

IBM and e-business:

Pr eaching What It Practices
Preaching

An IDC e-business Case Study

!Through 3Q2000, IBM's e-commerce revenue totaled

$14.6B, versus $9.9 for the same period in 1999.
!Through 3Q2000, IBM handled 66M self-service transac-
tions on ibm.com, resulting in more than $1.4B in cost
THE RESULTS avoidance and productivity gains.
!Through 3Q2000, IBM procured $27.7B in goods and
services over the Web, with cost savings of $246.6M.
!IBM's supply/demand planning time has been reduced
from 45+ days to 20 days.

To transform, integrate and Web-enable its core business

THE STRATEGY processes to increase revenue and profits, reduce costs and
enhance customer satisfaction and loyalty.

With 1999 revenues of $87.5 billion and over 300,000

THE COMPANY employees worldwide, IBM (www.ibm.com) is the world's
largest information technology company.
Table of Contents

Executive Summary 1

IBM at a Crossroads 2

Simple is Better: A Key Theme of IBM’s Transformation 3

IBM’s Transformation Framework Emerges 7

IBM as an e-business 8

A New Corporate Culture 12

Lessons Learned 13

IBM’s Road Ahead 14

Executive Summary

IBM has emerged as an e-business leader—integrating Internet technology into

its core business processes. In the new millennium, IBM moves with more
speed, agility, efficiency and intelligence than ever before, the result of
enormous and often wrenching changes to its long-standing practices. Trans-
formed for the e-business age, today’s IBM is built to adapt to continuous
change atop a foundation of simplified and cross-integrated business pro-
cesses. The emphasis on simplified, integrated processes is manifested not
only in IBM’s internal operations, but in its seamless, “one IBM” approach to
its customers which has strengthened relations with them. Thus, in the process
of tearing down its operational “silos”, IBM has built up both internal effi-
ciency and customer satisfaction. This is the essence of IBM’s e-business
“transformation”.

IBM in the early 1990s was a company in dire need of simplification and
adopted a strategy of streamlining its core business processes by simplifying
them. IBM’s simplification initiatives fell under five general categories:
• Internal business processes
• Applications
• IT infrastructure
• Management processes
• Operations
As a result of its transformation, IBM is now better equipped to compete in the
emerging information economy, which demands speed, flexibility and the
effective leveraging of information. Another significant benefit of IBM’s
transformation experience has been the ability to apply its own lessons
learned—as well as those gleaned from thousands of customer engagements—
to other businesses. This has allowed IBM to effectively create a new model
for companies seeking to embrace e-business. This model, called the e-
business cycle, outlines four steps that organizations must address as they
reinvent themselves for e-business. These steps are defined as:
• Transform business processes
• Build new applications
• Run a scalable, available, secure environment, and
• Leverage knowledge and information.
Of all the process transformation initiatives conducted by IBM thus far, none is
more important than IBM’s Web-enabling of its core business processes and
internal systems. An ongoing part of its transformation process, IBM’s Web-
enabling efforts have yielded a series of highly successful programs targeted to
customers (e-commerce and e-care for Customers), suppliers (e-procurement),
partners (e-care for Business Partners), influencers (e-care for Influencers)
and employees (e-learning and Knowledge Management).

