became riddled with problems as a result of a lost vision and increasing costs. IBM’s lost vision included not predicting the problems of converting from a lease-oriented business into a sales oriented business, need for network consultants, and the evolution of the PC. Finally, costs went up faster than revenues causing lower profits. 2) What did Gerstner do when he assumed the role of CEO in April 1993? Evaluate Gerstner’s approach in 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? In 1993, Gerstner put the customer first, consolidated costs and looked to the future. His approach to the crisis in 1993 was to get involved with IBM’s......

Words: 328 - Pages: 2

Ibm's Decade of Transformation: Turnaround to Growth

...9-805-130 REV: JULY 8, 2009 LYNDA M. APPLEGATE ROBERT AUSTIN ELIZABETH COLLINS IBM's Decade of Transformation: Turnaround to Growth This is my last annual letter to you. By the time you read this, Sam Palmisano will be our new chief executive officer, the eighth in IBM’s history. He will be responsible for shaping our strategic direction as well as leading our operations. . . . I want to use this occasion to offer my perspective on what lies ahead for our industry. To many observers today, its future is unclear, following perhaps the worst year in its history. A lot of people chalk that up to the recession and the “dot-com bubble.” They seem to believe that when the economies of the world recover, life in the information technology industry will get back to normal. In my view, nothing could be further from the truth. Lou Gerstner, IBM Annual Report, 2001 In 1990, IBM was the second-most-profitable company in the world, with net income of $6 billion on revenues of $69 billion, and it was completing a transformation designed to position it for success in the next decade. For the world leader in an industry that expected to keep growing spectacularly, the future looked promising. But all was not well within IBM, and its senior executives realized it. “In 1990, we were feeling pretty good because things seemed to be getting better,” one executive remarked. “But we weren’t feeling great because we knew there were deep structural problems.” Those structural problems......

Words: 13418 - Pages: 54

Ibm's Study

...PM 750 Week 5 Individual Assignment IBM-Successful Enterprise Project Management Office Zhaojie Wang (Will) Brenau University Nov 26, 2013 Why IBM should establish PMO Growing global competition, change the staff ability and resources pressure, plus client technology rapidly changing expectations affect IBM's bottom line, the company to reconsider its organization structure, business mode and management methods. With the help of some influential people are professional project managers, IBM believes the practice of project management is the key in a reliable way to its global customer complex business solutions. Lack of good project management is the failure of some project, customer satisfaction, revenue and profit. IBM's CEO believed team, set up a strategy converts IBM project based enterprise by improving the project management of the company's core competitiveness. And then execute the steering committee charter and continue to guide the IBM project management center of excellence (PM/COE), a formal enterprise project management office, as its agent converts the IBM project based business changes. Enterprise PMO Implementation across IBM global project management ability of organization, PM/COE establish and promote a consistent professional infrastructure, a common method based on industry standards and support project management agents including process, tools and measuring system. As Rad said: “A fully-functional enterprise project management office (EPMO)......

Words: 874 - Pages: 4

Ge's Two Decade Transformation: Jack Welch's Leadership

...GE’s Two Decade Transformation: Jack Welch’s Leadership Submitted by: Group 11 When Jack Welch took over GE as CEO in April 1981, GE comprised of a complex diversified conglomerate consisting of 10 overlaying groups of 46 divisions and 190 departments all supporting 43 business units. GE was already considered as a bench mark for its sophisticated strategic planning and management practices. But at that time US was facing recession, an economy of high unemployment, high interest rates, and strong U.S dollar. So Welch set in motion a series of changes that were to radically restructure the company over the next few years. Welch set the target for each of the businesses to be number 1 or 2. He laid down a three circle concepts in which each business was categorized as core, with the priority of investing in productivity and quality, high technology, with the purpose of having an edge over competitors and services, to add outstanding people and to make contiguous acquisition. He also followed a ‘fix, sell or close’ policy under which many businesses were sold. The money which was collected through sales was invested in acquisition. He tried to make GE more lean and agile which resulted in a highly disciplined de-staffing process. He chipped away bureaucracy, laborious strategic planning system was scrapped and instead real time planning system was bought in. Hierarchy was removed and confined to four levels and made all businesses to report directly to himself. Due to this......

