ibm business strategy case study

• About / Contact
• Privacy Policy
• Alphabetical List of Companies
• Business Analysis Topics

IBM’s Generic Strategy, SWOT Analysis & Strategic Choices

IBM (International Business Machines Corporation) is among the world’s biggest technology companies. The company, nicknamed Big Blue, has one of the strongest brands in the computing technology industry, and is one of the biggest employers in the industry. At IBM, strategic choices of top executives favor global expansion and increased outsourcing, while focusing on business operations that have the highest profitability. In global expansion, the company aims to penetrate developing markets. Also, the company outsources its material processing and manufacturing to specialized companies to take advantage of cost-efficiencies. The company also outsources some of its software development to its India group. Thus, IBM’s strategy involves a combination of global expansion and increased outsourcing. This strategy is competitive. The lower production costs help optimize profit margins. Global expansion enables the company to have higher stability. These strategic choices contribute to the firm’s competitive advantages.

The strategic direction of IBM for business competitiveness relates to Porter’s generic strategies and the SWOT analysis model. The company’s strategies are built on organizational strengths directed toward the goals of IBM’s mission and vision . These strengths and corresponding competitive advantages address the company’s weaknesses and the threats to its business. At the same time, these strategies exploit opportunities in the information technology business environment. IBM’s generic competitive strategies have shifted over the years, reflecting the company’s changing emphasis on profitability and the reduction of less profitable business operations.

IBM’s Generic Strategies (Porter’s Model)

• Main article: IBM’s Generic Competitive Strategy and Intensive Growth Strategies

IBM’s primary generic strategy is cost leadership . In Michael Porter’s model, the generic strategies are what companies use to ensure competitive advantages. In this case, through operational cost-effectiveness, the generic competitive strategy of cost leadership supports IBM’s competitive advantages over other firms, including Intel , Microsoft , Google , and Amazon . Some of the company’s strategic objectives are focused on reducing the costs of production. Cost differences enable IBM to make its prices more competitive and, consequently, make its products more attractive to target customers. Also, the lower costs allow the company to keep a higher profit margin if product prices are maintained. Nonetheless, despite this prioritization for cost leadership, the generic strategy of differentiation continues to play a strategic role in supporting the company’s competitive advantages.

IBM has shifted its generic strategy through the years. Initially, the company used differentiation focus as its generic competitive strategy. Differentiation focus involves differentiation of products through uniqueness or value to customers, while focusing on a specific segment or segments of the market. In this case, IBM’s initial strategy focused on businesses as its target customers, and hence the name International Business Machines. However, as the business grew, the company started emphasizing cost reduction to ensure competitiveness in its current markets. This condition shifted IBM toward using the cost focus generic strategy. Cost focus involves focusing on a segment or number of segments of the market but relying more on cost minimization to ensure competitive advantages. Today, IBM has shifted toward using the cost leadership generic competitive strategy. The company no longer limits its product offerings to businesses as its target customers. For example, in acquiring The Weather Company, PwC Consulting, and SPSS, IBM has broadened its target markets beyond business organizations as clients.

IBM SWOT Analysis

• Main article: SWOT Analysis of IBM Corporation

Strengths . In the SWOT analysis model, IBM’s strategy successfully capitalizes on business strengths, such as the company’s strong brand and global supply chain. The company has one of the strongest brands in the global information technology industry. In addition, financial capacity is a strength that supports IBM in terms of acquisitions and global expansion. These strengths enable the business to maintain its direction toward further outsourcing of manufacturing, and expansion of services worldwide.

Weaknesses . IBM’s weaknesses reduce business potential for expansion and growth. In recent years, the company has experienced challenges to its financial performance, which analysts associate with competitive rivalry (see Porter’s Five Forces Analysis of IBM ) and the pitfalls of the company’s corporate culture (see IBM’s Organizational Culture or Work Culture ). For example, the company’s cultural approach is criticized for inadequate support for workforce flexibility, which is necessary in keeping the business competitive.

Opportunities . IBM has the opportunity to improve its financial performance through further and aggressive expansion in developing markets. Another opportunity is to use acquisitions to enter new industries and establish new operations that can complement the company’s existing operations. The strategic objective of such further acquisitions should be to enhance existing products and associated operations, and not necessarily to widen the company’s level of business diversification.

Threats . In this SWOT analysis, competition is the main threat to IBM’s business. For example, the company suffers from the aggressive approaches of other technology firms, such as Intel , Google , Microsoft , and Amazon , which have investments in artificial intelligence and offer cloud computing services that compete with IBM’s products. The company continues to experience the forces of even more competitors as more companies are entering the computing technology market. Many of these firms compete with IBM by providing their products online.

• About IBM .
• IBM Annual Report .
• International Business Machines Corporation (IBM) – Form 10-K .
• Jukka, T. (2023). Does business strategy and management control system fit determine performance? International Journal of Productivity and Performance Management, 72 (3), 659-678.
• Palomares, I., Martínez-Cámara, E., Montes, R., García-Moral, P., Chiachio, M., Chiachio, J., … & Herrera, F. (2021). A panoramic view and SWOT analysis of artificial intelligence for achieving the sustainable development goals by 2030: Progress and prospects. Applied Intelligence, 51 , 6497-6527.
• U.S. Department of Commerce – International Trade Administration – Software and Information Technology Industry .
• Varshney, M., & Jain, A. (2023). Understanding “reverse” knowledge flows following inventor exit in the semiconductor industry. Technovation, 121 , 102638.
• Copyright by Panmore Institute - All rights reserved.
• This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s.
• Educators, Researchers, and Students: You are permitted to quote or paraphrase parts of this article (not the entire article) for educational or research purposes, as long as the article is properly cited and referenced together with its URL/link.

Hybrid Business Strategy of IBM

Founded in 1911, International Business Machines Corporation (IBM) has invented many essential products like the automated teller machines (ATM), floppy disk, and the hard disk drive that have transformed the world. Over a century, IBM has transformed its business, but one aspect remains common: IBM’s business strategy of innovation. 

We live in a digital era of AI and the cloud. Hence it makes perfect sense for IBM to have a business strategy to lead in the hybrid cloud and AI era. In 2021, IBM took dramatic steps to execute that business strategy, strengthening its portfolio and expanding the partner ecosystem. 

IBM now focuses on integrating technology and expertise—from IBM, its partners, and even its competitors— to meet the urgent needs of our clients, who see hybrid cloud and AI as crucial sources of competitive advantage. 

A deeper look at IBM’s business strategy

IBM’s business strategy is focused on helping clients leverage the power of the hybrid cloud and Artificial Intelligence (AI) to resonate with clients who must continually innovate and redefine their businesses with technology. 

Today, IBM has designed a business strategy for accelerated growth while preparing the company for future opportunities. Let’s look at the key elements of IBM’s business strategy.

1. Accelerating Digital Transformation 

A new era of rapid change and disruption is underway. The need for digital transformation has dramatically accelerated due to the pandemic and extends through the core mission-critical business processes of almost all large enterprises. Successful digital transformations face significant obstacles: 

• Managing increased complexity, as large enterprises use multiple heterogeneous IT environments and clouds
• deriving value from an explosion of available data, projected by analysts to grow up to three-fold in the next three years, 
• guaranteeing competitive operations in the context of disruptive changes and worker shortages,
• addressing the increase of malicious security breaches and the rising cost of cybercrime, and
• successfully meeting those challenges together with a cohesive end-to-end sustainable execution. 

To address these obstacles, enterprises want technology that provides flexibility with open-source across heterogeneous environments – an approach known as hybrid cloud. 

IBM believes such an approach creates 2.5 times more value for enterprises than a public cloud-only one. Open-source technologies, such as Linux, containers, and Kubernetes, are essential to the hybrid cloud, as they harness millions of developers’ power to accelerate innovation. 

85% of organizations expect to use Linux containers by 2025. Additionally, AI continues to expand as a critical technology to unlock value, with more than 80 percent of enterprises agreeing that intelligent automation can improve business results. 

As AI for production scales, enterprises and governments focus on ensuring AI models are unbiased and trustworthy. 

2. A Differentiated Architecture for Business Innovation 

IBM claims its differentiation derives from a flexible, secure, open hybrid cloud platform, the comprehensive set of assets it impacts, and its ability to combine them to scale up solutions for enterprise digital transformation and mission-critical systems. 