1
 IBM at a Crossroads

!The Roots of IBM’s e-business Transformation

The roots of IBM’s transformation extend back to the early 1990s. The primary
impetus for IBM’s transformation came from the marketplace in the form of a
double whammy: demand for mainframes—IBM’s bread and butter at the
time—was softening due to the rise of the client/server model, while competi-
tion from other, low-cost mainframe vendors was eroding margins. IBM’s initial
reaction to the looming crisis was to scale back its costs, but the task proved
IBM’s initial reaction to
daunting due to, among other things, the extreme complexity that characterized
the looming crisis was IBM’s operations. For example, in 1991 — when the need for draconian
to scale back its costs, actions became apparent — IBM operated no fewer than 20 separate business
but the task proved units, which together sold 5,000 hardware products and 20,000 software
daunting due to, among products.
other things, the ex-
treme complexity that !Seizing the Initiative: Starting the Transformation Process
characterized IBM’s IBM realized the need for action on a wide number of fronts, but the issues of
operations. For ex- cost reduction and organizational change emerged as issues of paramount
ample, in 1991—when importance. A key milestone in IBM’s transformation occurred on April 1,
1993, with the hiring of Louis V. Gerstner as CEO. IBM’s selection of
the need for draconian Gerstner—formerly chairman and CEO of RJR Nabisco and a top executive at
actions became appar- American Express for 11 years—was noteworthy because it marked the first
ent—IBM operated no time IBM did not hire a CEO from within. This departure from standard
fewer than 20 separate practices foreshadowed a wave of organizational changes within IBM on a scale
business units which that had until then been almost unimaginable. The most dramatic change was
a head count reduction of 85,000 for the calendar year 1993, leading to a
together sold 5,000
charge against income of $9 billion.
hardware products and
20,000 software prod-
At the same time, IBM also initiated a series of realignments to its worldwide
ucts. organizational structure and process framework that had even more far-reach-
ing implications. These changes included the creation of a single, global IBM
organization, increasing the accountability of line managers, and the “global-
ization” of IBM’s sales force, reflecting IBM’s broad goal of approaching the
market as “one IBM.”

2
 Simple is Better: A Key Theme of IBM’s Transformation

IBM in the early 1990s was a company in dire need of simplification. Tradi-
tionally, the company had promoted country and unit independence and
rewarded individual excellence often at the expense of overall corporate
objectives. For example, IBM’s product designs called for little commonality of
components, thus squandering a major opportunity for cost efficiencies. On
the IT operations side, fragmentation and inefficiency were equally rampant—
pushing data processing costs to three times the industry average. The sheer
numbers tell the story: In 1991, IBM operated 155 separate data centers
worldwide, employed 128 CIOs, ran 31 private and separate networks, and had
hundreds of different configurations of PC installations. To address this, IBM
adopted a strategy of streamlining its core business processes by simplifying
them. IBM’s simplification initiatives fell under five general categories:
• Internal business processes
• Applications
• IT infrastructure
• Management processes
• Operations

!Simplified Internal Business Processes

IBM’s efforts to transform its business processes—including such key pro-
cesses as product development, supply chain management, procurement, and
customer relationship management —unfolded in three phases. Begun in
1994, phase one focused on cost reduction through consolidation and stan-
dardization. A couple of years later, the emphasis shifted to the global
deployment of re-engineered processes, leading to significant results: over a
five-year period, customer satisfaction jumped 5.5 points, time to market
became 75% faster, and in total, savings exceeded $9 billion including over $4
billion from the re-engineering of the procurement process. The third phase
—the Web-enabling of its core business processes and internal systems—
began in 1998 and continues to unfold today.

!Simplified Applications
IBM’s initial focus was on reversing the unchecked proliferation of applications
throughout the company. An audit, conducted at the start of the consolidation
IBM embarked on an effort, provided a measure of the scope of the problem: approximately 16,000
effort that led to a applications were running within the company, of which nearly one-third
reduction of its base of lacked clear ownership. At the same time, the company, which had as a rule
applications by nearly developed the majority of its software on its own, recognized that no single
one half and began a company could do it all alone. As a result of these revelations, IBM embarked
on an effort that led to a reduction of its base of applications by nearly one
practice of buying and
half, and also began a practice of buying and running best-of-category applica-
running best-of-category tions from leading software developers. Examples of best of category third-
applications. party applications now used by IBM include SAP for ERP, Siebel for CRM, i2
for supply chain management, and Ariba for procurement.

