From Finance to FinTech: A Journey Leading Digital Transformation Journey
IBM's Transformation Journey
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Transcript of IBM's Transformation Journey
© 2009 IBM Corporation
IBM‟s Transformation Journey Enabling growth, productivity, and culture change
George Mattathil 4/28/2011
© 2009 IBM Corporation
Business Model, Operating Model and Workforce Transformation
Remixed our portfolio toward services,
software, and integrated solutions…
Shift in geographic mix…
57%
21%
21%
2008
Segment
Revenue
Mix
49%
35%
16%
2003
Segment
Revenue
Mix
2008 revenue: – 21% Asia Pacific
– 37% Europe, Middle East, Africa
– 42% Americas
Hardware
& Financing
Software
Services
71% of employees outside US – 84K in India, 60K increase in 5 years
– 16K in China, 10K increase in 5 years
IBM‟s Ongoing Transformation Journey
Record Performance in 2008… – $103.6B revenue, up 5%
– $16.7B pre-tax earnings, up 15%
– $8.93 Earnings Per Share, up 24%
– Strong performance in services, software and
growth markets
$4
$10
$16
2000 2001 2002 2003 2004 2005 2006 2007 2008
$2
$6
$10
Pre-tax income
Free Cash Flow
EPS
EP
S
Pre
Tax Incom
e &
Fre
e C
ash F
low
($B
)
Revenue ($B)
Exited commoditized businesses: – PCs
– Hard disk drives
– Printing Systems
Strengthened position in: – Business Consulting
– Service-Oriented Architecture
– Information on demand
– Virtualization
– Open, modular systems
Acquired over 60 companies in last 5 years – to complement and scale our portfolio
of products and offerings
© 2009 IBM Corporation
IBM Strategy and Values
Deliver integration and
innovation to clients
Become the premier Globally
Integrated Enterprise
Focus on open technologies
and high- value solutions
All things are becoming
INTELLIGENT.
Our world is becoming
INSTRUMENTED. Smart traffic
systems
Smart energy grids
Smart healthcare Smart
retail
Smart supply chains
Smart food systems
… Building a Smarter Planet
Our world is becoming
INTERCONNECTED.
IBM Strategy
© 2009 IBM Corporation
A globally integrated
enterprise-- business
in a connected world
The multinational era
-- replicating The international
era -- exporting
20th Century
21st Century
The Evolution of the Enterprise
AGlobally Integrated Enterprise (GIE) is an open, modular organization that is
integrated into the fabric of the networked economy and operates under a business
model that makes economic sense in the new global landscape.
Global Demand Capture
Global Supply Management
Global Production Optimization
IBM Strategy
© 2009 IBM Corporation
IBM‟s Approach to Transformation
Transformation Framework
Business Process
Excellence
Values-based Culture
Information Technology Enablement
Enabling Growth Enabling Productivity Enabling Culture Change
Growth markets leadership
Mergers & acquisitions
Client value focus
State-of-the-art
sales enablement
Global shared services
Business
process excellence
IT enablement
Transformational
Leadership
Values-based culture
Collaborative innovation
Transformation Focus Areas
IBM Strategy
IBM Values
Guided by the IBM Strategy
and grounded in our Values
Enable transformation at
the intersection of business
process, technology
and culture
Sustain our strength in the
global marketplace by focusing
on areas that enable growth,
productivity, and culture change
© 2009 IBM Corporation
Enabling Growth
Growth Markets Leadership
Mergers & Acquisitions
Client Value Focus
State-of-the-art
Sales Enablement
Enabling Growth
© 2009 IBM Corporation
Central & Eastern Europe Middle East & Africa
Latin America
Asia Pacific
Central & Eastern Europe Middle East & Africa
Latin America
Asia Pacific
Why?
Emerging markets growing at
more than twice the rate of
major economies
Growth markets source of global
innovation, high-value, and
competitively-priced skills
What we’ve done
Mobilized resources and leadership
to accelerate growth
Leveraged established
business relationships
for competitive advantage
Taken disciplined approach
to categorization of markets
Enabling clients with fast scaling
and flexible environments
Capturing opportunities to build
out public & private infrastructures
“You can’t “leapfrog” into being a global company.You’ve got to be committed for
the long term, and you have to invest, on multiple levels.” Sam Palmisano, 2007 IBM Annual Report
Growth Markets Leadership Enabling Growth
© 2009 IBM Corporation
Growth Markets Leadership (continued) Enabling Growth
Impact How we did it
Created Growth Markets unit
in Shanghai
– Covers nearly 150 countries across Asia,
Africa, Eastern Europe & Latin America
Leveraged efficiencies from global
support functions to free up investments
Focused management system
on future and current period
Continued emphasis on integrity
& business practice standards
IBM‟s business in growth markets
grew by 10% in 2008
Revenue in Brazil, Russia, India and
China (BRIC) up 15% in 2008
Growth countries contributed 18%
of IBM’s 2008 revenue
Constant currency revenue grew 8
points higher in growth markets
than major markets
© 2009 IBM Corporation
“In today’s rapidly changing marketplace, one must look atall sources of innovation to
sustain one’s value proposition to the customer. As a consequence, IBM has become
more and more acquisitive.” - Mark Loughridge, IBM Chief Financial Officer
Why?
