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This is our presentation about IBM turnaround case when it was led by Gerstner.
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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