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IntegratedStrategyProject-IBM
AllanWilliamsMay5th,2008
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Contents
0.1ExecutiveSummary.................
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1.1StrategicDirection........
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1.1.1ExternalAnalysis............
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1.1.4SWOTAnalysis........
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1.2AnalysisofSuitability,Feasibility,andAcceptability..
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1.2.1Conclusion...............
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2.1MobilizingforChange...
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2.1.1CommunicatingtheChangeProcess.......
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2.1.2LeadershipandChangeAgents.
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2.2TranslatingStrategyIntoObjectivesandInitiatives.
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2.2.1ProcessofImplementingStrategy...........
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2.2.3Finance.
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2.2.5Process......
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CONTENTS
2.3.6Stories..................
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2.3.7
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2.4AligntheOrganization................
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2.4.1SocialCohesion.
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2.4.2ActionPlan....................
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2.4.3MonitoringandEvaluatingtheChange
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2.5Conclusion...
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2.6PersonalDevelopmentReport.
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57.1.5IBMsStakeholders....................
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0.1.EXECUTIVESUMMARY0.1ExecutiveSummaryNomatterhowdismaltheUSeconomymaycurrentlybe,theseareheadytimesforIBM.Record
profitswereannouncedfor2007,withIBMreporting$10.4billionUSDonrevenues
of$98.8billion.$21billionwerereturnedtoshareholdersthroughstockbuybacksand
dividends,andafurther$12.2billioninvestedintoacquisitionsand
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capitalexpenditures.Unprofitablebusinessesweresoldoffordivested,newmarketsentered,allowingIBMtoenjoya42.3%grossmarginonrevenue.
Despitethesesplendidresults,IBMknowsfullwellthatitmustcontinuouslyput
newofferingsintheproductlifecycle;rivalsarealltookeentoemulate
orundercutIBMslineofproductsandservices.IBMhas
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longabandonedthetraditionalpracticeofcustomerlock-in,wherecustomersareforcedtouseIBMproductsoncetheyenteranIBMcontract1.IBM
fullysupportsanysoftwareplatformonanyhardwaresystem,allowingcustomerslowentrance
andexitbarriers.IBMreliesononeassetthatprovidesthehighestvalue
(andmargins)itsconsultants,contractors,andexpertsprovidedto
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customerstosolvetheirmostdifficulttechnicalandbusinessproblems.Tomeetclientdemands,IBMemployeesaredispersedthroughtheworldtobeclose
totheircustomers,takingfulladvantageofvirtualization,oranofficeless,alwayson
workingstyle.
IBMinmanywayspioneeredthecurrenttrendof
virtualization,alreadyhavingeliminatedofficesforemployeesandvacatedentire
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buildings,suchasthethefamousaddressof550MadisonAvenueinNewYorkCity.Employeesareequippedwithlaptopsthataretheiroffices;
theycanconnectandworkanywhere,fromhome,clientsites,airports,foreigncities,
andanyconceivablelocationwithanInternetconnectionofsomekind.Employeesare
alwayson,workinganominal40hoursperweek,but
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reachableatanytime.IBMemployeesarealsoisolated,workingasindividuals,attheirowndiscretionofwhatthecompanysfutureholdsandwhat
skillsanddevelopmentstheywillundertake.IBMemployeesmustregainacommonvision,
purpose,camaraderie,andformalearningnetworkthathasdisappearedwiththeircubicles
andoffices.
Manyofthecomponentsforthis
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transformationisalreadyinplace;knowledgemanagementsystemsareplentiful,socialnetworksarereadilyused,rewardmechanismsused,andeducationwellestablished.Whatis
missingisanarchitectureforimplementingthenewstrategyofteam-basedlearning,customer
engagement,andmarketadvantage.Thenewarchitecturehasitscomponentsofhigh-levelobjectives
mappedtocriticalsuccess
1Gerstner,2002
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CONTENTS
factors,targetsmatchedwithinitiatives,andartifactssuchasaBalancedScorecardwillbeusedtomonitorprogressandresults.
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0.2.INTRODUCTION0.2IntroductionIBMisaglobalITmanufacturingandconsultingcompany,with335,000employeesacrossnearlyeveryindustrializedcountryinthe
world2.Oncelargelyfocusedonthesaleofmainframesandrelatedsoftware
contracts,IBMhasevolvedintolucrativetechnologyandbusinessconsulting,supportedbya
widerangeofIBMsoftwareplatformsandproducts.Figure1
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showsIBMsvaluesysteminthemarketplace,demonstratingarelianceonknowledge-basedtransformationandprocesses.Productssuchashardwareandsoftwareareeither
soldoutright,orused(alongwithcompetitorsproducts)asabasisforconsulting
engagements.
Table0.2givesanoverviewofIBMsfinances,showinga
mildlyflatgrowthinrevenue,butasteadyincreasein
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Table1:IBMYear-EndFinancialResults,inBillion$USD
2IBMAnnualReport,2007
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CONTENTS
Open Source InitiativeServicesSoftwareSystems &FinancingConsulting and Systems IntegrationApplication Management ServicesStrategic OutsourcingBusiness Transformation OutsourcingIntegrated Technology ServicesMaintenanceWebsphereInformation ManagementTivoliRationalOperating SystemsServersStorageRetail Store SolutionsMicroelectronicsCommercial FinancingClient FinancingFortune 500 CompaniesSmall Business/Home BusinessOpen Source InitiativesUniversities/EducationGovernment/Federal/MilitaryRetail/POS/e-CommerceFinance/BankingMicroelectronicsResearch & DevelopmentMainframes/Workstations/NetworksConsulting/Contracting/ServicesIntegration/Business TransformationIBMCUSTOMERSSUPPLIERSCompetitor Systems and PlatformsSub-contractingservicesUniversity research departmentsJoint ventures / alliancesRaw materialsfor microelectronicsHardware manufacturersInternal/external laborFigure1:ValueSystemofIBM
0.2.1AssignmentStructureThestructureofthisassignmentisintwoparts;the
firsthalfdeterminesIBMscurrentstrategicpositioninthemarketplace,withfocuson
competitionandcustomerdemands.Fromthisdetermination,theunderlyinglogical
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reasonsforIBMsfuturedirectionsareanalyzed,formulatingthebasisofabusinesstransformation.Thesecondpartofthisassignmentdetailsthe
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0.2.INTRODUCTIONmechanicsofthetransformation,keepingIBMaheadofrivals,preservingmargins,andraisingrevenue.
* Porters 5 ForcesSWO TRVEInternalExternal* McKinseys 7S* Value System* Product Portfolio* Competitive AdvantageStakeholder AnalysisScenariosStrategic ChoicesCHAPTER 1Henley Transformation Framework* PESTLECHAPTER 2Figure2:
AssignmentStructure
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CONTENTS
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Chapter1
StrategicPositionAnalysis
1.1StrategicDirection1.1.1ExternalAnalysisPESTLEAnalysisAfullPESTLEanalysisisperformed
inAppendix.1.1,andthepressingissuesarediscussedinturnbelow:
SkilledEmployees-DespitetheranksofskilledworkersinIndiaand
othercountries,competitionhasshrunkthepoolofavailablecandidates.
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Employeesworkinavirtualorganization,wherelocationisnolongerdefined;employeesareconnectedtoeachotherthroughnetworksandtechnology.Commoditization
ofTechnology-Ascompetitorsbecomeadeptatduplicatingthesametypesofservices
IBMdevelops,competitionincreasesandprofitsdrop.BecauseIBMdoesnotforceclients
touseanyparticularproduct,itiseasyforclients
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tomovetoIBM,attheriskofthemeasilymovingelsewhere.PressuretoInnovate-Innovationofnewproductsandservices(orthe
acquisitionofthesame)isthelifebloodofIBM,misstepsinpredictingindustry
trendscanbecostlyinvestmentswithlittlereturn.AdangerouspositionforIBM
isthenon-differentiationbetweenaskilledemployeeworkingforIBM
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andthesameemployeelaterworkingforacompetitor.ClientsmaynotseevalueinpayingIBMspremiumpricesifthesameservicescan
befoundcheaperelsewhere.Simplypayingemployees
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CHAPTER1.STRATEGICPOSITIONANALYSIS
moremerelyincreasescostsallaroundandmaynotbeaneffectivesolution
anewwaytodifferentiatetheavailablepooloftalent,raisecompetitivebarriers,
andyetkeepoverheadcostslowmustbefound.Porters5Forces
Figure1.1diagramsthedetailedFiveForcesanalysisfrom
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Appendix.1.2.
High/Lowgrowth and sustained advantageis difficult.THREAT OF NEW ENTRANTSRivals are small compared to IBM,but can compete on at least onespecialized front, such as anarrow or unique service orproduct, or more often, on price.BARGAINING POWER OFSUPPLIERSSuppliers are skilled workersemployed by companies,specialized skills can berare and expensive.BARGAINING BUYERSHigh if the service be bought elsewhere,low if the service propietary, or the close relationship OF SUBSTITUTIONLow forIBMs recent technologyfrom R&D efforts, or productsgiven away for free by IBM.High if service is copied oravailable from the competition.INTENSITY OF RIVALRYIBM, as the dominant player inthe market, is the natural focusof rivals. IBM can expect smalloutfits to attempt to chip awayat every weakness it has.HighMediumHighHigh/LowMarket is easy to enter, butFigure1.1:PortersFive
Forces
Competitionisintense,althoughIBMholdsthelargestshareof
anyonecompany(seeAppendix.1.4),itdoesnotholdadominantposition.
