Emerging Business Opportunities at IBM - Case Study Example

Introduction IBM is a computer company that was founded in the year 1911. It had a major head start in the business since introduction of other companies that deal with computers took a much longer time to enter the scene. It is to be expected then that with this head start, the company would be in the market long enough to be a way a head of the other computer companies in terms of technological development, innovation, as well as profitability. This has not been the case and certainly was not the case in the early '90s when the company was losing more and more profits to its competitors in sales of products. It was on this realization that the top people at the company sought to reverse their 'ill luck' in the business. They did this through identifying hindrances that prevented the company from growing from where they could workout possible solutions, which would assist the company to get back to its feet. There was need for radical changes, and for introduction of a strategy that would allow the company to systematically adopt the new measures that would ensure the growth of the company. Through a series of deliberate measures to check on the problematic issues within the company and efforts to change the dumb situation, IBM managed to get positive results for their efforts, since their sales gained momentum and they felt that they were in the right track. The greatest or umbrella concern here was the growth of the emerging businesses hence it became necessary to come up with strategies that could handle the issue of the emerging businesses, and ensure that their growth would be experienced and sustained to the reach the profit making level. The essay below is an analysis that shows the trend adopted by IBM to regain footage in the computer industry. Primary barriers of success for large companies like IBM The greatest issue that concerns the growth of large business units like IBM through creation of new businesses is the rigidity of structural creations of leadership within the companies. This is achieved through development of practices that only act negatively to their growth often leading to the stagnation in growth of the companies. Another reason that can account for lack of creation of new businesses is preoccupation with existing markets and the products offered thus concentrate much on the performance of existing system and overlook the possibility of creating new businesses to expand the existing system. This problem also blindens the company to possible new opportunities in the market (Pugh 2001p36). Development of systems that encourage attainment of short term results through insisting on the near-term performance of the specified short term goals is a barrier to the success of the big companies like IBM. Meeting of the specified goals discourages the leadership from taking challenges of better things to engage in as their performance within stated confinements are recognized and rewarded. Presence of rigid bureaucracies that often delay or steps into the way of development of new business marks the other problem hindering development of new businesses. This happens when an attractive opportunity is cited but has to be approved by a number of leaders before it can be implemented. Some of the leaders, might for some reasons, be opposed to this new development then fail to approve of them, thus forcing the company to discard the issue. Lack of a deliberate strategy for encouraging development of new businesses is another barrier. Development of new strategies might entail the need to encourage spotting opportunities, experimentalism, funding the opportunities among others. A case scenario of IBM can illustrate this. IBM would diligently fund existing businesses, and then fail to sponsor ideas for new businesses, fail to give them attention and cut them off from budgets when funding was hurdled. Biased information gathering for evaluation and decision making is another barrier. The biased system of information gathering means information gathered is necessarily biased as well e.g. failing to gather information about the experiences of the programmatic issues but concentrate exclusively on finance for analysis means that the problems faced while making the finances, are not considered and neither are they attended to. This then would discourage establishment of new businesses since programmatic issues that might need to be considered might miss for proper implementation. The drive to make profits without considering other overheads that might be required for making the desired profits during the establishment of a new business, only serves to discourage the growth of such a business because, enough time is not allocated for a start into the business to the point where the business can sustain itself. IBM, for example, expected the new businesses to immediately start making profits and sustain themselves thus burdening them with expenses that proved hard for the new businesses to bear. 'Phobia' of new business opportunities may also account for barriers in establishment of new businesses. This is where management find fault with new business opportunities and discards them immediately without evaluating them, or feel uncomfortable with the imagination that they could have the scope of the company expanded via use of a product they are unfamiliar with. This would mean that no new business can be established since its uncertainty cannot be risked (Carey et al. 1995). Evaluation of horizons of growth model and the features of emerging, H3 businesses The horizons of growth model utilized the division of the business' levels into horizons that are dependent on the level of development. Horizon 1 (H1), indicates a well established business with a flow of profits and can account for the profits. Horizon 2 (H2), are experiencing growth while Horizon 3 (H3) businesses are emerging. Based on division of the company's assortment into levels that depend on their stages of development, the model is an all encompassing strategy that is useful for directing the necessary attention to a given product. Since the businesses could be divided into three levels that could in return be handled differently depending on the performance expected from each, then it is a great lot easier for the management of any one business to devote the necessary resources, both material and human, for the separate development of each of the levels without making the other levels suffer, or even, overlook them. Its requirement for a multiple management system would prove fit for the execution of an undivided analysis of the horizons and to focus only on the horizon desired. The features of the emerging H3 businesses that distinguish it from the rest include a long term time limit; the risk of uncertainty is necessarily high; the profits expected from them are either low of not expected at all; they need a management team that has a vision, can champion for performance, and can spot opportunities at all times; they must be focused on exploration with creation of project plans and identification of realistic milestones; the team working at this horizon must be encouraged for recognizing viable ideas, experimenting and generally for innovating practises that can push the business forward; evaluation of performance is based on achievement of identified milestones and the degree of innovating ideas; while their corporate behaviour is based on attainment of a viable model for propelling the business venture (Carey et al. 1995). Evaluation of the Emerging Businesses Opportunities (EBO) management with time The decision of the company to adopt the three horizon model in the attempt to promote the development of emerging businesses, made it necessary to come up with a management team that would oversee the strategy. This team took two levels; the Thompson era and the