3
 IBM, like most other established companies, continues to rely on some key
legacy systems and applications to run its business. To enable itself and its
customers to develop and deploy e-business solutions in this environment, IBM
created the Application Framework for e-business. Conceived as a foundation
for developing and deploying e-business solutions, the Framework is built
IBM’s Application around a set of industry standards and technologies, proven methodology, and
leadership products.
Framework for
e-business, designed to
IBM's internal adaptation of the Application Framework for e-business is
facilitate the develop-
called Global Web Architecture (GWA), a common Web architecture for all of
ment and deployment of its internal and external Web hosting in support of IBM's e-business initiatives
e-business solutions in provided in partnership with IBM Global Services. Seven GWA centers in
a legacy environment, is Raleigh, Southbury, Boulder, Schaumburg, Portsmouth, Kawasaki, and Sydney
built around a set of have been configured with standard hardware and software, systems manage-
industry standards and ment, and network and security components. Core elements of GWA include
VisualAge for Java, Lotus Notes/Domino, the DB2 family of products (data-
technologies, proven bases and connectivity to mainframe DB2 databases), and MQSeries, which is
methodology, and used to link IBM's newer solutions with legacy systems. More recent additions
leadership products. to the Application Framework include WebSphere Application Server and
WebSphere Commerce Suite, as well as software products from NetObjects and
Tivoli Systems, which are used to provide end-to-end application, system and
network management. Having GWA in place allows IBM to build speed and
flexibility for e-business into its processes.

!Simplified IT Infrastructure
Prior to IBM’s transformation efforts, its sprawling IT infrastructure epitomized
the fragmentation and lack of standardization that permeated the IBM organiza-
tion as a whole. In the early 1990’s, IBM was running 155 data centers.
Outside the data centers, inefficiencies were equally common. For instance,
the company operated 31 private networks and supported over 100 client
configurations. Faced with the challenge of reining in its IT infrastructure,
IBM embraced a two-phased approach: consolidation, followed by standardiza-
tion. As a result of its consolidation efforts, IBM reduced the number of its
data centers by close to 90%, to 16 worldwide and transitioned to one global
network. Four standard client configurations were established. IBM’S IT costs
which had once been three times the industry average were dramatically
reduced.

The core of IBM’s standardization initiative was a move toward a shared,

TCP/IP-based architecture and a centralization of its knowledge management
infrastructure. IBM’s decision to run the same version of Lotus Notes world-
wide has produced monumental improvements to the scalability of the system,
by virtue of IBM’s ability to centralize the maintenance and updating functions.
IBM’s worldwide Lotus Notes implementation runs on IBM RS/6000 SP2
servers running IBM’s AIX operating system. Today, IBM’s IT infrastructure is
scalable, available, and secure, and is built to facilitate the rapid design,
development, and deployment of new applications. Anticipating the prolifera-
tion of intelligent devices and the continued growth in e-business transactions,

4
 IBM continues to evolve towards what it calls an “intelligent infrastructure”—
characterized by high-speed networks, seamlessly integrated applications, and
powerful servers designed and optimized for specific computing workloads.

!Simplified Management Processes

The effort to simplify management processes within IBM’s overall transforma-
tion effort was a reaction to the extreme state of fragmentation that had devel-
oped across business units and geographic regions. This fragmentation of
processes included not only business-level processes but also IT-related
processes, such as hardware and application deployment strategy. The fact
that IBM had more than 100 CIOs operating with relative autonomy within the
company is emblematic of the fragmentation and decentralization that pre-
vailed prior to transformation. To address these issues, IBM devised a “top-
down” approach to managing business process transformation and IT built on
three pillars:
• Enterprise-wide Process Re-engineering—Replacing multiple, non-
standard processes with a single global process (for a given func-
tion)—and deploying it pervasively—enabling the delivery of better
services with fewer resources. This activity is led by senior executives
who report directly into IBM line businesses.
• Business Unit Transformation and IT Strategy—Developing a transfor-
mation and IT strategy at the business unit level, using standard
technology components.
• Leadership, Integration, and Deployment—Developing an e-business
enabling strategy, including architecture and standards, ensuring
cross-process integration, and deploying technology worldwide. This
is a corporate function.

IBM’s Framework for Simplified Management

Source: IBM and IDC

5
 IBM’s sole CIO and vice president of Business Transformation manages this
matrixed organization and is responsible for overall transformation results and
IT performance.

!Simplified Operations
One of the key outgrowths of IBM’s transformation initiative was an increased
IBM’s decision to willingness to outsource IT services—including application development and
integration and infrastructure deployment and management—to IBM Global
outsource IT services
Services. This approach has allowed IBM staff to focus on strategic issues and
has enabled it to focus has helped enforce standards and reduce redundancies, resulting in significant
on strategic issues and process and cost efficiencies. Under this drive for “operational simplicity,”
reap major efficiencies. IBM has essentially adopted the credo, “If it’s not your main business,
outsource it.”