IBM growth strategy includes
acquiring high-value
solutions and exiting
commoditizing businesses
IBM‟s revenue growth must
come from both organic and
non-organic sources to meet
investor expectations
Mergers & Acquisitions
What we’ve done
Over past 5 years, invested nearly
$16B in acquiring more than
70 companies
Continued to divest low growth, low
margin, commoditizing product lines
Acquired new technology AND
complementary business models
and channels to create new revenue
Enabling Growth
© 2009 IBM Corporation
How we did it
IBM has outperformed peers on acquisition
execution over the past 5 years:
– Growth in PTI margin
– Average cash realization
– Average return on invested capital
Across 39 acquisitions between 2002 and 2005, IBM’s
average acquisition doubled its direct revenue
within two years
Efficient divestitures from commodity businesses has
improved profitability
Mergers & Acquisitions (continued)
Impact
End-to-end M&A process with early
focus on integration:
– enables fast start
– reduces risk
– optimizes return
Integration Executives appointed
early to lead the integration
Best in class deal management tool
– IBM M&A Accelerator – to manage
global cross-functional teams
Post-acquisition performance
metrics aligned with our
management system
Enabling Growth
© 2009 IBM Corporation
Client Value Focus
“Client success isn’t just “the customer is always right.” It means maintaining a long-
term relationship where what happens after the deal ismore important than what
happens before it’s signed.” – Sam Palmisano, Harvard Business Review, December 2004
Deployed Client Value Method to improve
end-to-end client experience – Recognized distinct types of client
buying behaviors
– Integrated process from solution design
through delivery
Increased industry orientation to serve
the client‟s agenda – Enhanced industry-focused skills
and capabilities
– Aligned market-facing teams around
an industry
Reinforced Values-based leadership
and enhanced employee experience
to deliver client value
To better meet our client’s expectation
of value; clients:
– expect IBM to align to what will make
them successful
– want IBM to consistently deliver
on commitments
– say we are strongest when we
collaborate across IBM
Client Value
– focuses on the client, not IBM
– is from the client’s perspective
– delivers positive impact
Why? What we’ve done
Enabling Growth
© 2009 IBM Corporation
How we did it
Yansha, leading Chinese retailer, improves
competitiveness by combining supply chain
& ERP – Order lead time reduced from 2.5 days to 4.5 hours
– 50% revenue increase in supplier information service
– ROI achieved in 9 months
City of Stockholmbreaks gridlock with a
smart road management system – 25% reduction in traffic
– 40K more citizens on public transportation
– Less noise & carbon pollution
Kika-Leiner, European furniture retailer,
implements “green data centers” to support
rapid growth – Energy consumption reduction of up to 40%
Client Value Focus (continued)
Impact
Transformation based on an “outside-in” view:
Client Behavior Driven
– Client Buying Behaviors
– Client / Industry Value Propositions
Client based Measurements
– Client Value Assessment
– Client Balanced Scorecard
Client First Organization
– Industry Aligned Teams
– Serving Clients Globally
Client Value Ready Teams
– Just In Time Knowledge
– Networked Communities
– End-to-end Issue Management
Enabling Growth
© 2009 IBM Corporation
“OnTARGET is the best resource for getting an overall picture of a territory
and identifying high potential accounts.” IBM Seller
Why?
Needed to capture new accounts
and grow organic revenue
Needed to improve sales
productivity by better aligning
resources with opportunities
Needed to support sellers in
developing proposals in
competitive timeframe
What we’ve done
Worked with IBM Research to apply
advanced analytics to sales issues
– OnTARGET – prospecting tool used by
sellers to identify clients with highest
propensity to buy
– Market Alignment Program (MAP) – tool
for sales managers to ensure that
resources shift to growth areas
Created Deal Hub – one-stop shop
to help sales teams coordinate:
– Technical Support
– Pricing
– Contracts
State-of-the-Art Sales Enablement
OnTARGET & MAP Ranked in InformationWeek’s
Top 20 Great Ideas
Enabling Growth
– Quality Assurance
– Proposal Generation
© 2009 IBM Corporation
Analytic tools identified nearly $8B in
incremental revenue opportunity
worldwide in 2008
OnTARGET tool identified nearly 100K
new sales leads in 2008
Sellers who use Deal Hub spend
over 3 hours more per week selling
– Have the capacity to handle 2 – 5
additional opportunities per rep
Impact How we’ve addressed it
Worked with business units – front-
line to top management – to ensure
relevance, buy-in and ownership
Analytic toolsnow used by business
units in fall planning process
Conducted hundreds of training
workshops with local sales
teams worldwide
Established global Deal Hub team
with >2K people
– Common roles, responsibilities and
management systems
– Look locally...operate globally
State-of-the-Art Sales Enablement (continued) Enabling Growth
© 2009 IBM Corporation
Enabling Productivity
Global Shared Services
Business Process Excellence
IT Enablement
Enabling Productivity
Consolidation/Standards Common Processes
Automation
Shared Services Web Enablement
Core vs. Non-Core
Global COEs
Enterprise Integration Globally Integrated Support Processes
Radical Simplification
© 2009 IBM Corporation
Why?