cooperate strategy era. The Thompson era began on September 1st 2000 with the commencement of Thompson's indulgence. During his time, consolidation of responsibility was attained. Seven corporate EBOs were developed, and a new system of reporting was developed for all the EBOs to periodically and consistently report to the top executives. The reports were based on all the areas of operation namely- the programmatic as well as the financial systems. A system of reviewing the seven corporate EBOs based on consultation and development prospective as opposed to merely financial performance was adopted. Most of the reporting and reviewing was thorough though reviewing was rather informally done. Follow up to ensure the EBOs were on their toes was another achievement in Thompson's era. During the corporate strategy era, which was headed by senior corporate vice president with the help of the corporate strategy group, IBM managed to make a number of accomplishments; there was the introduction of a system that was meant to increase expertise with the EBO project management and strategies of marketing for a greater chance of meeting the set goals. This therefore led to the introduction of the experienced, able Cohen as the new vice president of the corporate strategy; Florence Hudson as the engineering consultant and Giersch to work within the corporate as well as the group EBO management system. Systems and processes were also adopted, leading to the formalization of the overseeing system due to the large numbers of EBOs involved. Reporting done on a monthly and quarterly basis to the senior management was also refined. There was introduction of a leaders' forum that offered a platform for sharing of best business practises. The number of corporate EBOs was also increased as a measure aimed at offering incremental growth of revenue for a set period. The corporate EBOs grew from 7 to 18 (Pugh 2001pp34-35). Key elements of the current EBO management system Leadership The management system adopted by the EBO management in its current state differs in a number of ways from the one that existed during the establishment stage of the IBM computer company. In leadership, there was a change in the characters to which allocation of duties was done such that the traditional system of offering management level jobs to inexperienced young leaders was changed, so that management of the emerging businesses was now offered to older experienced personnel. Leadership was placed on the hands of competent persons who had the talent required, who could create viable structures and who portrayed the discipline required for the job. The management team was involved in the development of their career paths, as they chose not to be transferred to other departments, for they could perform in the departments they were working in. a system of evaluation was put into place to ensure the EBO management played its expected role in the undertaking. The evaluation was based on the ability of the leader to meet the expected and identified EBO milestones, as well as the financial results expected of the department these EBO leaders were serving (Carey et al. 1995). Development of strategy The EBO leaders had to indicate that they were strategic in their approach towards the attainment of the goals that were set for them. The leaders had to display their motive to achieve 'strategic clarity' i.e., understand the market place, customers, present and future capabilities and to formulate what to do next. This meant that leaders were to have an understanding of their role in engaging the marketplace, in order to understand the needs of the customers. They also needed to identify how the market would evolve, so that the company products could spot and maintain a consumer base. Monthly reviewing meetings were held to ensure that the strategies developed were worthy of meeting the expected goals. Thus some were discarded, others adopted while others remained. The meeting also offered a great chance for a collective problem solving and brainstorming (Pugh 2001p36-37). Resources These were directed towards adequately funding the emerging businesses through friendlier means of securing the funds. Groups were expected to fund the emerging businesses, while the senior vice president and the vice president held some of the funds to fund emergencies or extra costs. It also entailed finding the right kind of people to start the EBOs. For effective performance experts in finance, technology, operations and strategy were in each group (Rodgers and Shook 1999p212). Tracking and monitoring This was done to ensure accountability; maintenance of discipline, for tracking growth and flexibility strategies used for attaining goals, and for tracking the financial engagement. To ensure that this was achieved, a system of reporting on the attainment of the project milestones was adopted. Other systems adopted include; financial measurement and reporting on revenue acquired, and the expenses incurred. The progress of the emerging businesses was attained through clearly defining strategies for execution of achievement of goals. Another system designed for monitoring performance that entailed use of colours to define the position of the emerging businesses was adopted. Red indicated a point of concern, yellow limited progress and green meant sustained success. Evaluation The key elements utilized by the EBO management, were deliberate actions taken to ensure that all areas that spelled success for the emerging businesses were actually taken care off. Indeed, sound leadership; well thought of strategies; careful utility of resources; and a system of tracking progress would, by all means, cater for the interests of the emerging businesses. Dealing with businesses now reaching H2 status Harreld should integrate a system of adoption of a smooth transition phase for the businesses outgrowing H3 and entering into H2 to ensure that they are catered for as required. This he can do by adopting regulations guiding transition. He should also find a way of integrating them with the rest of the company so that they can stand independently to ensure growth (Pugh 2001p35). He should also employ more experienced leaders for these businesses so that they are safely elevated into the next phase. He should also, through judgement based on the evaluation he makes of the H3 businesses now ready to enter the H2 level, adjust the policies and demands expected for this group to meet the required standards for the elevation to take place. He should also prepare all the necessary structural, documentation, resources etc that may call for the transition process. To increase the EBOs, Harreld should call for participation and a feeling of ownership for products from the groups charged with the other EBOs. He should also encourage the corporate strategy to continue supporting the EBOs after they have adopted the new EBOs for their support was necessary to ensure that they manage to pick up and stand independently. Hiring of staff to serve in the new EBOs is equally important for the creation of the new ones. He would also need to ensure that all the EBOs get all possible attention they need for support and growth so that their needs are catered for. Conclusion Opportunities for growth through development of new businesses are available for IBM if only they will put their energy to it for it is not only physically tasking but also involves the mind a great deal in strategic formulation among others. References Pugh E (2001) Building IBM: shaping an industry and its technology MIT Press pp34-37 Rodgers F, Shook R (1999) The IBM way: insights into the world's most successful marketing organization Harper & Rowp212 Carey et al. (1995) Towards heterogeneous multimedia information systems: the Garlic approach retrieved from portal.acm.org/citation.cfmid=827880 as at 4.00am, June 5, 2009 Read More