IBM’s value proposition builds on five core capabilities to address clients’ hybrid cloud, and AI needs: 

• Build and modernize for the hybrid cloud, to develop and operate with speed, consistency, and agility,
• Create data-driven business insights regardless of where data lives and while maintaining enterprise-grade data governance, privacy and trust, 
• Automate the end-to-end enterprise processes for effectiveness and efficiency with AI-driven decision-making, 
• Secure everywhere, with consistent governance and compliance across environments, and 
• Bring it together by transforming our clients’ businesses and processes into sustainable best-in-class industry practices. 

IBM’s business segment to realize this business strategy

IBM operates in more than 175 countries around the world. IBM’s platform-centric hybrid cloud and AI business strategy are realized through four business segments: Software, Consulting, Infrastructure, and Financing. 

Software: Software brings together IBM’s hybrid cloud platform and our software solutions, optimized for that platform, to help clients become more data-driven and to automate, secure, and modernize their environments.

Consulting: Consulting provides deep industry expertise and market-leading business transformation and technology implementation capabilities. Consulting designs and builds open, hybrid cloud architectures and optimizes key workflows and business processes with IBM and ecosystem partner technologies. Consulting uses its IBM Garage method to convene experts to co-create business products and solutions with clients to accelerate their digital transformations. 

Infrastructure: Infrastructure provides trusted, agile, and secure solutions for hybrid cloud and is the foundation of the hybrid cloud stack. Infrastructure is optimized for infusing AI into mission-critical transactions for accelerated hybrid cloud benefits. Infrastructure also includes remanufacturing and remarketing used equipment with a focus on sustainable recovery services. 

Financing : Financing facilitates IBM clients’ acquisition of information technology systems, software, and services through its financing solutions. The financing arrangements are predominantly for products or services critical to the end users’ business operations and support IBM’s hybrid cloud platform and AI strategy.

How Acquisitions Drive the Business Strategy of New York Times

Strategy and execution .

IBM has set ambitious goals: to strengthen its portfolio, simplify its operations, and broaden its ecosystem. IBM has aligned its offerings with the two most transformational technologies of our time: hybrid cloud and AI. 

IBM’s platform-centric approach starts with Red Hat, which allows clients to develop and deploy their applications on private and public clouds, achieve consistent security across their computing infrastructure, and consume innovation from anywhere. 

IBM’s business strategy is positioned to capture the $1 trillion hybrid-cloud opportunity by enabling clients to access and deploy AI capabilities on IBM’s cloud or those of other major providers.

IBM has expanded its partner ecosystem dramatically, including systems integrators, independent software vendors, service providers, channel partners, and developers to deliver value to IBM’s clients and partners. For instance, 

• IBM has created new consulting services in collaboration with SAP and co-created an AI-enabled analytics solution with Deloitte. 
• IBM announced strategic partnerships with Cisco , Palo Alto Networks, and Telus. All focused on 5G, Edge, and network automation.

Using this business strategy, IBM generated $57.4 billion in revenue and $12.8 billion in cash from operations in 2021.

A passionate writer and a business enthusiast having 6 years of industry experience in a variety of industries and functions. I just love telling stories and share my learning. Connect with me on LinkedIn. Let's chat...

Related Posts

Revolutionizing Supply Chain Planning with AI: The Future Unleashed

Is AI the death knell for traditional supply chain management?

Merchant-focused Business & Growth Strategy of Shopify

Business, Growth & Acquisition Strategy of Salesforce

Strategy Ingredients that make Natural Ice Cream a King

Investing in Consumer Staples: Profiting from Caution

Storytelling: The best strategy for brands

Rely on Annual Planning at Your Peril

Sprinklr Business Model: Managing Unified Customer Experience

Innovation focused business strategy of Godrej

Business Strategy behind Pixar Animation Films

LinkedIn: Redefining its content strategy

Stitch Fix: Data-Driven Innovation Strategy & Business Model

How Moderna’s Unique Business Strategy Led to Its Spectacular Success

Amazon: Mastering the art of decoupling & recoupling

Write a comment cancel reply.

Save my name, email, and website in this browser for the next time I comment.

• Advanced Strategies
• Brand Marketing
• Digital Marketing
• Luxury Business
• Startup Strategies
• 1 Minute Strategy Stories
• Business Or Revenue Model
• Forward Thinking Strategies
• Infographics
• Publish & Promote Your Article
• Write Article
• Testimonials
• TSS Programs
• Fight Against Covid
• Privacy Policy
• Terms and condition
• Refund/Cancellation Policy
• Master Sessions
• Live Courses
• Playbook & Guides

Type above and press Enter to search. Press Esc to cancel.

Performance Management Case Study

In collaboration with mckinsey & company.

Rebooting Work for a Digital Era

How ibm reimagined talent and performance management, february 19, 2019, by: david kiron and barbara spindel, introduction.

In 2015, IBM was in the midst of a tremendous business transformation. Its revenue model had been disrupted by new technology and was shifting toward artificial intelligence and hybrid cloud services. To increase its rate and pace of innovation, the company was rapidly changing its approach to getting work done. New, agile ways of working together with new workforce skills were required to accomplish its portfolio shift. But standing in the way was an outdated performance management (PM) system employees did not trust. Diane Gherson, chief human resources officer and senior vice president of human resources, recognized that IBM’s approach to performance management would need to be entirely reimagined before the organization could fully engage its people in the business transformation.

Gherson says the performance management system then in place followed a traditional approach, one that revolved around a yearlong cycle and relied on ratings and annual reviews. “You’d write in all your goals at the beginning of the year, and at the end of the year, your manager would give you feedback and write a short blurb and then give you your rating,” she says.

IBM’s approach to performance management would need to be entirely reimagined before the organization could fully engage its people in the business transformation.

That approach was “holding us back,” Gherson says. “The massive transformation meant we were shifting pretty dramatically into new spaces and doing work really differently. Whereas efficiency was very important in the prior business model, innovation and speed had become really important in the new business model. And when you’re trying to make that kind of a fundamental shift, it’s important, obviously, to bring your employees along with you.”

Gherson knew from employee roundtables and surveys that IBMers didn’t have confidence or trust in the existing PM system. This view was at odds with the views of other senior leaders, who felt the system in place was working well from their perspective.

It took Gherson more than a year to convince her peers in senior leadership that IBM’s digital transformation would not succeed without higher levels of employee engagement, and that meant focusing on the existing PM system. Eventually she won them over. As for the traditional PM system that was holding the company back? “We threw all that out,” Gherson says. “We kept our principle of cultivating a high-performance culture, but pretty much everything else changed.”

Company Background

2015 was hardly the first time the company had found itself in the midst of a fundamental shift. IBM has had to reinvent itself time and again to remain relevant. Founded in 1911 as machinery manufacturer Computing-Tabulating-Recording Co., IBM (International Business Machines) over the decades has repeatedly adjusted its business focus — from early data processing to PC hardware to services to software systems — in response to evolving markets and competitive pressures.

Today, IBM, headquartered in Armonk, New York, employs about 360,000 people in 170 countries. After 22 consecutive quarters of declining revenue, the company reversed the trend in the fourth quarter of 2017 and subsequently has shown revenue growth. Growth in its cloud, artificial intelligence, cybersecurity services, and blockchain units have contributed to the turnaround, with about half of its revenues now derived from new business areas. Indeed, these days, IBM is betting big on AI and hybrid cloud, recently announcing plans to acquire open-source software pioneer Red Hat, an innovator of hybrid cloud technology, for $34 billion. With that notable acquisition, the company is making a bold bid to compete against heavyweights like Google, Amazon, and Microsoft in the cloud services market.

The new strategic direction has necessitated a change in how IBM’s talent is managed and how the work of the digital enterprise is done. “In a classic, traditional model, a manager will oversee the work of an employee and, therefore, have firsthand knowledge of how they’re doing,” Gherson observes. “That traditional model is long gone in most companies. Work is more fluid.”

At IBM, work is being done differently in three fundamental ways. One is a stronger emphasis on project work: Individuals move around the organization to work on various projects and initiatives, joining teams for short stints before moving on to new teams to tackle new challenges. Two, the entire concept of performance is shifting from primarily emphasizing performance outcomes to a model that also emphasizes the “how,” including the continuous development and application of new skills to keep up with the exponential rate of change in technology. Finally, with the adoption of agile ways of working, continuous feedback becomes a critical part of workflow. The new PM system needed to abandon the concept of an annual feedback event and find a way to reinforce a culture of feedback ― up, down, and across.