Vertically-aligned support
functionsinefficient and incompatible
with
global integration
Ongoing productivity improvements
essential to meet financial goals
Rigorous management of back-office
needed to enable shift of resources to
front-line roles that deliver client value
Global Shared Services
What we’ve done
Created globally integrated
support functions
Established disciplined approach:
– Integrate: Place all resources under
one global leader
– Automate: Use tools and technology
to streamline the workflow
– Optimize: Decide where each
process is best performed – locally,
regionally, globally
– Elevate: Move resources to higher
value-add work to drive further
efficiency and effectiveness
Enabling Productivity
Finance HR IT Sales Ops
Mktg &
Comms
Real Estate
Legal &
Contract
Gov’t Relation
Integrating Globally
© 2009 IBM Corporation
How we did it
Shared Services reduced spending
by $3B over the last three years
Supply chain averaging $3-5B in savings
every year for the last five years
Each Shared Service driving ongoing
efficiency & effectiveness:
– Finance E/R reduced from 3% to 1%
– Real Estate improved E/R by 50%
– HR HC Ratio to Employee: improved
from 1:122 to 1:169
Global Shared Services (continued)
Impact
Established consistent set of
processes, measures, systems and
governance for global shared services
Global function owners accountable
for meeting productivity goals based
on benchmarked targets
Shared Services Council provides a
common approach for identifying
opportunities to improve efficiency
and effectiveness
“We no longer have to replicate IBM from floor to ceiling in every country.We are optimizing key
operations in the right places in the world– eliminating redundancies and excess overhead –
andintegrating those operations horizontally and globally.…This is aboutdoing the right tasks,
with the right skills, in the right places.”– Sam Palmisano, May 20, 2005 Analyst Meeting
Enabling Productivity
© 2009 IBM Corporation
Why?
Complexity of processes major
source of frustration for employees,
partners and clients
Unit-specific, geo-specific
approaches contributed to complexity
and inefficiency
Siloed processes inconsistent with
vision of globally integrated enterprise
Business Process Excellence
What we’ve done
Took an outside-in approach to address
critical client and employee pain points
Focused first on client-facing teams
Established IBM Enterprise Process
Framework with owners for 12 processes
Launched enterprise-wide program to
provide common global processes,
based on SAP
– Key opportunity-to-cash processes
– Financial management processes
Geos Brands Sectors/ SMB
Support Functions
Horizontal Integration Horizontal Integration
Enabling Productivity
© 2009 IBM Corporation
How we did it
Process improvements contributing
to growth & productivity:
– Lean Sigma projects drive $100M cost
benefit in 2008, doubling benefit from
previous year
Improved client-facing processes:
– Reduced cycle time on automated special
bid by 75%
• from 2 days to 4 hours
– Reduced time to execute signatures on
contracts for all brands in U.S.
• 2-signature contracts from 2 days to 15 mins
• 3-signature contracts from 1 wk to 2 hrs
Business Process Excellence (continued)
Impact
Focused on driving horizontal, end-to-
end process improvements and
put senior leaders in charge of
key processes
Developed hundreds of professionals
with business process skills, including
Lean Sigma black belts
Simplified and standardized processes
across business units and geographies
Identified principles for
radical simplification
Current Baseline
Horizontal Integration
Simplification
Radical Change
Enabling Productivity
© 2009 IBM Corporation
Why?
IT representsbiggest spend aside
from workforce
Unlocking new IT efficienciesfrees up
resources to fund investments
for growth
Common IT platformsrequired for
global integration & growth
Need for faster collaboration across
global, mobile employee population
What we’ve done
Consolidated disparate systems,
created common platforms and
standards worldwide
Centralized CIO role
Established enterprise-wide
governance model
Built a flexible, responsive and
open global infrastructure
Embraced open standards & Web
2.0 technologies
“".The IT organization plays a strategic rolein driving a firm’s global competitiveness.
