IBM Company: Assessment on the Innovation Capabilities

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Since the beginning of the 20th century, innovations in IT determine business opportunities, brand uniqueness and company image. Innovation is nothing more than the process of introducing newness into a production process or product. It involves an idea, its implementation, the authentic production of the innovation, and its acceptance by the market. Essentially, buyer reaction determines the success of an innovation. Without acceptance, new ideas and solutions do not become an innovation. IBM is one of the outstanding computer companies founded as an innovative enterprise. IBM is a leading company with S$96 billion revenue a year which is influenced by both customers and technology changes (IBM Home page 2009).

Key Drivers of Innovation

IBM is a global computer company founded in 1889. Thus, the company created its hardware and soft ware business during 1970s, when computers were customized. Today, the main categories are consumer electronics and software products. The main products are personal computers and media players, mobile phones and computer hardware and software (IBM Home Page 2009). Stable market position is achieved by IBM because of unique products and entrepreneurship in software and computer industries.

This can best be accomplished through allowing divisions that specialize in certain areas the freedom to experiment, promoting a culture that emphasizes a big hit, creating compensation systems that reward individual and group creativity, and implementing an accounting system that emphasizes business development. The key drivers of success can be divided into internal and external drivers (Bellis, 2001; IBM Home Page, 2009).

External Drivers of Success

Customers and technology are the primary driving factors in this arena. Customers want products that satisfy their needs or improve their productivity. IBM looks for ways to deliver these benefits at a lower cost, smaller size, and higher speed. Operating within an industry with this kind of rapid change presents several challenges for personal computer and notebooks, namely production costs, intellectual property owners, and monopolies. In general, IBM is one of the profitable Corporations today and, as predicted, in future. Strengths of IBM Corporation include knowledge, relationships, selling and history (Sterman, 2000).

The challenges of the company are based on high quality of products and services. Direct sales force maintains a relationship. Among the weaknesses are high competition and rapidly changing technology market. The innovative PC technology is not cheap and that is why not all the potential customers can afford it today. IBM, in contrast to Dell Corporation, tries to maintain high standards of service proposing and selling (the most important) to its customers high quality products (Bennett et al 1994; IBM Corp. 2009).

As an innovating company, IBM faces a range of possible marketing policies. At one extreme, they can choose policies to make the maximum short-run profit and then decide to meet competition as it arises as with a pricing policy of skimming markets. At the other extreme, they can build a solid market position by accepting modest immediate returns and taking a longer period of time to cover their outlays, thus making it more difficult for new entries, as with a pricing policy of market penetration (Kotler and Armstrong 2005).

Between these extremes, they may choose to be reimbursed for their original outlays while still holding a competitive advantage, and then use the advantage to increase volume and build a stronger market position. From a social perspective, the benefits of various innovations are often challenged. Fundamental innovations that create something new in the physical sense are hailed as beneficial. The case of IBM shows that the key activities in the innovation process are delineated: acceptance of change, programmed perception of market needs, relating opportunity and corporate resources, specifying innovative opportunities and strategies, and evaluating, deciding, promoting, and assuring market acceptance (Chase and Podlesnik 2006; IBM boosts sales productivity 2009).

Internal Drivers of Success

Internal drivers of success involve unique vision of market needs and demands, and creative and innovative ideas of engineering staff. The main technological changes took place during 1994-1997 and 1998-2005. These changes in modifications and software wee influenced by increased competition and global leadership of IBM’s direct competitor, IBM. Thus, the company always follows the blue ocean strategy which helps IBM to compete and remain profitable.

This strategy can be explained as constant innovations in all spheres and in all directions (Crawford 2003). Thus, IBM has to shift from the blue ocean to the red ocean strategy based on the idea that the market is saturated with innovations and adapt to market conditions and products created by competitors (IBM Home Page 2009). A company’s executive leadership is instrumental in making the needed changes. The first step that Jobs takes is to perform an organizational audit of the strengths and limitations of the company in terms of its entrepreneurial capabilities. Once the audit has been completed, the next step is to develop some action programs for improving the company’s entrepreneurial capabilities.

This typically involves some sort of innovative planning exercise and possibly a management development program designed to help managers make the transition from technical specialists to more entrepreneurially oriented general managers (Crawford 2003; IBM takes customer service to another level. 2009).

Strategic Enables of IBM

IBM Inc. is a private global company. A market analysis of the current and expected needs, behavior, perceptions, and preferences of consumers and intermediate marketing organizations (retailers, wholesalers, and others) is critical to the firm’s ability to identify areas requiring creative solutions and innovative products and services (Hollensen, 2007). There is no substitute to a thorough market analysis as a guide to understanding the firm’s customers and prospects and their distributors, and identifying areas that can benefit from creative solutions and innovative products and services (IBM Home Page 2009).