Meanwhile, digital transformation in the economy at large is exerting pressure on IBM as the tech giant strives to maintain an edge over its competitors. As a result of these internal and external changes, the company has seen the need to prioritize not only innovation and agility but also the continual development of employee skills, since what it requires of its talent base has also changed, with the need to continually develop employee skills becoming paramount.

Test-Driving a New System

The company’s key decision was to crowdsource its new performance management system rather than impose something top-down on its workforce, which was not consistent with agile methodologies or design thinking. Gherson says it was “really important to have employees feel like they were stakeholders in the new design, not just bystanders or consumers of it.” To that end, IBM undertook a process for designing the system that was a radical departure from the past. “There were many skeptics initially,” Gherson recalls, highlighting the challenges of the project. IBM relied heavily on enterprise design thinking, creating a minimum viable product (MVP), and invited the workforce to test it and offer feedback. Gherson likens the process to “giving people a concept car that they can drive and kick the tires as opposed to asking them what they would like to have in a car.” The rollout was fast: The September 2015 launch of the MVP happened within a couple of months of the first design-thinking session.

While many employees were thrilled that the traditional approach to performance management was on its way out the door, most were skeptical that the replacement program would be an improvement. As Joanna Daly, IBM’s vice president of global talent, recalls, “Employees actually said to us, ‘We don’t believe that you want our input. We think you already know what you’re going to do, and you’re just sort of pretending to ask for our input.’ We had to figure out how to prove to employees that we were authentic and serious in wanting them to shape this.”

Changes to IBM’s Performance Management

HR did so in a simple way: by asking employees what they wanted, giving their responses due consideration, and playing back what it was hearing. “We asked, ‘What do you want to get out of our approach to performance?’” Daly says. “And the answer we got was they wanted richer feedback. And they hated being defined by a single assessment rating.”

When Gherson blogged about the new system on the company’s internal platform, her first entry was viewed by 75,000 IBMers within hours, with 18,000 responding with detailed suggestions. The company used its proprietary Watson text analytics to sort through what employees wrote, enabling Gherson to put out a second blog within 48 hours enumerating which elements employees liked and which they disliked. The company proceeded through numerous iterations and playbacks, with employees continuously participating in the design process. Management even reached out personally to the most vocal critics at every step, directly engaging their input in producing the next prototype. The eventual result ― officially launched in February 2016 and called Checkpoint ― was aligned to the employees’ input, providing a PM system focused more on feedback and less on assessment. (See “Changes to IBM’s Performance Management” for key differences between the old and new system.)

The eventual result was aligned to the employees’ input, providing a performance management system focused more on feedback and less on assessment.

Rather than receiving a single rating at an annual review, employees now have more frequent check-ins with managers. Through the company’s mobile ACE (appreciation, coaching, and evaluation) app, they also can seek feedback from peers, managers, or employees they manage.

The new and more agile system allows IBMers to revise their goals throughout the year. In response to crowdsourced input during the design process, employees are assessed according to their business results, impact on client success, innovation, personal responsibility to others, and skills. Managers are held accountable through pulse and mini-pulse surveys of the people they oversee, with poor results leading to training or, in some cases, removal from management.

Checkpoint is a far cry from the previous stand-alone HR program that rated and ranked employees. It’s aligned to the critical factors for IBM’s success and designed to ensure that the company achieves advantage with its talent in a fast-moving competitive landscape.

Checkpoint has been a major contributor to employee engagement, which has increased by 20% since IBM deployed the revitalized performance management system. In fact, in the company’s annual engagement pulse survey, employees pointed to Checkpoint as the change that made the biggest difference in their experience at IBM.

Focus on Learning and Growing

Technological change ― in the marketplace and in IBM’s business focus ― is driving an unremitting need for new skills, making their development an essential part of IBM’s corporate strategy. “In today’s world, skills are actually more important than jobs,” Gherson declares. “In order to reinvent our company, we need everyone to reinvent their skills on a continuous basis. You can’t hire someone because they have a particular skill. You have to hire someone because they have the capacity to continue to learn.” To that end, in addition to the new approach to performance management, talent management at IBM now includes a personalized learning platform and a personalized digital career adviser.

The platforms use data to infer which skills employees have and connect them with learning to build those skills that are increasingly in demand. The personalized program is “really accessible, very consumer-friendly,” Gherson says. “It has everything: internal and external courses, Harvard Business Review articles, MIT Sloan Management Review articles, YouTube videos ― you name it. And it serves it up for you as an individual, based on your unique role. It will say, ‘Given what you’ve taken so far and your career goals, here are some recommendations and here’s what people like you have taken and how they’ve rated it.’”

To encourage career mobility, IBM launched a digital coach for employees wishing to advance their careers within the company. My Career Advisor (known commercially as Watson Career Coach) was created by employees during a company-wide hackathon. It features a virtual assistant that uses data to provide personalized career counseling, such as average time to promotion from an employee’s current role and career steps taken by others to acquire the job a user might want. Another related platform, Blue Matching, serves IBM employees internal job opportunities tailored to their qualifications and aspirations, inferred from their CVs.

What enables these learning and career programs, says Daly, is “having more data available and having better insights to guide the user. These new digital platforms mean we can get these insights directly into the hands of employees and their managers.” Also essential has been uniting these platforms. “It’s not about having a learning platform and having separately an internal jobs platform,” Daly notes. “It’s how do we integrate these two together with AI-enabled advice for employees to explore? What kind of job should I do next? What are my skills gaps if I want to pursue that job, and then what learning would I take to close that gap?”

Real-Time Insights

The new PM system was about agility and prioritizing feedback over assessment. IBM elected to go further and figure out how to use all the insights it was developing from its analytics and AI capabilities to ensure that useful insights could readily emerge and be accessible to both HR and the workforce.

More predictive and prescriptive insights will be transmitted directly to managers and employees at the moment they’re needed most, embedded in the workflow.

“Thanks to these digital experiences, we’ve modernized how to deliver insights to our workforce and management ― right when they need it,” Daly says. She cites compensation decisions as an example. Using machine learning, “we advise managers about which employees should get the highest salary increase. We arrive at the recommendation using dozens of internal and external data sources. This helps with more transparent conversations between the manager and her employee,” she says. “We give managers talent alerts directly on their personalized dashboard. For example, the system might observe, ‘Hey, your team member has been in her band level for a few years and is a good performer and is building her skills. Have you thought about promoting her?’”

Going forward, Daly anticipates that more predictive and prescriptive insights will be transmitted directly to managers and employees at the moment they’re needed most, embedded in the workflow.

Preventing Attrition

“In our industry, talent is the No. 1 issue,” Gherson contends. “And so, it’s really important that we attract and develop and continue to upgrade our skills and retain talent if we’re going to win in this market.” Despite more than 7,000 job applicants coming into IBM every day, with a tech talent shortage and ongoing talent wars in AI and cybersecurity, retention becomes particularly crucial; experts agree that in the coming decades, there won’t be enough qualified people to fill available jobs.

Gherson and her team received a patent for their predictive attrition program, which was developed at IBM using Watson AI algorithms to predict which employees were likely flight risks. Most managers were initially skeptical at the notion that algorithms could have more insight into their employees’ intentions than they did — until the algorithm consistently made correct predictions. Then, Gherson recalls, “We started getting these little notes from managers saying, ‘How did you know?’”

Significantly, the technology is about prescription in addition to prediction. “We reach out to you as a manager,” Gherson explains, “and we tell you that you’ve got someone who is at high risk to leave and here are the actions we recommend you take.” Because the AI is able to infer which skills individual employees possess, it can then recommend actions for managers to implement — often related to furthering skills development — to prevent them from leaving. By helping their employees develop new skills, managers bolster employee engagement and increase job satisfaction, advantages in a talent-scarce market environment. “The attrition rate of the people we touch with this program is minuscule compared to the control group,” Gherson says, noting the improvement in employee retention has already saved IBM nearly $300 million.