6
IBM’s Transformation Framework Emerges

As a result of its transformation, IBM is now better equipped to compete in the

emerging information economy, which demands speed, flexibility and the
effective leveraging of information. Another significant benefit of IBM’s
transformation experience has been the ability to apply its own lessons
learned—as well as those gleaned from thousands of customer engagements—
to other businesses. This has allowed IBM to effectively create a new model
for companies seeking to embrace e-business. This model, called the
e-business cycle, outlines four steps that organizations must address as they
reinvent themselves for e-business. These steps are defined as:
• Transform business processes
• Build new applications
• Run a scalable, available, secure environment, and
• Leverage knowledge and information.

Key Elements of IBM’s e-business Cycle

Source: IBM and IDC

7
 IBM as an e-business

!ibm.com
The underlying theme of “one IBM” has driven transformation efforts and
supported the company’s continuing e-business transformation. In an
e-business environment, branding remains critical and requires special skills.
One of the most visible and important elements of the company’s e-business
transformation centers on ibm.com, its Web site. In the first few years after its
e-business Metrics May 1994 launch, the site’s purpose was to provide company and product
information. Like many corporate Web presences in the mid-1990s, ibm.com
Focus on:
was a reflection of the company’s organizational structure. Nearly every
Web-enabled organization and geography was putting content on the site. Many of these
Call Centers content pages had their own “look and feel” and while each of the sites had its
own merits, they were organizationally driven, not customer driven. Over time,
the disparate nature of the overall site was a barrier not only to content presen-
!Scope
In late 1999, IBM fully
tation and navigation, but to IBM’s e-commerce ambitions. As the world of
integrated its Web sites with its e-business experienced explosive growth, IBM needed to make ibm.com easier
worldwide call centers. to use for its customers.
ibm.com has more than 2000
sales professionals who are As it set to redesign ibm.com in September, 1998—its ninth redesign since
brand specialists, each of whom
1994—IBM conducted extensive customer research and solicited the feedback
generates an average of $5M
revenue per year.
of IT decision makers, developers, IT implementers, business and general
users. A key finding of the study was that the majority of respondents visited
ibm.com for product information, comparative shopping and support, and
!ROI/Business Results
wanted relevant information presented in a unified and easy-to-use manner.
Revenue generated by special-
ists using IBM’s Web-enabled
call center—or “TeleWeb”— IBM has increasingly leveraged its Web sites into other customer channels in
facilities costs 40% less to order to increase access and reach with all its customer segments. In addition,
produce than that of traditional in 1999, IBM integrated its Web presences in more than 70 countries with its
face-to-face reps. worldwide call center operations, to provide customers with a seamless pre-
and post-sales and support experience, or what the company calls “e-relation-
!Key Featur es
Features ships.” The integrated ibm.com channel offers “teleweb” features that allow
As part of IBM’s "Call-Me" customers to browse for products or solutions on the Web and click on either a
coverage, IBM customers can “Call Me Now” or “Chat Online” button that connects them to a call center
browse products, solutions, etc.
sales specialist who knows what page and product the customer is considering.
on the Web and click on either
a “Call Me Now” or “Chat
On the Web site itself, IBM has focused on developing a consistent “look and
Online” button that connects feel” and navigation scheme throughout the site. The site is organized in a way
them to a call center sales that makes sense to its customers including single click-throughs for key
specialist who knows what page audiences like small businesses, consumers, developers, business partners and
and product they're seeing. investors, as well as buttons for key functions like ShopIBM, Download and
Support.

In May of 2000, IBM launched the 10th redesign of ibm.com, which included
200,000 new Web pages designed to provide customers and partners world-
wide with a consistent user experience from information gathering to shopping,
buying and support. An ongoing part of its transformation process, IBM’s Web-
enabling efforts have yielded a series of highly successful programs targeted to
customers, suppliers, partners, influencers and employees, which are outlined
on the following pages.

