Business Strategy Implementation at IBM - Essay Example

BUSINESS STRATEGY: IBM CORPORATION Contents Strategy Implementation at IBM……………………………………………………………………...2 1 What is Strategy………………………………………………………………………………………...2 1.2 Various schools of Strategic Management..…………………………………………………3 1.3 Corporate & Business Level Strategy……………..……………………………………………4 1.4 Four questions of Corporate Strategy…………………………………………………………5 2. Benefits & Limitations………………………………………………………………………………………8 3. Recommendations for enhancing strategy implementation…………………………….10 4. Interview Questions 4.1. Interview 1……………………………………………………………………………………….....13 4.2. Interview 2………….……………………………………………………………………………….15 4.3. Interview 3………….………………………………………………………………………………17 References…………………….……………………………………………………………………………….19 Appendices (Summary of Interview Responses)...………………………………………………………………19 1. Strategy Implementation at IBM “Strategy is a mental tapestry of changing intentions for harmonizing and focusing our efforts as a basis for realizing some aim or purpose in an unfolding and often unforeseen world of many bewildering events and many contending interests. Its aim is to improve our ability to shape and adapt to unfolding circumstances, so that we as individuals, group or as a culture or a nation state can survive on our own terms” – John R Boyd. 1.1. What is a Strategy? The term strategy bears its origin to the military, who, conceptualized a definition for the process and the enduring endeavor of individuals, groups or organizations; for survival and includes policies, plans and frameworks structured to survive and reach the desired goals / destinations. According to Mintzberg & Quinn (1996), strategy could be termed as efficient if it has the ability to accentuate the consequences of managerial decision making by appropriately channelizing its resources, considers probable outcomes, and combat the competitive forces within the industry. According to Vijeon & Dan (2003), “Strategy is the management of the interface between the activities of the organization and the changing environment in which it operates. This process involves too much uncertainty, novel situations and lack of firm information to be automated”. 1.2. Current Theories of Strategy Mintzberg classifies the process of Strategic Management as belonging to ten different schools of thought, some of which are discussed hereunder: The Design School This school of thought perceives the process of strategy formation as a process of conception. The basic underlying approach in this school of thought perceives strategy formulation as a deliberate process whereby the internal organizational factors are often associated with its external environment. The basic feature of this school of thought lies in its simplicity and the ability to reduce ambiguity. However, overtly simple process is often associated with high degree of risk in distorting reality. The Planning School The Planning School perceives the process of strategy formulation as a formal process whereby stringent steps are taken to ensure an appropriate analysis of the situation right from the conception stage to the final execution of the proposed strategy. It helps in providing a better understanding of the process of resource allocation and helps the strategists in exercising control over the strategy planning process. Although it might sometimes become too static and activities like group thinking and predicting might become cumbersome and difficult. The Positioning School This school of thought assumes strategic planning as an analytical process and places the business within the context of an industry in order to ascertain the manner in which organizations manage to improve their strategic positioning within that particular industry. This school of thought encourages prediction of future events and perceives the process of strategic management as a scientific process rather than managerial process. It provides a platform to execute the process of strategy formulation in a well structured and systematic manner and enable the managers to focus on hard facts i.e., accurate data and statistics. This process could prove to be helpful especially in the initial stages of strategy formulation when the data / statistics need to be analyzed. The significant drawback of this school of thought, however, is that it neglects social elements, culture, and politics and is highly number oriented and scientific in its approach. 1.3. Corporate and Multi Business Strategy (Hubbard) The golden rule for corporate strategy: There are two golden rules: i. The corporate strategy must add value to the combined businesses over and above the value of each individual business ii. The value to the owner of the corporation must be greater than the value to another owner – which comes from the parenting advantage concept. 1.4. Four questions of corporate strategy Does the organization plan to grow (profitably)? What is the corporate vision? Are the businesses related? What position the corporations want to achieve? These questions can be addressed by the detailed explanation and analysis of IBM as discussed hereunder which traces its journey from the inception stage to that of one of the world’s greatest organizations. IBM has witnessed unprecedented corporate shape lift over the last decade, from its humble beginnings as an ordinary and relatively unknown hardware vendor to a globally known and recognized brand name offering broad range of solutions on an international platform. This sea change has been facilitated and can be attributed to the strategic foresight and the meticulous accomplishment of its organizational goals in sync with its ably defined corporate vision. The phenomenal metamorphosis of IBM demonstrate the vibrant competency of the organization to foretell significant transformations occurring in the industry and grasp the various benefits accruing from such transformation by realigning its current strengths organizational competencies. The success achieved by IBM reaffirms the fact that the dynamic abilities of the company influenced their strategic decision making process which enabled them to foresee the future of their products and the grabbed the opportunity to invest and develop it further by exploring new markets as well as technologies such as life sciences and pervasive computing on one hand and mature well established products such as mainframe computers and middleware on the other. During the 1990s IBM was written off by industry experts as its stocks hit rock bottom since its inception and all efforts directed at rejuvenating the company