Managing and Leading Strategic Change at IBM - Case Study Example

?Managing and Leading Strategic Change - the case of IBM Select aspects emerging from the organizational change which you find interesting and intriguing (these aspects may be guided by those areas of change management/leadership theory we have introduced within class sessions). From these chosen themes create a focus for critical enquiry into the challenges of managing and leading strategic change, through the application of appropriate theory. 1. Introduction IBM is a well-known manufacturer of software and hardware. In the past the organization was the leader in the particular market. However, the increase of the market share of Microsoft, the major competitor of IBM, led to the limitation of the power of IBM in the global market. Accenture plc and Hewlett Packard are other important competitors of IBM (Yahoo Finance 2011). The strategic plans of IBM have changed many times in order to support the increase of the firm’s competitiveness towards its rivals. In 2003-2004 a major restructuring of the firm’s supply chain management framework took place, aiming to enforce the firm’s competitiveness the support the increase of its profits. The above plan is analytically reviewed in this paper, as explained above, aiming to show the ability of the firm to monitor its operations and identify its weaknesses. Also, the willingness of the firm’s employees to support radical organizational changes – in order for the firm’s performance to be stabilized, is critically evaluated. 2. Strategic change in IBM 2.1 Key change plans in IBM As noted above, the strategic plans of IBM have been periodically changed in order to align the organizational practices with the market trends and the customer needs. The last effort of such type has been developed in 2009 – when the firm established ‘the Business Analytics and Optimization (BAO) consulting service line’ (Soejarto 2009). The particular initiative aimed to improve the performance of the organization in regard to its consulting potentials, especially for covering the relevant needs of the firm’s customers (Soejarto 2009). The above plan is just part of the firm’s effort to update its operational strategies in order to increase its competitiveness. In 1990, the firm had updated its ‘product line architecture’ (Meyer et al. 2005) aiming to keep its market share – against the industry’s major competitors, especially Microsoft. However, the above initiative did not led to the expected benefits – in 1993, the losses of the firm were estimated to $8 billion (Meyer et al. 2005). In 2003 the firm’s strategic planners identified important failures in the organization’s supply chain management strategies; efforts were made for updating existing supply chain management practices. The Integrated supply chain (ISC) has been a scheme introduced for helping towards the elimination of delays in the firm’s operations – as these delays were related to failures in the existing supply chain management framework (Paton et al. 2006). The update of the particular sector of the organization lasted for 2 years, 2003 and 2004 and led to the introduction of an integrated plan for managing the supply chain relations in all their aspects. The above change plan contributed in the improvement of the firm’s supply chain management. However, certain implications were not avoided, a fact that led to the limitation of the plan’s benefits – as planned by the initiators of the particular project. 2.2 Implications of change initiated in IBM Despite the fact that change, as part of IBM’s strategic planning process, has been traditionally aligned with the organizational needs and the market conditions, still, the effectiveness of the relevant plans is rather limited – at least compared to the resources engaged and the preparation made for the particular initiatives. The reasons for the delays in the development of the organization’s performance need to be identified and evaluated; also, the potential failures in the plans of change, as promoted in the organization in different time periods should be presented and analysed. As noted above, the change process developed in IBM in 2003/2004 – referring to the organization’s supply chain strategy – will be used as the key point for explaining the terms of change in IBM. The review of the firm’s practices in regard to the above change process proves that the specific plan was appropriately prepared but was not closely monitored; as a result, many of its parts were not fully developed, leading to delays in the improvement of the firm’s performance. Other implications of the above project were the following ones: conflicts were developed in the internal organizational environment, mostly because not employees were not given equal chances to participate in the realization of the particular plans. Also, the communication and trust because the organizational leader and the employees were rather deteriorated – the leader of the organization did not emphasize, as necessary, on the needs of employees as key contributors in the particular project. Finally, it was revealed that the measures taken for changing the firm’s traditional practices were not carefully checked in advance – this problem was made clear afterwards, i.e. after the implementation of the specific plan of change; it is then that the inadequacy of this plan to support the increase of the firm’s performance above its competitors was made clear. These issues are analysed below using the relevant literature. It seems that failures cannot be avoided when attempting major organizational changes; in the case of IBM the limitation of the scope of change – focusing on the firm’s supply chain management practices – was considered as an important strategy for responding to the needs of the organization in the particular period – in 2005-2006. However, as in all organizational plans, implications could not be avoided. The potential limitation of their effects, using appropriate theoretical tools and frameworks would be examined – as of its feasibility. 