The Evolving Role of HR

Given the heightened significance of talent, HR, as the function primarily responsible for talent, has a revitalized role to play in executing corporate strategy and driving value at IBM.

To achieve a more central role in value creation, IBM’s HR function had to be freed from the tasks that traditionally consumed so much of its managers’ time. “People have a million questions: ‘When do I have to sign up for my 401(k)?’ ‘What’s the deadline for the health benefits program enrollment?’ These are all findable pieces of data, but actually finding them has always been the hardest part,” Gherson says. “I wouldn’t say that’s the highest value that HR could provide, but it’s a lot of what HR has been doing. Maybe in some companies that’s all HR does. But that’s not the purpose of HR. You don’t need HR to answer those questions. You just need really great bots and virtual assistants.”

Here, the company again exploited its own capabilities in AI and analytics. In HR alone, IBM currently deploys 15 virtual assistants and chatbots, and the company is diligent about measuring both employees’ experience and the effectiveness of the bots in responding to questions. With the bots taking on routine tasks previously performed by people, IBM’s HR function can devote itself to what Gherson sees as its real purpose: “to create competitive advantage with your talent and improve the employee experience.”

Of course, technology and data are vital not just in freeing up the humans on the HR team but also in optimizing their performance. “For too long, HR people have relied on just being highly intuitive: ‘I think this person’s going to be a good fit for the job’ or ‘I think a two-year assignment is the right length,’ or whatever,” Gherson observes.

“And actually, you can employ science-based methods to come up with an estimate ― for example, there’s an 80% chance they’ll fail in this job because they lack these capabilities or there’s a 50% chance that you’ll get no return on your investment in that international assignment because it’s too short,” she says. “So, we should be able to give much better advice to the people that we support.”

Gherson acknowledges that working this way also requires culture change within the HR function, which demands different skills like data science and different job roles to fully realize the disruption. She has invested in a robust re-skilling education program for her team of HR professionals.

Gherson says HR can’t simply stop at using technology to detect patterns. Giving managers data on, say, turnover rate, without also offering guidance on how to use that information, leaves them to rely once again on intuition to solve problems. As with the predictive attrition program, IBM pairs reporting data with recommendations for action.

“Technology enables us to not just report, but to then say, ‘If you keep doing what you’re doing, here’s what the picture will look like a month from now, a year from now. Your cost of labor will be higher than your competitors by 12% if you carry on hiring at the rate you’re hiring. So here’s a prediction that’s going to be a bit of a wake-up call for you. But if you take these actions, here’s the impact,’” Gherson explains.

“We’re going from intuitive to reporting to predicting to prescribing,” she adds. “And if we can take it all the way to that level, then we’re really adding value. We’re very proud of the fact that through these talent programs, HR delivered more than $107 million in benefits in the last year.”

IBM’s efforts to modernize its performance management system are part of an ongoing process. “We will continue to refine the measurement and expectations of skills growth in IBM as it becomes clear that we need to become a fabulous re-skilling-at-scale machine and hold ourselves accountable to that,” Gherson says. Daly echoes that point: “These aren’t programs that HR is developing. This is a new way of working that all IBMers are developing together so that we can keep our skills up to date as things keep changing in the future.”

Joanna Daly

vice president, global talent

Joanna Daly is IBM’s vice president of talent with global responsibility for talent acquisition, people analytics, AI strategy for HR, employee experience, performance management, and careers and skills. Her previous roles at IBM have included leading compensation and running HR for the company’s global industry platforms, blockchain businesses, and European business services operations, with stints in Singapore and India as well. Joanna is a frequent speaker at conferences and in the media on AI in HR, diversity and inclusion, skills, and the future of work.

Diane Gherson

chief human resources officer and senior vice president, human resources

As chief human resources officer and senior vice president of human resources, Diane Gherson is responsible for the people strategy, leadership, skills, careers, engagement, employee services, labor cost, and diversity and inclusion of IBM’s 360,000-person global workforce. During her tenure as CHRO, as IBM has dramatically shifted its business portfolio, Gherson has redesigned all aspects of the company’s people agenda and management systems to shape a culture of continuous learning, innovation, and agility. At the same time, she has digitally transformed the HR function, incorporating AI and automation across all offerings, resulting in more than $100 million in net benefits in the past year.

HR Transformation as the Engine for Business Renewal

Commentary by Anna A. Tavis

Industry disruptions have headlined business news since the early 2000s. With the cloud revolution driving change in global markets, traditional built-to-last companies have had to rapidly transform themselves to survive, adapt, and compete. Market-facing customer service, sales, and marketing functions reinvented themselves in the new digital image a decade ago. Although HR is a latecomer to the digital scene, it stands ready to undergo its own reinvention armed with smart technology, data-driven insights, and a renewed sense of purpose.

To paraphrase Diane Gherson, IBM’s chief human resources officer, talent is unquestionably the new economy’s number one competitive asset. HR, as a traditional caretaker of talent, has to leapfrog generations of evolution, moving from intuition to reporting to predicting and ultimately to prescribing — all in a matter of a few years. Some companies, like IBM, are successfully making this leap. Critics, so ready to question HR’s relevance and viability, should take note.

This case study describes HR transformation at IBM. It is particularly instructive for companies embarking on their own HR digital transformation efforts. IBM’s most important lessons are less about the specific solutions they introduced and more about the way they went about finding their new philosophy and their new operating model. The IBM story is as much about what they decided not to do as it is about what they ended up doing.

Diane Gherson’s most consequential first step was to abandon the practice of benchmarking other companies and not to rely on HR experts to renew her strategy. She turned instead to IBM’s own employees for answers. Not surprisingly, the message her team heard from employees was not always in line with the view of senior management, which did not believe much in HR could change. It became clear that IBM’s transformation was to be anchored in agile ways of working. The company’s traditional performance management (PM) was seen by employees, however, as an administrative chain holding back the adoption of fast agile ways of working. The decision was made to radically redesign PM with employee experience in mind. In the process, all other functional areas in HR were redesigned and realigned to serve HR’s new purpose.

The following 10 decision points are worth considering when reviewing the IBM case in the context of your own organizational transformation:

1. Decide where to start. IBM’s first and highest priority was to redesign its PM system. The team turned to its own employees for redesign ideas, not HR experts or senior leaders.

What you can do: Identify the weakest link in your talent management system. If it’s your PM approach, this is where change should begin.

2. Connect your transformation to an existing element of your strategy. IBM used its adoption of agile practices across the organization as the primary catalyst to overhaul its entire talent management system.

What you can do: Choose the one key performance indicator (KPI) that intersects with talent that will have the most impact on your business.

3. Renew your talent/HR purpose. By committing to employee experience, engagement, and learning, IBM shifted away from an earlier focus on differentiation and high potentials.

What you can do: Decide what type of culture you want to have. Assess how fast you can move from an administrative compliance- and appraisal-based approach to being employee-centric and learning-focused.

4. Decide where to start: Identify the most consequential first step with the broadest possible impact. IBM made a PM redesign the priority in its talent transformation process and had the capacity, capability, and political capital to go global with its minimum viable product (MVP) for the entire organization.

What you can do: Identify whether performance management is the weakest link in your talent management system and where the pain points are for your employees and management.

5. Select the design method consistent with your new purpose. For IBM, agility and design thinking became key methodologies HR successfully applied.

What you can do: Select and agree on design principles and method(s) consistent with your talent philosophy and aligned with your purpose. Teach those skills and test to see if they work for all.

6. Get your organization’s buy-in to support your transformation effort. IBM took a two-tiered approach to secure buy-in: (1) It earned employee trust and engagement by crowdsourcing design ideas from across the company. (2) It won over senior management by running successful experiments proving that attrition could be predicted by data.

What you can do: Learn to listen. Generate insights and communicate decisions supported by the evidence you collect. Engage key stakeholder groups with data relevant to them.

7. Decide how to test and improve the designed product. IBM went for speed, customer feedback, and continuous improvement. Having designed and released their crowdsourced PM process, Checkpoint, in record time, the company “proceeded through numerous iterations and playbacks, with employees continuously participating in the design process.”

What you can do:

Choose one of three approaches:

• Launch a company-wide MVP: Your priority initiative is based on your company’s KPIs and readiness for the company-wide rollout.
• Experiment and create a proof of concept. Run a series of experiments starting with the business units most ready to innovate. Show results to others.
• A combination of the above two approaches.