For IBM, competitive benchmarking can serve both as a way of identifying what creative and innovative things competitors are doing as well as finding out for each of the areas requiring creativity and innovation who is the best. Once such a “benchmark” is identified, whether in the firm’s industry or in any other industry, it is useful to study the case thoroughly to see what can be learned from the experience (Big-Bang, Technologies Converge at Last,” 2004).

There are many ways of distinguishing innovations. These are based on degree of importance, breadth of application, and impact. The introduction of absolutely new products, variations of products, extension of new services, new packages, new advertising campaigns, and different pricing arrangements are all innovations. A continuum of innovation exists, ranging from very slight modification to radically new, important developments that give rise to new industries. Viewed from the consumer’s perspective, three types of product innovations may be delineated: fundamental, functional, and adaptive.

Fundamental innovations create totally new products that have much greater impact than adaptive innovations (Crawford 2003). IBM Inc. is an innovative firm as it creates a conceptually new approach in computer industry and technologies (Rothaermel 2000). Where totally new products are developed, new industries are created. As a result, fundamental innovation may create a monopoly position within an industry for a period of time. For such new products, the creation of primary demand is more important than for products that are adaptations (Clarke 2001; IBM Business Consulting 2006).

Drucker statement emphasizes the pivotal role of marketing activity in business enterprise. It implies that markets do not exist automatically, and that effective demand depends on customers that are created through marketing activity. It stresses that the customer essentially dictates the directions and dimensions of what constitutes a business. “The customer is the foundation of a business and keeps it in existence and it is to supply the consumer that society entrusts wealth-producing sources to the business enterprise” (Drucker p. 54 cited Crawford 2003 p. 92).

In IBM, consumer-based approaches to the generation of new product ideas are of course, used as part of any innovation aimed at identifying areas requiring creative solutions and innovative products and services. In addition, these approaches can be used on the “internal consumers,” all the organizational members who use organizational products and services (Portfolio Management Capabilities Using IBM Rational Portfolio 2009).

Organizational creativity and innovation in designing products and services as well as in making any business decision can greatly benefit from marketing concepts and methods. In this context, marketing is not only a function, but also a management perspective and philosophy that offers a set of concepts and tools that can help an organization enhance its creativity and innovation. By utilizing marketing concepts and methods to increase the organizational creativity and innovation, management has a better chance at preparing the organization for the twenty-first century (Degraff and Lawrence 2002).

In functional innovations, the product or service remains essentially the same, but the method of performing the function is new. Such innovations may require considerable adjustment on the part of consumers. Adaptive innovations are the least complex and refer to such minor alterations in an existing product as package, color, design, shape, trim, and size variations. The adoptive innovations do not perform new functions for the user and does not require changes in consumer-use skills or behavior patterns. IBM’s innovations were adopted by a large number of other companies worldwide. They involve software solutions and computer technologies.

For IBM, entrepreneurship can be explained as the process of creating a new business within an existing business. In contrast, entrepreneurship is the process of creating a new business per se (Mclagan, 2006). The entrepreneur creates a new business as a separate, stand-alone entity, while the marketer creates a new business within or as an adjunct to an existing business. IBM Computer was entrepreneurship, while IBM’s celebrated PC division was an innovative venture. Both required entrepreneurially oriented behavior (Winograd 1997). In firms that encourage entrepreneurial behavior, managers tend to adopt a very nondirective style.

The most effective style under these conditions is a positive laissez-faire style in which the manager gives subordinates a great deal of freedom in both setting goals and how they are achieved. There is a great deal of trust between these managers and their subordinates. The philosophy is that employees know what they are supposed to do so they will do it with little direction. This affords subordinates a great deal of creativity in accomplishing their goals and may result in innovative products, production processes, or procedures that increase the unit’s efficiency (IBM Home Page 2009; Hophe and Woolf 2003).

Strategic Blockages within IBM

Basically, marketing is a mechanism for modification. It stimulates competition and generates changes in such factors as products, prices, channels, and advertising to satisfy the demands of dynamic markets changing opportunities. This necessitates imagination and foresight to sense developments along new frontiers. However, when new frontiers are evident, risks and dangers are also present. For new environments tax resources and technology, planning becomes difficult, and timing and rewards are uncertain. Innovations developed by IBM are advantageous for the company as they represent a core of its business.

