IBM: Case Study

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  • Topic: IBM, Louis V. Gerstner, Jr., Samuel J. Palmisano
  • Pages : 10 (3849 words )
  • Download(s) : 58
  • Published : December 30, 2011
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Introduction This report is a case study on IBM from 1993 to the present. The reporters’ objectives were to define the problems within IBM in 1993; management tools used to remedy these problems; if these solutions will lead to a sustainable competitive advantage; and what kind of innovators IBM is and what streams of innovation IBM is involved with today. This report is from a managerial science perspective, with a focus on innovation. Executive Summary This case involves IBM, an international computer hardware, software and services company. The head of this organization in 1993, since 1985, was John Akers. Akers was replaced that year by Louis V. Gerstner, Jr. During Akers’ reign, the company had gone from a workforce of 407, 000 in 1986 to 300, 000 in 1992 ; the stock had dropped from a peak in 1987 of $1757/8 to $25 (split adjusted) in 1993 ; and a loss of $2.8 billion in 1991 to be followed by a loss of $8 billion in 1993 . Akers’ effect on the structure of the company resulted in, among other things, two outcomes; 13 highly defined divisions that were theoretically autonomous from one another and many job losses. Gerstner was brought in to remedy IBM’s fiscal situation and bring IBM back into the black and back on top of their industry. Problems within IBM in 1993 Focus One of the most notable problems within IBM was their focus. It seemed that inter-politics within the organization overshadowed what should have been their prime directive: the customer. They had dismissed the priority of putting the customer first and letting the customer drive their innovation and, in turn, ended up trying to drive their own innovation and directing the customer to what IBM thought they would need. In an article in Communications Weekly, John Mulqueen states that IBM was more concerned with “pushing inter-networking solutions as a means to control the customer.” John Joback, the president and CIO of First Virginia Services Inc noted that “they were more focused on developing career paths for the sales people than with focusing on the customer.” One of the first things that any manager in any industry learns is that the customer drives innovation. If managed properly, this will give their organization a sustainable competitive advantage. Business Politics It had become obvious to many that business politics were playing a part in impeding IBM’s growth. David Andrews, of the D.H.Andrews Group in Cheshire, Connecticut noted, “IBM has a serious culture problem in developing software because internal debates became so political that projects never seem to be completed.” Even Gerstner acknowledged the problem; “We have people who will not respond to a customer because one unit is debating with another how they’re going to share revenue.” Business politics is a barrier that can interfere with the smooth running of any organization. It occurs when any employee in upper management does something solely for personal gain, rather than company growth. This is the most dysfunctional aspect of business today . Success A senior executive at Chrystler once noted, “Living with success is always a challenge.” This is the next problem to face IBM. The company became too comfortable within their own superiority; it became a victim of a barrier known as ‘cushy chair syndrome’ . IBM was the industry leader and became too confident in their success, trying to create changes within the organization instead of within the industry to stay on top as an innovator. Their glorious history was one made up of successful incremental of changes and structure ; rather than discontinuous changes and experimentation, which is one of the key success factors to keeping a sustainable competitive advantage . As well, their upper management was that of an ‘old guard’ which had been around for some time, giving the aura of a stale environment, one ill-conducive for innovation and change to occur . Culture The culture at IBM was one characterized by its extremely defined...
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