8. Go beyond performance management: Decide on your next steps. Successful implementation of the redesigned PM process revealed further strategic talent needs for IBM:

• Accelerate and personalize skills renewal.
• Customize decision support for managers.
• Create an internal marketplace for jobs.

What you can do: PM renewal has a domino effect on all HR processes and tools. What comes next on the renewal list will have to be decided by your company depending on its strategic priorities. Meanwhile, HR will have to renew and upskill itself as the transformation process continues.

9. Assess how to turn technology and data into the greatest enablers of transformation. IBM HR fully leverages its tech and AI capabilities, often creating its own tech tools. My Career Advisor, for example, is IBM’s mobile in-house career coach created by employees at a company-wide hackathon. Blue Matching serves IBM employees with notice of new internal job opportunities tailored to their qualifications and aspirations.

What you can do: Technology and automation are central to the transformation of HR. Yet, no two companies’ technological and data capabilities are alike. Choose your tools wisely, develop technical expertise internally, or borrow your experts. Do not overspend on systems unless you understand how they will deliver.

10. Integrate tools, platforms, and processes with employee experience in mind. IBM’s case shows how to bring all processes, tools, and platforms together into one renewed talent ecosystem. “It’s not about having a learning platform and…an internal jobs platform,” noted Joanna Daly, IBM's vice president of global talent; it’s how they integrate together with AI-enabled advice for employees to explore what jobs they should do next.

What you can do: No matter where you decide to start, integration should be your final destination.

IBM’s case could be the timely accelerator of your own company’s HR transformation. There is a lot to learn here, but no one’s “best practice” is a replacement for your own discovery. The best lesson to learn from Diane Gherson and her team is their innovative attitude and openness to experiment in the face of the unknown. Learning to innovate, take on risks, and show courage is what IBM’s HR has shown us how to do. It is now the right time to take the right lessons from IBM and apply them and scale. Best of luck as you begin.

Anna A. Tavis is a clinical associate professor of human capital management and academic director of the human capital management program at New York University. She tweets @annatavis .

About the Authors

David Kiron is the executive editor of MIT Sloan Management Review ’s Big Ideas Initiative, which brings ideas from the world of thinkers to the executives and managers who use them.

Barbara Spindel is a writer and editor specializing in culture, history, and politics. She holds a Ph.D. in American studies.

Contributors

Carrie Altieri, Michael Fitzgerald, Jennifer Martin, Allison Ryder, Karina van Berkum

Acknowledgments

Joanna Daly, vice president, global talent, IBM

Diane Gherson, chief human resources officer and senior vice president, human resources, IBM

More Like This

Add a comment cancel reply.

You must sign in to post a comment. First time here? Sign up for a free account : Comment on articles and get access to many more articles.

To read this content please select one of the options below:

Please note you do not have access to teaching notes, ibm 2000 to 2010: continuously transforming the corporation while delivering performance.

Strategy & Leadership

ISSN : 1087-8572

Article publication date: 11 May 2010

The strategic initiative IBM undertook to resurrect itself after the dot.com era of a decade ago provides meaningful lessons for other multinational corporations looking to pursue higher margins, globalize their operations, and change and reduce their cost structures. This paper aims to look at these lessons.

Design/methodology/approach

This case describes how IBM executed a number of strategic shifts – from investing billions of US dollars in strategic acquisitions and new markets, such as India, China and Brazil, to aggressively driving costs out of selling, general and administrative expense (SG&A) – to create a stronger portfolio of offerings and a more efficient operating model.

IBM achieved success by executing toward four strategic goals: Capture higher value: migrate to more attractive customer segments as well as higher‐value products and service offerings; invest for growth: take advantage of the global footprint to benefit from global growth, as well as invest in new market offerings; shift the operating model to drive productivity: improve operating performance by globally integrating, while pushing decisions further down into the organization; and apply shared values and performance management

Research limitations/implications

This is an internal case analysis.

Practical implications

IBM has shifted substantial focus and investments to growth markets in recent years and created an operating unit dedicated to the world's growth markets in 2008. The newly established growth markets unit generated more than twice the revenue growth of IBM major markets operations in 2008.

Originality/value

Enabled by global integration, supported by increased visibility and driven by an integrated management team, the IBM operating model investigated here provides the capability to understand and balance not only what is needed to perform today, but also to meet the needs of the future. It creates a dynamic that gives managers and senior leaders the ability to both lead and follow the enterprise's aspirations and each other.

• Globalization
• Integration
• Portfolio investment
• Management strategy
• Corporate strategy

Bramante, J. , Frank, R. and Dolan, J. (2010), "IBM 2000 to 2010: continuously transforming the corporation while delivering performance", Strategy & Leadership , Vol. 38 No. 3, pp. 35-43. https://doi.org/10.1108/10878571011042096

Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

Related articles

We’re listening — tell us what you think, something didn’t work….

Report bugs here

All feedback is valuable

Please share your general feedback

Join us on our journey

Platform update page.

Visit emeraldpublishing.com/platformupdate to discover the latest news and updates

Questions & More Information

Answers to the most commonly asked questions here

IBM Company’s Strategy in Context Case Study

Introduction, institutional theory, impacting factors, external factors and institutional pressures, internal factors and strategic responses.

An event that serves as the basis for the following case study, analysis of strategic management and factors impacting decision-making revolves around International Business Machines Corporation (IBM) and its desire to meet the new requirements of society and its members by buying Red Hat company. IBM is an American multinational corporation that operates in 170 countries globally and significantly impacts the market of technologies (IBM, 2018). Its central office is located in Armonk, New York; however, there are many departments in other strategically important regions. The corporation manufactures, designs, and sells hardware, middleware, software and provides diverse consulting services in the area of innovation and nanotechnologies (IBM, 2018). At the moment, it is one of the leaders in this market segment with annual revenue of about $79,591 billion (IBM, 2018). The company is managed by the Board of Directors who accept all critical strategic decisions and are responsible for substantial growth. At the moment, Virginia Marie Rometty is the chair and president of IBM who correctly realizes the peculiarities of the company and contributes to its further evolution.

IBM’s strategic acquisition of Red Hat company with a total value of about $34 billion is taken as the background for the given case. In accordance with the majority of experts in the field of technologies, this purchase signalizes a new era of open cloud services as Red Hat is known as a leading designer and provider of open-source software products that can be used by the enterprise community (Bloomberg, 2018; Carey, 2018). The given act became one of the potent approaches to support the gradual improvement of IBM Corporation and its focus on dominance in the sphere of nanotechnologies and innovative solutions that can be used by wide populations globally. The scope of this agreement is also evidenced by the fact that it has already been called the biggest open-source transaction of all time, which will reconsider the balance of power in the market and precondition the emergence of new opportunities for IBM (Carey, 2018). That is why the given settlement between IBM and Red Hat becomes the central event discussed within the provided case study.

The choice of this deal offers multiple opportunities for strategic analysis and an improved understanding of factors impacting the decision-making process and planning. Being the leading company in the sphere of innovations, IBM experienced both internal and external impacts that stipulated the appearance of this idea and its realization. For this reason, it is critical to delve into the peculiarities of the purchase to outline the central aspects that should be mentioned to understand how CEOs came to this conclusion.

The document has some important sections that are arranged logically to ensure that a clear understanding of the discussed events. In the introductory part, the main actors of the panned strategic decision and its details are provided. The next section is devoted to the detailed analysis of all elements of decision-making that affected IBM and preconditioned its choice. The paper also utilizes the Institutional theory to create the theoretical framework for the investigation and guarantee that all meaningful factors are considered. Finally, there is a concluding paragraph that summarises all provided information and sets the basis for the future discussion of this strategic incentive.

On October 28, 2018, IBM made an announcement stating that it was going to buy Red Hat with all rights for products and services created and distributed by the company. Regarding the scope of the deal, the established price was the acquisition was $34 billion, which contributed to the purchase becoming one of the most significant events in the market (Carey, 2018). The given strategic decision became revolutionary to the field of technologies as it meant that IBM acquired the opportunity to launch a new line of products and support services that gradually become more and more popular in large population groups (Hammond, Porter, & Barinka, 2018). The preliminary work for making this agreement apparently presupposed the in-depth investigation of the existing market trends and the way companies evolve. At the same time, many of Red Hat’s solutions are utilized by various business organizations, which also guarantees stable income and the popularity of future products.