Muchofitscompetitionissmallcompaniesandindividualswho
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mayhaveafocusasnarrowasIBMsiswide.FewcompaniescanholdtheirownagainstIBMsbreadthanddepthofsoftwareproducts
andplatforms,butthelucrativebusinessofprovidingskilledindividuals(thesuppliers)is
attractivetoanycompany,largeorsmall.
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1.1.STRATEGICDIRECTION131.1.2InternalAnalysisMcKinseys7S
Figure1.2illustratestheeffectivenessofeachoftheelementsofthe
McKinseys7Smodel(pleaseseeAppendix.1.3formoredetail).Thebiggestweakness
inthisdiagramistheStructure,puttingIBMinacriticalriskwith
competitors.Employeesdeployedinconsultingpositionsoftenareworkingalone,
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withtheirlearningself-directed.WhilematerialsareavailableforlearningonanyconceivablesubjectthatIBMhasinterestin,thereislittledirection
inwhichmaterialstostudyortherelevanceofsubjectsnotinthe
immediatescopeoftheemployeescurrentpositionorproject.Inturn,Structureweakens
theStrategyandSharedVisionportionsofthe7Sdiagram.
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IBMsstrategypertainingtoitsconsultingbaseisstronglylinkedtoemployeessharingthesamecorporatevision.
GoodEffectiveness: GoodEffectiveness: GoodStructureSystemsShared VisionStrategySkillsStyleStaff*DefinesIndusry StandardsWell developedplatformsFlexible,work orientednetworks fordispersedemployeesHighly skilledand diverse fromall industrializednations in the
worldEmployeesworking onsolitary projectsIndividualsresponsible fordevelopmenrCompanywide vision isgood, individualor specialistvision needsimprovementGood companywide strategyfor systems,but improvementsfor analyists/consultantsHighly developedskills, top notchtraining availableas well as activerecruitmentWeaknessNeitherStrengthInteraction with other elements: GoodInteraction with other elements: PoorInteraction with other elements: GoodInteraction withother elements: PoorEffectiveness: FairInteraction with other elements: Figure1.2:McKinseys7S
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CHAPTER1.STRATEGICPOSITIONANALYSIS
ValueChain
IBMcanbesplitintoitscomponentsusingPortersValueChain,as
showninFigure1.3.Inthisfigure,arrowsinredindicateweaklinkages,
whilearrowsingreenshowstronglinks.
PlayingtoIBMsstrengths
isthestronglinkbetweenTechnologyDevelopment,ProcurementandInbound
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Logistics,asIBMhasaggressivelyacquiredordevelopedawidearrayoftechnologyplatformsthatmeetthechallengesofclientsneeds,aswellas
awillingnesstosupportnon-IBMproducts.
Weak linksOrganizations InfrastructureHuman resource managementTechnology developmentProcurementInboundLogisticsOperationsOutboundLogisticsServiceMarketingandSalesMarginMarginWeak contribution to margin.Strong linksFigure
1.3:ValueChain
AsTable0.2shows,IBMsprofitshaveincreased
asadirectresultofwideningmarginsdespiteflatrevenues.
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Thisisaresultofcuttingoverheadandimprovingefficiency,butthereisanaturallimittohowlongthistrendcancontinue.To
increaseprofits,revenuesmustincrease.TheweaklinkbetweenHumanResourceManagement,Organizations
Infrastructure,andOperationsisthelackofdifferentiationbetweenIBMspoolofconsultants
andthesamepoolatIBMsclosestcompetitors.Areasthat
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needstrongercontributionstomarginsareindicatedinyellow.
ProductPortfolio
IBMhasanenormousproductportfolio,encompassingeveryaspect
ofITandbusinessconsultingforclients.IBMreliesonwidemarginsand
ability
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1.1.STRATEGICDIRECTION15
touseitsspecializedknowledgetoattractclients,ratherthancompetingonprice.Forthisreason,IBM
putsgreateffortincreatingnewmarketsandrespondingtoearlytrends.Figure
1.4shows(inred)therandomnatureofemployeesdirectingtheirlearningwithout
guidance.Greenarrowsshowthedesireddirectionoflearningeffort.
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ThisrequiresanimblemobilizationofIBMconsultantswithreadilyavailableskillsandexperienceinareasthatrepresentacompetitivebusinessadvantageforclients.
ItisessentialthatIBMorchestratesthelearningeffortsofemployeestocapitalize
onemergingandpotentiallylucrativeopportunities.
Current Learning EffortsDevelopmentMaturityDeclineShakeoutGrowthMarketGrowthProfitHighest Profit Margins for IBMIBM Exits MarketDesired Directed Learning EffortsFigure1.4:
IBMProductLifecycle
Matureordecliningmarketswith
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diminishingprofitmarginsareroutinelyexited,leavingthecostadvantagemodeltolowerpricedrivals.
1.1.3IBMStakeholderAnalysisAsalarge
publiccorporationwithaglobalpresence,IBMhasmanystakeholderswithvariedinterests.
ThestakeholdersofkeyconcernareshowninFigure1.5.Clientswhoare
cost-sensitivearegenerallynotpursuedbyIBM,andhavea
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diminishingrelevance.However,companieswhoprovidediscountedpricessetthepricefloorforIBM,andhenceIBMsexitpointfromthemarket.Quickercapabilities
andentriesbylow-costrivalsputspressureonIBMmaintainingmarketlead.Clients
withtechnologicalleading-edgeneedswhoarewillingtopayhighinitialpricesare
themostdesiredcustomersforIBM,aswellasits
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closestcompetitors.IBMscriticalasset,itsownconsultants,needtomigrateupthePowerscaletoedgeoutcompetitionwithaearlymarketcapture
advantage.
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CHAPTER1.STRATEGICPOSITIONANALYSIS
INTERESTPOWERLowHighHighShareholdersMinimal EffortKeep SatisfiedKeep InformedPrincipalLeading edgeCustomersCompetitionLow-CostPreminum ServiceCompetitionIBM ConsultantsPlatformsCompetitorCost sensitive customersFigure1.5:IBMStakeholderMapping
1.1.4SWOTAnalysisTable1.1is
aSWOTanalysisforIBM.IBMhasenviablestrengthsinmarketleadershipand
respondingtonewtrends,inadditiontohavingbillions$USDtospendas
necessary.
TheweaknessesthatIBMfacesareskills
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shortagesincriticalareas,especiallyinnewproductsandservicesIBMwishestodominate.Timingiscritical,waitingtoolongtogetemployeesup
tospeedonneededputsIBMatriskoflosingbusinesstolower-cost
rivals.Motivatinganddirectingemployeesinalearningcorporationrequiresshapinganddriving
acommonsetofvalues.Alackofcompetitiveadvantage
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inretaininganddeployingskilledemployeesshortensthetimewhenIBMcancountonthewidemarginsdrivingprofits.
1.1.5EVRCongruence
IBMisatightlyrunorganization;carefulstrategies,positioningofproducts,andlevel
ofservicehasresultedinaeffectiveEVRcongruence.However,Valuesisin
dangerofdriftingoutofcongruence,duetotheneed
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tocoordinatethevisionanddirectionofIBMconsultantemployees(Figure1.6).
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1.1.STRATEGICDIRECTIONStrengthsIndustryLeadershipDeepresourcesNimbleresponseWeaknessesUndirectedlearningRelianceonhighmargins
EmployeevaluesOpportunitiesEmergingmarketsImmediateclientneedsSkillsdemand
Continuouslyscoutfornewmarketopportunitiesanddevelopproductsandservices,cultivatedemand
throughmarketing.Systemizeemployeelearningeffortstopointtoemerging
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marketsandareasofhighdemand.Mobilizeteamstosupportclientneeds.ThreatsFormulatenewstrategythatmakesskillsAddressskills-buildingandem
CostcompetitionLowentrybarriersprovisioninghardtoployeevaluesissues.
Skillsshortageduplicatebycompetition.
Table1.1:IBMSWOTAnalysis
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CHAPTER1.STRATEGICPOSITIONANALYSIS
EVRFigure1.6:IBMEVRCongruence
Environment
IBMhasrespondedtoan
environmentofhighcompetitionandaconstantneedforinnovativeandemergingtechnology
fromclientsseekingoutanybusinessadvantage.Thebusinessmodelofcreatingnew
marketsandrespondingtoemergingtrendsiscriticaltomaintaining
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IBMswideprofitmargins.
Resources
IBMhasconsiderableresources,incash,assets,intellectualproperty,andproductlines.Despitetheseassets,
IBMsprincipalmethodofcreatingshareholdervalueistobuybackitsown
shares.Table1.1.5showsIBMsstockpriceandmarketcapitalizationvs.theamount
spentonsharerepurchase1.