Rather than remain on the sidelines, globally-minded CIOs must help shape and
drive their companies business transformation initiatives.” – Forrester Research
IT Enablement Enabling Productivity
© 2009 IBM Corporation
$1.5B in IT savings over past four
years; IT E/R reduced by 1.7 pts
Project Green initiative to deliver 80%
energy cost savings & 85% floor
space reduction
SOA delivering $125M in business
value based on $35M investment
Web 2.0 fueling collaboration: – 110,000 employees participate in
Technology Adoption Program
– 50K BlogCentral users
– 150K in InnovationJam 2008
Impact How we did it
Began with a massive consolidation: – 128 CIOs to one
– 155 data centers to 5
– 16,000 applications to 4500
Capitalized on open standards
& virtualization – 1500+ servers running Linux
Leveraged SOA to enable integration &
faster development
Developed intranet into robust social
networking platform
IT Enablement (continued)
IBM Strategic Delivery Model
GlobalResources
Strategic IGA Location
Strategic Web Locationfor IGA
Ethernet & Power9 Networks
TAP: Driving Early Adoption Application Portfolio Mgmt SOA for Enterprise Flexibility Global Data Centers Security for Global Business Project Big Green
Enabling Productivity
© 2009 IBM Corporation
Enabling Culture Change
Transformational Leadership
Values-based Culture
Collaborative Innovation
Enabling Culture Change
© 2009 IBM Corporation
IBM Values Corporate Social Responsibility
Environmental Influences
Transformational Leadership
Established and periodically refreshed a core set
of leadership competencies for all IBMers
Pervasive use of competencies for development,
succession planning and selection
Defined a new Leadership Framework emphasizing
business results and employees‟ experience
Created a collective leadership force of senior
leaders accountable to integrate IBM and lead
by Values
Defined a clear methodologyto link strategy
to execution
Need to develop global leaders for
the 21st Century who:
- are culturally adaptable
- unleash IBMers‟ energy
- leverage IBM‟s
enterprise-wide capabilities
- enable IBMers to execute IBM‟s
strategy in the face of uncertainty
Why? What we’ve done
IBM’s Leadership Framework
Leader Behavior
Organiza-tional
Climate
Employee Engagement
Business Results
Employee Experience
Enabling Culture Change
© 2009 IBM Corporation
Transformational Leadership (continued)
Impact How we did it
Identified leader behaviors that impact
employees’ experience and performance
(with 360 feedback for development)
Embedded Leadership Competencies in all
leadership development programs
Senior IBM leaders participate in all leadership
programs as role models, mentors
and coaches
Launched I&VT Initiatives sponsored by
SVPs and Chairman to solve strategic
enterprise challenges
Deployed Business Leadership Model to
identify and resolve performance/opportunity gaps
IBM‟s leaders’ competencies have steadily
improved each year
IBM‟s leaders, at all levels, demonstrate a
broader set of effective leadership behaviors
I&VTleaders driving integration and
enabling key transformation efforts
IBM‟s performance continues to improve
year to year
Leadership Competencies
Client Partnering
Embracing Challenge
Earning Trust
Enabling Performance
and Growth
Developing IBM People
and Communities
Passion for IBM’s Future
Strategic Risk Taking
Informed Judgment
Thinking Horizontally
Collaborative Influence
Enabling Culture Change
© 2009 IBM Corporation
Values-based Culture
Needed to re-establish a set of
Values as the core of IBM’s
culture and brand
Expanding the IBM brand
experience beyond products to
integrated solutions and people
Evolving the IBM management
system to leverage global and
cross unit integration
Why? What we’ve done
Engaged employees globally in Values Jam
to refresh our Values
Conducted World Jam with employees to
collaborate on solutions for growth, innovation
and bringing the Values to life
– Implemented 32 top-rated ideas
Employee Values Survey conducted
annually to measure progress in operating
and behaving consistently with our Values
Engaged leaders at all levels on enabling our
Values-based culture locally and globally
Enabling Culture Change
© 2009 IBM Corporation
Values-based Culture (continued)
Impact How we did it
Named a global leader to work with
leaders and teams worldwide to drive
our culture transformation
Identified actions focused on
organizational enablers of culture
change, including:
– Leadership Behaviors
– People Practices
– Management Systems
Building leader accountability
for role modeling and enabling
Values-based culture
Engaging all employees in
the transformation
IBM‟s Values are integral in our performance,
recognition and talent management systems
IBM employees actively participate in
advancing our Values-based culturevia
collaborative technologies
– 1500 communities of practice with 250,000+
IBMers build organizational capability
Majority of IBMers worldwide believe:
– IBM management is committed to making the
changes necessary to enable us to operate
consistently with the Values
– The Values influence how IBMers interact
with clients
“So if there's no way to optimize IBM through organization or management dictate... you've got to
createa management system that empowers peopleand provides a basis of decision making
consistent with who we are at IBM” – Sam Palmisano, Harvard Business Review, December 2004
Enabling Culture Change
© 2009 IBM Corporation
Collaborative Innovation
Established an innovation agenda
that spans multiple dimensions:
– Product
– Services
– Business process
– Business model
– Management and culture
– Policy and society
Enabled global collaboration
– Culture of collaboration
– Innovation ecosystem
Why? What we’ve done
Become our clients‟ “innovation partner” – Address client priorities
– Build deeper client relationships
Respondto changing nature
of innovation
Organizations need each other
to be successful – Pace of innovation outstrips an
organization‟s ability to “go it alone”
Changing workforce dynamics – Globalization
– “Millennials”
Venture Capitalists ISVs Business
Partners
Universities
Technical Business
Community Leaders
Competitors Employees
Regulatory Bodies
Investors
ITAnalysts
Alumni
Standards Bodies
Policy- makers
Clients Innovation Ecosystem
“We opened up our labs, said to the world, „Here
are our crown jewels, have at them‟. The Jam --
and programs like it – are greatly accelerating
our ability to innovate in meaningful ways for
business and society.”
- Sam Palmisano, IBM CEO
Enabling Culture Change
© 2009 IBM Corporation
Impact How we did it
Provide platforms to foster open dialog
– Single Portal: On Demand Workplace
– Innovation incubator: Technology
Adoption Process
– Information sharing: Cattail
– Brainstorming, idea creation: Jams
– Content creation: BluePedia
– Dynamic interaction: Sametime
Collaborate with everyone
– Collaboration with client
– Societal Innovation
– Social network participation
IBM Research
– #1 on the US patent list for 16 years
– Collaboration with clients on real-world
challenges and solutions
On Demand Workplace
– One of the world’s top 10 intranets
JAMs
– $100M investment to bring 10 ideas
to reality
– 35 Innovative solutions in 4 areas
Global Innovation Outlook
– Entire ecosystem to create new and
unforeseen opportunities
CollaborativeInnovation (continued) Enabling Culture Change
© 2009 IBM Corporation
Dear IBM Investor:
“Put it all together, and
IBM today is very
different from what it
was when we entered
the decade.”