Words: 539 - Pages: 3

Ge's Two-Decade Transformation: Jack Welch's Leadership

...General Electric – Case Study Out of recession The callange Welch faced in 1981 Welch‘s objective Which goal did Welch aim at? Welch´s meassures strategic and organizational iniatives The change process The logical structure behind the change process Added values The values Welch added related to the change process Our opinion Evaluation of Welch‘s approach Welch‘s heritage Longterm implications for GE Summary Short overview of Welch‘s achievments 2 THE CHALLENGE WELCH FACED IN 1981 Out of recession 1. 2. 3. Reorganization of his predecessor (Reg Jones) CEO of the year (3 times), CEO of the decade (1979)… Recession of US economy (1981): High interest and unemployment rate(s), strong currency Strong competitors: Especially from Japan Welch‘s objective Welch‘s measures The change process Added values Our opinion Welch‘s heritage Summary 3 Leads to the radical restructuring during 1981- 88 HOW EFFECTIVELY DID HE TAKE CHARGE? Out of recession #1 or #2: Fix, sell or close Core Welch‘s objective - Three circle concept (1983) Welch‘s measures The change process Added values From 1981 – 1990: - Sold more than 200 business ($11 billion ) - Made over 370 acquisitions ($21 billion) Service Technology Our opinion Welch‘s heritage Summary 4 HOW EFFECTIVELY DID HE TAKE CHARGE? Out of recession Disciplined destaffing Chip away at bureaucracy „Real time planning“ Welch‘s objective - To......

Words: 884 - Pages: 4

Ge's Two-Decade Transformation Case Analysis

...GE’s Two-Decade Transformation Case Analysis March 17, 2005 For: Anne Becker From: Scott Ashby 999004953 _ Phil Parkinson Judy Lee 04003094 Gianni Liburdi 049003649 Executive Summary This report’s objective is to provide analysis of the leadership challenge that General Electric (GE) is currently facing, and to recommend solutions. The primary problem is determining what kind of candidate is required to replace retiring CEO Jack Welch. This has left GE to question how much does the company want to change policy over the previous era, and where does the company want to be in future? Detailed examination of the impact Jack Welch has had as CEO over the past twenty years reveals a leadership style that is the driving force behind a successful transition from a corporate model that was highly centralized and bureaucratic to one that is dynamic, flexible, and many times more profitable. If GE wishes to sustain and build upon the progress of the Welch era, it would do well to nominate a new CEO from within the organization who is familiar with his brand of leadership, and who can continue to provide it for many years to come. 2 Table of Contents Executive Summary................................................................................................................... 2 Table of Contents ....................................................................................................................... 3 Statement of Problem ...............................

Words: 4601 - Pages: 19

Kodak Turnaround

... Name: Professor: Class: Date of submission: Turnaround strategy for Kodak Introduction The rapid changes in business environment and increased domestic and global competition have made the business environment to be more unstable. Organizations of different sizes are struggling to survive if they do not change according to the changing business environment. Many organizations have realized the need to change in order to survive in the changing business environment. Businesses which do not change are getting into trouble due to some factors some of which are internal while others are external. The businesses can easily get a turnaround if they properly diagnose the symptoms leading to failure and take collective action. The concept of turnaround can be described as taking action when a firm is facing a financial disaster or to prevent the firm from having a financial disaster. Turnaround does not only involve transforming which has declined but also those whose management fell the results are not satisfactory (Mason & Gerard, 160). Kodak one of US most recognized company which has been in operation for over a century has been struggling for years due to its slowness in adapting to the changing business world. The company had been one of the leading image solution providers in the world for many years. Established in 1880 by George Eastman Kodak become one of America’s well known company by helping to establish the market for camera film and the becoming the......