Year20052006
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20072008ShareRepurchase(Billions,USD)$7.7$8.0$18.8N/AIBMStockPrice,January$98$85$98$110MarketCapitalization(Billions,USD)$163$129
$146$160
Table1.2:IBMEffectsofStockRepurchase
Theflatmarketcapitalizationandstockpriceseemstoindicatethatinvestorsdo
notseeIBMasagrowthcompany.Itisnot
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clearthatthesharerepurchaseishavinganysignificanteffectonvaluecreation.Thismoney
1http://fortboise.org
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1.1.STRATEGICDIRECTIONmaybebetterspentoninnovatingnewwaystocreategrowthandrevenueincreasesforIBM.
Values
IBMcurrentlyhasaworkingprocess,butinordertoenergizevalue
creationatIBM,amorefocusedvisionandstrategyisneeded.Valuesis
anareaofcriticalattention,andmustbepreventedfrom
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drifting.Thedisconnectthatemployeesfeelastheyworkinavirtualenvironmentenforcesdrift;eachemployeemakesthebestchoicefromtheinformation
thatisavailabletothemandapplicabletotheirsituation.
Conclusion
IBMisindangerofbecominganunconsciouslycompetentorganizationwithout
astrictcorrectionofitsvalues2.Abetterredirection
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ofIBMsconsiderableresourcescantightentheEVRcongruence.
1.1.6ScenariosInthenearfuturethereisabestcaseanda
worstcasescenarioforIBMtoconsider:
IBMsWorstCase
IBMcanexperienceanaturallimittoimprovementsinefficiencyandcost
reductionthatiscurrentlydrivingmargins.Revenueremainsflat,stalling
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profitgrowth.CompetitorstakeadvantageofIBMsisolatedconsultantsandemployeesbypoachingthem,providingfocusedteamsvs.IBMsunorganizedranks,andchipaway
atwideningnicheadvantages(costandexpertise)overIBM.
IBMsBest
Case
IBMcanincreaseprofitsbybothincreasingrevenueandlowering
overhead,anddifferentiatetheirconsultingservicestoraiseentrybarriers
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forrivals.Figure1.7showstheidealpositionforIBMsconsultingofferings,whichisdonebyidentifyingandenhancingIBMssweetspotadvantagesover
thecompetition3.
2Thompson,Page1253Collins&Ruckstad,2008
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CHAPTER1.STRATEGICPOSITIONANALYSIS
Sweet SpotIBMsCapabilitiesCompetitorsOfferingsCustomersNeedsIBM StrategicFigure1.7:IBMStrategicSweetSpot
Option1
IBMcountersthe
downsidesofvirtualization,bringingIBMemployeestogethertoaddresstheneedsofa
LearningOrganization4:
ASharedMindsetSpeedofNewIdeasLearning
AndKnowledgeManagementAccountabilityCollaborationLeadership
Option2
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IBMleavesemployeestofindtheirownlearningplanbasedontheirpositionandunderstandingofindustrytrends.IBMdevisesareward
schemetoemployeeswhosuccessfullyreachlevelsofskillsthatclientsdemand.
Option3
IBMaggressivelyhiresemployeeswithhigh-demandskills,and
shedsemployeeswithskillsthatareinindustriesthatIBM
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planstoexit.
4HenleyCritique11
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1.1.STRATEGICDIRECTIONConclusion
Options2and3arethemosteasilyimplementableandmayusefinancialrewardsasincentivefor
employeestofindthebestsolutiontogainskills,perhapsinwaysIBM
hasnotthoughtof.Unfortunately,thisdoesnotprovideanydistinctcapabilitiesthat
cannoteasilybecopiedbycompetition.Employeeswhohaveindependently
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achievedhighskillsthroughtheirowninitiativemaynotfeelthattheymustremainloyaltoIBM,andcaneasilyleavetoworkfor
competitorsorthemselves.
Option1isthehardesttoimplement,but
fitswiththenewgoalofcreatingasustainablecompetitiveadvantage.Thisoption
makestheassumptionthatemployeescanbecomecapableinnew
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skills,avoidingtheproblemofrecruitmentinatightlabormarket.Option1ischosenfortheBusinessTransformationinthenextChapter,to
implementthegoalofcontinuousretrainingasshownonFigure1.4.Thistype
ofchangewillnotbeasuddenshiftforIBM,asitwill
takeadvantageofmanyprogramsandfacilitiesalreadyavailable,marking
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itasanIncrementalTransformationasshowninFigure1.8.
Scope of ChangeDirectionProposedTransformationBig BangIncrementalEvolutionRevolutionReconstructionAdaptionRealignmentOutcomeFigure1.8:IBMsScopeofChange
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CHAPTER1.STRATEGICPOSITIONANALYSIS
1.2AnalysisofSuitability,Feasibility,andAcceptabilityThestrategyfromtheprevioussectionisanalyzedthrough
aSFAtest,asshowninTable1.2.
SuitabilityThechosen
strategyfitsinwiththeaimsofcreatingsustainableandhard-toduplicatecompetitiveadvantage
forIBM,whileavoidingproblemswithrecruitmentorinefficienttraining
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mechanisms.FeasibilityIBMhasspentmuchenergysolvingthehardfactorsofvirtualization,thebalanceremainsonfocusingonthesoftfactors.Thetransformation
isbasedonbehavioralandpeoplemanagementissues,andnotreliantontechnology
thatneedstobeinventedorsoftwarethatmaynotbeusedor
accepted.AcceptabilityTherewillbecertainemployeeswhowillnot
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acceptanychanges,nomatterhowbeneficialthesechangesarethoughttobe.Forthisreason,thistransformationmustbetargetedtoemployeeswho
arereceptivetochangesthatwillbebeneficialforthemselves,theircareer,and
forIBM.
Table1.3:SFAAnalysis-JohnsonandScholes
1.2.1ConclusionFromtheSFAanalysis,theTransformationwilltarget
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IBMshighlymotivatedemployees,withasuitablerewardmechanism,toalleviatetheisolationfromthevirtualworkenvironment.Theendresultwillbea
migrationintolearningteamsthatcannoteasilytransferredtocompetitorsifanemployee
leavesIBM.
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Chapter2
BusinessTransformation
InthisChapter,theHenleyBusinessTransformationmodelisusedtoleadthechangefor
IBMtosustaincompetitiveadvantage.
2.1MobilizingforChangeAtthe
centeroftheTransformation,IBMwilladdressthefollowingfivecorecategoriesof
behavior1:
ChallengingtheProcessesInspiringaSharedVision
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EnablingOthersModelingtheWayEncouragingtheHeart
ThefocusofchangeswillbeintheStructure,Strategy,andSharedVisioncomponents
oftheMcKinseys7Smodel(Figure2.1).Manyofthecomponentsnecessaryfor
thetransformationexist(asindicatedbyStructure),butarepoorlyutilizedordisorganized.
Theultimatefocusistoinstillanew
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SharedVisionthatwillleadIBMforward.
2.1.1CommunicatingtheChangeProcessAtthisjuncture,IBMfacesadifficultyinmountingany
transformationefforts;thebalancesheetistoogood(Table0.2),IBMbeatWall
Streetestimatesfor20072,andcontinuedwins,orsignificantcontractswithimportant
1KouzesandPosner(1998)2IBMAnnualReport,2007
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23
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CHAPTER2.BUSINESSTRANSFORMATION
StructureShared VisionStrategyEmployeesworking onsolitary projectsIndividualsresponsible fordevelopmenrCompanywide vision isgood, individualor specialistvision needsimprovementWeaknessbut improvementswide strategyfor systems,Good companyfor analyists/consultantsNeitherFigure2.1:IBMsChangesintheMcKinsey7S
clients,
continuetobesigned.Thereislittleurgencyforchange;itisnot
plausibletostateIBMisintrouble.Asenseofurgencythereforemust
becreatedtomotivateemployeestolookforwardtowhat
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maybeinstoreinthefuture.Unmotivatedorchange-resistantemployeeswillbebypassed,withtheexpectationthatemployeeswhogoalongwiththe
changeswillsetagoodexamplebyhavinganadvantageinleantimes.
Figure2.2showsthetargetedstakeholdersinthischangeeffort:
Inaddition,IBMseffortsinthecommitmentcurveshown
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inFigure2.3willfocusonemployeesattheAdoptionstage,andnotspendanysignificantenergyonemployeesintheDenialorResistance
stage.Employeeparticipationwillbeoptional.
IBM,bynomeans,is
astaticcompany;therearemanyprogramsandinitiativesthatcurrentlyexist.IBM
employeeshaveresponsibilitiesforimportantongoinggoals,suchasa
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personaldevelopmentplan,skillsassessment,certifications,professionalinterestgroups.Inaddition,thereareclasses,workshops,electroniccommunitygroups,electronicforums,andeducationavailable.What
ismissingisaformalstructure,asshowninFigure2.4.
Thenewstructureforemployeesistoformformallearninggroups,inwhich
employeesbelongtogroupsthatareexpectedtoachievelevels
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ofcompetenciesinspecifictechnicalareas,increasecommunicationamongsimilargroups,providementoringopportunities,andawardprofessionalrecognitionforaccomplishments.Thisstructureisdescribed
inSection2.4.
