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Case Analysis: Transformational Change at IBM

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Case Analysis: Transformational Change at IBM

The case of IBM stresses the synergism between organizational structure and strategy as

the firm evolved over time. Due to the dynamics IBM faced in the slow and fast-moving high-

technology environment in some of its business segments, it required restructuring its

organizational form to align itself with its strategic objectives, vision, and mission streams,

which were innovation and customer centricity. This case analysis focuses on analyzing the

organizational problems that IBM faced, organizational changes, and structure and strategy.

Based on the case of Bivins (2014) and other theoretical concepts, this paper focuses on

exploring the ways of the efficient change management at IBM and the effectiveness of the

aimed change.

Identifying Change Challenges and Needed Organizational Changes

IBM was making a strategic change based on its organizational problems such as low

revenues, stiff competition, and disruptions in technology (Bivins, 2014). These challenges

immediately pointed towards massive reorganization requirements within the organization. In

order to boost the revenues, some companies had to leave their core segment and focus on the

promising sectors, for example, cloud services and AI. Intensification of competition brought

IBM to search for a more decentralized and adaptable organization model to meet customer

needs. Lastly, technological disruptions highlighted the importance of cross-functional

integration and decentralization of decision-making to avoid undue hitches when integrating new

technologies into the company savvy. The company faced the following key challenges:
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Technological Obsolescence: IBM’s traditional markets of selling hardware products and

servers were becoming less attractive as growing numbers of its clients preferred buying

software, services, and cloud computing.

Market Competition: New entrants in the cloud as well as the software segment put pressure on

IBM, now forced to reconsider its market strategy.

Internal Resistance: Employee and middle management resistance and the bureaucratic nature

of organizations hindered the flow of new strategies and change.

Solving these problems in many cases implied a dramatic partnering of the overall IBM

structure. As pointed out by Bivins (2014), the company had a very bureaucratic structure where

the various departments worked in isolation from each other, and the company transitioned to a

matrix structure of working. This structural change emphasized:

Decentralization: Implementing decentralized decision-making to support business units’

decisions closer to customers.

Cross-Functional Collaboration: Eliminating hierarchy to encourage creativity and flexibility.

Customer-Centricity: A process of integrating the procedures of an organization to better meet

with customers’ demands to improve the service delivery.

According to Errida and Lotfi (2021), for the organizational change to be successful, it

must be synchronized with the structures within the organization’s strategic direction. A good

example of this principle is IBM, which initiated restructuring that established the right structure

to support its transition to cloud computing and analytics.

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Contribution of the New Structure to Strategy

The new organizational structure of IBM assisted a great deal in the attainment of the

strategic objectives. By adopting a decentralized and customer-focused structure, IBM was able

to:

Accelerate Innovation: Multidisciplinary teams ensured that there was an accelerated evolution

of cloud solutions and artificial intelligence (AI) (Bivins, 2014). This made it possible for IBM

to maintain its technological perspectives and therefore improve on its market dynamism.

Enhance Customer Responsiveness: Decentralization of decision-making at the business unit

level was beneficial when it came to customers. This turned around customer satisfaction and

built better client relationships.

Improve Efficiency: Standardization resulted in increased efficiency because there was more

efficient use of system resources. It made it easier for IBM to set priorities on the resources to

use and improve productivity as a whole.

Switching strategic changes that were made in IBM guarantees that the execution of its

strategy to leverage cloud computing as well as artificial intelligence is well maintained. These

changes could only have been driven through the framework of transformational leadership. IBM

managers developed a clear and attractive picture of the organization’s desired state to go in the

right direction and facilitate creativity and the taking of risks. In this regard, they aligned

leadership practices and activities to close the gaps between the top management’s vision and

day-to-day management by engaging subordinates in the process. As Tidd and Bessant (2020)

also pointed out, change management can be seen as a typical application of transformational
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leadership since structural changes often require the need to support the organizational culture in

line with new organizational strategies.

Application of Organizational Life Cycle

The situation at IBM fits well into the organizational life cycle framework that allows the

analysis of the company’s transformation. Organizations generally achieve a sequence of the

startup, growth, maturity, and decline or renewal phase (Tidd and Bessant, 2020). IBM can be

described as moving from the mature to the renewal stage.

Maturity Phase: IBM, until this change, was operating in the maturity phase characterized by

reliance on hard products and set procedures. This phase was one with low opportunities for

development but fairly stable.

Renewal Phase: Fully understanding the need for renewal, IBM started the renewal process.

This included repositioning its strategic direction, exploring new technology direction, and

organizational transformation towards new objectives (Bivins, 2014).

Fuertes et al. (2020) also point out that flexibility should be practiced during the renewal

phase. Specifically, the firm realized that flexibility was a critical success factor that allowed

IBM to maintain the competitive advantage. This flexibility made it possible for IBM to realize

that new opportunities were on the horizon and then realign itself to capture those opportunities

in a constantly evolving market environment.