Words: 3894 - Pages: 16

Ibm Transformation and Growth

...INFO 410 Case Studies 1-2 Handout General Instructions Case studies are to be performed as described in the syllabus and in the Chapter 1 lecture notes. The questions provided here are NOT designed to be comprehensive steps, just some of the points I’d expect you to address while doing the case studies. So please go beyond the issues identified here; these are just help to get you started. 1. Case Study I-1 IBM’s Decade of Transformation: Turnaround to Growth (starts on page 5) This case study addresses several problems over the history of IBM, so it’s more like a series of little case studies. Focus your attention on the state of IBM when Louis Gerstner took over in April 1993, and address how he could have proceeded from that point. Of course the actual answer is the creation of One IBM, but what other options could he have pursued? Only use the exhibit data through 1994, and you can ignore the discussion of EBOs and other events well after 1994. Since IBM is both a user of IT, as well as an innovator and creator of IT equipment, they have an unusual position compared to many organizations. Focus on the problems IBM faced during this time and the alternatives they faced for dealing with the problems. What is the origin of the problem? Is it a technical issue, or customer relations, or competition, or something else? What functional areas within IBM were responsible for handling each problem (e.g. HR, accounting, marketing, engineering, etc.)? ...

Words: 624 - Pages: 3

Ge's Two Decades Transformation

...GE’S Two-Decade Transformation 1.How difficult a challenge did Welch face in 1981? How effectively did he take charge? When Jack Welch assumed as CEO of GE in April 1981, he had the challenge of revitalizing the competitiveness and productive competency of the company. In 1981 the economy was in a recession and high unemployment combined with high interest rates exacerbated GE’s problems. GE needed to be restructured and this entailed the modernization and streamlining of operations, downsizing the organization, reduction of payrolls and stringent efficiency measures. Welch Early Priorities: GE’s Restructuring 1 or 2: Fix, Sell or Close Each business needed to be 1 or 2 competitor in industry. It had to be a broad strategy because it was a broad corporation. Circle Vision: 
Services (acquisition), 
Technology (leading edge), Core (re-invest in productivity)
Support, Outside, Ventures. Internally wanted company “lean and agile,” chip away bureaucracy example laborious strategic planning system or budgeting process (targeted towards competitors), reducing hierarchical levels from 9 to 4 ensured all business reported directly to him Downsizing, de-staffing, de-layering 123,000 staff cut, operating profits rose dramatically, and set base for strong increase in sales and earnings for second half of decade (exhibit 5) Replace 12 of 14 business heads, called “Varsity Team,” all strong commitment to new management values, and willingness to break old......

Words: 2007 - Pages: 9

Ibm Decade of Transformation

...cade of 9-805-130 REV: JULY 8, 2009 LYNDA M. APPLEGATE ROBERT AUSTIN ELIZABETH COLLINS IBM's Decade of Transformation: Turnaround to Growth This is my last annual letter to you. By the time you read this, Sam Palmisano will be our new chief executive officer, the eighth in IBM’s history. He will be responsible for shaping our strategic direction as well as leading our operations. . . . I want to use this occasion to offer my perspective on what lies ahead for our industry. To many observers today, its future is unclear, following perhaps the worst year in its history. A lot of people chalk that up to the recession and the “dot-com bubble.” They seem to believe that when the economies of the world recover, life in the information technology industry will get back to normal. In my view, nothing could be further from the truth. Lou Gerstner, IBM Annual Report, 2001 In 1990, IBM was the second-most-profitable company in the world, with net income of $6 billion on revenues of $69 billion, and it was completing a transformation designed to position it for success in the next decade. For the world leader in an industry that expected to keep growing spectacularly, the future looked promising. But all was not well within IBM, and its senior executives realized it. “In 1990, we were feeling pretty good because things seemed to be getting better,” one executive remarked. “But we weren’t feeling great because we knew there were deep structural problems.” Those......

