Damage Assessment
a. System/390 had a 58 percent declined in sells b. The company wanted to increase the bank credit to $4.7 billion c. IBM operated in 44 countries, peaked at $27 billion in 1990, between 1990 and 1992 pertax profits had declined from 18 percent in 1990 to 6 percent in 1992. d. Two perceptions emerged: 1. Rapid declining mainframe sell 2. Higher prices than competitors e. 90 percent of the companies profits originated from large servers and software.
Style
1. A private cadre of advisors 2. Sell off unnecessary IBM assets: art and property $31 million in art sells, $1.5 billion for the sell of the Federal Systems Company. 3. Increase the number of stock options in company circulation: In 1992, 1300 employees had stock options and nine years later 72,500 employees; stock based options became the largest compensation for executive pay; and executive put their own money in on the purchase of the stock options. 4. Increase the share price of the stockholders. (Gerstner boasts a twice stock split and 800 percent growth and 100,000 new employees in his tenure) 5. If your competition is drowning, take a firehose to their mouth. 6. Build user based support and systems 7. The employee is not entitle to a job and performance is the measure of profit sharing and job security. Performance products satisified customers, increase profits, and ensures the survival of the company. 8. Ignore the IBM culture and focus on market driven change.
Reengineering ($9.5 billion dollar savings - Jim York lead the effort)
a. Consolidate the data centers and financial structures b. Formulate Market-Driven strategies c. Stop the hemoraging of cash. d. Keep the company together e. Keep with the mainframe and stop the declining sells of the System 390. f. Lower the price of the large servers g. Implement CMOS technology into mainframe architecture, $1 billion investment and a $19 billion dollar return by 2001. h. Belief the Networked model would become the model of the future i. Increase the role of outsourcing to establish and IT dominance in service and software j. Reorganize the board: Chuck Knight, Chuck Vest, Juergen Dormann, Minoru Makihara, Ken Chenualt, and Sidney Taurel. k. Increase Hardware development cycle to sixteen month from four years l. Increase ontime deliveries from 30 percent in 1995 to 95 percent in 2001 m. $2 billion in IT expenses: consolidate from 155 data centers to 16, 31 communication networks into one. n. Sell 8,000 acres of land.
Profitable by 1994
a. Use stock options and company ownership to drive productivity b. The focus on the stock price was subject to the hype of the dot.com boom. If stocks were the truth measurement of the valuation of the company, they were over inflated.
Develop a customer strategy
a. Customer segmentation b. Move from direct sales force to customer centric sales force
Right size
a. Layoff a 100,000 employees b. Shutdown unprofitable departments
Develop and intermediate Business Strategy
a. Service Marketing: innovate software to support customer requirements, encourage technical sales to support innovation as a source of more sales, and segment service to handle a global customer. b. Market eBusiness: market and promote the internets as a global business solution, promote IBM as a software leader in global businesses. c. Market "Solutions for a small planet" - part of customer segmentation d. Software Marketing: shift to open environments, standard with api protocols, integrate software from multiple hardware platforms and protocols.