Case Study of Fortune 500 - IBM

By Sheena Goel

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Of all the fortune 500 companies, that we can choose to case study, with each

having an interesting anecdotes to recount, IBM is by far the most interesting,

invigorating and engrossing as it is one of the longest running IT company in the

world and has seen it’s fair share of ups and downs.

International Business Machines Corporation or widely known as IBM is

Computers based Technology company which sells computers Hardware and

software, other infrastructure services and global consulting services.

With it’s foundations laid in as early as 1910, IBM moved on to become the

largest Computers company in the world. Growing exponentially between 1910 –

1940. As, IBM established it’s unquestioned leadership in mainframes.

However, with the advent of Personal Computers, it’s market shares eroded, so it

moved towards production of Thinkpad which helped it regained the lost market

share.

By the early 1990’s IBM was in dire need of new leadership, which could infuse

fresh lease of life in the company on the verge of breakdown.

After much search and to everyone’s surprise, IBM’s board of directors offered

Lou Gerstner, then CEO of RJR Nabisco to take over the reins of the floundering

company. No one outside of IBM and many inside IBM believed in the potential

success of this decision as Gerstner had experience for consumer goods and had

remotely anything to do with technology and computers. He was blessed with

exceptional common sense and logical intelligence, And his non-association with

technology was blessing in disguise as it helped him focus on business rather than

the getting lost in the overwhelming details of technology.

Immediately after joining IBM, Gerstner made it a task to personally meet and

understand as many IBM employees as possible. He made good PR network with

them and made them feel like he was one of their own. It helped him understand

the problems faced by the employees and customers. He gathered suggestions to

improve and ways to implement them. Employees felt that they were being heard

by the upper management and valued, as a result Gerstner won over their trust

and the employees in return, pledged unwavering loyalty to Gerstner.

He then moved on to figure out and work upon the pain points of the customers.

There again he asked most of his executives with a target to meet as many

customers in month and provide him with a 1 or 2 page document of what

information they gleaned out of such meetings regarding the complications that

the customers faced and then providing his inputs to his executives as to how they

can best help the customers to get rid of those pains.

He felt that IBM was well positioned to provide solutions that met customer’s

needs, and future ambitions.

He cut down the prices of hardware and software dramatically to suit customer’s

budgets.

He did not leave technology neglected either. He decided to move IBM

mainframes to the then new CMOS technology which helped IBM reduce the

prices of mainframes from $63,000 to $2,500.

He emphasized on improving the customer service. Individual employees were

respected and Managers needed to be hands-on. A customer would receive the

same service in all the locations.

A centralized Management Committee was constituted. A culture of fearlessness

was promoted. Employees were allowed to make mistakes and put forth their

opinions without fear of retaliation from the management.

He realized that inefficiency of systems and processes at IBM were a major hurdle

in higher cost of operations. The hardware development time was reduced to 16

months from 4 years. He reduced the large number of data centers that IBM

owned and save lot of revenue. Same goes for the IBM facilities which were in the

prime locations of the country. IBM saved $9.4 billion by way of selling and re-

structuring the real estate.

He stopped the investment on dead technology, instead he focused on internet

and world wide web. He turned IBM into software services based company.

It was an amazing story of turning around a rusted company back to it’s glory.

Much like phoenix that rises from it’s ashes. IBM was huge company and to turn

around it’s misfortune to it’s fortune is story par excellence. And a CEO who most

selflessly worked in the best interest of his company keeping the company’s

recovery above that of this own ambitions. He matched all the characteristics of

Jim Collin’s ‘Level 5 leadership’ -Humble, Consistent determination, incredibly

ambitious. Making IBM regain it’s lost position in the market.

Refrences:

1. https://hbr.org/2000/07/waking-up-ibm-how-a-gang-of-unlikely-rebels-transformed-big-blue

2. https://www.slideshare.net/UrmiArora/ibm-case-analysis-63537973

3. https://medium.com/@shahmm/ibms-turnaround-under-lou-gerstner-case-study-business-

management-lessons-a0dcce04612d