IBM Corporation Turnaround Brief Description

IBM Corporation

A multinational technology company founded in 1911 as the Computing-Tabulating-Recording (CTR) company.

Net Income

The profit of a company after deducting all expenses and taxes.

Sales

The total amount of money generated from selling products or services.

Transformation

A process of making significant changes to improve the performance or success of a company.

Structural Problems

Deep-rooted issues within the organization's framework or systems.

Losses

Negative financial results, indicating that expenses exceed revenue.

CEO

Chief Executive Officer, the highest-ranking executive in a company.

Turnaround

The process of reversing a company's decline and restoring it to profitability.

Profitable

Generating a financial gain or positive net income.

Lou Gerstner

CEO of IBM from 1993 to 2002, credited with leading the company's successful turnaround.

RJR Nabisco

A multinational food and tobacco conglomerate, where Lou Gerstner was previously CEO.

E-Business

Business conducted electronically, typically via the internet.

21st Century

The current century, spanning from 2000 to 2099.

Agile

Able to move quickly and easily, often used to describe highly adaptable companies.

Entrepreneurial

Having the characteristics or mindset of an entrepreneur, such as being innovative and risk-taking.

Information Technology

The use of computers and telecommunications to store, retrieve, transmit, and manipulate data.

Robert D. Austin

One of the professors who prepared the case study on IBM's turnaround.

Richard L. Nolan

One of the professors who prepared the case study on IBM's turnaround.

Computing-Tabulating-Recording (CTR) company

The original name of IBM when it was founded in 1911.

Thomas J. Watson

The president of IBM from 1914 to 1956, known for his leadership and corporate practices.

Thomas Watson, Jr.

The son of Thomas J. Watson and the CEO of IBM from 1956 to 1971.

FORTRAN

One of the first high-level programming languages developed by IBM.

System/360

A family of mainframe computers introduced by IBM in 1964, known for its component interchangeability.

Floppy Disk

A magnetic storage medium used for data storage in early computer systems.

Hard Disk

A non-volatile storage device used to store and retrieve digital information.

Client/Server Model

A distributed computing model where tasks are divided between client devices and server devices.

Mainframe

A large, powerful computer system capable of handling complex tasks and serving multiple users.

Internet

A global network of interconnected computers that enables communication and information sharing.

Worldwide Web

A system of interlinked hypertext documents accessed through the internet.

Netscape Browser

A web browser developed by Netscape Communications Corporation, popular in the early days of the internet.

Java

A programming language commonly used for developing web-based applications.

E-Commerce

The buying and selling of goods and services over the internet.

Returns on sales

Profitability ratio indicating sales efficiency

Assets

Total resources owned by a company

Equity

Value of ownership in a company

Leasing oriented business

Company focused on leasing products

Sales oriented business

Company focused on selling products

One time gains

Non-recurring profits from specific events

RISC processing

Reduced Instruction Set Computing technology

Commercially viable PC

PC with market feasibility

Mainframe sales

Sales of large, powerful computers

Mainframe alternatives

Options to traditional large computers

Exceptional margins

High profit percentages

Interoperate

Ability to work together

Structural efficiency

Optimization of organizational structure

Six-sigma quality

Quality management methodology

Cycle times

Time taken for a process to complete

Voluntary retirement programs

Initiatives allowing employees to retire willingly

Attrition

Natural reduction in workforce

Decentralized authority

Distribution of decision-making power

Etherington

Individual involved in IBM-Canada operations

Mid-range market

Market segment between low and high-end products

VAX-killer

Product designed to compete with VAX machines

Complexity

State of being intricate or complicated

Data centers

Facilities housing computer systems and data

CIOs

Chief Information Officers

Spinning off

Separating a business unit from the parent company

Breakup of the company

Division or dissolution of a corporation

ISSC

Integrated Systems Solution Corporation, later IBM Global Services

Nolan-Norton

Consulting firm that highlighted hardware commoditization and services expansion

Outsourcing deal with Kodak

Major contract won by IBM, signaling growth potential in services

Cost reduction efforts

Initiatives to cut expenses, including job eliminations

Lifetime employment policy

Practice abandoned in 1991 at IBM

Louis V. Gerstner

CEO who joined IBM in 1993, not from within the company

Bureaucracy hindrance

Evolved bureaucracy impeding decision-making at IBM

Pre-meetings

Sessions held before senior management meetings to align positions

New CEO search

Initiated due to poor forecasts in 1992, leading to Gerstner's appointment

Stock plan changes

Implemented by Gerstner to retain key employees through options exchange

Senior executives' papers

Documents requested by Gerstner for insights on IBM's business and turnaround strategies

Collegiality under Gerstner

Emphasized paying for performance over personal relationships

Gerstner's engagement strategy

Requested papers from executives and spent time discussing business with each

Industry leader visits

Part of Gerstner's efforts to understand IBM's business landscape

Gerstner's Approach

Focused on integrating marketing, improving customer relationships, and global solutions

Disconnection between Research and Market

Observed lack of alignment between research efforts and market demands

Sophisticated Marketing Techniques

Advanced marketing strategies lacking in IBM's practices

PR Policy

Missing public relations policy within IBM

Sales-Oriented Company

Company with a strong emphasis on sales as a core strategy

Managing Relationships with Customers

Maintaining and enhancing customer connections and satisfaction

Global Solutions

Integrated solutions across regions and services

Integration Principle

Emphasized merging divisions and operations into one cohesive entity

Cost Reduction Targets

Specific goals to reduce expenses within the company

Line Managers' Accountability

Holding managers responsible for decisions and outcomes

Operation Bear Hug

Initiative where executives personally engaged with customers to retain them

Cost Cutting

Efforts to reduce expenses and streamline operations

Transfer Pricing System

Internal system causing inefficiencies in divisional performance evaluation

Stock Price Increase

Doubled stock price from low point by third quarter of 1993

Organizational Reorganization

Restructuring into a global organization with new executive committees

Corporate Executive Committee (CEC)

Group of senior executives meeting bi-weekly to focus on strategy

Worldwide Management Council (WMC)

Top 35 executives meeting quarterly to discuss global operations

Performance Evaluation System

Introduced system emphasizing execution and utilizing a forced curve

Sales Organization

Structure responsible for selling products and services

Product Knowledge

Understanding of company offerings lacking in sales personnel