IBM Company: Organizational Change


Change is inevitable in any organization. Change and development processes are the basis on which such organizational phenomena as career development, group decision-making, formation of organizational strategy, innovation, and inter-organizational networking are anchored (Poole, 2000). Substantial organizational change takes place, for instance: when an organization decides to alter its overall strategic approach to increase chances of success; when an organization adds or eliminate some or one of its main features; and when an organization intends to carry out a complete overhaul of their nature of operations (Poole, 2000). Organizational change can also occur when an organization goes under several life cycle evolutions, which compel it to adhere to the changes that come with such process evolutions. In other words, for any organization to prosper and develop substantially, it must go through particular forms of developmental changes at some point in its lifespan. Managers often make endless efforts to accomplish important transformational changes. It is realized that some are exemplary in adopting such changes while others fail continuously to make any mark that corresponds with the need for change. Some refer to this change as a move from functional to process alignment.

IBM Company recently found itself in a position that needed absolute change in certain parts of its operation. Through the years 2003 and 2004, the company’s Integrated Supply Chain (ISC) has undergone significant changes, to comply with the market demand or market forces (Hammer & Champy, 2003). For this case, IBM had to carry out necessary changes to compete favorably and maintain sustainable growth and success. However, the transition that had to affect the structure of the organization and alignment, production process, and IT section has faced several problems and challenges. Furthermore, organizations should be in a position to develop a more flexible end-to-end process that can be transformed to conform to the customer demand changes, and availability of a product, and the general performance of the product (Hammer & Champy, 2003). This paper critically discusses the importance of organizational change, taking IBM as an important example of a company that has successfully implemented the change process to get past the difficult economic situation in the present global business.

Problem Identification

Earlier, IBM initiated a project that saw them introduce personal computers into the market, after realizing that Apple had successfully done so. However, this project failed as the Computing Division could not keep up with the needed technology and the products became relatively expensive to the ordinary household users, who preferred Apple’s PCs due to low costs. Several trials failed to bear fruit and several suggestions were made, including IBM to buy Atari, a company that had a lot of experience in manufacturing low-cost computers Hammer & Champy, 2003). However, the then CEO, Frank Cary could not buy the idea as he was sure IBM had the capacity in terms of skills and technology to manufacture the required computers for its target market. What was the problem then if IBM had the entire necessary requisite to produce PCs? The CEO noted that the problem was embedded in the company’s establishment, i.e. organizational structure and the routine way in which things were done. This structure could not allow the manufacture of any unique product, different from their “main product line of large, complex computing system” (Hammer & Champy, 2003, p.122).

By 2004, IBM had not reached the target in its overall end-to-end performance of the supply chain, as the company could not satisfy the overall demand in European, Asian, and African regions. Moreover, people were initiated into the units of businesses that were considered critical but unfortunately, there was no significant positive change in performance. It was noted that the problem was not being perpetrated by any obvious drivers, hence the need to look at the overall end-to-end format of the business (Dougherty & Hardy, 2006). Furthermore, it was not easy to identify any interrelationship between these drivers. The complexity of the end-to-end flow of business and the nature of its time consumption was critical in finding lasting solutions. Again, it was realized that the company executives were more interested in fixing the symptoms of the problem rather than getting into the core business of the day. Dougherty & Hardy (2006) state that the managers’ focus on performance pressure was intuitive rather than visible and was mainly managed through functional alignment, instead of the more change pragmatic process alignment.

In 2004, the teams that represent Europe, Africa, Middle East, and Asia combined forces with the ICS management team to work together to reveal what major issues the team needed to handle to manage the performance more positively. However, the general impact of these efforts was that the team realized that there was a lack of joint process and insufficient understanding of the indicators of the end-to-end process (Dougherty & Hardy, 2006). To ensure that there was a proper link between supply chain activities and units of business, the team agreed to categorize the process into system effects, availability of supply, availability of options and delays or misunderstanding between the manufacturing team and the clients, management systems, and priority set by customers and business associates.

Process: The Theoretical and Objective View

IBM’s ISC is known to use a codified approach in its approach to defining its strategies in knowledge (Bresnahan, 2009). This approach plays a very critical impact in the transfer as well as storage of information (Bresnahan, 2009). In this process, information is readily available and this guides the performance of the system. However, the express meaning of the information is sometimes not easy to identify from the amount of information available (Bresnahan, 2009). From several types of research, it has been revealed that the level of knowledge as concerns specific aspects of the business should be updated to ensure they are sufficient. Coupled with the continuous movement of information in the entire organization, one would constantly ask; why do the managements fail to solve the concerns about performance? Several explanations have been given, particularly from the academic perspective. Poole (2000) draws us to the beginning of a principle that indicates that knowledge is a process guided by the cognitive aspects of the human mind.

There was no need to doubt that knowledge existed in the minds of ISC, whose only weakness was on how to make use of this knowledge or how this knowledge could be exploited to help come up with a solution to the inherent problem facing IBM. This is the particular area that many experts have argued that technology has failed to support business, and the problem may worsen if the organization is a multinational or large organization with its subsidiaries. This is because these organizations would need to build boundaries between the business units, to achieve the set goals in the business setting.

The Team for ISC Optimization

The company initially identified an area for improvement in the supply chain as explained earlier. However, the impacts of these changes could not be quantified until after full implementation. In an attempt to understand much better the value and impact of these changes, the team acknowledged and agreed that the process needed to be understood adequately. Again, the proposed changes would be evaluated to ensure that their impacts would be positive and not pose any threat or create negativity in other areas of the business.

