Ibm turnaround

Case Report on IBM

The “IBM corporation turnaround” case is a great example of how a company which has been the world leader in the information technology industry since the beginning of the XX century can suddenly experience significant structural problems and important economic losses (16 billion) within just a few years. An all of the sudden with some managerial, integration “IBM as One”and vision adjustments a company can make a remarkable turnaround and get back as being an agile information technology company.

In order to completely understand how IBM implemented these changes, it is of great importance to study the different approaches that exist for managing change. First there is Lewin’s three step model which consists in unfreezing the status quo, movement to a desiredend state and refreezing the new changes to make them permanent. In the other hand there is John Kotter’s eight step plan for implementing change. He began by listing the common mistakes that managers incur in while trying to initiate change. These can include the inability to establish a sense of urgency, failure to form a powerful guiding coalition, being able to create and communicate avision, among many other initiatives[1]. This case report is based on Kotter’s eight step model entirely, since he builds on Lewin’s model and improves it.

IBM’s primary problems started to appear in the late 80’s and early 90´s when problems like incompatibility among product lines (costumer unsatisfaction), weakening in the demand for IBM’s core mainframes (main income for IBM worldwide), costswere going up (warranty costs, new buildings) and revenues softened. As a result of this, there were loses of nearly 3 billion dollars in 1991[2]. I think it is safe to say that the most concerning problem was how IBM’s managerial organization was established, these inner circles where kept intact (impossible to replace weak performers) and with this evolved bureaucracy it hindered decision makingsince most of the time they didn’t even do their own work and investigation.

As a result of these weak performances the company searched for a new CEO this time an external search was approved and Louis V. Gerstner was appointed as the person who would lead this rescue operation.
Louis implemented Kotter’s eight step plan to perfection. From the very beginning he knew that he had to move fast inorder to establish a sense of urgency. So he made immediate impressions that he was a strong leader. Then Lou started getting up to speed on IBM’s business, by asking senior executives what ought to be done to turnaround the company’s overall business (first step- “establish a sense of urgency by creating a compelling reason for why change is needed”[3]). Another aspect that Gerstner was verycareful to control was getting support form key people who would help him turn the business around, so it came to his concern to hire external people: Jerry York was hired to lead the cost cutting operation and Rick Thoman to head the troubled PC division (second step- “form a coalition with enough power to lead the change”3).
Evidence indicated that the idea of breaking the company into differentpieces wasn’t a good idea, because from the costumer’s point of view it was the ability to integrate and deliver solutions that IBM was best at. So Gerstner decided against this break up and set out eight principles as to why do business as One IBM[4] (third step – “create a new vision to direct the change” 3). Following this it was made clear that the new CEO was going to use every means at hisdisposal to communicate the new vision, employees explained that the way he delivered the new strategies were not systematized like in the past, “he just made statements” (fourth step- “communicate the vision throughout the organization”3).
The reorganizations with in the company also affected line executives since they had to make important decisions in which they would be held accountable. It...