IBM’s transformation from a “product-centric” to a “service-centric” organisation required investments in a number of key areas. The CEO of IBM at that time was Louis Gerstner Jr. He placed importance on focus, speed, customers, teamwork and execution. Gerstner totally revamped the company’s whole operating procedures, from top management to bottom, by standardising global core processes, centralising the company to leverage its strengths as provider of solutions to customers, fixing the core businesses, redesigning the metrics and reward systems of employees and relentlessly driving the culture toward an intense focus on the marketplace and the customer. It can be inferred from these action Gerstner took, that he changed the company’s culture. Before Gerstner took over, IBM was only focused on selling products to customers. Gerstner recognized the change in the marketplace towards business services, and took the necessary actions to transform IBM into a “service-centric” organisation. He drove the culture of focusing on customers in the employees and even redesigned the metrics and reward systems of employees, to encourage employees to reach the goals set. Gerstner also realised that competitive superiority at that time, was based on knowledge, experience and expertise of personnel rather than the technical quality of its products. Thus he cut the number of employees from 400,000 employees to 220, 000 employees, possibly to eliminate the incompetent, inexperienced employees while maintaining and also upgrading the quality of service the remaining employees provide to the customers. 2)
Louis Gerstner’s implementation style of IBM’s competitive strategy in the early 1990’s was very authoritarian. Once Gerstner finished analysing the market situation and the condition of the organization, he did not hesitate to take the necessary actions to change for the better. For a company such as IBM, who has been around for almost a century, to change its culture...
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