– Sam Palmisano, 2007 Annual
Report, Letter to Investors
© 2009 IBM Corporation
Appendix
Lessons Learned
How to get started?
Global Business Services – Portfolio Snapshot
Other topics:
– IBM at a Glance
– IBM‟s History of Transformation
– IBM‟s Leadership Governance
– Business Transformation / Information Technology Governance
– Enterprise Risk Management
– Corporate Social Responsibility
Other Shared Services Examples:
– Integrated Supply Chain
– Human Resources
– Finance Transformation
© 2009 IBM Corporation
IBM Transformation Journey: Key Lessons Learned
Strategy CEO sponsorship is critical
Create a “sense of urgency” that the
organization can rally around
Think, act and optimize globally
Implement governance, performance
goals and reporting discipline
Enabling Growth Focus on high growth customer segments
and new markets
Leverage business analytics to better align
resources with opportunities and inform
fact-based decisions
Consider both organic and non-organic
sources for revenue growth
Enhance end-to-end client experience
Enabling Productivity Business transformation and IT should be
closely aligned
Don‟t automate a mess – fix processes first,
then apply IT
Sunset legacy systems and tools as new ones
are deployed
Take an end-to-end, outside-in view
of processes
Build process skills and methodologies
Need cross-unit leadership and
clear accountability
Enabling Culture Change Engage leaders at all levels
Address the underlying drivers of behavior
Engage employees broadly
Make culture tangible
Recognize that changing culture is a journey
Lessons learned
© 2009 IBM Corporation
How to get started? Key questions for consideration…
GBS Services – Portfolio Snapshot
Clarity of Strategy Who are our target client /customer segments?
What is our value proposition to our
client/customer segments?
How do we differentiate ourselves?
Are we clear on what we do versus where to
partner externally?
Enabling Growth What percent of our business is coming
from outside our home market? Are we
well positioned?
Do we have the right data and analytical tools
to understand our changing clients/customers
and market?
Do we understand our clients‟/customers‟ needs?
How well are we positioned to meet them?
Do we have a clear M&A strategy and process?
Are we well positioned to effectively capture
share and build future capabilities?
Enabling Productivity Are we leveraging scale, global talent and
resources across our organization?
Do we have the capabilities to quickly cut low-
value spending and redeploy to activities,
products, markets that generate
growth/productivity?
How effective and efficient are our support
functions (e.g., supply chain)?
Do we have the tools and support to make our
people as effective as possible?
Enabling Culture Change Do we have senior executives engaged and
accountable to be change leaders?
Are our people aligned with and committed to our
strategy/direction?
Does our culture support the strategy and
its execution?
Are we effectively collaborating and innovating?
© 2009 IBM Corporation
Strategy & Change
(S&C)
Business Strategy
Operations Strategy
Technology Strategy
Organization Change Strategy
Human Capital Management
(HCM)
Supply Chain Management
(SCM)
Customer Relationship
Management (CRM)
Financial Management
(FM)
Practice Areas Snapshot of our Services
HR Strategy & Transformation
Learning Solutions
Knowledge & Collaboration
Workforce Transformation
Business Intelligent Services
CRM Strategy
CRM Outsourcing
Contact Center Optimization
SCM strategy and planning
Complex Supply Chain Optimization
IT services for SCM
Supply Chain Enterprise Applications
Finance Transformation
Business Performance Management
Business Risk Management
Finance Enterprise Applications
IBM‟s GBS portfolio supports Transformation
GBS Services – Portfolio Snapshot
© 2009 IBM Corporation
IBM Strategy and Change - What we offer
Business Strategy Create and realize
business value
Operations
Strategy Improve efficiency
and productivity
Organization
Change Strategy Make change work
Technology Strategy Interact between
business and technology
Merger &
Acquisition support
Growth & Innovation
Business Model
Innovation and GIE
Green & CSR Strategy
Strategic
Profit Improvement
Target Operating Model
Lean Six Sigma
Green Sigma™
Business
Process Management
Catalyst for Transformation – We create strategies and design operating models that drive innovation from strategy through execution
Focal point for Innovation – We bring strategy together with the range of IBM services and solutions to deliver end-to-end client value
Intersection of Business & Technology – We enhance client competitiveness through innovative business models that leverage IBM‟s unique research and technology capabilities
Key benefits
Better Change
Organization Design
Collaboration &
Partnering (including
Jam & Mini-Jam)
ERP Transformation
IT Strategy & Planning
Service Oriented &
Enterprise Architecture
IT Performance
Management
GBS Services – Portfolio Snapshot
© 2009 IBM Corporation
Six Major Elements to Successfully Manage Change
Create strategy for managing and measuring
the change to ensure the alignment of the
organization towards transformation objectives
and contributing initiatives
Help to manage all dependencies,
organizational risks and conflicting interests
across initiatives
Understand the readiness and ability of the
organization to absorb / adopt the change from
the top down and bottom up
Clarify work responsibilities and redefine
jobs as well as their relationships to one another