8
 !e-commerce
The key goals of IBM’s e-commerce programs are to build revenues and reduce
costs by selling IBM products and services online. Through 3Q2000, IBM
generated e-commerce revenue of $14.6B, versus $9.9B for the same period
in 1999. In 1999, the total of IBM’s e-commerce revenue was nearly $14.8B.
E-commerce revenue is comprised of sales through ibm.com, including e-sites
for enterprise customers, Small Business Centers for Small Business Customers
and ShopIBM for the general public, all of which include both end-to-end Web
e-business Metrics and Web-assisted call center revenue, IBM Business Partners and OEM
partners. Top product categories among IBM’s e-commerce transactions
Focus on: include PC products, midrange servers, software and technology products.
e-pr ocur
e-procur ement
ocurement
!e-procurement
!Scope Under its e-procurement initiative, IBM procured $27.7B in goods and
19,000 suppliers are enabled services over the Web through 3Q2000, yielding cost savings of $246.6M. Of
for Web-based e-procurement, the roughly 19,000 IBM suppliers now enabled for Web-based e-procurement,
including 7,500 enabled YTD over 7,500 joined through 3Q2000. One of the major benefits of IBM’s Web-
in 2000.
based procurement approach has been a quantum leap in the efficiency of
purchasing within IBM, and a commensurate increase in satisfaction among
!Volume IBM employees. When IBM’s e-procurement initiative began, 60 percent of
IBM procured $27.7B in goods IBM employees were dissatisfied with the existing process due to such factors
and services over the Web
as the time it took to process a purchase order (30 days) and the average length
through 3Q2000, compared to
of a contract (more than 40 pages). As a result of these inefficiencies, one in
$13B for all of 1999.
three IBM employees engaged in “maverick buying”—bypassing the standard
procurement process to avoid the bureaucracy—often incurring higher costs as
!ROI/Business Results
a result. By Web-enabling the procurement process, IBM has reduced its
• Overall cost savings of complexity. Purchase order process time is now one day, maverick buying is
$246.6M. down to 2%, internal employee satisfaction has increased by 45%, and the
• Major reduction in average length of contracts has been reduced to six pages.
procurement cycle time
• Increased employee !e-care for Business Partners
satisfaction
IBM’s e-care for Business Partners is designed to promote loyalty and revenue
• Major decrease in growth through Web-based programs. Through 3Q2000, 20,000 partners used
“maverick” buying
Global PartnerInfo and purchased $9.3B on the Web. IBM’s PartnerInfo
• Improved ability to application allows Business Partners to access product and marketing informa-
leverage IBM’s buying tion in 10 languages. PartnerCommerce, IBM’s Web-based ordering tool for
clout via improved Business Partners, gives partners the ability to check on supply status, pur-
company-wide informa-
chase products, and track orders on the Web. PartnerCommerce also offers
tion sharing capabilities
Business Partners the means to apply for and receive credit and financing
online through IBM Global Financing. IBM’s QuickShip application has
reduced Business Partners’ order/shipping cycle from three days to less than
24 hours.

