Ibm Turnaround to Growth Case Study

In 1960s IBM's head Thomas Watson Jr. invested $5 billion in the company for development of new technology products such as the System/360 computer, hard disk, floppy disk, checkout terminals and FORTRAN computer language. This investment really paid off and made IBM the biggest and most dominant player in Information Technology industry. This move also paved path for the arrival of the IBM PC in the coming decade. Such factors to innovate and heavily invest into future technologies gave IBM a very reputable reputation and success in the mid-century.

By early 1990s, IBM's revenue dropped by almost 150 percent, and the company started heading downhill. IBM had grown heavy with excessive company staff, resources and departments who often were feuding over internal company politics. IBM had lost focus of their innovative behavior which had made them successful in earlier decades, and continued to maneuver their strategies around their existing mainframe product, which was starting to lose steam and revenues. IBM failed to invest rightly into new technologies and did not nurture the relationships with their customers.

Lou Gerstner took the top job with the company in 1993 and single-handedly turned around the fate of the company, putting them back on the path of profitability and eventually returning IBM to the elite status of most successful IT companies.

Phase1: Gerstner started immediately with identify issues grappling IBM and working towards addressing them. He promoted "customer first" attitude in the company, and started attending meetings with key customers himself. He also realized that instead of breaking the company into smaller parts, he had a stronger chance of achieving company turnaround by promoting "one IBM". Gerstner worked to "trim the fat" in the internal IT organization, by approving layoffs, changing personnel, centralizing control and reducing the number of high paid, out of sync upper-management technical positions (e.g. 128 CIO positions were downsized to 1).

Phase2: In order to fuel his "One IBM" ideology, Gerstner coagulated smaller divisions into larger business groups with appropriate heads, who would co-ordinate regularly to focus on the company turnaround strategies. Next step, Gerstner decided to change the culture of the company, and started meeting and communicating with downstream employees directly, in order to explain them the new company core values and principles.

Phase3&4: Under Gerstner watch, IBM started focusing and capitalizing on e-business centric strategies in wake of rise of the Internet in mid-1990s. The e-business strategies triggered, majority of key decisions regarding new products and markets for IBM under Gerstner's term. In order to get back to past innovative ways of IBM, Gerstner appointed key personnel to identify potential great ideas and innovations within the company, and to start investing