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2.1.MOBILIZINGFORCHANGELowHighHighLowCommitment to ChangeEnergy for ActionSleepersChampionsPreachersFocusLowFocusMediumFocusHighBlockersFigure2.2:IBMStakeholderMapping
For IBM EffortTIME/EFFORT5. Commitment4. Acceptance2. Resistance1. Denial3. AdaptionCutoff PointFigure2.3:IBMCommitmentCurveFocus
Unfreeze,Move,andSustain
Acommunicationsstrategywillbecomplex,
especiallyinanorganizationthesizeofIBM.Thefocuswilldrawand
attractreceptiveemployees,withthe
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CHAPTER2.BUSINESSTRANSFORMATION
Competency GroupsIBM CONSULTANT POOLCURRENT STRUCTUREProfessional DevelopmentMentoring ProgramsTechnical Jam SessionElectronic GroupwareTechnology FairsCertification ProgramBalanced ScorecardPerformance BonusesBusiness CommitmentsTraining and EducationIndividual Development PlanFigure2.4:IBMEmployeeStructureNow
messageofpromotingyourcareer;
thedesiredsegmentwillbeemployeeswhohaveaninterestinmovingahead
intheirlineofwork.
2.1.2LeadershipandChangeAgentsIBM
hasnoshortageofgoodleaders,andcanrelyon
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skilledemployeeswhoareexpertsintheirspecialtytogivebacktothecommunity.Thefocusofleadersandchangewillbetheemotional
needsofemployeestoensuresuccess.
Inthistransformation,theleaders
aregiventhegoaltoformasenseofcommunityandtoenhance
moraleamongIBMemployeeswhomaynotbelocatedin
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thesamegeographicarea.Withsupportfromuppermanagement,leaderswillberecruitedfromcurrentIBMranksthatdemonstratethefollowingcharacteristics:
1.Adesiretoleadandtoinspireworkers2.Highlycharismaticand
championsforemployees3.Deepexpertsinadistinct,specializedfield4.Are
abletodesignlearningprogramsandcertificationlevelsDozensto
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afewhundredleadersmayberecruited,forspecializedcommunities(forexample,databasedevelopment),withalearningplan,drawnfromIBMswiderangeof
trainingmaterials.Leaderswillbeinchargeoforganizingrecruits,fosteringnetworks,and
givingrecognitiontoachievements
inanenvironmentwhereemployeeparticipation
isstrictlyvoluntary.
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2.1.MOBILIZINGFORCHANGE27ChangePhaseCommunicationsPurposeAimsMethodUnfreezeMobilizingBringawarenesstoIBMstaffGenerateinterest
CreatemomentumBeginadvertisinginIBMinternalwebpagesbeforerollout.Pamphlets,e-mail
distributedtomanagersandstaff.Transformationdetailsreleased.MoveInformDescribechanges
BenefitsHowtoparticipateProvidefulldetailsin
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websites,howtogetstarted,workshops,conferencecalls,kick-offmeetings.SustainUpdateSustaininterestProvideprogressupdatesSuccessstoriesAnnouncesuccesses;
employeeswhohavegonethroughthetransformation,encourageemployeestolistcredentialsearned,
periodicworkshopstoinvitenonparticipantstotakepartoftransformation.
Table
2.1:IBMUnfreeze,Move,Sustain
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CHAPTER2.BUSINESSTRANSFORMATION
ThenextsectionsappraisetheculturalchangesthatmaybeneededwithinIBMtorealizethetransformation.
OperationalCultureFocus
Table2.1.2showstheanalysisfrom
theGarrisonDiamondTestModeltodeterminethenecessaryissuesthatmustbe
focusedontomakethetransformationeffective.
Behavior
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CurrentDesiredActivityFocusedonemployeescurrentassignment,dependentonvaluesandgoalsofclient.Employeessenseofactivityisoutofalignmentwith
IBMduetoisolation.Employeeencouragedtokeepupwithlatestdevelopments,contribute
topeerlearning,andforgeemotionalandprofessionaltiestoco-workers.ExcellenceRewarded
throughclientworkandatIBM,basedonclientfeedback.
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Honoraryandfinancialincentivesexist.Continuefocusonexcellence,usinganyadditionalresourcesthatbecomeavailable.BalanceBalanceisskewedtowardsuccessofclients.
Developmentandcareerdesiresofemployeesaresometimesneglectedduetolackof
communicationfromIBMside.Careeradviceoftencomesfromclientsemployeesratherthan
IBM.AdjustbalancesothatIBMemployeehasaready
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andsympatheticgrouptodiscussconcernsanddesires,andtogetadviceandhelpfromIBMresources.FriendlinessCamaraderieexistswithinIBMranks,with
recognitionforworkingforthesamecompany.Leveragethisfriendlinessintoatrue
networking,learning,andengagingexperience.
Table2.2:IBMGarrisonDiamondTest
FromtheGarrisonDiamondtestmodel,theneed
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tomovethedependencyforconnectionandfulfillmentawayfromtheclientandbackintoIBM.
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2.1.MOBILIZINGFORCHANGEManagementStyle&Structure
Figure2.5showsthecurrentanddesiredpositionofIBMintheBlakeMouton-
McCansemodel.IBMscurrentorientationliesbetweenProductionPusherandDoNothingManager.
ThisreflectsIBMfocusingonresults(successattheclientengagement)whileleaving
IBMemployeestofindtheirowncultureandguidance.The
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desiredpositionistobeintheTeamBuilderquadrant.
DesiredCountry ClubBuilderTeamManagementPusherProductionDo NothingManagerCurrentPositionPositionFigure2.5:IBMintheBlakeMoutonMcCanseModel
UsingtheHandymodel,IBMiscurrentlyleaningtowardtheTask
Culture,withthedesiredemphasisonPersonCulture.Thegoalbeingtorecognize
theIBMemployeeasapersonneedingaperson-orientednetwork,
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ratherthanbeingfocusedonlyonthetasksontheircurrentassignments.
RiskOrientation
IBMisagreatrisktaker,
asindicatedintheDeal&KennedymodelinFigure
2.7.
AsIBM,bynecessity,mustalwaysfindnewmarketsandeventuallymustabandon
entireindustriesaslow-costcompetitioncatchupincapability.IBM
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isinaconstantpositionofneedingtobetyourcompany,andwilllikelykeepthiscultureintheforeseeablefuture.
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CHAPTER2.BUSINESSTRANSFORMATION
CultureDesiredCurrentPositionPersonCultureCultureRolePowerCultureTaskPositionFigure2.6:IBMintheHandyModel
ThepreviousmodelsshowthatIBM
istask-and-resultsoriented,withlittleinthewayofaddressingtheemployeeas
anindividual.Figure2.8supportsthisconclusionbyshowingcontrolthroughgreatemphasis
ontechnologicalachievement,butnotfollowingthroughonthesofter
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organizationalneeds.
LearningOrganizationStructure
Aneworganizationalstructureisnecessarytoimplementthelearningandcommunityenvironmenttore-introduce
asenseofcommonvaluestoIBMemployees.Thenewstructure,shownin
Figure2.9,isreplicatedacrossspecifictechnicalsubjects,andisdesignedtoaccomplish
theseobjectives:
1.Addressneedforemotionalsense
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ofbelongingandloyaltytoIBMAsinglefaceisgiventoeachtechnicalspecialty,usuallyarecognizeddomainexpert.Chosenforcharismaticleadership,
thisResidentDomainExpertisresponsiblefororganizingIBMcoursesfortraining,setting
upnetworks,beingapointofcontact,anddrivingmomentuminnetworkingefforts.
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2.1.MOBILIZINGFORCHANGEHigh RiskPositionBetWork HardMachoYour CompanyPlay HardProcessLow RiskSlow FeedbackHigh RiskSlow FeedbackFast FeedbackFast FeedbackLow RiskCurrentFigure2.7:IBMintheDeal&KennedyModel
Yearly review withRoutines and RitualsControl SystemsTechnically competentIBM ="Im By Myself"Success through winsmanagerIBM employee fitin with client powerstructureIBM employees ontheir ownLittle supervision onceIBM employee is
engaged in client projectTechnical focusStoriesPower StructuresParadigmOrganization StructuresProfessional DevelopmentBehaviorsother than IBM logodeployed withclientNo distinctive logoValuesEmployee is OK ifSymbolsFigure2.8:IBMsCulturalLevers
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CHAPTER2.BUSINESSTRANSFORMATION
1ExpertLevelLevelBeginnerLevelIntermediateCertificate AwardCertificate AwardCertificate AwardCohortCohortCohortCohortCertifiedDomain ExpertBeginnerMentoringMentoringMentoringCommunicationNewslettersEventsGroupwareAnnouncementsRecognitionAchievementceremoniesNetworkingCohort timelineClass studiesExpertDomainResident23456Figure2.9:TransformationalOrganizationforIBM
2.Buildnetworksamong
employeeswithsimilarinterestsIBMemployeesareplacedintocohorts,orgroupsformed
atspecifictimeswithatimetabletocompleteacourseofstudyfor
acertificate.Teamassignments,regularcalls,andasmalland
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intimategroupwillformbondsandasenseofobligationbetweenmembers.3.GiveinformaladviceaboutcareerandskillsEmployeesincohortswill
beencouragedtomentoremployeesinlessadvancedcohorts.
4.Promote
learninginchosenspecialtyAstaggeredlearningcoursewithawardedcertificatesaregiven
ateachleveloflearning.Cohortsandnetworkingfacilitiesallow
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remotelearning.