9
 !e-care for Customers
IBM’s e-care for customers initiative provides Web-based customer service and
support to reduce costs and improve customer satisfaction. Through 3Q2000,
IBM handled 66M self-service transactions on ibm.com resulting in more than
$1.4B in cost avoidance and productivity gains. These Web-based self-service
e-business Metrics inquiries enable customers to obtain product information, installation and
service information, and to download software updates, fixes, ‘early release’ or
Focus on:
‘beta’ code. Customers are also able to track the status of open problems and
e-car
e-caree for Customers communicate with IBM via the Web. Through personalized technical support,
PC users can put a profile of their PC on the PC Support site, which enables
!Volume IBM to tailor its technical support to the customer’s specific needs. Moreover,
Through 3Q2000, IBM handled by integrating ibm.com and IBM’s International Technical Support Organiza-
66M self-service transactions tion (ITSO), IBM is now able to provide extensive online technical content
on ibm.com. through its Redbooks to customers and Business Partners worldwide, enhanc-
ing their online shopping experience. About 200,000 IBM Redbooks are
!ROI/Business Results downloaded each month from the ibm.com/redbooks Website, which experi-
Through 3Q2000, e-care for ences more than 11 million hits per month.
customers provided IBM with
more than $1.4B in cost
avoidance and productivity
!e-care for Influencers
gains. The e-care for Influencers program provides Web-based access to information
and resources for such key stakeholders as the press, IT consultants, financial
!Customer Benefits analysts and shareholders, and prospective employees, with tailored Web sites
Through Web-based self- on ibm.com providing easy and worldwide access to information. IBM’s Press
service inquiries, customers Room for the media offers access to company press releases, executive biogra-
can get product information, phies and speeches, high-resolution photography and a worldwide database of
installation and service press reps by beat.
information, download software
updates and fixes. IBM’s e-care
for Customers also enables the
!Knowledge Management
downloading of 'early release' With more than 300,000 employees, IBM has the largest deployment of Lotus
or 'beta' code, as well as Notes and Domino which have proven to be crucial tools for Knowledge
tracking of the status of open Management. The centerpiece of IBM’s Knowledge Management initiatives is
problems. IBM also provides ICM/Asset Web, a Lotus Notes/Domino application that supports the gathering,
extensive online technical managing and publishing of intellectual capital. Used by professionals within
content through its Redbooks
IBM’s Global Services organization, ICM/AssetWeb has thus far produced more
to customers and Business
Partners worldwide, enhancing than $27 million in productivity improvements as its base of users has nearly
their online shopping experi- tripled since the beginning of 1998. The system also has increased win rates
ence. by as much as 90 percent for certain practice areas within Global Services and
improved cycle times by up to 60 percent.

The highly mobile nature of the IBM work force (approximately 40 percent of
employees overall) makes it an ideal proving ground for a variety of collabora-
tive tools and applications, including instant messaging (Lotus Sametime),
e-meetings, and virtual workplaces. The Notes/Web platform enables IBM
employees to work with colleagues across time zones and geographic distances
and improve team effectiveness and execution.

10
 !e-learning
One of IBM’s key Knowledge Management initiatives, e-learning provides
employees with Web-based services such as distance learning, whose features
e-business Metrics include online instruction, study groups and exams. Services such as Web-
based distance learning dovetail closely with IBM’s highly mobile workforce,
Focus on: which don’t have time to spend in a classroom, but nonetheless need to keep
e-lear ning
e-learning up-to-date. Through 3Q2000, approximately 36% of all employee training
was through distributed learning, for a total cost avoidance of $312M. IBM
!e-lear ning in Action
e-learning estimates that for every 1,000 classroom days converted to distance learning,
IBM’s Basic Blue program more than $400K in costs can be avoided.
provides management training
to all new managers worldwide An area that has especially capitalized on e-learning technologies is manage-
via a Notes/Web-based plat- ment training. Today, IBM delivers Notes/Web-based management develop-
form. A similar program, based ment programs to all new managers worldwide. This e-learning model, called
on Basic Blue, is offered to
Basic Blue, blends Web-based performance support, virtual collaboration and
customers under the name IBM
Management Development classroom experiences; it has won four major awards to date, including three
Services. best practice citations by the American Society for Training and Development,
one of the world’s premier professional associations in workplace learning and
!ROI/Business Results performance. Based on this success and to respond to customer demand, IBM
modified Basic Blue and created a customer offering, called IBM Management
• Through 3Q2000, Development Services. To date, more than 2700 courses (mostly developed on
approximately 36% of all Lotus LearningSpace) have been delivered to IBM employees via its IBM
employee training was
Global Campus Web site.
through distributed
learning, producing a
total cost avoidance of Similarly, marketing training has heavily leveraged IBM’s e-learning technolo-
$312M. gies, with one third of its curriculum delivered through Web-based distance
• IBM estimates that for learning. In the market intelligence area, a new 18-month training and
every 1,000 classroom accreditation program is all done on the Web. This program, called Core Body
days converted to of Knowledge, has resulted in 60-70% cost savings and significantly improved
distance learning, more program effectiveness.
than $400K in costs can
be avoided.
• IBM’s Core Body of
Knowledge program,
which features include
on-line instruction, study
groups and exams, has
resulted in 60-70% cost
savings and significantly
improved program
effectiveness.