(structure), governance mechanisms, and other
organizational elements to drive new behaviors
Realign key performance measures (e.g., job
measures, rewards and incentives) to meet the
requirements of the future state operating model
Organization Design
Skills and Knowledge
Program Strategy and Management
Clearly define and agree to skills and
knowledge targets
Assess and implement required skills
and knowledge
Provide education that delivers the right
tools and solutions to support individuals
through the change
GBS Services – Portfolio Snapshot
© 2009 IBM Corporation
Six Major Elements to Successfully Manage Change (continued)
GBS Services – Portfolio Snapshot
Stakeholder Engagement and Communications
Culture Transformation
Program Leadership and Governance
Create a shared vision of the desired culture
and assess alignment of the existing culture
Design/deploy interventions that align both
the hard-wired (operating guidelines,
measurements, structures, processes, etc)
and soft-wired (mindsets, business practices,
behaviors) components
Identify, classify, align, engage, and effectively
communicate to impacted and / or influential
stakeholders to prepare them for the
organizational changes
Obtain buy-in and ownership of the changes
to be implemented from leaders as well as employees
Establish awareness, set expectations, and create
buy-in, or commitment, to the change
Create approach and tools to build and
sustain support among executive leaders
and stakeholders
Provide guidance and establish
governance mechanisms
Create a compelling and comprehensive vision
for the change with collective accountability
Help prepare and align leaders for the change
and inform them of their role in the
transformation‟s success
© 2009 IBM Corporation
Helping clients succeed in delivering business value
by becoming more innovative, efficient and competitive
through the use of business insight and information
technology (IT) solutions, and providing long-term value
to shareholders
Business Model
Business Segments
398,455 Employees
$16.7B Pre-Tax Profit
$103.6B Revenue
170 Countries Global Presence
Services, Software, Hardware,
Research and Financing
IBM at a Glance: Y/E 2008 IBM at a Glance
© 2009 IBM Corporation
Phase One Gerstner era (’93 thru 2002)
1993 1995 1997 1999 2001 2003 2005 2007
Keeping company together
& stabilizing business
Bringing massive decentralization under
control (e.g., 128 CIOs to 1; 70 ad agencies to 1)
From country to global brand P&L statements
Move to integrated solutions
Dramatic growth in services
IBM‟s Transformation: An Ongoing Journey
2009
Fo
cu
s A
rea
s
IBM’s History of Transformation
“I think the greatest challenge
facing the company is … to adapt
our strategy, structure and culture
to a world of constant change.
I can’t promise this journey will be
easy or fast… the steps we will
take will not be pussyfooting but
bold strides.” -- Lou Gerstner, 1993
© 2009 IBM Corporation
1993 1995 1997 1999 2001 2003 2005 2007
Phase Two Palmisano era
(‘03 thru present)
Shift to high-value solutions
Move to Values-based culture
Lowering center of gravity for decision-making
Becoming premier globally integrated enterprise
Maintain focus and execute in a radically shifting market
A Smarter Planet
IBM‟s Transformation: An Ongoing Journey (continued)
2009
Fo
cu
s A
rea
s
IBM’s History of Transformation
“Thecrisis in our financial marketshas jolted us
awake to therealities and dangers of highly
complex global systems. But in truth, the first
decade ofthe 21st century has been a series of
wake-up callswith a single subject:the reality
of global integration.”- Sam Palmisano, Nov. 6, 2008
© 2009 IBM Corporation
IBM Leadership Governance Model
Systems &
Technology
Group (STG)
Global Business
Services (GBS)
Software
Group (SWG)
Global Technology
Services (GTS)
Sales &
Distribution (S&D)
Integrated Supply
Chain (ISC)
Business Units
Globally Integrated Support Functions
Geographies
North America
Northeast Europe
Southwest Europe
Japan
Sectors
IBM Organization At a Glance IBM Leadership Governance
Strategy Team
IBM’s strategic direction and emerging
business opportunities
Technology Team
Near- and long-term emerging technologies,
technical developments and issues
Integration and Values Team (I&VT)
Integrate IBM’s enterprise-wide capabilities, and
align and communicate strategies and values
Performance Team
Accountable for business performance & results.
Develop cross-unit strategies.
Distribution
Industrial
Financial Services
Communications
Public
General Business
HR Comms IT Finance Legal Marketing/
Strategy
Sales
Operations
Growth Markets
Operating Team
Day-to-day marketplace execution
IBM’s Leadership Governance
© 2009 IBM Corporation
Interlock on business unit
and Geo requirements
and priorities
STG SWG GBS GTS STG SWG GBS GTS STG STG SWG SWG GBS GBS GTS GTS
Enterprise Process
OwnerTeam CIO Operating Team
Run Management
Team
Globally Integrated Enterprise
SVP Forum
Transformation Executive IPMT Transformation
Executive IPMT Transformation Executive IPMT
Transformation Executive IPMT Transformation
Executive IPMT Transformation Executive IPMT
BT/IT Transformation Programs
Process
transformation priorities
Funding allocation Program governance Enterprise architecture
Strategy Funding approval
Value realization
Strategy Value realization
GMU NA NE SW Japan GMU NA NE SW Japan GMU GMU NA NA NE NE SW SW Japan Japan
Unique Business Unit
& Geo requirements
BT/IT Governance Model
Globally
Integrated
Support
Processes
Enterprise
Process Owner
(EPO)
© 2009 IBM Corporation
Why?