5.RewardandrecognizeachievementamongpeersFormalawardsceremoniesareheldtopresentachievements;ifgeographicconsiderationsmakethis
impossible,thenotherformsofrecognitionaregiven,suchaspersonalcongratulationsfrom
theResidentDomainExpert,publicationinacompanywidenewsletter,andtheright
touseatitleonpresentingqualificationsinIBMsBlue
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Pagesdirectoryandresumessenttoclients.
6.UseexistingIBMresourcesandinitiatives
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2.2.TRANSLATINGSTRATEGYINTOOBJECTIVESANDINITIATIVES33CoursesandfacilitiesaresimplifiedbyusingIBMsestablishedtrainingprograms,tailoredtofittheschedule
ofthecohortsoeachmemberlearnsalongsidefamiliarpeople.
2.2
TranslatingStrategyIntoObjectivesandInitiatives2.2.1ProcessofImplementingStrategyTo
determinetheeventualresultoftheTransformation,analysismustbe
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performedtodeterminethespecificactionstobetaken.ThestrategicgoalsaretakenfromSection1.2andaremappedinanetworkof
strategicgoalsinFigure2.10.
8PerspectiveCustomer PerspectiveProcessPerspectivePotentialPerspectiveIncrease revenuesby 10%Gain more wins bypredicting futurein-demand skillsetsBuild employee loyaltyThroughnonfinancialincentivesWe deliver superiorservicesOur employeesfeel connectedandfulfilledLower costsof recruitingWe go beyondsupplying aconsultantOur technologyfits every needpossibleWe do not haveskills s
hortagesOur services arecutting edge andcannot be hadelsewhereWe position ourskillsets to theforefront of marketdemandWe generate newideas and innovatenew solutions andproductsOur employeesare trained in thelatest technologiesWe are notaffected bytalent warsOur employeesanywhereand can workare virtualizedWe see new marketsbefore our rivalsand opportunities1234567FinancialFigure2.10:IBMStrategicGoalNetwork(Ahn,
2001)
Strategiclinkspointtotheultimatestrategic
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goalofraisingrevenueby10%,apointraisedinSection0.2.Reducingcostsandoverheadsetsthefloorofmargins,whiletotalrevenue
setstheceiling.Thelinksarediscussedbelowinturn:
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CHAPTER2.BUSINESSTRANSFORMATION
1.Link1IBMemployeesfeelingsoffulfillmentandconnectionbuildsloyaltyandmakesIBManemployer
ofchoice.Salaryisnottheonlyconsiderationforemployeeswhohavechoices
ofwheretowork.
2.Link2Byseeingwherethe
marketisgoingandnewopportunities,IBMcanpositiontraining
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programstomeetskillsdemandaheadoftime.Employeesoftenonlyseetheday-to-dayresponsibilitiesoftheirjobsandnotlong-termindustrytrends,or
strategypositionsIBMmaybetaking.
3.Link3Bybeing
inacompanythatoffersthelatesttraining,IBMemployeesbecomeawarethat
theylosethisbenefitinthelongtermbymoving
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toacompetitor.
4.Link4Bymakingthetrainingregimenteamandnetworkoriented,theclientisassuredthattheyare
notbenefitingjustfromthetalentoftheIBMconsultant,butalsofrom
thepersonalnetworkandresourcesavailabletotheconsultant.Theclienthaspenetration
intoIBMstotalknowledge.
5.Link5Keeping
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inwithIBMsstrategyofpursuingthehigh-endmarket,IBMassurestheclientofsuperiorservicestoanyotherinthemarket.Thisassurance
restsonthequalityofIBMemployees.
6.Link6Superior
servicesmeansgoingabovewhatacompetitorcanoffer,inthiscase,more
thanjustwhattheconsultantisexperiencedwiththe
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potentialtotapintootherexpertsasneeded.
7.Link7Withthepositionofprovidingonlysuperiorservices,morewinsare
signed,contractnegotiationsfallingtoIBMsfavor,withthegoalofboostingan
otherwiseflatrevenuetrendupwards.
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2.2.TRANSLATINGSTRATEGYINTOOBJECTIVESANDINITIATIVES352.2.2GapAnalysisThegapsbetweenIBMspresentstateandthedesiredstatein3years
isanalyzedinTable2.3.
20082011GapsLoyaltyandbelong-Loyalty,
connec-Createnetworkingtoimmediatesurtions,andfulfillmentingstructurestoroundings,suchas
withinIBM.overcomedraw-clientworksite.backsofvirtualizedworkplaces.
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IBMemployeesmustdecidetheirownlearningstrategyonownperceptionofindustrytrends.Directedtrainingprogramstokeepaheadofclientdemandsand
industrytrends.Createtrainingprogramsbasedoninformeddecisionontechnologyanddemand
trends.IBMEmployeescanmovetoacompetitoreasily.IBMEmployeesreluctantto
movetocompetitorsbecauseoflossofpeernetworks.Enhance
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andencourageemployeestoworktogether,evenwithgeographicalgapsandacrossprojects.ClientsgettheknowledgethatcomeswiththeIBMemployee.Clients
getthesameknowledgepluseveryoneelseontheemployeesnetwork.Encouragenetworking
andtrackmetricsandeffectivenessofteamwork.Revenuesremainflat.Revenuesincreasemarkedly,
goalis10%overthreeyears.Implementstrategicplanningwith
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ultimategoalofrevenueenhancement.
Table2.3:IBMGapAnalysis
2.2.3FinanceThefinancialgoalsarea3.3%growthover
2007revenues,asshowninTable
2.2.3.
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CHAPTER2.BUSINESSTRANSFORMATION
20072008200920102011$98.8102105108.58111.84
Table2.4:IBMFinancialGoals,
in$USD,billions
Initiatives
Thefinancialgoalsarea
10%increaseof2007revenuesover3years,representing$10billionUSDin
2011.Consultantswithdesiredskillsetsindemand,andIBMgaining
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afirsttomarketadvantage,drivesextrarevenue.Revenuecancomefromnewclients,negotiatingahigherrateforexistingclients,orfollow-upcontracts
fromcompletedwork.IBMisnottoloseanybusinessbynothaving
skilledcontractorsreadytoworkonaproposedcontractreadytosign.
2.2.4CustomerPerspectivesSetgoalsforCustomerPerspectives:
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1.IBMprovidesclientswithcompetitiveadvantage2.IBMhasareliablesupplyofskilledconsultants3.IBMcommandsapremiumfee,not
discountedservicesInitiatives
Torealizethisgoal,marketingfocusesonIBMs
consultinginitiativeswiththemessagethatclientsgetmorethanjustanIBM
consultant.Thispromiseisfollowedupbysuperiorcustomersatisfaction,
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aperceivedgapbetweenIBMslevelofservicevs.acompetitor,anddeliveryofservicebasedoncompetitivevalueratherthanonprice.Marketing
campaigns,readilyavailableresources,andclearleadershipinindustrytrendsarevital.
2.2.5ProcessSetgoalsforProcesses:
1.Createdirectedlearning
inskillsidentifiedtobeespeciallyvaluabletoIBMsclients.
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2.CreategroupsofnetworksforIBMemployeestoparticipatein.3.Encouragepeernetworking,trackeffectivenessthroughmetrics.
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2.3.THECHANGEPROCESSInitiatives
Theinitiativestocreatethisnewprocessfollowsthesestages:
1.Identifyareasof
skillsthatareinshortsupplyandlucrative.2.Identifyandrecruitleaders
responsibleforencouraginganddrivinglearningandnetworkingactivities.3.Createcertificatelevels
andcurriculum(fromIBMsexistingeducationcourses),dependingonindustry
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needs.4.StandardizecommunicationsthroughITsystems,suchaswikis,forums,newsletters,personalcommunication,mentoring.5.Tracknetworkingactivity(suchasawardingpointsfor
answeringpeoplesquestions),andcontinuouslyimprovingprogram.2.2.6PotentialThePotentialperspectivehas
twomaingoals:
1.IBMEmployeesareconnectedandfulfilledat
IBM.2.IBMisnotaffectedbytalentshortages.Initiatives
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Toachievethesegoals,IBMmustpayspecialattentiontothehumannetworkingneedsofemployeeswhoarenotworkingintraditional
offices,andfollowthroughwithdirectedlearninginitiatives.
2.3TheChange
ProcessTheTransformationwillfocusonthechangeleversshowninFigure2.11
toaffectanewparadigm.
2.3.1SymbolsIBM
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employeesvaluemarksoftechnologicaldistinction,suchastitlesconveyingalevelofachievement(CertifiedITSpecialist,DistinguishedEngineer).Thesetitlesgivestatusto
employees,especiallyinasituationwhereemployeesworkathomeandrarelymeet
theirpeersinperson.Traditional
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CHAPTER2.BUSINESSTRANSFORMATION
Change ArchitectureNew ParadigmTargeting LeversFigure2.11:IBMCultureChange
symbolssuchascompanycarsandcornerofficesare
noteffectiveifemployeesarenotseeninthem.
Inthe
virtualworld,symbolsappearintheformofemployeeresumes(viewablebyanyone),
thenumberoftimesanameappearsinasearch
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engine,andmentionsincompanynewsletters.Takingadvantageofthisfocus,anewsymbolwillbeintroducedforemployeeswhohaveachievedahigh
levelofcertificationinadirectedlearningcourse.Thissymbolwillbedisplayed
prominentlyinanemployeesentryintheBluePages,orcompanydirectory.The
employeewillhavetherighttousethissymbolin
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hisresume,andtoreinforcetheprestigeofsuchsymbols,areal-lifemanifestationwillbeawardedaswell.Thismanifestationmaybeasmall
plaque,pin,orotheritemmeanttobedisplayedathomeorin
anoffice.