The uniqueness of IBM’s products is in color graphics, open architecture and 5 ¼ inch floppy disk drive. Design rationale often means the historical record of the analysis that led to the choice of the particular artifact or the feature in question (IBM Home Page 2009).

The main technological changes took place during 1994-1997 and 1998-2005. These changes in modifications and software wee influenced by increased competition and global leadership of IBM’s direct competitor, IBM. 2002 year was marked by emergence of a conceptually new device, the Butterfly Grid. The next innovations came in 2005: Nano technologies. So, the main trajectories which helped IBM to become a global leader are science based approach, specialization, scale intensity (Turkle, 1995).

The case of IBM vividly portrays that the management of change implies the management of new market situations, the solution of new problems on a continuous basis. Yet change is often viewed as a threat to existing profitable markets and products. In reality, it is just the opposite (Mills and Grandy 2000). By recognizing profitable opportunities in continuing change, companies overcome threats and achieve growth.

To manage change, companies must forecast developments, predict logical consequences, translate them into potential opportunities, and plan to capitalize on profitable alternatives. Marketing management must, therefore, create an atmosphere in which market change is expected, anticipated, and sought (Keegan and Green 2003). To survive, business systems must adjust to environmental changes, and be flexible enough to adjust to their consequences.

New products and services must be planned and developed on a programmed basis. The opportunities inherent in change must become a major focus of executives. management must, therefore, create an atmosphere in which market change is expected, anticipated, and sought. To survive, business systems must adjust to environmental changes, and be flexible enough to adjust to their consequences. New products and services must be planned and developed on a programmed basis. The opportunities inherent in change must become a major focus of executives (Kotabe and Helsen 2006).

The challenges of the company are to follow the technological trends of computer industry and develop new products for professional users. For instance, notebook processors will double in power every two years, “to 12 GHz in five years, predict industry observers. Disks will shrink and may be replaced by solid-state memory. Displays will grow clearer, brighter and more energy-efficient and may even unfold to desktop size.

The efficiency of batteries will improve, but perhaps not enough to keep up with power-hungry applications such as multimedia and wireless communications” (Anthes, Brewin, 2002). For this reasons, IBM strategies should integrate technology refresh provisions early in the design process of major systems and components to allow upgrades during development, production and system operation. Cost leadership (Porter, 1980) is a sustainable source of competitive advantage if barriers exist that prevent other companies from achieving the same low costs.

For every IT company, it is extremely difficult to avoid risks and damages associated with market changes and environmental fluctuations. For IBM, innovations result in two groups of forces, competitive and monopolistic. The monopolistic forces, or the delayed action of competition, offer the innovator incentives to innovate. The competitive features diffuse the benefits of past innovations into the public domain (Tischler, 2004).

Successful management of innovations must stress the competitive aspect. Innovation is, then, one of the competitive tools of the business firm. It is a major means of creating a differential advantage, albeit sometimes short-lived. In adjusting to change, and in attempting to meet the demands of the marketplace, it must be managed, and programmed innovation is becoming one of the foundations of business strategy (Portfolio Management Capabilities Using IBM 2009).

Programmed innovation is an extremely important process that involves great amounts of resources and effort in promoting and accelerating economic change. The result of R&D is newness and change, and hence market opportunity (Kotabe and Helsen 2006). They come from both, and marketing plays a significant role. Acceptance of the inevitability and necessity of change and innovation in a period of accelerating technology is a basic management and organizational responsibility. This is essentially a directorship responsibility that requires an awareness on the part of top management of the need for discerning unsatisfied market demands (Kotler and Armstrong 2005).

Taking into account his vision of the company, it is possible to say that central planning and negotiating inputs from might have gone, but there remained the assumption that some other agency would solve the problems: an assumption the CEO himself appeared to share. All of this was taking place within a structure which remained hierarchical, with little involvement of junior management or the workforce, who believed that their product could only sell locally and clung to the assumption that they could sell everything they could produce (Hophe and Woolf 2003).

All of the IBM leaders participate in the change processes which allow them him to strengthen commitment. This is important because it entails the setting up of project teams or task forces; those involved are then able to make a meaningful contribution to the decision-making process, the outcome of which may be of higher quality than decisions taken without such an approach (Sterman, 2000).

The case of IBM shows that innovations introduced and directed by effective leadership is a part of an integrated process which is involved with all the other aspects of the business. IBM operates in innovative environment and that is why there is a constant need for changes and improvements. The use of dynamic lead-time policies allows IBM to capture some of the cost reductions and optimize the overall profit of the firm under certain conditions. Effective change management based on leadership provides methods for assessing the value of coordinating mechanisms between operations and marketing.


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