Ibm Case Study

Case Study Situation

• IBM to renew their products and processes on a continuing basis; else their survival chances are seriously vulnerable
• If IBM should innovate but how it should organize its innovation system? Is a challenge
• Based on IBM’s limited growth rates, it was clear that IBM was not leveraging the emergence of new technologies and industries to the best possible extent.
• Current markets and existing offerings were more important than building new offerings and new markets.

IBM´s initial status quo

• In 1999, IBM formed an internal consulting team to study how new businesses were started within the company.  The team (Three executive including Harreld, Startegy Sr. VP Corp) concluded that there were six difficulties. 

    1. Focus only on Short Term Results: - Management system rewards execution directed at short-term results at the cost of strategic business building.

    2. Limited Reach, Same set of customers: - IBM focuses on listening intensely to current customers. As a result, it frequently misses new business models, new markets and new classes of decision makers.

    3. Expense/revenue ratios drive the planning process. New businesses are often burdened with unrealistic overhead allocations.

    4. Rely on factual financial analysis only: IBM has a long history of relying almost exclusively on factual financial analysis when making investment decisions, even when a market is too immature or small to support it. 

    5. Budget Constraint comes first on new Innovative Business:-Innovative business ideas often lack sponsorship and attention; when budgets become tight, they are often the first programs to be cut. IBM is funding its new businesses 180 degrees differently from the way venture capitalists are: starting big, then whittling away resources rather than ratcheting up commitments over time.

    6. Once selected, many IBM ventures fail for reasons (such as) inadequate entrepreneurial leadership and absence of sustained funding.

Overcoming cultural inertia

 At IBM that obstacle reflected a complicated organization with seven groups and 39 strategic business units (sbu´s). Achieving strategic clarity and getting consensus for its implementation (allocating resources) among many stakeholders was extremely difficult. Therefore Gerstner (the first outside CEO in IBM´s history) decided to appoint an "EBO. . . to shepherd these efforts.