Involved People

Ginni Rometty, IBM’s Chairman, was one of the key actors promoting this deal as it was considered a part of the company’s course aimed at the continuous improvement and focus on higher-value, more profitable markets. She called this transaction a game-changing event in the world of technologies as it had the potential for reconsideration of the cloud market and transformation of IBM into the world’s leading hybrid cloud provider offering corporations solutions satisfying their current diversified demands (Rometty, 2018). Correctly realizing a competitive advantage generated due to the given agreement, Rometty was one of the main promoters and supporters of these strategic incentives because of the necessity to create the basis for the further evolution and overcome rivals by offering new and unique products to clients with the high level of expectations. The positive impact of this step can be evidenced by the fact that the company’s shares increased in value and specialists predict further growth (Leprince-Ringuet, 2018). It means that there are multiple opportunities for IBM’s evolution and it is becoming a central actor impacting the rise of the market.

Preparations

Considering the long-term perspectives arising because of the discussed deal and its scope, the given decision can be taken as a well-thought-out step that resulted from the combination of factors impacting IBM at the moment. Moreover, there is a 20-years history of IBM’s attempts to conquer the web segment and provide customers with services related to it (Moody, 2019). In1998, it created the first Apache Web server as a central component of the WebSphere product family, which signalized the first movements towards the creation and utilization of cloud services (Moody, 2019). In such a way, the given deal can be taken as a result of complex and hard work performed by the corporation to evaluate all potential advantages and disadvantages of developing this segment. Additionally, the necessity to move forward was also one of the central factors preconditioning the agreement and making it real.

These facts evidence that the decision to purchase Red Hat was planned in advance and became an integral part of IBM’s strategy aimed at the further diversification of provided services and increased ability to satisfy customers’ needs. Due to the effective analysis and planning department, the companies managed to come to an agreement that signalized a new era in the sphere of digital technologies and cloud services characterized by IBM’s overwhelming impact on the majority of operations and products.

The analysis of the given strategic incentive and factors preconditioning its success can be performed regarding the institutional theory that is relevant to modern organizations’ functioning. In accordance with this framework, various components such as rules, norms, strategic decisions and solutions are a result of the organizations’ attempt to conform to easily recognizable and acceptable standards peculiar to the society and popular within a particular field (Crossan, 2015; Puranam, 2016). The theory also describes that deliberate or accidental choices affect companies, their values, and ideologies, which is critical for outcomes (Kotler & Armstrong, 2015). Functioning and evolving in a particular business environment, a corporation has to mirror its peculiarities and align its development according to the most topical patterns (Bensoussan & Fleisher, 2015). For this reason, IBM’s intention to buy Red Hat can be analyzed through the prism of the institutional theory as it will help to explain the main steps of decision-making and understand the underpinnings of this solution.

Graphically, the company’s decision-making can be represented as a combination of institutional pressures and strategic responses (see Figure 1).

In such a way, analyzing the given step, it is critical to consider the existing institutional pressures that affected IBM while making the decision to by Red Hat and its possible response to these pressures that could have contributed to the improvement of the company’s position at the market and it is becoming one of the leaders with a significant competitive advantage. The utilization of the given model can also help to understand better what critical factors were taken into account in terms of the necessity to guarantee the emergence of new products that will remain popular with the audience and attract in a prolonged period of time (McPhail, 2014). For this reason, the application of this very framework is critical for the better analysis and formulation of credible outcomes.

An outstanding significance of the discussed strategic incentive means that IBM experienced the impact of multiple factors that stipulated a need for an effective solution that would help it to evolved and preserve leading positions. As it comes from the utilization of the above-mentioned model, there were both internal and external pressures and factors presupposing the necessity to alter to conform to the altering environment. Analyzing all forces that were topical for IBM at that moment of time, one can outline the main causes for the selection of the strategy aimed at the acquisition of Red Hat and focus on new products and cloud services (Vaughan-Nichols, 2018). In such a way, the discussed step will be investigated as a set of impacts and factors that triggered a particular response and shifted the corporation’s priorities.

As for the external stressors, it is critical to understand that IBM exists in an extremely competitive environment in which functioning is regulated by multiple normative acts and constantly emerging demands to hardware and software. For this reason, the necessity to generate advantage by acquiring rights for the creation and distribution of one of the most popular products of the modern business world became one of the determining aspects. IBM has to compete with such giants as Intel, Hewlett Packard, and Xerox, which means that its products should be different to attract customers and increase revenues (Bhasin, 2018). For this reason, the purchase of Red Hat, the leader of open-cloud service provides, can help to make the corporation’s presence in the market stronger.

Furthermore, the growing popularity of open-source systems can be considered another institutional factor impacting the discussed decision. Modern society insists on the increased security of software which can be achieved by using open code (Red Hat, 2018). For this reason, Red Hat becomes a company that can release this pressure because of the existence of outstanding open-source developers who can provide IBM with new products to satisfy customers’ diversified demands (Red Hat, 2018). This factor became an important aspect impacting the given strategic incentive because of the possibility to create the basis for the future development by devoted attention both to the given sort of software and cloud services which are also become more popular in wide populations. It will also empower IBM’s position in the market because of the ability to capture a wide segment and preserve leading positions.

Finally, society’s demand for change became another sort of institutional pressure that preconditioned the given decision. The fact is that traditional software solutions became less popular because of their inability to meet the diversified requirements and the necessity to provide multiple resources to ensure their stable work. That is why in accordance with the latest investigations, open-source cloud services become the potent business and international cooperation tool that facilitate the further development of various industries and markets (Gall, 2018). For this reason, IBM’s solution to affect this domain and launch a new product line associated with this technology becomes reasonable regarding the growing need for improved results. Additionally, this cloud software is taken as an innovative approach that can reconsider the further evolution of the sphere by offering a wide range of opportunities.

There is also a set of internal factors that emerged as a strategic response to the above-mentioned pressure and affected the decision-making presupposing the purchase of Red Hat. First of all, IBM has traditionally been associated with a company that utilizes traditional methods while creating its products (Sherman & Kolodny, 2018). Its software did not cover the sphere of top-notch hybrid clouds because of the lack of expertise in this field (Red Hat, 2018). Now, with the acquisition of Red Hat, the company acquires an opportunity to fill this gap in knowledge and attract new customers by diversifying its products and offering unique solutions to a broad category of clients that were previously unaffected. From this perspective, this very strategic incentive will also help to avoid the institutional pressure due to the consideration of the latest trends and introduction of the ways to conform to the environment.

Finally, the decision to buy Red Hat can be explained by the company’s need to provide appropriate responses to public concerns related to losing their personal data and the low reliability of some traditional services offered by IBM. With the current shift of priority, the corporation will be able to explore the popular and positive image of Red Hat to eliminate the majority of problems related to this sphere (Cortada, 2019). As far as the purchased firm has significant expertise in this sphere, the knowledge accumulated due to this very deal will contribute to the further successful development of the conglomerate that will be able to use all its assets and power to support new solutions and implement them into the existing environment (Henry-Stocker, 2018). From this point of view, the agreement becomes an effective way to attract new customers and eliminate old fears.

In such a way, the analysis of internal factors and strategic responses proves the idea that the existing environment was beneficial for making the agreement between IBM and Red Hat. This statement can also be evidenced by the fact that in accordance with the majority of forecasts related to this deal, IBM will be able to generate even higher income in the next ten years because of the growing popularity of cloud services and open-source solutions (Agency Staff, 2018). That is why it can be considered a successful solution that became possible due to the in-depth investigation of all factors impacting the company at the moment and correct realization of all opportunities associated with this transaction. Being one of the most significant events in the sphere of technologies, it reconsiders the further evolution of the sector and its perspectives.

In conclusion, IBM’s decision to buy Red Hat became a successful strategic incentive that created the basis for the company’s further evolution and substantial growth. The central factors that stipulated this agreement were the growing popularity of cloud services and open-source systems, the increased demand for new software, the high level of rivalry, IBM’s lack of expertise in this area, and the existence of an interest in this very problem. Investigation of the case shows that business planning demands a comprehensive research of the market to determine the existing trends and decide whether the new approach will help to improve the company’s position and its ability to struggle with the closest rivals.