Contribute to consistent growth and
economic return by improving the
company‟s ability to take calculated
& fully-informed risks
Key indicator of good corporate
governance and as important
components of controls and
compliance programs
What we’ve done
Inform strategic decisions with
explicit consideration of risk
Anticipate issues and problems in
executing growth plans and prepare
for them
Analyze variations in ongoing
operations and take action to
improve performance and
increase consistency
Take advantage of experience
in other parts of the enterprise
“Managing risk within silos, for example, country by country, or contract by contract
isn't adequate.”- Mike Daniels, SVP GTS
Enterprise Risk Management ERM
© 2009 IBM Corporation
Prioritized enterprise level risk map
– 25 Risk Action plans in place
Risk assessments in Brazil, Russia,
India, China, and Argentina
established common frameworks
and improved risk outcomes:
– Integrity in the Hiring Process: 13K new
hires, 128 approved vendors through
revised process
– Resource Optimization across 43K
service employees
– Health & Safety: 51 sites upgraded
Enterprise IT Risk assessment with
focus on company-wide actions in:
– Data Security & Privacy
99.7% compliance
Impact How we did it
Benchmarked best practices
Established Governance Model
& Enterprise Steering Committee
Engaged senior executive team
in identification of enterprise risks
Developed a structured risk
assessment methodology
Integrated risk into the strategic
& operational planning process
Risk owners performed assessments,
implemented actions, and defined
metrics for ongoing monitoring
Enterprise Risk Management (continued) ERM
© 2009 IBM Corporation
Why?
Need for CSR strategy to align with
global business goals
75% of executives needed to better
understand their stakeholders‟
CSR expectations
Despite growth in developing
economies, 2.8 billion people live on
less than $2 a day
Desire to create real solutions (not
just make donations) – and deliver
innovation that matters the world
Moved from scattered grants with
limited ROI to strategic focus on
education – Gerstner era
Defined corporate citizenship as the
intersection between business
and society
Identified critical issues that
intersect with IBM capabilities
Pursued global approach to
corporate citizenship
Empowered IBMers to be
global citizens
“With more than 100,000 registrants and over 6 million total hours of volunteer time,the On
Demand Community is an extraordinary example of corporate philanthropy. Even more than the
massive numbers, it is notable for leveraging the core strengths of IBM – its technology and the
vast skills of its employees – to make a global difference.” - David Eisner, CEO, Corporation for National and Community Service
Corporate Social Responsibility
What we’ve done
CSR
© 2009 IBM Corporation
Corporate Services Corps
– sending 1,500 employees over next three
years to work on economic development
projects in emerging markets
Transition 2 Teaching
– bringing seasoned IBMers into second
careers in classroom
– 100+ new math & science teachers
World Community Grid
– harnessing power from 1M+ devices to aid
research on AIDS, cancer, dengue fever,
muscular dystrophy & hunger
Meedan
– using social computing & IBM translation tools
to advance dialogue between Western and
Arab worlds
Impact How we’ve done it
Empowering IBMers to acquire new
skills, transition to new careers and
make a difference in the world
Created the Global
Citizen’s Portfolio:
– Corporate Service Corps
– Personal Learning Accounts
– Transition2
Applied own technology & talent
to tackle societal problems
– On Demand Community
– World Community Grid
– AccessibilityWorks
– KidSmart
Corporate Social Responsibility (continued) CSR
© 2009 IBM Corporation
Why?
The ISC is accountable for $40 billion,
or roughly 50 percent, of IBM’s total
cost and expense
ISC was a fragmented cost center
and not mission critical
Distributed and hard-wired to
business units
Pockets of integration in functional
silos but no enterprise-wide
common processes
Established online links to suppliers, partners
and clients, cutting processing time for average
PO from a month to less than a day
95% of business partner orders now “touchless”
In 2002, formed the Integrated Supply Chain
as a single business unit
Manage entire ISC – from procurement and
logistics to strategy and planning -- on a global
basis (moved procurement HQ from Westchester
to Shenzhen, China)
Consolidated transaction processing in global
delivery centers in Malaysia, Bratislava, Spain
and Brazil
“IBM has been on the forefront of globalizing the supply
chain...I think the interesting thing is the strategic
implications. For IBM it sayswe are shifting, yet
again,from being a traditional manufacturing business,
to a solutions business.”
- Kevin O‟Marah, AMR Research
Integrated Supply Chain
What we’ve done
ISC
Supply Chain
Procurement Fulfillment Logistics Manufacturing
Integrated Globally
Automate
Optimize
Process Technology Global Capabilities
Integrate
© 2009 IBM Corporation
Driving EPS growth for 23
straight quarters
Averaging $3-5B in savings every year
for the last five years
A 5-point improvement in margins
since 2003
Improving sales force productivity; now
spending 38% more time with clients
Turning orders 32% faster and improving
client satisfaction
Impact How we’ve done it
Tied ISC together with shared
measurements to support
end-to-end operation
Focused on client satisfaction along
with operational results
Leveraged global scale – nearly 20K
employees at 100 locations in 62
countries, speak 80 languages, 31K
suppliers connected online
In 2005, introduced world‟s first supply-
chain business transformation
outsourcing capability
Applied supply chain principles
to services business
Integrated Supply Chain (continued) ISC
© 2009 IBM Corporation
Why?