met with disastrous consequences. Today, IBM Corporation’s net worth has crossed billions and its popularity has made the brand phenomenal. To combat the failure and resurrect the organization the management team sought major transformation at the company whereby factors such as speed, accuracy, transparency, focus on customers and teamwork were taken into consideration. For the purpose global core processes were developed which focused on the company’s strengths which lay in their ability to provide efficient solutions to their customers, repair their core businesses, reframe their metrics and reward systems and persistently drive their organization towards their corporate goals by focusing on the marketplace simultaneously. The basic driving force behind such a transformation was the substantial change in IBM’s strategy formulation and approach towards execution of corporate level strategies. The underlying essence of the theory of strategy formulation is to understand how organizations accomplish goals and corroborate competitive advantage. Strategy defines the manner in which companies should approach change and sense the potential opportunities in the market and the subsequent transformation accruing out of technological evolution. Another significant attribute that the firms must possess in order to succeed is core competency, which is described as simple business level process that enables the organizations to gain an insight into the markets and assess its potential strengths and weakness which gives them an edge to compete with their rivals. 2. Benefits and limitations 2.1. Advantages and Disadvantages of Strategy There are several advantages of Strategic planning of which the ability to monitor and evaluate unforeseen events which further helps organizations to safeguard themselves form impending losses and setbacks is one of the most significant advantages. The other benefits that accrue from strategic planning include the ability to define clearly the organizational aims and goals and to create feasible objectives which are in accordance with the company’s mission. It helps the firms in transmitting those objectives and aims to the various constituents of the organization, establish appropriate plans and policies, safeguard efficient utilization of organizational resources by directing their use on key priorities, establish a standard measure to gauge the degree of successful implementation of plans and co-ordinate the efforts of all those involved in the formulation of such strategy in establishing a common consensus about the desired direction of the organizational progress. Strategic planning and implementation involves exercising control over the decisions and plans made as well as over the managers, employees, markets and customers. Such dependence on planned strategies reflects the fear of unexpected occurrences that might render the firms / organizations incapable of confronting the changes in the market place. According to some researchers, strategic planning help the organizations in combating unforeseen situations and safeguarding their own corporate interests of retaining their competitive positioning in the industry but it also, on the other hand restricts them to a limited number of alternatives which might not endure desirable results. Establishing a vision might help the organizations in charting out a proper plan to attain its business goals but it focuses on the general / broader picture, largely ignoring the specifics and intricate details required to be attended to in a most diligent manner. It facilitates development of a clearly defined organizational objectives, thereby ensuring effectiveness and efficiency, build efficient teams which work on common goals and vision and increase productivity and profitability of the organization in the process. Some of the most apparent follies of strategic planning and its subsequent implementation include the belief that it possesses the ability to control the external forces of the environment as opposed to the real actual degree of control. It requires the organizations to focus their abilities and strengths on attainment of goals and ensure successful implementation of its policies but it ignores the actual action in the process, which defeats the very purpose of strategic planning and implementation, since execution of proposed plans is of equal, if not more, significance (Mintzberg, 1994). 3. Recommendations IBM Corporation has currently been applying new methods of strategy implementation which involves breaking down the entire process into several small and manageable parts and turning them into achievable goals. Such a method would ensure proper and efficient monitoring of the company’s performance and check any deviation from its desired goals and vision. With the changing face of global market place and increasing competition, IBM should ensure proper utilization and allocation of its financial resources as an alternative for cost reduction measures. Such a move would help in safeguarding the company from being compelled to take severe operational decisions such as employee layoffs especially considering the ongoing global economic meltdown and the resultant financial crunch being felt across all sectors in the industry. IT service management could prove to be critical and highly expensive owing to the tremendous capital investments required and hence organizations such as IBM should establish strategic alliances as a measure to ensure cost sharing and provide optimized IT management services. The company should ensure effective utilization of CRM systems as a means of ensuring customer retention. In a highly competitive market the customer loyalty is often bargained in favor of cheaper and affordable products and hence delivering quality services at competent prices should be kept into consideration. Service management implementation should be adequate and efficient enough to assure better visualization of the company’s strategic positioning in the market. Companies such as IBM which are highly technology driven should implement the Technology / Know how Driven Strategy. This strategy requires the companies to push their companies to develop products which are innovative, inimitable and better than their competitors. Technology driven companies often indulge in creating markets rather than merely respond to its demands. Several investments in technology and R&D by IBM has led the company to achieve unprecedented success in the field of IT enabled services and helped it to generate an on going stream of new and innovative products that is highly sensitive to new products (Robert, Pp.113). Implementing the Balanced Scorecard framework would help the organizations in developing new set of measures that describes the results and targets of the company with more efficiency and clarity. The balanced scorecard system assists the senior management team in focusing their strategies in developing goals that would ensure long term success for their firms, by choosing the most important objective. The system approaches various organizational issues and propagates the active allocation of resources in areas which needs financial assistance (Kaplan, Norton, Pp.274). 