THE TURNAROUND OF

by
Cornelius Mellino (0832200222)
K. Joko Maryono (0912200426)
Fera Setyawati Tanuwidjaya (0912200451)
Aloysius Abel (0912200520)
 
04 MAM
 PRESENTATION ROADMAP

LESSONS
LEARNED
SOLUTION

PROBLEMS

CASE
SUMMARY

RAISON
D’ETRE
RAISON
D’ETRE
 3 KEY DECISIONS
Appointing Gerstner the
1
●
●

CEO

2 ●
●Gerstner’s diagnostic steps

Gerstner’s sustainable
3
●
●

implementation measures
 CASE
SUMMARY
 Watson
(1914 – Watson Jr John Akers
1952): (1952-1982): (1985-
Shaping the Computer 1993): Gerstner Palmisano
fundamental era; IBM Starting in (1993- (2002-):
culture; being the peak 2002): Sustainabilit
guiding to the world’s condition; Turnaround y
threshold of leading IT ending up in
computer era company deep crises
 1911  Founded; merger of three 5
companies dating back to 1890

Thomas J. 1914  Shaping culture of: 1) “Dark- 6-7

Watson suited salespeople”; 2) Corporate
(’14-’52) pride and loyalty; 3) Implied
lifetime employment; 4) Work
ethic: “THINK”
 Guiding to the threshold of
computer era
Watson Jr 1952 – late  Computer era 7
(’52-’82) 1960s  World’s dominant player in the growing IT industry
 $5 billion investment for System/360; the biggest privately
financed commercial project ever
 The first family of products based on an integrated
semiconductor chip and offering interchangeability of
components
 Innovations: FORTRAN, hard disk, floppy disk, IBM
supermarket checkout station, early version of ATM
by 1980-1981  IBM PC: most successful technology introduction with sales
of 241,683 unit in a single month, exceeding the five-year
forecast.
 Sold through: retailers, distributors, and value-added resellers
 Known as “the best place to work”

1984  Early signs of trouble: sales, assets, and equity began to 8,

decline; believed to be the impact of changing from leasing- 13
oriented business of mainframes into sales-oriented business
inefficiency
 The customers’ need to interconnect the mainframe with other
components led to the fall of mainframe sales
 PC sales didn’t even increase
John 1990  The second most profitable company in the world 5
Akers (Net income: $6 billion; Revenues: $69 billion)
(’85-’  Completing the transformation designed to position it
93) for success in the next decade
 Feeling pretty good but not so great; deep structural
problems remain

‘91-‘  Earnings dropped to negative $2.8 billion (146% 5, 8

93 drop)
 Suffering from substantial losses (total loss: $16
billion)
 Reasons: 1) Blinded by hubris (dibutakan oleh ambisi
berlebihan); 2) Out of touch with customers; 3)
Internal problems
Gerstner 1993  Akers was dismissed, believed to be responsible 5-6
(’93-‘02 for the declining financial results
 April Fools' Day of 1993, Gerstner from Nabisco
(no technology background, but promising
capability to break it up for sale) took charge of
CEO; learning much from customers, analysts,
employees (p. 6)

1994  Turnaround; first time gain since 1990

by ‘95  Turnaround started: began to recover 6

 Rate; slower than IT industry as a whole – not yet
getting to “The Next Big Thing”
 Successful revitalization widely known as
turnaround (titik balik), though not so
revolutionary, but steadily.
PROBLEMS
1 ●
● Lack of customer intimacy

●
Inefficiency
2
●
●
● Lights-on
Lights-on high
high cost
cost
●
● Too big organization
Too big organization
●
● Too
Too long
long time
time to
to market
market

●
Culture: too long celebration of past
3
●

success

4 ●
● Weak corporate leadership
BUSINESS INTENTION:
ONE MORE POWERFUL
IBM
1 ●
Improve efficiency

2 ●
● Improve speed: time to market

●
Clearly translate innovative technology
3
●

concepts

4 ●
● Streamline the organization
 ●
Keep customer intimacy
Customer losses ●
e-commerse: B2B
●
Selling  leasing

●
Cut non-performing investments
●
Reengineer processes (125  3 megacenters)
Inefficiency ●
Streamline organization (e.g 128  1 CIO)
●
Employee lay offs (40000)

●
Boost up sales
Financial losses ●
Effective sales team

●
Knowledge management
●
Research and translating results more effectively.
Technology ●
Invest on performing projects
●
Software integration and networking
 CONTOH AKSI NYATA GERSTNER
1 ●
Change meeting culture

2 ●
Lay off 40.000 employees

3 ●
Consensus-based  knowledge-based decision making processes

4 ●
Encourage people to keep on integrating and create solutions to customer needs (p. 17)

●
Encourage people to think from the business matter; forming CEC, DMC, global sales team, CR manager, etc (pp 18-
5 19)

6 ●
Financial, cultural, and business transformation (p. 22)

7 ●
Internet: Olympic Website, B2B network computing, etc. (p.23)

8 ●
Outsourcing and recruitment
RESULTS
One IBM
NEXT BIG
THING
LESSONS
LEARNED
 Strategic
Refer to the
thinking : From
bottom-line,
business strategy
always
to IT actions;

Keep close to
Be creative in
customers and keep
product innovation
an eye on
and translate it into
competitors’
the customer needs;
pivotal movement
THANK YOU