Need to deliver more HR support for
less and evolve the function from
administrative to strategic role
Better support the requirements of
a diverse and mobile workforce
Empower employees to continuously
upgrade their skills
Recruit and on-board 30,000 new
employees a year globally
Human Resources
Centralized the HR function and
manage globally as a shared service
Outsourced benefits enrollment and
pension administration
Rolled out self-service online tools
for HR applications and learning
Aligned HR resources to focus on
growth markets
What we’ve done
“The globally integrated enterprise will require fundamentallydifferent approachesto
production, distribution, andwork-force deployment….New kinds of managerial skillsare
also needed.” - Sam Palmisano, Foreign Affairs, 2006
Shared Services
© 2009 IBM Corporation
Impact
Human Resources (continued)
How we’ve done it
Aligned Talent, Learning and Diversity
as one integrated function
Established HR Integrated Services
Team with specialized skills
and practices
Transformation to a new HR partner
model; partners aligned to businesses
in areas or regions
– Including growth markets focus
Established global standards for HR
technologies and performance
management across business units
End-to-end focus
on the talent value
chain to innovate
for clients
Manufacturing
Development
Support
Suppliers
Bus. Partners
Relationship
Delivery
Clients
Manufacturing
Development
Support
Suppliers
Bus. Partners
Relationship
Delivery
Clients
Reduced ratio of HR to employees from
1:122 to 1:169 from 2001 to 2007
Increased focus on strategic work from
15% to 30%
– Increased focus on HR programs and policies from
25% to 60%
– Reduced HR administrative work from 60% to 10%
Delivered 50% more learning hours while
reducing education budget by almost $300M
from 2001 to 2007
– almost 70% of learning is currently online
Hired more than 100,000 new employees
in growth markets in past five years
Shared Services
© 2009 IBM Corporation
Why? What we’ve done
Finance Transformation
What does it mean to be
an Integrated Finance Organization (IFO)? Revenue and Stock Price Growth of IFOs out
perform peers in growth markets
Globally
mandated
standards
Standard
CoA
Standard
Processes
Standard
Data
Definitions
IFOs achieve increased
effectiveness through greater
integration of information
6%
14%
10%
24%
Stock Price 5 Yr CAGR -
Industry
Revenue Growth 5 Yr
CAGR
Non-Integrated Finance Organizations Integrated Finance Organizations
Finance
IBM Finance was highly
decentralized – a maze of systems
14K finance employees was 2
times competition
High percent of time spent on
administrative tasks
Lack of integration and unique
measurement systems led to
inconsistent data
Finance function viewed as low
value add
Drove 3-prong approach to finance
transformation: process, data, IT
Standardized processes & controls
Created common ledger, common
data definitions, common
worldwide planning system
Created global centers
of excellence
Focused on supplying headlights
to the business
© 2009 IBM Corporation
Optimized global capability
– Increased use of global support
from 12% in‟05 to 40% in ‟08
Shift to higher value work
– Increased decision support work
from 30% in ‟94 to 70% in ‟07
Lowered expenses
– Lowered expense to revenue share
from 3% in ‟94 to 1% in „ 07
Impact How we did it
Evolution of our Finance processes …
Focused on the basics (‟94 – ‟98)
– Standard / Common Process
– Automation
– Functional Best Practices
– Financial Reporting
Integrated the Enterprise (‟98 – ‟02)
– Shared Services
– Web Enablement
– Core Competency
– Decision Support
Moved to globalization (‟02 – present)
– Process Outsourcing /Global COEs
– Technology Exploitation
– Rationalized ERP
– Information On Demand
Finance Transformation (continued) Finance
1994 1996 2005
Change
vs. 1994
Financial data centers 67 15 6 -91%
Key applications 145 95 44 -70%
Days for accounting close 18 8 7 -62%
Estimated Finance operations expense* $2.1B $1.4B $1.2B -43%
Estimated Finance ops exp / revenue* 3.3% 1.8% 1.3% -2.0 pts
© 2009 IBM Corporation
Trademarks and notes
IBM Corporation 2011
IBM, the IBM logo and ibm.com are registered trademarks, and other company, product
or service names may be trademarks or service marks of International Business
Machines Corporation in the United States, other countries, or both. A current list of
IBM trademarks is available on the Web at “Copyright and trademark information” at
www.ibm.com/legal/copytrade.shtml
Adobe, the Adobe logo, PostScript, the PostScript logo, Cell Broadband Engine, Intel,
the Intel logo, Intel Inside, the Intel Inside logo, Intel Centrino, the Intel Centrino logo,
Celeron, Intel Xeon, Intel SpeedStep, Itanium, IT Infrastructure Library, ITIL, Java and
all Java-based trademarks, Linux, Microsoft, Windows, Windows NT, the Windows
logo, and UNIX are trademarks or service marks of others as described under “Special
attributions” at: http://www.ibm.com/legal/copytrade.shtml#section-special
Other company, product and service names may be trademarks or service marks of
others.
References in this publication to IBM products or services do not imply that IBM intends
to make them available in all countries in which IBM operates.
© 2009 IBM Corporation 53
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