2.3.2PowerStructuresTheTransformationisdesignedtobe
voluntary,withIBMemployeeschoosingifandwhentheywill
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participateinthedirectedlearningandnetworking.Thisisdesignedtoensureahighlevelofcommitmentandenthusiasminthosethatparticipate.IBM
employeesareempoweredinthisregard,withthefocusofpoweronthose
whofreelysharetheirknowledgeratherthantheirpositioninthemanagementhierarchy.
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2.3.THECHANGEPROCESS392.3.3OrganizationalStructuresIBMemployeescurrentlyhaveanetworkedorganizationalstructure,whichfollowsthenon-geographicalnatureofvirtualized
workspaces,andthefactthatemployeesoftenchangeassignments,withnewproject
managersandco-workerswitheachchange.Figure2.12showsatypicalnetworkof
anIBMemployeeinred,andthenewelementsin
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blue.Thenewelementsarethecohortsthatarealsotakingthedirectedtrainingastheemployee,andtheprofessionalnetworkinstitutedbyIBM.
IBM EMPLOYEERESOURCESHUMANMENTORMANAGERPERSONALDEVELOPMENTCLIENTMANAGERMENTOREERESOURCEDEPLOYMENTMANAGERCOHORTNETWORKIBMMANAGERIBM EDUCATIONAND TRAININGFigure2.12:IBMEmployeeOrganization
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CHAPTER2.BUSINESSTRANSFORMATION
2.3.4ControlSystemsITSystemsIBMhasaheavyinvestmentanddependenceonITsystems,andthe
existinginfrastructurewillbevitalinmeasuringthesuccessoftheTransformation.As
employeeswillhaveverylittlechancetonetworkinperson,thebasisof
communicationwillbenearlyentirelyelectronic.Figure2.13showsthe
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necessarymetricstobecollected.Keytoencouragingnetworkingandcommunicationiskeepingscoreinhowoftentheemployeeaccessesthenetworkingfacilities,the
frequencyandnatureofinteractions,andfocusontimesavingshortcutstomakethe
systemconvenientandeasytouse.
IBMCLIENTIBM EMPLOYEEContributionsto body of(newsletters,training)Activity inelectronicresources,answers toqueries, etc.126345Metrics Gathered1) Existing metrics of client satisfaction2) Employees cont
ribution to body of knowledge3) Progress in keeping up with cohort in learning4)Employee interaction with others in networks5) Activity in supporting IBM engagements6) Employees use of network resourcesCOHORTNETWORKknowledgeFigure2.13:IBMControls
Management
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CentraltotheTransformationisthedesiredincreaseofhumaninteraction;theResidentDomainExperts(Figure2.9)toencourageanddrivethis
interaction.Theymaychoosetopublishregularnewsletters,answerinquires,communicateone-to-onewith
individuals.Theirpurposeistoputahuman
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2.3.THECHANGEPROCESSfaceontotheprocess,andservetodrawinterestandinteractiontoissuesandtopicsoftheday.
Moreimportantly,theseleaderscontinuouslyimprovetheprocessinacycleshownin
Figure2.14.
Inadditiontoexistingcriteriaconsideredattheemployees
annualreview,participationandnotablecontributionstonetworkingwillbe
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afactorindeterminingtheoutcomeoftheemployeesreview.
ComparisonGaps identifiedStable SystemImprovements implementedNew metrics gatheredFeedbackAccurate andtimely data,relevant tousersCorrectiveActionCorrection planinitiatedFigure2.14:IBMPerformanceMonitoring
2.3.5
RoutinesandRitualsOnanongoingbasisintheinterestofrecognizingachievements
andperiodicallyreviewingtheperformanceofthedirectedlearningandnetworksinstalledby
theTransformation,routineswillinclude:
Quarterlyreports
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ofmetricsandperformancebyResidentDomainExpertsPeriodicnewsletters,meetandgreetevents,workshopsIndividualone-on-onediscussionsbetweentheResidentDomain
Expertsandconstituentsofdirectedlearningandnetworkingefforts
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CHAPTER2.BUSINESSTRANSFORMATION
Ritualswillinclude:
Awardsceremonies,recognitionforachievementsFeedbackforannualreviewgiving
metricsforemployeesparticipationinTransformationeffortsBalancedScorecardresultstyingTransformation
toultimategoalof10%revenueincrease.2.3.6StoriesStorieswillreflectthe
successofindividualswhohavecompletedacourseofeducation
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inagivenskillset,focusingonhowtheycontributedtoIBMssuccessaswellastheirown.Thepositivebenefitsofnetworkingandhow
employeesreliedonittosolvedifficultproblemsarehighlighted,whileplansare
discussedtoaddressareaswheredrawbacksordifficultieshavebeenuncovered.Thesestories
willbeusedtodrawnon-participantsintotheTransformationscheme,
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usingallavailablecommunicationschannelswithinIBM.
2.3.7NewParadigmAsaresultofmodifyingthechangelevers,Figure2.15showsthe
outcomeoftheTransformation.
Control SystemsSymbolsRight to use iconson online directoryand resume forlearningachievementsIBM power focusedon knowledgableindividuals who sharewith other employeesIBM works togetherSuccess throughnetworkingInvitation to allto join as wellTechnical and socialfocus in professionallife within IBM,bringing successesto all clientsNetwork of manyindividuals to drawknowledge fromPeriodic improvementreviewsAchievement
recognitionIT systems to implementnetworking channelsManagement tracksnetworking metricsParadigmStoriesPower StructuresOrganization StructuresRoutines and RitualsBehaviorsValuesFigure2.15:IBMCultureChange
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2.4.ALIGNTHEORGANIZATION2.4AligntheOrganization2.4.1SocialCohesionThedesiredalignmentoftheTransformationistoraisesocialcapital,or
socialcohesionamongIBMemployeesinavirtualworkplace3.Figure2.16shows
IBMmovingthroughPhase5,wheregrowthisaresultofcollaboration4.
ToleadIBMemployeesthroughthisphasechange,managementwill
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stressthattheactionisvoluntaryontheemployeespart.Thissidestepsemployeeswhomayresistoropposethechange,whilegivingambitiousand
willingemployeesanopportunitytobuildandcreatethemissingsocialcapitalin
theirdaytodayactivities.Bysettinganexample,theymayenticethose
withawaitandseeattitudetojoinaswell.
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Avoluntaryapproachtiesmanagementshandsinthenumberofapproachestheycanemploy;namely,coercionisruledout,leavingonlypositivechangebehaviors
suchaspersonalencouragement,actingonfeedbackandcriticism,aswellassetting
thetoneofmutualrespect,powerofknowledge,andrecognitionofachievements.
2.4.2ActionPlanThetimelineforthisactionplan
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withtheirdutiesshiftedtothisendeavor.AmodestbudgetwillbeallocatedtoeachResidentDomainexperttohostawardsfunctionsandprizes
asappropriate.
2.4.3MonitoringandEvaluatingtheChangeProcessFora
largescaleeffortinvolvingmanypeopleandtheirneeds,criticismandfeedbackare
tobeexpectedimmediatelyafterinceptionandimplementation.Forthis
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reason,theResidentDomainExpertsaregivenawidelatitudeonactionstakentoimprovetheTransformationefforts.Periodically,feedbackandmetricsmeasurementsare
gathered,analyzed,andactedupon,asshowninFigure2.9,showingadouble-loop
learningfeedbacksystem.