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Application of the Change Management Model

The experience change model fully encompasses IBM’s change approach. This model

comprises seven steps that guide organizations through the change process:

Establishing a Sense of Urgency: The top management of IBM ensured that the organization’s

leadership communicated the need for change and embracing of new change since the market

was shifting and volatile (Bivins, 2014).

Building a Guiding Coalition: At IBM, cross-functional teams were created, and leaders were

given authority for change to happen. To this end, cross-section support base for the

transformation was garnered through this coalition.

Creating a Vision and Strategy: The overall strategic management of IBM was having a clear

idea to transform into a leader in cloud computing and analytics. Leaders ensured that this vision

was being echoed as well as the goals being aligned (Bivins, 2014). Communicating the Vision:

To manage employee concerns, there was clear communication as a common approach to

support a common goal.

Empowering Broad-Based Action: This allowed the employees at various levels to participate in

IBM’s change since it is a decentralized organization. The training programs and other resources

were introduced for the new responsibilities assumed by the healthcare employees.

Generating Short-Term Wins: Sustained accomplishments in several areas, including product

development and enhanced customer satisfaction, supported the importance of the shift.
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Consolidating Gains and Anchoring New Approaches: IBM committed changes to

organizational memory through socialization and implementation into the workflows.

According to Errida and Lotfi (2021), it is crucial to effectively address the issues of

resistance to change. Beyond trial- and error-based implementations, however, it became

apparent that IBM's approach of training its employees in order to overcome concerns that hinder

effective implementation of technologies was a crucial factor for success. Furthermore, the

company made several efforts to encourage employees to be actively involved in the

transformation process to ensure that the transformation process would not be met with much

resistance due to the change in the organizational direction.

Assessment of IBM’s Change Approach

IBM’s transformational change demonstrates several strengths:

Strategic Alignment: The company’s structural changes were strategic and tightly connected

with the further strategic objectives, which provided both coherence and high efficiency. This

alignment helped IBM to meet the need of having new technologies or strategies introduced into

the company better since the structures were aligned.

Leadership Commitment: Transformational leadership brought direction together with the

means to help employees embrace change, according to Bivins (2014). This, therefore, shows

that the heads made sure they provided commitment that made sure the change was

accomplished in the right spirit and in a coordinated manner.

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Employee Engagement: The work at IBM being centered on communication and training

ensured that the necessary change and attitude of togetherness was observed. Through top-

managed decentralization, IBM was thus able to figure out its new structure with the people who

would have to accommodate it in their everyday work practices.

Innovation and Agility: New structure encouraged quick decision-making and innovation and

placed IBM in the forefront of advancing technologies. This flexibility gave IBM a cutting-edge

advantage, especially when markets and technologies were changing at a very high rate.

However, there were also areas for improvement:

Initial Resistance: A major concern that characterized the transformation process is all the

resistance that was coming from the employees and most of the middle management. Despite

this, the strategies applied by IBM were efficient in tackling this resistance; however, earlier

involvement of stakeholders could have avoided such interruptions.

Cultural Challenges: Transformation from hierarchical corporate culture to the more innovative

and team-based culture was a massive process. Possibly an even higher focus on cultural change

initiatives could have helped speed up the process.

Thus, the change approach that was being employed by IBM was very effective, as

exemplified by its shift from traditional mainframes to cloud and data analytics. This paper

establishes that many lessons can be derived from such a transformation, and these may be useful

to other organizations facing similar issues.

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In conclusion, IBM is an excellent example of the major importance of structure when it

comes to attaining the realization of strategic objectives. The case of IBM provides evidence that

sustaining commitment to strategy implementation requires adapting the organization's structure

to it, as they were able to handle crucial issues, drive innovation, and sustain competitive

advantage. An overview of the application of the organizational theories and change

management models suggests that the concepts of strategic alignment, leadership, and employee

participation are crucial to effective change processes. Because organizations and their markets

are in states of transition and high velocity, especially in regards to technology, IBM serves as a

study of good practice in change management.

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References

Bivins, S. S. (2014). A transformational change at IBM. Paper presented at PMI® Global

Congress 2014—North America, Phoenix, AZ. Project Management Institute.

https://www.pmi.org/learning/library/transformational-change-ibm-9297.

Errida, A., & Lotfi, B. (2021). The determinants of organizational change management success:

Literature review and case study. International Journal of Engineering Business

Management, 13, 18479790211016273.

https://journals.sagepub.com/doi/full/10.1177/18479790211016273.

Fuertes, G., Alfaro, M., Vargas, M., Gutierrez, S., Ternero, R., & Sabattin, J. (2020).

Conceptual framework for the strategic management: a literature review—descriptive.

Journal of engineering, 2020(1), 6253013.

https://onlinelibrary.wiley.com/doi/full/10.1155/2020/6253013.

Tidd, J., & Bessant, J. R. (2020). Managing innovation: integrating technological, market and

organizational change. John Wiley & Sons. https://books.google.co.ke/books?

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e&q=organizational%20change%20models&f=false.