Agency Staff. (2018). Why IBM is buying Red Hat. Tech Central . Web.

Bensoussan, B., & Fleisher, C. (2015). Analysis without paralysis: 12 tools to make better strategic decisions . Upper Saddle River, NJ: FT Press.

Bhasin, H. (2018). Top IBM competitors . Web.

Bloomberg, J. (2018). Three things IBM must do to keep the Red Hat acquisition from sinking the company. Forbes . Web.

Carey, S. (2018). Most notable tech acquisitions of 2018. Computer World UK . Web.

Cortada, J. (2019). IBM: The rise and fall and reinvention of a global icon . New York, NY: The MIT Press.

Crossan, M. (2015). Strategic analysis and action . (9th ed.). Vancouver, Canada: Pearson Canada.

Gall, R. (2018). 4 reasons IBM bought Red Hat for $34 billion. Packt . Web.

Hammond, E., Porter, K., & Barinka, A. (2018). IBM to acquire Linux distributor Red Hat for $33.4 Billion. Bloomberg . Web.

Henry-Stocker, S. (2018). The future of Red Hat: How will IBM’s acquisition affect the company? Network World . Web.

IBM. (2018). 2018 IBM annual report . Web.

Kotler, P., & Armstrong, G. (2015). Principles of marketing (16th ed.). New York, NY: Pearson.

Leprince-Ringuet, D. (2018). Why IBM buying Red Hat won’t be the last big open source sale. Wired. Web.

McPhail, T. (2014). Global communication: theories, stakeholders and trends (4th ed.). New York, NY: Wiley-Blackwell.

Moody, G. (2019). IBM began buying Red Hat 20 years ago . Linux Journa l. Web.

Puranam, P. (2016). Corporate strategy: Tools for analysis and decision-making . New York, NY: Cambridge University Press.

Red Hat. (2018). IBM to acquire Red Hat, completely changing the cloud landscape and becoming world’s #1 hybrid cloud provider . Web.

Rometty, V. (2018). Chairman’s letter . Web.

Sherman, A., & Kolodny, L. (2018). IBM to acquire Red Hat in deal valued at $34 billion. CNBC . Web.

Vaughan-Nichols, S. (2018). Why IBM bought Red Hat: It’s all open source cloud, all the time. ZDNet . Web.

• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2024, February 22). IBM Company's Strategy in Context. https://ivypanda.com/essays/ibm-companys-strategy-in-context/

"IBM Company's Strategy in Context." IvyPanda , 22 Feb. 2024, ivypanda.com/essays/ibm-companys-strategy-in-context/.

IvyPanda . (2024) 'IBM Company's Strategy in Context'. 22 February.

IvyPanda . 2024. "IBM Company's Strategy in Context." February 22, 2024. https://ivypanda.com/essays/ibm-companys-strategy-in-context/.

1. IvyPanda . "IBM Company's Strategy in Context." February 22, 2024. https://ivypanda.com/essays/ibm-companys-strategy-in-context/.

Bibliography

IvyPanda . "IBM Company's Strategy in Context." February 22, 2024. https://ivypanda.com/essays/ibm-companys-strategy-in-context/.

• Open-Source Software and Its Benefits
• Open-Source Intelligence and Deep Fakes
• Hat Styles for Men and Women
• Navy White Hat Eulogy Essay
• White Hat and Black Hat Hacking
• The Internet Should Remain Open Source
• IBM and International Business
• What Is This "Mother Fxxker With a Hat" All About?
• General Motors and IBM as Successful Companies
• Organisational Behavioural Issues: IBM, Inc.
• The LEGO Group: Forces for Change
• Improving Work Performance: Tom's Auto Service
• Job Loss and Career Counseling Strategies
• New Belgium Brewing Case
• Zensar Company's Innovation & Change Management

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Reading Lists
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

Diversity as Strategy

• David A. Thomas

IBM expanded minority markets dramatically by promoting diversity in its own workforce. The result: a virtuous circle of growth and progress.

Reprint: R0409G

IBM’s turnaround in the last decade is an impressive and well-documented business story. But behind that success is a less told people story, which explains how the corporation dramatically altered its already diverse composition and created millions of dollars in new business.

By the time Lou Gerstner took the helm in 1993, IBM had a long history of progressive management when it came to civil rights and equal-opportunity employment. But Gerstner felt IBM wasn’t taking full advantage of a diverse market for talent, nor was it maximizing the potential of its diverse customer and employee base. So in 1995, he launched a diversity task force initiative to uncover and understand differences among people within the organization and find ways to appeal to an even broader set of employees and customers.

Gerstner established a task force for each of eight constituencies: Asians; blacks; the gay, lesbian, bisexual, transgendered community; Hispanics; white men; Native Americans; people with disabilities; and women. He asked the task forces to research four questions: What does your constituency need to feel welcome and valued at IBM? What can the corporation do, in partnership with your group, to maximize your constituency’s productivity? What can the corporation do to influence your constituency’s buying decisions so that IBM is seen as a preferred solution provider? And with which external organizations should IBM form relationships to better understand the needs of your constituency? The answers to these questions became the basis for IBM’s diversity strategy.

Thomas stresses that four factors are key to implementing any major change initiative: strong support from company leaders, an employee base that is fully engaged with the initiative, management practices that are integrated and aligned with the effort, and a strong and well-articulated business case for action. All four elements have helped IBM make diversity a key corporate strategy tied to real growth.

When most of us think of Lou Gerstner and the turnaround of IBM, we see a great business story. A less-told but integral part of that success is a people story—one that has dramatically altered the composition of an already diverse corporation and created millions of dollars in new business.

• DT David A. Thomas is the president of Morehouse College. He is also the H. Naylor Fitzhugh Professor Emeritus at Harvard Business School and the former dean of Georgetown University’s McDonough School of Business.

Partner Center

MBA Knowledge Base

Business • Management • Technology

Home » Management Case Studies » Case Study: Marketing Strategies of IBM

Case Study: Marketing Strategies of IBM

International Business Machines Corporation, better known as IBM, is a multinational IT company involved in the manufacture and retail of computer hardware and software applications, and IT consulting services. The company has established itself as one of the selected information technology companies since 19th century. Adoption of marketing strategies for IBM has been a planned structure since 19th century and by means of these strategies it has earned enough success all over the world. With its growth in the manufacturing as well as marketing domains of computer hardware and software, it has gained the nickname of “Big Blue”. On marketing grounds, IBM follows strict infrastructural services, added by hosting provisions and consulting services in various areas from mainframe computers to the persuasion of nanotechnology.

Well – devised and efficient marketing strategies have been the key to IBM’ global success. The company strongly believes that devising effective marketing strategies requires making appropriate decisions that can well enhance all kinds of competitive advantages and can create all kinds of new sources of value for the purpose of improving the organisational revenue growth. According to Luq Niazi, Leader of Strategy and Change at IBM, “when the leaders of an organisation think about their business as components, it becomes clear which ones they need to own – and which they do not”. This clearly indicates the great emphasis that IBM places on the performance and decision making capabilities of leaders in devising effective marketing strategies . In addition, the firm also considers understanding the requirements and needs of customers as crucial for developing effective marketing strategies. Understanding the innovative demands of customers lies at the core of developing effective marketing strategies.

Based on IBM’ market share and dominance in the IT industry, the firm can be aptly described as a ‘market leader’. Being a market leader , an important marketing strategy which IBM uses against its competitors is the defensive marketing warfare strategy. The defensive marketing strategy involves the firm employing tactics to maintain its market share. There are several tactics that firms use for defending their market share, such as fortification, counterattack, mobile defence and strategic retreat. Being the courageous market leader that IBM is, the firm adopts the best defensive marketing strategy which is “self attack”. IBM’ strategy is “cheaper and better than IBM”. Aware of IBM’ tactic, customers wait for IBM’ new prospects as they know that the Big Blue will constantly introduce new and better products which makes the firm’ own products obsolete. Another key marketing strategy employed by IBM for sustaining its market leadership is product differentiation strategies . Product differentiation can be achieved using a variety of factors such as distinctive products, reliability, durability, product design etc. IBM uses a product differentiation strategy based on quality of performance. In line with its quest for further growth and market leadership, the firm adopts a diversification strategy . The importance of IBM’ growth strategy has heightened in the current economic situation with companies in the computer industry having faced a massive drop in the industrial production and productivity of computer hardware and the future growth for this segment also appearing dim. In such a context, IBM has strategically reduced its exposure to hardware by diversifying into software and services.

