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MANAGEMENT INNOVATION
IBMmanaged to turn its fortunes around in the 1990s by completely transforming its business model. The transformation turned out to be IBMIreland’s opportunity, according to the Irish operation’s country manager Peter O’Neill. GRAINNE ROTHERY reports
Reversal
IBM MAY HAVE THE AIR OF AN INSTITUTION THAT WILLALWAYSBEWITHUS,BUTTHECOMPANYCAME DANGEROUSLY CLOSE TO BANKRUPTCY IN THE EARLY 1990S. Addressing the Irish Centre for Business Ex- cellence Network’s annual conference recently, Peter O’Neill, IBM’s country manager in Ireland, explained howthe organisa- tion managed to turn itself around and how its Irish operation has positioned itself to benefit fromthe transformation. Noting that IBM had reached the milestone of 100 years in
business last June,O’Neill said transformation has always been central to the company’s story and continues to be a core part of its business strategy.He said the company’s history has some valuable lessons about the key challenge for leaders of how to innovate for organisations. “Institutions are not permanent structures even when they
are very successful for a long period of time,” he said. “I think in- stead they’re evolving organisms and the job of each generation is to adapt themto a continually changing world.” He recalled howin 1993, IBMrecordedwhatwere the largest
losses in corporate history at the time. “Our share price col- lapsed,wewereweeks away fromdeclaring bankruptcy andwe could barely get the cash together to cover the payroll,” said O’Neill. “Therewas talk of splitting up the company and selling off our assets. “Essentially as an organisation we had lost sight of what mattered – our customers.We’d become hugely inefficient,with
68 INNOVATION IRELAND REVIEW Issue 4 Spring/Summer 2012
of fortune
duplication of functions, silos of information, and we had sim- ply forgotten that every organisation has to change with the times. Instead of continuously transforming, we were trying to preserve a comfortable position and the status quo. Our cus- tomers and the markets quite rightly punished us.” The initial response to the crisis included very significant cut-
backs, rationalisation right across the organisation and big changes at the top, including the arrival inApril 1993 of LouGer- stner, IBM’s first externally
recruitedCEO.According toO’Neill, Gerstner helped IBMrediscover its core values by focusing once again on the customer. While itwaswidely expected that hewould come in and break
the company up, he opted instead to reengineer the organisa- tion. The transformation programme that followed in the 1990s involved completely reinventing or transforming every single aspect of the company. One example of this, said O’Neill, was the reduction from 126 chief information officers worldwide to just one. “We reversed some very long-held policies – some might call
themsacred cows,” saidO’Neill. This included licensing some of its proprietary technologies to other companies, even to some of its competitors, and exiting fromits commodity businesses, in- cluding PCs, hard disks and printers. “Instead, we focused on providing higher value solutions to
clients, based on innovation and based on open technology.We radically shifted the mix of where we earn our revenues. Ten
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