2.3 Challenges of managing and leading strategic change – critique of the change plans initiated in IBM in 2003-2004 2.3.1 Key elements and needs of organizational change – review of literature In order for managers to initiate the appropriate organizational changes, it is necessary that they understand the needs of the organization but also the conditions in which these changes will be promoted. In other words, managers have to be aware of the organizational characteristics considering organization as a living entity (McMillan 2008). Otherwise, they are likely to use inappropriate tools for promoting change within the organization, a fact that could lead to the failure of the change process involved (McMillan 2008). On the other hand, the support of the change initiatives by employees is of critical importance for the success of the particular plans. Under certain terms it is necessary for the responses of employees to organizational practices to be changed, as a prerequisite for the success of the organization’s plans for change. The role of individual behaviour in the successful promotion of change within modern organizations is highlighted in the study of Cummings (2004, in Hughes 2006) .The above researcher noted that change, as part of the organizational strategy, cannot be successfully implemented unless it is combined with a change in the individual behaviour – meaning the behaviour of employees but possibly of other organizational stakeholders, such as the shareholders or the suppliers. A similar approach regarding the criteria of success of organizational change is promoted in the study of McMillan (2008). It is noted that the development of change within modern organizations can be successful only if emphasis is given on the structure of organizational activities, having the form of a web. At the next level, the responses of employees to the challenges appeared in the workplace have to be taken into consideration – these responses are also likely to have the form of a web, characterized by complexity and continuous change (McMillan 2008). In other words, organizational environment is not still but it is likely to be changed continuously; this trend could affect all attempts for introducing change within a particular organization. The importance of employees’ responses for the change plans promoting within each organization can be identified at the following point: change in each organization is consisted from a series of initiatives/ proposals; each of these proposals is expected to cause the reaction of employees – more or less (McMillan 2008). However, this reaction is not standardized, a phenomenon which is further promoted by the fact that each employee responds differently to the organizational challenges. On the other hand, the elimination of conflicts within organizations in regard to the implementation of changes is not necessarily a demanding task. Towards this direction, French (2001) notes that in certain cases, a quite simple plan of action, like hiring an employee, can be of critical importance for reducing conflicts caused because of the promotion of change within a particular organization (French 2001, in Fineman 2003). In any case that the limitation of conflicts within an organization, mostly because of the changes promoted within the particular organization, is attempted, the following fact needs to be taken into consideration: employees are likely to be highly influenced by their emotions. Therefore, understanding the emotions of employees is critical for foreseeing their potential reactions to organizational changes (Fineman 2003). The above issue is of critical importance in the following case: if major changes are promoted within a particular organization, employees may perceive this fact as a loss, if one of the following terms exist: a) if employees perceive their job as the centre of their life they would not be able to manage a potential loss of the job – in case they are fired, b) employees are also likely to perceive the change of their role/ duties as a loss – if they are accustomed to a particular routine of work (Fineman 2003). Under these terms, it could be stated that the ability of managers to handle the emotions of employees is of critical importance for the success of plans of change – being based on the fact that emotions can have a contradictory role, enhancing or freezing employees (Fineman 2003). At this point reference should be made to the following fact: the response of leaders and managers to external pressures is not identical across organizations (Palmer et al. 2009). There are leaders, as managers also, who are able to respond rapidly to any emergent organizational problem; there are also others, who need a bit of time to identify the appropriate solution (Palmer et al. 2009). In the second case, the risk for severe organizational failures is high. The response of leaders and managers to change is likely to have similar characteristics: certain leaders may identify early the need for changes in one or more organizational operations while others may delay in identifying the specific need or the solution required. In accordance with the above, the ability of the leaders and managers to understand the emotions of employee and to respond rapidly to organizational problems is quite critical for the success of plans of change. However, the development of effective communication and cooperation within the organization, a prerequisite for understanding the emotions of co-workers and responding rapidly to