IBM Strategy

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As CEO of IBM, Samuel J. Palmisano used the momentum of the success gained under the leadership of Louis Gestner to steer the business in a new direction. Sam intends to restore the organization to the former status it held as a technological leader with an admirable company culture. Palmisano's plan calls for the reorganization of the executive management board, restructuring of incentive programs, and an emphasis on collaboration across all divisions. Establishing closer relationships between researchers and clients is also a key factor in creating new opportunities for growth for IBM. E-business on demand is the new initiative at the heart of Palmisano's strategy for the growth of IBM's Global Services. E-business will transform IBM from a hardware and software company to an IT services provider.

Disbanding the executive management committee and creating a set of management teams was the first step in Palmisano IBM restructuring plan. "He created three of them: strategy, operations, and technology. Instead of picking only high-level executives for each team, Palmisano selected managers and engineers most familiar with the issues."1 Sam found the remoteness of the committee members from the frontlines was impeding the company's progress. Decentralizing management empowers employees to make decisions and participate in IBM's future success. The transference of knowledge across the organization is more efficient and effective when collaboration at all levels is encouraged. To show his commitment to the participative management approach the CEO then had the board take a portion of his bonus and redistribute it to top executives based on their team performance. This gesture of sharing the rewards solidifies Palmisa...

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...and stimulates innovation. Customers' relationship with researchers fosters a sense of a deeper connection with IBM that leads to long-term financial commitments.

Sam Palmisano's team approach and dissolution of management sets the stage for improved morale in IBM. As the decision making process is extended communication improves across the organization and a learning culture is established. A collaborative environment inspires innovation of new products as the divisions are aligned with IBM's strategic goals. Palmisano's support of open-source platforms provides the vital ingredients necessary to build the backbone of the on demand system that he envisions IBM will provide to customers. As Sam's vision blossoms a symbiotic relationship is formed that will provide enhanced business applications and services to customers and a recurring source or revenue for IBM.

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