MiniCase 7: Dynamic Capabilities at IBM

MiniCase 7/ help kicks es standard of the I Mio in the ye Dynamic Capabilities at IBM CU er en ciencing play in main e produced by an open str y valec ered its diffe RM, which Rather than , Lou ved the con demanded ther as ated soluti ware, VaR al XWLS Outty business. IBM partnered with App to take the right decision for the long run. You ir the lone w wowo higher way. The wink my bir LED BY CEO Virginia Rometty, the IBM of today is an agile and nimble IT services company. Rometty was promoted to CEO in 2012 from her position as senior vice president of sales, marketing, and strategy. Rather than facing just one technological transformation, IBM and its clients are currently facing three disrup tions at once 1. Cloud computing: By providing convenient, on- demand network access to shared computing resources such as networks, servers, storage, appli- cations, and services, IBM attempts to put itself at the front of a trend now readily apparent in services that include Google Drive, Dropbox, or Microsoft 365. Increasingly, businesses are renting computer services rather than owning hardware and soft- ware and running their own networks. One of the largest cloud computing providers for businesses is Amazon Web Services (AWS), which beat out IBM in winning a high-profile CIA contract. This was seen as a major embarrassitent given IBM's long history of federal contracts. Microsoft with its Azure cloud offering is another potent competi- toc especially after CEO Satya Nadella focused Microsoft on a cloud first, mobile first strategy. 2. System of engagement: IBM now helps busi- nesses with their systems of engagement, a term the company uses broadly to cover the transition from enterprise systems to decentralized systems or mobility, IBM identifies the traditional enter- prise system as a "system of record that passively powides information to the enterprise's knowledge workers. It contrasts that with systems of engage ment that provide mobile computing platforms. often including social media apps such as Facebook of Twitter, that promote rapid and active collabo- quick toca sd further also move Chinese ubietor In 2014, ale of Exh: ty to over it period business productivity apps on Apple 3. Big data and arabic IBM now climate analytics solutions that focus on how to process, store, manage, analyze, and it data arriving at high volume, velocity, and Prime applications are in finance, medicine, and many other professional fields the deep domain expertise within fast movie ronments. IBM partnered with Twitter to provide IBM's business clients big data and analysis tions in real time based on the vast amount Indus net Edit drop produced on Twitter C IBM's Core Competency: Providing Solutions At its core, IBM is a solutions company. It solved based problems for its business clients, but the school ogy and problems both change over time. As a Frek T. Rotheermei prepared this MiniCase from puble Mis once podle the purpose of condicions to be used for any kind of endorsement soldado actor incitament. Also Con Nerely ther's Revised and wat ration. To drive adoption of mobile computing for OFrank Rothemel 456 AT od kort the revolution in 19 byt of the IBM PC running on an inel 5 stand in the computery with the ca. In the years following nearly vanished Pada Microsoft operating salem (MS-DOS). In the full force of that revolution le beleved that the future of com in mantrames and minicomputers that would med by fully integrated companies. However, en standard in personal computing the catre we chains disentegradod, and many new firms diferent stages. This led to a strategie mastit What resulted in a competitive disadvantage to some 5120 study in 2016. Andrew for Meas for the years high of S107 on whics Hometecto 578 in 2017. During the same INES (normal) stock price Ich by more than 50 over 110 percent during the same period. The while the tech. NASDAQ-100 oby is clearly underperforming the Web huge margle and has done so fame time Some critics even go so far as to call for replace Rometty, however, as co to M's Lo Center, installed as CEO in 1993. relo Tas coc entity allowed Gerstner to integrate ment of Rometty strategic focus and poes that she is transforming IBM for the long run. She views the most recent of technology disruptions as creating major business opportunities and has made sure that IBM iness heavily to take advantage of them. IBM has tried of its consultants over 100,000 in these three seas to help its business clients with their own transforma tion. Moreover, Rometty ended the option of TSM employees to work from home. In an attempt to for ter innovation through co-location, she gave all IBM employees a choice: Start working from a regional office Monday through Friday, or leave the company, This came as a shock to many IBM employees as it has been a pioneer in providing telecommute options for its employees for decades. Indeed, IBM's strate- gic initiative of the anytime, anywhere workforce was extremely popular among its employees. Until recently, IBM believed that a distributed workforce with many employees working from home, allowed it to further perfect the technology solutions it was providing for its customers with similarly distributed workforces. Rather than breaking up IBM into independent busi- ed the company on satisfying market needs, which rounded sophisticated IT services. Keeping IBM ware, software, and services to provide sophisti- and solutions to customers' IT challenges. IBM was pak to capitalize on the emergence of the internet to further value to its business solutions. The company homoved quickly to sell its PC business to Lenovo, a Chinese tech company, in 2005 when substitution from shid computers was just beginning to impact demand. 2014, IBM followed up on this transaction with the ale of its server business also to Lenovo Exhibit MC7.1 shows IBM's dynamic capabil- accessfully transform itself multiple times er is more than 100-year history-a history with periods of major disruptions in the data information netry, from mechanical calculators to the inter- In contrast to IBM, note how at the bottom of Ebbit MC7.1. strong competitors in one period up from significance when a new wave of technol- ES Apple pole devin now on locity, and an ce, medicine, fields rely : Twima pro and analysical a moto Koorde Bax but the in Challenges Ahead Cities of Rometty's strategic approach, including the vid investor Mark Cuban, point out that IBM was to take advantage of these mega-opportunities, she continue to watch IBM's stock performance DISCUSSION QUESTIONS 1. Why has IBM been underperforming the broader technology market for several years now? What are the reasons for its sustained competitive disadvantage? 2. Describe the three current transformations that IBM is facing. What causes these transformations? Who are the main competitors? 3. What are dynamic capabilities? Explain. Look- ing at IBM's track record of technological trans- formation depicted in Exhibit MC7.1, which role did dynamic capabilities play in these successful transformations? . The critics grew louder when Rom. voda pay increase and a $3.6 million bonus the 2014 performance, during which revenue pol about 6 percent and net income 27 percent Bw's market cap plummeted by 50 percent th of $240 billion in the spring of 2013