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Strategy Through Innovative Behaviors, Actions, and Risk-Taking That Drive Towards and Can Be Measured Through Improved Metrics of Success."

IBM faced declining revenues in the late 1990s as it failed to adapt to new industry trends. CEO Lou Gerstner implemented a strategy of corporate entrepreneurship to promote innovation. He overhauled leadership, planning, and accountability. Key changes included hiring entrepreneurial leaders, empowering creative strategy development, and monitoring projects' progress. This helped IBM merge traditional operations with innovative approaches. The results were successful, with $15 billion in new revenue generated within four years and only 3 of 25 new projects failing. IBM's turnaround demonstrated the potential of corporate entrepreneurship to drive business transformation.

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Simran Rai
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87 views

Strategy Through Innovative Behaviors, Actions, and Risk-Taking That Drive Towards and Can Be Measured Through Improved Metrics of Success."

IBM faced declining revenues in the late 1990s as it failed to adapt to new industry trends. CEO Lou Gerstner implemented a strategy of corporate entrepreneurship to promote innovation. He overhauled leadership, planning, and accountability. Key changes included hiring entrepreneurial leaders, empowering creative strategy development, and monitoring projects' progress. This helped IBM merge traditional operations with innovative approaches. The results were successful, with $15 billion in new revenue generated within four years and only 3 of 25 new projects failing. IBM's turnaround demonstrated the potential of corporate entrepreneurship to drive business transformation.

Uploaded by

Simran Rai
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Case of IBM

One of the business acumen skills that is critical to success is the concept of Corporate Entrepreneurship.
Corporate entrepreneurship as:

“A business process that occurs inside an existing company that will lead to the successful execution of business
strategy through innovative behaviors, actions, and risk-taking that drive towards and can be measured through
improved metrics of success.”

We’ve had very positive feedback and several of our clients have asked for more information, ideas and follow up
on the top.

We are proud to dedicate the rest of this blog to a case study that illustrates how IBM saved their company by
creating a culture of corporate entrepreneurship. Some of these lessons are more applicable today than they
were 15 years ago when IBM changed their strategy from product leadership to customer intimacy.

The IBM Situation:

In 1999, IBM CEO, Lou Gerstner, wanted to determine why IBM had been missing new industry trends that the
company’s competitors were picking up on. After doing extensive research, they found that their shortcomings
were a result of six causes:

1. A management system that rewarded execution and short-term results rather than strategic business building
2. A preoccupation with IBM’s current markets and existing offerings
3. A business model that emphasizes sustained profits and improvement in earnings per share rather than
actions to drive higher price-earning ratios
4. A financial, data driven approach to gathering and using market insights that was inadequate for embryonic
markets
5. An absence of process suitable for selecting, developing, funding, and terminating new growth businesses
6. A lack of entrepreneurial skills
 
All of these causes can be classified as a “two-cultures” problem in which a company has difficulty merging
traditional systems with innovative ones of corporate entrepreneurialism. This was a problem for IBM because
they were losing business to their competitors as a result of their inability to merge new industry demands with
their older business acumen.

The Solution:

In 2000, Gerstner promoted John Thompson (leader of the software group) to Vice Chairman and placed him
responsible for leading the emergence of the new business effort. Thompson did this by focusing on the following
areas of business for IBM:

 Leadership
 Strategy development
 Monitoring
With regards to leadership, Thompson hired Emerging Business Opportunity (EBO) leaders to bring skills,
entrepreneurship, and creativity to the company. To enhance strategy development, Thompson changed IBM’s
planning process to have “strategic clarity,” giving employees the freedom to have a creative, exploratory, and
entrepreneurial brainstorming process that allowed for autonomy in direction. He also focused on gaining positive
coverage in the press and encouraged his employees to engage in the marketplace.

Lastly, Thompson used monitoring to foster a sense of accountability. He evaluated the finance and corporate
strategy employees on three metrics: (1) project-based milestones (2) financials (3) assessments of business
maturity. They then tracked the EBOs in three areas using a color-coded system (red, yellow and green): (1)
developing a clear strategy (2) defining an executable model (3) winning in the market place.

Results:

Just four years after making the shift to corporate entrepreneurship, IBM had grown by $15 billion in revenues. Of
the 25 projects that IBM had attempted to execute, only 3 had failed, leaving the remaining 22 to be contributors
to the financial success previously described. IBM serves as a great example of the potential that rests in
corporate entrepreneurship.
 
Business Simulations Provide a Forum for Exploration
If you are a business leader or an HR leader looking to develop the skills needed to be successful as an internal
corporate leader of corporate entrepreneurship, you should think about business simulations. The simulation and
supporting content are presented in a professional way that opens up endless potential for taking ownership of
innovation and experiencing how businesses react when you are consistent with business strategy and focused
on doing the right things.

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