IBM also realises the importance of maintaining good relationships with its customers and in line the firm lays great emphasis on trust-based marketing strategies. Trust-based marketing strategies stress on the need for organisations to gain ethical hold over consumer dealings and also be honest and open about its products and the services. For IBM, adoption of this strategy has been very effective in developing its brand identity and image. In all of its marketing activities, the firm strives at building customer trust and loyalty.

Importance and Use of Information in IBM Marketing Strategy

The importance and use of information is vital for gaining success. In line, IBM adopted the strategy to take up Social Networking to the work place . It is an absolute means of sharing ideas, complains and letters of appreciation in public. By means of adopting networking opportunities, IBM established its strong hold over competitive market. It is through the provision of Social Networking (SN), that IBM established its commitment to technology and developed an enterprise – wide SN mindset. IBM is the first major IT supplier that has got potential provisions for social networking and is in the process of changing the entire enterprise along with a credible application to address the market.

By means of investments made in the social networking  domain, IBM has gained enough market strengths in the enterprise lineage, global services, deep pockets and above all in gaining loyal customers. By success of social networking, IBM proved to be a fine player in the domain of information networking. The proceedings have added many advantages to its organisational global services. Social networking for enterprises have been implemented with enough marketing strategies and this is what is providing IBM with technical expertise in the field of organizational/adoption issues. The launching of more facilities related to social networking  are relevant to the competition of the market. The launcher came up with a new idea and launched it much before the though had developed in anyone’ mind. The second big thing to the adoption of marketing strategy is the IBM’s mindset in the launching of Lotus Connection. It is an information networking process with collaboration-centric approach to social networking  and helps in information sharing and uninterrupted workflow. By few minutes of exploration anybody can well get hold over its functionalities. IBM kept it easy and user friendly; the basics of marketing strategies.

When it comes to the use of information system in IBM, the adoption of unique kind of marketing strategies is predominant. The basic approach is in being innovative and adopting something that is very user friendly and easy for the customer to adopt. Complicacies in the same field can lead to failure of the same. This is the reason that IBM lays emphasis over making it simple, easy and sharing more than the consumer can expect. Once there is a kind of trust and sense of being facilitated gets into the consumer, he hardly will opt for any other company and this is what IBM believes to the core. Application of innovative ideas in the field of information sharing units can be of great risk, but under the marketing strategy of IBM, this risk has been taken again and again with enough success.

Global Context in IBM Marketing Planning

In the global context, IBM has proved itself as a strong contender by managing to sustain in the most difficult situations. It has overcome the twists and turns it initially faced in adjusting to the ‘bricks-and-clicks’ business structure. Overcoming all the hurdles IBM is now achieving milestones through the advantages forwarded by brick-and-click enterprises. It is through this enterprise structure that IBM has transformed into a major player in terms of getting hold over global marketing plans. Its formulisations are inclusive of creating a global brand blueprint. It is a mode that usually gets expressed locally and after attaining some success approaches on global grounds. IBM always follows the process of establishing central framework and then architects the relevant consumer experiences to gain consistency with the brand.

IBM always concentrates in gaining single view from its consumers and that helps in assessing the risk factors of global marketing strategies. In order to meet the diversified point of views, IBM follows the structure noted below;

• Process of analysing the context of ‘when’, ‘where’ and ‘how’ the appropriate and relevant customer data can be collected. This is an approach that is done under the provision of practical market survey.
• The means to create absolute governance framework with special attentions led over management policies and overall practices. These are the sources that are collected through the purpose of encouraging customer centricity added by the scope to safeguard customer privacy.
• Approaches led by institute consistent processes for target customer is the next step. In this process the relationship led by the management across all the domains of sales and provided services of the organisation are scrutinized professionally.
• The process of appointing efficient team leaders and strong management initiators. IBM also appoints a leader who can perform as a single customer advocate and is very much accountable for all the sorted touch points.

The marketing strategies adopted by IBM to meet global demands and competitions are well inclusive of a robust infrastructure. It has the provision for optimising flexibility and a hub-and-spoke architecture for collecting consumer demands on global arena. There is also well marked acknowledgement for all the innovative ways adopted by the partners of IBM. Developments attain by the partners of IBM in global terms is also directly related to the marketing strategies followed by IBM. IBM understands the fact that partners can add much hold over the local market and can reach the consumer with more in-depth formulations. This is the reason that they believe in developing capitalized relationship with these partners for future opportunities.

IBM and E-Business Strategies

The motive of any electronic business is to efficiently meet consumer demands through internet networking. The internet provides a medium for businesses to reach out to customers globally at very low costs. It is an exclusive means adopted through the dealings related to information and communication technologies. In case of IBM the role of e-business is very strong. Through e-business strategies, IBM is equipping itself with all kinds of external activities and is applying determined relationships for respective business dealings; with individuals, diversified groups and corporate clients. According to ‘Who Says Elephants Can’t Dance?’; a book by a former CEO of IBM, Louis Gerstner (2003), IBM’ approach for e-Business strategies is handled by specialized e – business teams operating under IBM’s marketing department.

It is through its e-business strategies that IBM is able to link its internal as well as external data processing systems with greater efficiency and flexibility. E-business helped IBM in reaching closer to its consumers, conveying the message of reliability and in urn enhancing customer loyalty to the brand. The proceedings led by IBM for the development and implementation of e-business concentrate on the diversified functions occurring through electronic capabilities. IBM is also a part of the entire value chain proceeding for more profitable dominance over the local as well as global market. There are some predominant sectors where the e-business strategies are applied to gain more trust and money from the consumer. These activities are noted below;

• electronic purchasing
• supply chain management
• processing orders electronically
• handling customer service
• cooperating with business partners

These proceedings add special technical standards in the e-business structure of IBM. The firm also utilises e-business strategies to exchange of data between its partners and associate companies. As a matter of fact the e-business strategies of IBM are not much different from the other marketing strategies. The basic difference however depends over the expansion of management for sending and receiving contracts from the consumer. It is under this strategic implementation that IBM has adopted many local dealers to be a part of its services. These dealers are of course selected through some professional modes. The reputations of these dealers are marked by IBM first before offering the partnership. In terms of services for each product sold through e-business, IBM provides appropriate training to all those people who are a part of this structure. With strategic planning IBM is also into the dealings related to integrated intra and inter firm business proceedings.

It can be well concluded that the marketing strategies adopted by IBM are very much structured on the basis of trust-based marketing strategies. It is through this theoretical approach that IBM has established itself very strongly, amidst burgeoning and very unpredictable online as well as global marketplace. IBM concentrates in providing its consumer every possible facility that he demands and that too with very balanced services. It is more about having the trust of every single consumer, rather than having lots of them without the trust. The products and services provided by IBM can guarantee their utility to the customer’s satisfaction. In a nutshell, IBM has got professional and the courage to take a risk for innovative ideas. It explores the consumer’s domain through proper hold over the local and global proceedings.

Related Posts:

• Case Study of Dell: Driving for Industry Leadership
• Case Study of IBM: Employee Training through E-Learning
• Case Study: Business Model Innovation and Customer-Driven Innovation at Dell
• Becoming a Successful Learning Organisation: Case Study of Apple
• Case Study of Apple: Competitive Advantage Through Innovation
• Case Study of China Telecom: ERP Implementation
• Case Study: “Dude, You're Getting a Dell” Ad Campaign by Dell
• Case Study of Zara : Application of Business Intelligence in Retail Industry
• Case Study: "Intel Inside" Campaign by Intel
• Case Study on Business Strategies: The Downfall of Sun Microsystems

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Unleashing the power of Presto: The Uber case study

7 min read - How does Uber make data-driven decisions at an unprecedented scale? By using a deliberate strategy which leverages cutting edge technology.

What asset-intensive industries can gain using Enterprise Asset Management

3 min read - Not that long ago, asset-intensive organizations took a strictly “pen and paper” approach to maintenance checks and inspections of physical assets. Inspectors walked along an automobile assembly line, manually taking notes in an equipment maintenance log. Teams of engineers performed…

IBM Newsletters