The company ensured the optimization team was comprised of subject matter experts from various sections of the supply chain, after considering all that had affected the order flow process (Bresnahan, 2009). These areas were engineering, customer satisfaction, customer management, customer care, manufacturing, logistics, and quality issues (Bresnahan, 2009). This means the entire organizational structure was initiated to ensure the process of business flow dad noninterfering factor elements.

Strategic Management to Drive Organizational Change

In an attempt to develop a strategic approach to organizational change, IBM adopted a strategic management approach. Strategic management is an art and science of management strategy that helps organizations formulate, implement, and evaluate particular decisions to reach the organizational goals and objectives (Bresnahan, 2009).

Formulation of the production strategy

To guide its managers in the process of organizational change, IBM formulated specific guides based on certain principles of business reorganizations. One of the main business formulations was restructuring its hardware division, to improve the company’s capacity to design products fit for small and mid-size businesses. This is in line with Stahl & Grigsby (2008) findings that some of the formulation processes that are linked to the ability of the manager to decide on whether to pursue new business opportunities to enter, what business initiatives to drop, how to allocate the available resources to different initiatives, guide the decision on whether to expand certain operations or just diversify, and whether to involve the firm into a merger or joint venture initiative.

The restructuring, which was referred to as System and Technology Group, was believed to be the largest organizational change in the history of IBM, at least in the last one and a half decades. This was following the decrease in revenue by 10%, combined with the divesture of IBM’s printing system (Bresnahan, 2009). Ideally, the restructuring was planned to take a format of business segmentation, i.e. targeting large organizations; small and medium-size businesses; specific customers in various industries such as retail, manufacturing, and health; and micro-electronic segment of the organization targeting clients with interest in buying custom-made microprocessors (Bresnahan, 2009).

With the above strategy, IBM believed that despite limited resources to cater to all these demands, they would manage it through the application of strategic management initiatives. One basic principle of strategic management operations is anchored in the belief that no organization has unlimited resources. It, therefore, means that managers IBM would be required to produce the best results with the available limited resources. Thus, the strategy-formulation decisions will tie an organization to produce only certain products, venture into specific markets, use the available resources prudently with improved technology as a supporting tool over a particular period (Hill & Rothaermel, 2003).

Strategy to Downsize

After realizing that they needed to improve their financial flow and status, IBM adopted a downsizing strategy that saw them increase their efficiency through the minimized scope. Downsizing is meant to reduce the size of the activities of the firm (Dougherty & Hardy, 2006). Other than increase efficiency, the downsizing strategy was meant to reduce costs of operations; reduce the number of layers in the management in an attempt to increase the speed of decision-making procedures; intensify the competencies of the company by ensuring that only core businesses initiatives take precedents at the company. Although downsizing has its benefits some are just short-term benefits, which in the long run fade as long-term negative impact take its toll. Apple suffered a bad reputation when it laid off its employees in large numbers in the 90s (Dougherty & Hardy, 2006). To avoid this kind of reputation fall, IBM did not lay off employees in large numbers but only abandoned its lifelong employment policy and concentrated on restructuring its other business units to increase efficiency.

In this stage, the managers established annual objectives, identified and implement policies, became the motivational factor to employees, and allocated resources such that the strategies that were formulated can be carried out (Dougherty & Hardy, 2006). In other words, strategy implementation involved developing a culture that is supportive of the set strategy, creating an effective structure for the organization, refocusing the marketing efforts, budget preparation and development and usage of information systems, and ensuring that the organization’s performance is connected to the employee compensation.

Evaluation of the Management Change

To ensure the organizational change is being followed accordingly, IBM adopted an evaluation criterion to ensure they were in line with the strategic management change strategies they had put in place. This is considered the primary method to establish whether a particular strategy is working or not. Evaluation helps the managers establish whether a particular strategy is successful or not. Since external and internal factors continuously affect strategic management, organizational change evaluation is important in helping the manager know what areas to change or to emphasize (Bresnahan, 2009). IBM, therefore, established some basic areas to evaluate, that includes: reviewing external as well as internal factors, measurements of the performance, and taking corrective actions to streamline where there is a shortage of adequate focus.


The paper outlines a case of IBM’s organizational change with time. This is mainly in the company’s supply chain management, manufacturing or production process, and business strategies. It is noted that this process is unique to IBM, and realistically adopted according to the market condition at the time of implementation of adoption. These changes have been successful despite the complexity of IBM’s business structure and process. From this research paper, it can be noted that IBM was successful due to several factors.

The first was the company’s ability to make its executives understand the end-to-end business process. This subsequently enabled the managers to know how to optimize their understanding of the ups and downs of the change process. Consequently, it helped them develop awareness on how to minimize the negative impacts and emphasize the positive impacts of change. The company was also able to organize one of its most valuable assets, human capital. In process of organization change, human resource is part and parcel of any change initiative. It’s no wonder IBM formed a team to spearhead the change process.


Bresnahan, T.F. (2009). Computing In U.S. Industry in 2000: Studies in Competitive Performance. Washington, DC: National Academy Press.

Dougherty, D., & Hardy, C. (2006). Sustained product innovation in large, mature organizations: Overcoming innovation-to-organization problems. Academy of Management Journal, 39(5), 1120–1153.

Hammer, M., & Champy, J. (2003). Reengineering the corporation. New York: Harper Collins.

Hill, C.W., & Rothaermel, F.T. (2003). The performance of incumbent firms in the face of radical technological innovation. Academy of Management Review, 28(2), 257–274.

Poole, S.M. (2000). Organizational Change and Innovation Process: Theory and Methods for Research. Oxford: Oxford University Press.

Stahl, M., & Grigsby, D. (2008). Strategic Management: Total Quality and Global Competition, New York: Wiley Publishers.

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