ibm turnaround case

THE TURNAROUND OF

byCornelius Mellino (0832200222)K. Joko Maryono (0912200426)

Fera Setyawati Tanuwidjaya (0912200451)Aloysius Abel (0912200520)

 04 MAM

PRESENTATION ROADMAP

RAISON D’ETRE

CASE SUMMARY

PROBLEMS

SOLUTION

LESSONS LEARNED

RAISON D’ETRE

1 •Appointing Gerstner the CEO

2 •Gerstner’s diagnostic steps

3 •Gerstner’s sustainable implementation measures

3 KEY DECISIONS

CASE SUMMARY

Watson (1914 – 1952):

Shaping the

fundamental

culture; guiding to

the threshold

of computer

era

Watson Jr (1952-1982):

Computer era; IBM being the world’s

leading IT company

John Akers (1985-1993): Starting in peak

condition; ending up

in deep crises

Gerstner (1993-2002):

Turnaround

Palmisano (2002-):

Sustainability

1911

Founded; merger of three companies dating back to 1890

5

Thomas J. Watson (’14-’52)

1914

Shaping culture of: 1) “Dark-suited salespeople”; 2) Corporate pride and loyalty; 3) Implied lifetime employment; 4) Work ethic: “THINK”

Guiding to the threshold of computer era

6-7

Watson Jr (’52-’82)

1952 – late 1960s

Computer era World’s dominant player in the growing IT

industry

7

$5 billion investment for System/360; the biggest privately financed commercial project ever

The first family of products based on an integrated semiconductor chip and offering interchangeability of components

Innovations: FORTRAN, hard disk, floppy disk, IBM supermarket checkout station, early version of ATM

by 1980-1981

IBM PC: most successful technology introduction with sales of 241,683 unit in a single month, exceeding the five-year forecast.

Sold through: retailers, distributors, and value-added resellers

Known as “the best place to work”1984 Early signs of trouble: sales, assets, and equity

began to decline; believed to be the impact of changing from leasing-oriented business of mainframes into sales-oriented business inefficiency

The customers’ need to interconnect the mainframe with other components led to the fall of mainframe sales

PC sales didn’t even increase

8, 13

John Akers (’85-’93)

1990

The second most profitable company in the world (Net income: $6 billion; Revenues: $69 billion)

Completing the transformation designed to position it for success in the next decade

Feeling pretty good but not so great; deep structural problems remain

5

‘91-‘93

Earnings dropped to negative $2.8 billion (146% drop)

Suffering from substantial losses (total loss: $16 billion)

Reasons: 1) Blinded by hubris (dibutakan oleh ambisi berlebihan); 2) Out of touch with customers; 3) Internal problems

5, 8

Gerstner (’93-‘02

1993 Akers was dismissed, believed to be responsible for the declining financial results

April Fools' Day of 1993, Gerstner from Nabisco (no technology background, but promising capability to break it up for sale) took charge of CEO; learning much from customers, analysts, employees (p. 6)

5-6

1994

Turnaround; first time gain since 1990

by ‘95

Turnaround started: began to recover Rate; slower than IT industry as a whole

– not yet getting to “The Next Big Thing”

6

Successful revitalization widely known as turnaround (titik balik), though not so revolutionary, but steadily.

PROBLEMS

1• Lack of customer intimacy

2• Inefficiency

• Lights-on high cost• Too big organization• Too long time to market

3• Culture: too long celebration of past success

4• Weak corporate leadership

BUSINESS INTENTION: ONE MORE POWERFUL

IBM

1 • Improve efficiency

2• Improve speed: time to market

3

• Clearly translate innovative technology concepts

4• Streamline the organization

•Keep customer intimacy•e-commerse: B2B•Selling leasing

Customer losses

• Cut non-performing investments• Reengineer processes (125 3

megacenters)• Streamline organization (e.g 128

1 CIO)• Employee lay offs (40000)

Inefficiency

• Boost up sales• Effective sales team

Financial losses

• Knowledge management• Research and translating results

more effectively. • Invest on performing projects• Software integration and

networking

Technology

1 • Change meeting culture

2 • Lay off 40.000 employees

3• Consensus-based knowledge-

based decision making processes

4• Encourage people to keep on

integrating and create solutions to customer needs (p. 17)

5

• Encourage people to think from the business matter; forming CEC, DMC, global sales team, CR manager, etc (pp 18-19)

6• Financial, cultural, and business

transformation (p. 22)

7• Internet: Olympic Website, B2B

network computing, etc. (p.23)

8 • Outsourcing and recruitment

CONTOH AKSI NYATA GERSTNER

RESULTS

One IBM

NEXT BIG THING

LESSONS LEARNED

Strategic thinking :

From business

strategy to IT actions;

Keep close to customers

and keep an eye on

competitors’ pivotal

movement

Be creative in product

innovation and translate

it into the customer

needs;

Refer to the bottom-line,

always

THANK YOU