4. Interview questions Interviews with various levels of management i.e., lower level, mid level and top level management, were carried out which are mentioned below: Question 1. How would you define the concept of strategy as followed by your organization? Question 2. What kind of issues do you associate the concept of strategy with? Question 3. What is your role in the process of strategy implemention? How do you identify and address key strategic issues faced by your organization? Question 4. In what manner does organizational culture affect strategy implementation? Question 5. What, according to you, is the single biggest obstacle to strategy implementation? Question 6. As the Chief of Software division at IBM, what is your view about the strategic priorities of your customers for the current year? Interview: 2 Question 1. What does strategy mean to you? Question 2. How would you rate the communication of strategic plans at various levels of your organization? Question 3. What, according to your views, obstructs the adoption and implementation of strategy? Question 4. Do you think that the level of commitment for strategy varies according to one’s position in the organizational hierarchy? Interview: 3 Question 1. What are the significant problems faced during implementation of a strategy? Question 2. What according to your view, is a more major problem in strategy implementation – lack of resources or lack of commitment? Why ? Question 3. What is more likely to hamper the process of strategy implementation – lack of organizational resources or uncontrollable environmental factors? Question 4. what changes would you propose in the current strategy adopted by your organization? How do you propose to ensure its effective implementation? References: Mintzberg, H., Quinn J. B., (1996). The Strategy Process: Concepts, Context, Cases, Massachusetts, Pp. 3 Mintzberg, H. (1994). The Rise and Fall of Strategic Planning, Pp. 221 – 231, Prentice Hall. Robert, M., (1998). Strategy Pure and Simple II: How Winning Companies Dominate Their Competitors, McGraw Hill Professional, Pp. 115. Kaplan, R. S., Norton, D. P., (1996). The Balanced Scorecard: Translating Strategy into Action, Harvard Business Press, Pp. 272 – 274. Appendices Summary of Interviewee responses: Table 1: Definition of Strategy Interviewee 1 Interviewee 2 Interviewee 3 Something which is connected to goals and objectives Policy, action plan, operational principle - Means to achieve organizational goals Table 2: Definition of Strategy Implementation Interviewee 1 Interviewee 2 Interviewee 3 Carrying out organizational goals - Decision Making Organizational tactics - Managerial process - Enhancing commitment - - Leadership - - Facilitating development of key areas - Applying policies and plans Goal setting Carrying out environmental analysis - - Balanced scorecard - - Optimum utilization of resources - Diligent execution of plans - Monitoring performance Changing priorities according to responses - Discussion: In the beginning of the interview the managers at various levels of organizational hierarchy were asked to define / provide their views on the concept of strategy and strategy implementation. Two of the three respondents identified it as something related to the achievement of goals and objectives of the organization. Term such as policy, action plan and operational principle were mentioned and often quoted while describing the concept of strategy. The middle level managers could successfully differentiate between a strategy and strategy implementation process but their version differed slightly as compared to the top level management. The definition provided by the mid level managers was mostly synonymous with Mintzberg’s five Ps model and were mostly co – related to Plan category. On the basis of the responses provided by the interviewees it could be concluded that the top level management were more concerned with the external issues faced by the organization while implementing strategies formulated by them while the middle and lower level managers showed concern towards internal issues. The concept of strategy implementation proved to be more difficult to explain / define for the lower and mid level managers as compared to the definition of strategy which was comprehended accurately at all levels of organizational hierarchy. Top level manager showed great concern and interest in the execution of strategy as opposed to the mid and lower level managers. My experiences during the interview and the responses provided on the question of basic problems faced by the organizations during strategy implementation stage, led me to conclude that factors such as impracticality of strategies developed, inefficient management, lack of awareness and misunderstanding owing to lack of proper communication between various levels of management in the organizational hierarchy, obstacles created by unforeseen situations, postponement of plans, as well as negligence towards day to day execution were considered to be more significant by all the three respondents. Besides mid and lower level management specifically mentioned lack of adequate resources to carry out strategy implementation as a major road block towards successful implementation of the same while top level management blamed the lower and mid level management for lack of commitment and negligence. Limitations of the study: The restriction in number of respondents could be considered as a major setback and hence the results of such a limited audience could not be conceived as conclusive. The respondents were alerted on the topic of study being strategy and its implementation in organization and hence it is likely affect their response. The basic understanding of the research topic being studied in great depth is likely to affect the interpretation provided by the respondents. In conclusion the definition of strategy and its formulation was found to be highly traditional and conservative. Read More