11
 A New Corporate Culture

IBM’s transformation efforts have resulted in radical changes to every aspect of

the company, including its organizational model, core processes, and IT
systems. Perhaps most importantly, they have also affected the way employ-
ees work at IBM. The company realized that its transformation initiatives
would only take root if they were driven by a passionate executive team,
IBM realized that its
embraced by all employees in the company, and were framed within a new
transformation initia- leadership model. The framework, centered around a “passion for the busi-
tives would only take ness” and emphasizing accountability, straight talk, and working as a team,
root if they were driven represents a major shift from a culture where individual excellence had always
by a passionate execu- been rewarded.
tive team, embraced by
all employees in the Despite this, IBM’s changes met resistance. Some employees had lost some
company, and were control and some—having lived through many reorganizations before—were
skeptical. The pace of change was relentless and employees were expected to
framed within a new learn new skills in both leadership and collaboration. Likewise, a new perfor-
leadership model. mance evaluation system was implemented, stressing execution and relying on
a forced curve. Ultimately, however, the company’s passionate leadership,
commitment to driving change, and sustained focus on consistent and frequent
communications led most employees to adopt the new IBM culture. This was
arguably one of the most remarkable achievements of IBM’s transformation.

12
Lessons Learned

IBM’s transformation into an e-business has resulted in valuable lessons that

have enabled it to identify with, and better serve, other companies engaged in a
transformation process. These key lessons include:

!Embrace a holistic, customer-centric view

The Web has spawned an economic environment that is customer-centric.
With the explosion of Internet technologies and faster and better communica-
tion via the Web, customers are regularly raising their expectations. To
connect with customers in today's dynamic e-business environment, companies
must develop a holistic view which is customer-centric and characterized by
speed and flexibility.

!Start small, grow fast—

— everywhere
An e-business environment recognizes experimentation and learning from
mistakes. In transforming a business, a company needs to pick specific
projects, begin small, learn from mistakes early on, and grow fast—every-
where. Because the competition is unrelenting, this must be done at lightning
speed.

!Outsource for speed and business value

In examining a company's strengths and weaknesses, strategic decisions should
be made on what can be done internally vs. what should be outsourced. This
will facilitate the reallocation of resources, help in leveraging those resources
and achieve the company's goals faster.

!Commit to success through leadership, culture, communication

In transforming a company, top executives and managers at every level need to
be committed and involved. Moreover, issues such as the corporate culture,
specifically the need to change the company’s collective mindset and way of
operating in a fast-paced environment, need to be addressed. The rule of
thumb: expect resistance, but recognize that one of the best ways of overcoming
resistance is through effective communications—not just from manager to
employee or employee to employee—but at every level.

13
 IBM’s Road Ahead

As the Web continues to produce new value models that will fundamentally
transform relationships with customers, partners, suppliers, and employees,
adaptability and speed will remain key competitive advantages. IBM also
expects changes in technology—both evolutionary and revolutionary—to alter
the landscape of Web-based computing. For example, IBM expects the Next
Generation Internet (NGi) to become so pervasive, reliable and transparent that
Knowledge manage- it will be taken for granted. Moreover, as part of what it calls “pervasive
ment and management computing,” IBM expects a far wider range of devices—from appliances to
will become synony- cars to products—to contain embedded semiconductor devices and interface
mous as the process of with the Internet.
inventorying, classify-
ing and sharing knowl- Within enterprises, more powerful processors married to more sophisticated
algorithms in powerful software will enable enterprises to “data mine” for new
edge becomes the insight and competitive advantage—including more personalized customer
generally accepted way relationships—while voice recognition will link with automatic translation to
of running a company. all but eradicate the issue of language differences as a barrier to communica-
tions. If “knowledge management” still seems like an awkward phrase, it won’t
be for long. Knowledge management and management will become synony-
mous as the process of inventorying, classifying and sharing knowledge
becomes the generally accepted way of running a company. IBM is well
positioned to exploit these trends and many others as it continues its transfor-
mation journey.

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