organizational need, is often delayed because of the following fact: organizations are quite complex entities. Therefore, the delay in the promotion of changes within modern organizations can be considered as fully justified. The use of certain theoretical models can help to understand the structure of modern organizations; at the next level, effective plans can be designed for promoting change within a particular organization. An indicative example is the Seven S Diagram (Graph 1, Appendix), a model representing one of the common forms of organizational structure, as identified in modern organizations. The specific model is included in the study of Peters and Waterman (1982). A similar model is the Managing Model of Mintzberg (2009, see Graph 2, Appendix). The specific model emphasizes on the importance of certain managing skills for the effective development of organizational plans – as promoted and monitored by managers in various organizational departments. It should be noted that when specific organizational needs have to be addressed, then the model chosen should have particular characteristics – aligned with the needs involved. For instance, when change is the priority of managers in a specific organization, then a theoretical model referring to the various aspects of change has to be used for assessing the risks and benefits of the specific initiative. The Change Management Iceberg of Kruger is an indicative example of such model (Graph 3, Appendix). In the case under examination, i.e. the changes initiated in IBM from 2003-2004 regarding the firm’s supply chain management practices, the Supply Management model of Kraljic (Graph 4, Appendix) would be most appropriate for identifying the framework in which the relevant initiatives would be developed. The needs and the challenges of strategic change, as a necessary element of the strategic management of modern organizations, can be made clear by referring to examples of firms that have supported organizational changes, meaning that these firms have already updated their strategic framework aiming to reduce – as possible – the resistance to change. In 1999 Unilever introduced the Catalyst project, a plan that was part of the firm’s new strategy ‘Path to Growth’ (Balogun et al. 2004). The above project involved in the use of art for the improvement of workplace but also for the increase of employee performance. In this context, the firm’s employees were asked to participate in a series of plans aiming to give to the firm the support required for making its products unique but also for resolving critical organizational problems (Balogun et al. 2004, p.197). The above plan of change did not face particular problems, apart from the initial resistance of employees who were not convinced on the potentials of art for resolving organizational issues (Balogun et al. 2004, p.197). Another aspect of change, as part of the strategic planning, is revealed through the strategic choices of Volvo; the specific company is among the leading Swedish companies; its presence in the global market is also significant. Under the pressures for controlling the dehumanisation of its operations the firm decided ‘to eliminate the moving assembly line and to replace it with group-based assembly’ (Burnes 2004, p.437). The above strategy could also help the firm to reduce ‘the labour turnover and the absenteeism’ (Burnes 2004, p.437). Indeed, the above plan of change was promoted in the firm’s production units; however, the above strategy was opposite to the existing market practice in regard to the specific production process, meaning that most firms in the particular industry are likely to use the moving assembly line (Burnes 2004, p.337). It should be noted that the promotion of change within organizations is likely to face strong resistance, especially if different cultures have been developed in the organization’s units worldwide – referring to the case of multinationals where such risk is higher. This problem is highlighted in the study of Alvesson et al. (2007); in this study reference is made to Technocom, a firm initially used for supporting Global Tech, a firm operating in the global high-tech industry (Alvesson et al. 2007, p.53). The firm had to change its traditional culture, which was effective in the past, in order to increase the level of its productivity, i.e. to increase its profits (Alvesson et al. 2007). The above plan of change has been successful, being supported by employees in all the firm’s departments (Alvesson et al. 2007). On the other hand, it is possible that the changes initiated in a particular organization are not fully supported by the organization’s leader. An indicative example is the case of Lee Iacocca, the president of the Ford motor company who was fired after a dispute with Henry Ford regarding the changes required for the improvement of the firm’s performance (Thomas 2003). 2.3.2. Change of IBM’s supply chain strategy – as initiated in 2003/2004 IBM is a key competitor in the computer – related technology, both software and hardware. In the past the firm has the control of the global market – referring to the ‘design, production, marketing and sales of personal computers’ (Campbell et al. 2002, p.40). However, in 1980s and 1990s the above advantage of the firm was lost. The reason was that other firms managed to offer to the public products of similar quality/ characteristics at a significantly lower price (Campbell et al. 2002). The failure of the firm to understand the market trends and the customers needs, led to the limitation of its market share. In 2003/2004 the firm’s managers tried to cover the distance between the firm and its competitors by updating the firm’s supply chain management practices. It was believed that in this way the price of the firm’s