Words: 13401 - Pages: 54

Ge's Two Decade Transformation: Jack Welch's Leadership

... GE’s Two Decade Transformation: Jack Welch’s Leadership 1. Jack Welch was hired to take on the role as the CEO at General Electric (GE) and responsible for rebuilding the organization. Jack was faced with several obstacles prior to taking on this position at GE. One obstacle was that prior to his assignment a powerful leader had a great impact on reorganizing GE’s business strategy. Another obstacle was that several companies were moving towards globalization and GE now had to compete in this market. Therefore, Welch had to react rather quickly before foreign companies replaced GE or any other company. The last challenge was that during 1981, the economic markets were experiencing a recession. Welch’s vision of reconstructing GE was that it became the most competitive, diversified, branded and profitable company in the near future. He suggested an effective strategy to help the company by fixing, selling or closing it. Therefore, he chose to make changes to the business strategy by doing away old culture and adapting effective new ways. First, he began by restructuring the company’s current departmental managers. These managers had to agree and commit to doing away with the old GE culture and accepting new ways. Second impact was that the company’s revenues increased by 9 billion dollars from 1981 through 1986 (Exhibit 1). However, GE’s operating earnings increased from 0 in 1981 to $36 billion in 1986 drastically during the same period (Exhibit 1). Therefore, the......

Words: 982 - Pages: 4

Ge's Two Decade Transformation: Jack Welch's Leadership

... GE’s Two Decade Transformation: Jack Welch’s Leadership 1. Jack Welch was hired to take on the role as the CEO at General Electric (GE) and responsible for rebuilding the organization. Jack was faced with several obstacles prior to taking on this position at GE. One obstacle was that prior to his assignment a powerful leader had a great impact on reorganizing GE’s business strategy. Another obstacle was that several companies were moving towards globalization and GE now had to compete in this market. Therefore, Welch had to react rather quickly before foreign companies replaced GE or any other company. The last challenge was that during 1981, the economic markets were experiencing a recession. Welch’s vision of reconstructing GE was that it became the most competitive, diversified, branded and profitable company in the near future. He suggested an effective strategy to help the company by fixing, selling or closing it. Therefore, he chose to make changes to the business strategy by doing away old culture and adapting effective new ways. First, he began by restructuring the company’s current departmental managers. These managers had to agree and commit to doing away with the old GE culture and accepting new ways. Second impact was that the company’s revenues increased by 9 billion dollars from 1981 through 1986 (Exhibit 1). However, GE’s operating earnings increased from 0 in 1981 to $36 billion in 1986 drastically during the same period (Exhibit 1). Therefore, the......

Words: 982 - Pages: 4

Ibm Decades of Transformation

...1) What factors led to IBM’s success during the 1960’s and 1970s and its problems during the late 1980 and early1990s? IBM’s success in the 1960’s and 1970’s was driven by the vision of CEO Thomas Watson Jr. as evidenced by IBM’s $5 billion development investment into the System/360, “the biggest privately financed commercial project ever”. The System/360, “transformed the industry”, along with IT innovations such as development of the FORTRAN, the hard disk, the floppy disk, IBM supermarket checkout station, and an early version of the automatic teller machine”. Mr. Watson’s vision and or innovation required acquiring talent by making IBM, “the best place to work”. The late 80’s and 90’s became riddled with problems as a result of a lost vision and increasing costs. IBM’s lost vision included not predicting the problems of converting from a lease-oriented business into a sales oriented business, need for network consultants, and the evolution of the PC. Finally, costs went up faster than revenues causing lower profits. 2) What did Gerstner do when he assumed the role of CEO in April 1993? Evaluate Gerstner’s approach in 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? In 1993, Gerstner put the customer first, consolidated costs and looked to the future. His approach to the crisis in 1993 was to get involved with IBM’s customers. Gerstner attended sales meetings,......

Words: 907 - Pages: 4