IBM : Still Emerging

IBM � Still Emerging
(Marketing Memo, December, 2002)

In July, 2002, IBM, the company that "pumped iron" in the sixties, purchased PwC (PricewaterhouseCooper), a consulting company, for $3.5 billion. Once more, despite its 100+ year history and 315,000 employees, the information technology leviathan has managed to update itself without completely departing from its origins as a producer of tabulating and recording equipment. Smaller, established companies can keep up with changes in technology and markets by continuing to behave as emerging companies. "Emerging" means literally "to rise from surrounding fluid," suggesting "to come into view," or "to gradually unfold."

During the past 35 years IBM has turned its focus from mainframe computers, to PCs, to software, and now to services. With a "little help" from Uncle Sam in the late 60's, the company began to sell software and hardware separately ("unbundling"). Eventually, the company began selling semiconductors and other technology to competitors. Now, consulting services account for 41% of the company's revenue. The target is 50%.

What can smaller companies learn from IBM?

Base decisions on a careful analysis of market forces. IBM has continued to develop and sell mainframes against the advice of industry pundits.
Use R&D capabilities creatively to augment corporate strategy. IBM researchers are exploring ways to meld scientific principles with consulting processes to solve problems, such as optimizing crew and plane schedules for airlines. ("IBM Is to Spend More on Services," Wall Street Journal, 11/20/02)
Follow both make and buy philosophies. IBM received 3,411 new patents last year, and it has already incorporated one-third into products. To add consulting expertise quickly, IBM acquired PwC and obtained a sophisticated consulting organization with new methods, staff, and customers.
Keep up with the times, but don't jump on every bandwagon. IBM has not released a tablet PC.
Take risks when necessary. In 1993 with losses of $8 billion and the future of the company in jeopardy, IBM recruited a new leader, Louis Gerstner, from RJR Nabisco even though he lacked information technology experience.

Admittedly, few companies have the resources of an IBM. However, all companies can assess their markets, weigh their own strengths and weaknesses, and when necessary, adapt their strategies as technology and markets evolve. Winett Associates can help you obtain an accurate and up-to-date view of your markets, technology, and competition.

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