products would be lowered, becoming more attractive for customers worldwide. The key problem of the firm, which needed to be addressed through appropriate plans of change, was the failure in identifying under-performance regarding the firm’s supply chain. It has been proved that the management of time up to the completion of its order has been quite problematic, an issue which was addressed by the ‘E2E order flow process’ (Paton et al. 2006, 2), a strategy ensuring the limitation of the time required for the completion of each phase of the ordering process. It is noted that the above plan of change was successful since the specific strategy was adequately supported by employees but also by the technology available for the development of the strategy’s various phases. The change plan initiated in IBM in 2003/2004 can be characterized as evolutionary, ensuring the continuous change of the organization’s operations so that organizational strategy is continuously aligned with market trends (Johnson et al. 2005). On the other hand, change, as part of the firm’s strategic planning, can be characterized as quantum change, meaning that major elements of the organization are updated simultaneously, a fact that increases the flexibility of the firm towards market pressures (Mintzberg et al. 1998). In any case, the change strategy followed in IBM has led to ‘small wins’ (Clegg et al. 2005, 363) instead of major updates, meaning that the level at which existing organizational practices are alternated is controlled so that radical changes in the firm’s strategies to be avoided, aiming to keep stability across the organization. At this point, the firm’s experience in its industry has helped it to confront easier the market’s pressures and controls the effects of change in its internal and external environment (Cameron et al. 2004). 3. Conclusion Organizations that are interested in surviving with the global market need to change their strategies continuously ensuring that they can respond to the needs of the customers worldwide. On the other hand, the needs of employees, as members of the organization, should be not ignored. As noted in the study of Stacey (2007), organizations are units where different behaviours are developed; these behaviours need to be managed effectively in order for conflicts to be avoided. In the case of IBM the above fact was taken into consideration when the change of the firm’s supply chain management practices was attempted. The potentials of the firm to further improve its position in the international market are significant under the terms that similar approaches are used every time that the update of the firm’s strategies is required. As proved in the literature, the methods and the criteria used for implementing change in organizations of different structural and operational characteristics are not standardized; however, certain rules would be used as the basis for such initiatives, as indicatively explained above. The choices of IBM in regard to the change of its supply chain management strategy can be characterized as appropriate, having in mind the resources and the time available for the completion of the relevant project. References Alvesson, M., Sveningsson, S. (2007). Changing Organizational Culture: Cultural Change Work in Progress. Oxon: Taylor & Francis Burnes, B. (2004). Managing Change. Essex: Pearson Education. Cameron, E & Green, M. (2004) Making Sense of Change Management. London: Kogan Page Campbell, D., Stonehouse, G and Houston, B. (2002). Business Strategy: An introduction. Oxford: Butterworth-Heinemann Clegg, S., Kornberger, M., and Pitsis, T. (2005). Managing and Organizations: An introduction to Theory and Practice. London: Sage. Fineman, S. (2003) Understanding Emotion at Work. London: Sage. Hughes, M. (2006). Change Management: A critical perspective. CIPD. IBM (2011) Organization change strategy. Available from Jackson, B., Parry, K. (2008) A very short, fairly interesting and reasonably cheap book about Studying Leadership. London: Sage. Johnson, G D., Scholes, K. (2008). Exploring Corporate Strategy: Text and Cases. Essex: Pearson Education Kraljic, P. (1983) Purchasing must become supply management. Harvard Business Review, 61(5): 109-117. McMillan, E (2008) Complexity, Management and the Dynamics of Change. New York: Routledge. Meyer, M., Anzani, M., Walsh, G. (2005) Organizational change for enterprise growth: IBM had to change its organization and development processes to survive the 1990s. Research – Technology Management. Available from Mintzberg, H., Ahlstrand, B. & Lampel, J.(1998). Strategy Safari. London: Prentice Hall. Mintzberg, H. (2009). Managing. San Francisco: Berrett-Koehler Publishers Palmer, I., Dunford, R. & Akin, G. (2009). Managing Organizational Change; A Multiple Perspectives Approach. New York: McGraw-Hill. Paton, R., Macbeth, D. (2006) Managing change within IBM’s complex supply chain. Emerald Management First. Available from Peters, T., Waterman, R. (1982) In Search of Excellence: lessons from America's best-run companies. New York: Harper Business Essentials. Soejarto, A. (2009) IBM GBS Breaks Ground on Analytic Solutions Practice. Available from Stacey, R. (2007). Strategic Management and Organisational Dynamics. Essex: Pearson Education. Thomas, A. (2003) Controversies in Management. London: Routledge. Yahoo Finance (2011) IBM Competitors. Available from < http://finance.yahoo.com/q/co?s=IBM+Competitors Appendix Graph 1 – The Seven S Diagram of organizational structure (Source: Peters and Waterman 1982) Graph 2 – Model of managing (Source: Mintzberg, 2009) Graph 3 – Change Management Iceberg of Kruger (Source: http://www.valuebasedmanagement.net/images/picture_kruger_iceberg.gif) Graph 4 – Supply Management model of Kraljic (Source: Kraljic, 1983) Read More