3Greenier19724HenleyCritique8
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CHAPTER2.BUSINESSTRANSFORMATION
EventIdentifyskillsets,nowandfuture,thatareinshortsupplyandlucrative.IdentifyandappointResident
DomainExperts,eachinchargeofskillsetsidentified.DomainResidentExpertstodesign
corecurriculumforImmediate,Advanced,andExpertqualifications,designedforpart-timestudyfor
cohortsatafixedtimeCreatestandardizedstructureforelectronic
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resources,libraries,wikis,newsletters,allowformaximumease-ofuseandmultiplenetworksforusers.BeginadvertisingandcommunicatingtoIBMemployeesaboutdirectedlearningand
networkingopportunities,stressingbenefitsandcallstoparticipation.Ongoingcollectionofmetrics,focusing
onperformance,effectiveness,andbottomlinescores.OngoingAwardsrecognition,periodicnewsletters,one-onones
withindividualIBMemployeesparticipatinginTransformationprogram.Halfwaypoint
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in3yearprogram-measureprogressofcompanyagainsteventualgoalof10%revenueincreasein3yearsafterinception.Endof3year
program-measureprogressofcompanyagainstgoalof10%revenueincreasein
3yearsafterinception.TimeJuly2008August2008October2008November2008
December2008OngoingOngoingJan2010July2011OutcomesList
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ofskillsets,inpriorityofprojectedmarketreturnsAppointmentsmade,jobdescriptionschangedtofocusonTransformation.CurriculumusingexistingIBMtrainingcourses,
withabsoluteminimumofnewmaterialscreated.Directedlearningandnetworkingplatformthat
iseasilyreplicatedasnewskillsetsarecreated,usingexistingIBMtechnology.IBM
Employeesformfirstcohorts,undergotrainingasdesigned,beginuse
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ofnetworking.Metricscollectedandanalyzed,feedbackactedupon,improvementsmadeActivitiestodrivemetricscollectedGeneralreportonprogrameffectiveness,successes&issues
toactupon.DecisiontocontinueTransformationprogramorterminateduetolack
ofperformance.PrincipalsIndustryforecasters,topstrategymanagers,expertemployees,HRTopexpert
employees,HR,StrategicmanagementDomainResidentExpertsITServices,Domain
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ResidentExpertsHR,SeniorManagement,ResidentDomainExperts,IBMEmployeesSeniorManagement,ResidentDomainExpertsResidentDomainExpertsSeniorManagement,ResidentDomainExpertsSenior
Management
Table2.5:IBMTransformationActionPlan
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2.5.CONCLUSION45through creativitySmallLargeSize of OrganizationAge of OrganizationYoungMatureCurrentPost-Growth throughdirection3. Growth throughdelegation4. Growth throughco-ordination5. Crisis ofleadership2. Crisis ofautonomy3. Crisis ofControl4. Crisis ofred tape1. Growth5 Figure2.16:IBMGrowththroughPhases
2.5ConclusionThispaperhasdetailedtheproposed
Transformation,onhowIBMcangiveitselfadistinctiveadvantageoverrivalswho
constantlytrytoduplicateIBMsofferingsatlowercostpoints.IBMgaineda
gooddealfromitsvirtualworkforce,beingthepioneerin
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manycases,butnowmustaddressthedownside-thelossofcamaraderieandknowledgesharingwithinatraditionalofficesetting.Theendresultof
theTransformationistorestorethesocialsettingoftheIBMemployee,building
loyaltytothecompany,promotingteamworkandrelianceamongpeers,givingjoyto
theworkexperience,andsatisfyingclientswithexcellentservicethat
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cannotbeobtainedanywhereelseinthemarket.
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CHAPTER2.BUSINESSTRANSFORMATION
MonitorCollect andevaluatemetricsManageImplementchanges withdata fromcollectedmetricsSearchFor newopportunitiesfor competitiveadvantageMonitorManageRecreateCreateCreate vision/strategy withTransformationFigure2.17:IBMDoubleLoopLearning
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2.5.CONCLUSIONHenley TransformationProcessPre-TransformationDesired Post-TransformationStateFigure2.18:IBMsTransformationProcess
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48CHAPTER2.BUSINESSTRANSFORMATION
2.6PersonalDevelopmentReportIBMhasbeenanexcellentplacetowork,andinmanyways
IfeelfortunatetohavejoinedIBMwhenIdid,justatthe
verybeginningofthedot.comcollapse.InsomewaysIBMpresentedcredibilityand
security,beingoldeconomyandanestablishedcompany.IBMmay
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notbeglamorousasworkingforGoogleorFacebookmightbe,butinexchange,workingondecidedlybread-and-butterindustriessuchasinsuranceandinvestment
bankinggivesmeinvaluableexperienceonprojectsthathavenohypetosell;
whateverIBMprojectIamonissuccessfulbecauseofthemany
experiencedpeopleIfindmyselfworkingwith.
In
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acompanyofexperiencedandtalentedleaders,itisdifficultforanyonepersontostandoutfromoveraquartermillionemployees,and
theonesthatdoareemployeeswhohavedoneagreatdealfor
IBMsbottomline.Standoutsincludesalesmen,inventorsofmarketcreatingproducts,visionaries,and
peoplewhohaveshownprescienceinthewaythemarkets
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areheading.WhileIhavecertainlydonewellonprojectswithatechnicalfocusordelivery,Ivealwaysbeenonlysomewhatawareofthe
businessdeliberationsthattookplacebeforeIbecameinvolvedinthework.With
theMBAstudies,evenwiththebasicsinFoundationsofManagement,Ivefound
itmucheasiertomakesenseofwhatIBMwas
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doinginitsbusinessdealings,suchasinitsacquisitionsorcourtingofcertainclients.Inmyownpersonaldailyworklife,merelymentioningan
interestinbusinessprocesseshasopeneddoorstoworkingcloserwithbusinessanalysts
onprojectsmostnotedforitsstrictdividebetweentechnologyandbusinessinterests.
OnewayIvefoundthatwouldallowme
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tostandoutatIBMistobridgethegapbetweentechnologyandbusiness.Itisraretofindanyonewillingtoworkwith
bothgroups.Usuallywhenthebusinessanalystsaredonewiththeirrequirements,its
tossedoverafencetothetechnologygrouptoimplementtobetossed
backatsomefuturedate.Withmyknowledgeandtools
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IhavelearnedfromHenley,hopefullysomedayonmyprojectstherewillbenofence.
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Bibliography
[1]Bragg,StevenM.(2006)FinancialAnalysis:AControllersGuideNewYork:WileyandSons.[2]Collis,DavisandRuksand,
Michael(1993)CanYouSayWhatYourStrategyIs?HarvardBusinessReview,April2008
[3]Gerstner,LouisV.Jr.WhoSaysElephantsCantDance?NewYork:HarperCollins
Publishers,2002[4]IBMAnnualReport,2007,2006,2005[5]
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KaplanRSandNortonDPTheBalancedScorecard:TranslatingStrategyintoActionHarvardBusinessSchoolPress1996[6]Larson,CarlE.and
LaFasto,FrankM.J.(1989)Teamwork:WhatMustGoRight;WhatCanGoWrong.
NewburyPark,Calif.:Sage.[7]Lewin:BusinessTransformationInstructionMaterial,HenleyManagement
College.1941[8]Marchand,D(2000)CompetingwithInformation,John
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WileyandSons[9]McFarland:ManagingInformationMaterial,HenleyManagementCollege.1963[10]Nellis,D.Parker.(2002)PrinciplesofBusinessEconomicsEssex:FinancialTimes
[11]Oakland,J.S.(1992),TotalQualityManagement,Oxford:ButterworthHeineman.[12]PorterM
(1980)CompetitiveStrategy:TechniquesforAnalysingIndustriesandCompetitors,TheFreePress[13]
Porter,ME&Millar,VE(1985)HowInformation
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givesyouCompetitiveAdvantageHarvardBusinessReview,Jul/Aug198549
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BIBLIOGRAPHY
[14]Porter,M.TheValueChainandCompetitiveAdvantage.FreePress.NewYork.p.33-61.1985[15]Thompson,Johnand
Martin,Frank(2004)StrategicManagement:AwarenessandChange,ThomsonPublishing[16]Treacy/Weirsema(1993)
CustomerIntimacyandOtherValueDisciplines,HarvardBusinessReview,Jan/Feb1993
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.1.APPENDICES51
.1Appendices.1.1PESTLE
Table6givesaPESTLEanalysisofIBM.
DriversExternal
FactorsInfluenceonIndustry0to10(A)ImpactonCompany-5to
5(B)(A)*(B)ProbabilityofChangePolitical/LegalConflictingregulationsbetweendifferentcountries;compliance
withlocallawsvs.globaloperations.4-1-4Low
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PatentlawsareinafluxintheUSandworldwide;patentreformchangesnatureofcompetition.8324MediumEconomicalGlobalrecession
fromUSeconomictroubles9-4-36HighShiftawayfromUSas
primarymarket7321HighSocialWorkforcegrowingolder;feweryoungemployees
andmorediverseworkers6212HighWorkersseparated
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geographically;trendofemployeesworkingfromhomeorregionaloffices8324HighTechnologicalTechnologyquicklybecomeswidespread/copiedbylowcost
rivalsDisruptivetechnology;newinventioncreatesordestroysanindustryquickly89
-4+/-532+/-95HighMediumEnvironmentalFocusongreenorlow-consumption
sustainableenergy428MediumNaturaldisasters2-4
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-8Low
Table6:EnvironmentalfactorsaffectingIBM
Political/Legal
-IBMisamultinationalcompanyoperatingin
manycountries,oftenresultinginIBMneedingtonavigateconflictingregulations.Whatmay
belegalinonecountrymaynotbeinanother,financialpracticesmay
differ.Workersrights,patentlaws,exportcontrolsareallfactors
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thatneedtobetakentoconsideration.
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BIBLIOGRAPHY
Economical
-EconomicrecessionscanimpactclientswhomaycutbackonspendingonITandbusinessoperations.IBM
mayfindthatitneedstorelylessonUSoperationsforprofit
asemergingcountriescomeonline,forexample,Chinesecompanieslookingforpremium
ITservice.
Social
-Workersaregradually
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graying,becomingolderasboomersmovetowardretirement.Employeeneedsanddesireschangeasworkforcebecomesmorediverse.Technologyallowsemployeestocollaborateand
workfarawayfromeachother,downsidesofisolationandseparationneedto
beaddressed.
Technological
-IBMisthetrendsetterandmarket
makerfornewtechnologyforITautomationandbusiness.It
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islikelythatoldstandardscanbedisruptedovernightwithintroductionofanewtechnology.IBMneedstocontinuouslyinnovateasanythingcanbe
copiedoradoptedbyrivals.
Environmental
-Naturaldisasterscan
disruptIBMoperations,asfacilitiesarelocatedworldwide.Focusongreentechnologyan
importantissueasclientsandgovernmentstrytoaddressglobal
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warming.
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.1.APPENDICES
.1.2PortersFiveForcesThreatofNewEntrants
AstheITandbusinessconsultingmarketislucrative
andaglobalbusiness,newentrantsareconstantlyenteringthemarketinresponse
tonewopportunities.Thisisespeciallytrueofemergingcountries,whereskilledand
low-costworkersincountriessuchasChinaandVietnamare
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underbiddingIndia,oncetheleadinglow-costbidderforWesternoutsourcingbusiness.Ashavinganadvantagethroughbusinessautomationandcostsavingsthroughoutsourcingmeans
aadvantageovercompetition,anybusinessofappreciablesizewillwelcomenewproducts
andservicesthatwillworktotheirfavor.
Threat:High
SupplierBargainingPower
IBMcannolonger
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engageincustomerlock-in,inwhichthecustomerisforcedtouseIBMproductsexclusivelyonceenteringacontract.Openstandardsallowsaclient
tomigratetheirdataandprocesstocompetitorplatformsasneeded.Forthis
reason,IBMembracescompetitorproductsaswellandprovidesservicewiththesame
depthasasimilarIBMbrand.Supplierscanalsomean
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IBMsconsultingbase,employeeswhocanworkforIBM,acompetitor,orhangouttheirownshingleasanindependentconsultant.
Threat:
Low
BuyerBargainingPower
Buyersaredividedintotwo
camps,oneseekinglow-costserviceandtheothercampseekingleadingedgeIT
productsandservices.Low-costservicereducesoverheadforclients,but
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requiresamaturemarketwithanadequatenumberofcompetitors.Leading-edgeclientsoftenwillpayapremiumfornewproductsandservices,andhave
fewvendorstochoosefrom.IBMnearlyexclusivelypositionsitselfintheleading-edge
market,andmustconstantlycedebusinesstolow-costcompetitiononcemarginsbecomeunsatisfactory.
Threat:Medium
ThreatofSubstituteProducts
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&Services
Whenanewserviceorproductisdeveloped,anewmarketiscreated,onethatpromisesanewlevelof
automationoranewwaytoreachcustomers.Inthetimeofmarket
creation,productsandknowledge(intheformofconsultants)arelimited.Overtime,
ascompetingproductsaremadeand
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BIBLIOGRAPHY
moreconsultantsgainknowledge,customershavemorechoicesandthethreatofsubstitutionincreases.
Threat:Medium
CompetitorRivalry
Competitionisfierce,butIBMenjoysalargeshare
oftheleading-edgeITconsultancymarket.ManyofIBMsproductssetthemarket
standard,allowingIBMtocontrolthedirectionandprogressof
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themarket.ManyofIBMscompetitionareniche-orientedorcost-leaders,orarecomplementary(usingIBMsproductstodrivedemandforaspecializedservice).
Threat:Medium
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.1.APPENDICES
.1.3McKinsey7S
HardElementsStructureAcompanyofIBMssizeissplitalongthree
lines:Software,Services,andSystems&Financing.Bynecessity,therearediversestructures
suitedtothenatureofaparticularbusiness.Thestructurethatisin
questionistheranksofIBMconsultants,whoaregenerally
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individualsonassignmentandarenotnecessarilyalignedwithanydirectionotherthantheirown.StrategyIBMsummarizedtheirstrategysuccinctlywith...
tosolveourclientshardestproblems;IBMcontinuouslyseeksopportunitieswhichrepresenta
technologicaladvantageoracostsavingsforclients.ServicecontractsbasedonIBM
productsandplatformsarelucrativeforgrowthmarkets.Systems
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IBMoftensetstheindustrystandardsforsystemsandautomation,andhasaninterestinbeingflexibleandresponsivetomarketconditions.Manymechanisms,
suchastraining,HR,andassignmentdeploymentarewelldeveloped,althoughoftenleft
toemployeestodiscoveranddeterminehowbesttousethem.Soft
ElementsStyleIBMhasasurprisinglyinformalandcollaborative
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styleforanorganizationofitssize.Gonearethedaysofpinstripesuitsandsincereties,replacedbyaglobalcollaborativenetworkin
whichIBMemployeesworkonprojectsfromanylocation.Afullthirdof
IBMemployeesworkfromhome,withtherestinsolutionsdeliverycenters,IBM
campuses,orinclientsites.SharedValuesIBMplaces
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emphasisonintegrityandcustomersatisfaction,andeveryIBMemployeemustreadandsignadocumentdefiningwhatIBMstandsfor.Becauseofthe
dispersednatureofIBM,oftenvaluesmaybethatofaclientthe
IBMemployeeisworkingfor,orassumedvaluesfromatemporarygroupworking
together.Transientassignmentstendnottoreinforcevaluesovertime.
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SkillsIBMplacesahighpremiumonskills,asitiswhatmakesthecompanymarketabletoclients.IBMisoftenthecompany
offirstresorttosolvecomplexissuesorintroducenewtechnologytoclients.
Despitetheimportanceofskills,cultivatinganddirectinglearningeffortsisleftto
theindividualemployee.
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BIBLIOGRAPHY
StaffWithnearly400,000employees,IBMhasawidepooloflabortodrawfrom.Cleanlydividedintobands,
orlevelsofresponsibility(andpay)aswellasbroadjobdefinitions,IBM
marksoutsteppingstonesinadvancementfortheemployee.Ayearlyperformancebased
bonus(bothindividual,department,andcompany)motivatesemployees.Specialprograms
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suchascertificationandtitlessuchasdistinguishedengineersgivespecialrecognitiontoemployeeswhohaveachievedaremarkablelevelofskill.
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.1.APPENDICES57
.1.4MarketShare
IBMSUNMicrosoftHPAccentureInfosysOtherFigure19:IBMMarketShare2006
IBMsmarketsharefor
ITandBusinessservicesin2006,showingthatwhileIBMhasalarge
portionofthemarket,anevenlargerportionisheldbysmallIT
consultancies.Individualconsultants,smallshops,anduniversitieslendingscholarsmake
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upforthelargestshareoftheITmarket.RivalssuchasHP,Infosys,andMicrosofthaveasmallmarketsharenow,butare
expectedtoinvestandstakeoutalargershareovertime.
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BIBLIOGRAPHY
.1.5IBMsStakeholdersCompetitorPlatforms
IBMsupportsallITplatformsandproductsasanormalcourseofbusiness.
IBMhasnostakeinprovidingserviceexclusivelyforitsownproducts.As
aresult,competitorsoftentakeaninterestinIBMsupportingtheirplatformas
itcandrivesales.Ontheotherhand,IBMsopenness
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alsoallowsthepossibilityofacustomermigratingtoanIBMproductaswell.
Shareholders
ShareholdershavenottreatedIBM
asahotstock,andIBMsP/Eratioremainslowcomparedwithother
similarcompanieswithintheindustry.Thistreatmentmakesitdifficulttoretainkey
executiveswithstockoptionsandemployeeswhomayownIBM
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stockthroughcompanyplans.Evenwithrecordprofits,IBMisnottreatedasagrowthcompany.
IBMConsultants
IBMConsultants
arethestockintradewhengivingcustomersadviceandsupplyingskilledlabor.
Consultantsfindthemselvesinhighdemandwhentheirskillsetisinshort
supply.However,consultantscanfindthemselvesisolatedfromanysense
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ofdirectionorcorporatevisionastheyareisolated,eitherbybeingembeddedinclientcorporationsorworkingalonefromhome.WhileIBMmay
seeemergingtrends,thisisoftennotsharedwithindividualconsultants.
CostSensitiveCustomers
Costsensitivecustomersareclientsthathavefound
acheaperalternativetoIBM,usuallywhenatechnologymatures
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enoughthatlow-costcompetitorshavedevelopedsufficientskillstoprovidethesameserviceIBMdoes,butatadiscount.IBMcannotcompeteoncost
somustfindwaystoprovideclientsvaluethatlow-costcompetitioncannot.
LowCostCompetition
Lowcostcompetitionarecompetitorswhohave
developedsufficientskillstocompeteagainstIBM,especiallyinmature
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ordecliningmarkets.LowcostcompetitionsetsthepricefloorforIBM,drivingIBMforwardtofindingnewmarketsinwhichIBMcancharge
higherprices.
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.1.APPENDICES
PremiumServiceCompetition
PremiumservicecompetitionarecompetitorswhohavethesamebusinessmodelasIBM,eschewing
competitiononpriceandinsteadfocusingonvaluedeliveredtotheclient.IBM
mayeithercompetehead-onorelseformpartnershipsandallianceswiththiscompetition,
especiallyfortechnologyrequiringsubstantialknowledgeandinvestment.
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LeadingEdgeCustomers
Leadingedgecustomersarecustomerswhowillpayahighpriceforproductsandservicesthatwillgivethem
abusinessadvantageorsignificantcostsavings.Theseclientsseektogainan
edgeovertheirowncompetition,andarewillingtomaketherequiredinvestments.
Leadingedgecustomerscanalsobecostsensitivecustomers,especially
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whenportionsoftheirinfrastructurehasmaturedenoughtomakeitdifficulttojustifyretainingIBMtoserviceit.
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