Monday, November 22, 1999

Driving Success at New Blue

My article of choice this week was a great piece on Lou Gerstner as Technology Leader of the Year. I thought it appropriate for the discussion of IBM’s cultural issues, organizational changes and the impact upon employees.

Titled Driving Success At New Blue – Louis V. Gerstner Jr. Helps IBM’s Customers Use Technology, this article is first of all a tribute to Gerstner’s reign at IBM. Since joining IBM on April Fools’ Day of 1993, Gerstner has been credited as the architect of the vast turnaround IBM currently has underway. The stock price and profitability metrics do indeed indicate a high degree of successfulness in Gerstner’s plan. However, the company’s total transformation as it morphs into the e-business arena is what is setting the stage for the company’s continued success.

Gerstner states that upon his arrival in 1993, his vision for IBM was simply to “return to its former position of leadership.” However, Gerstner is not talking about leadership based on the proprietary standards propagation which IBM enjoyed in the past. Rather Gerstner wants IBM to be the company that customers turn to for technology innovation and an understanding of how to “explore technology for competitive advantage”.

The first step Gerstner took in this regard was one of dismantling the spin-off strategy that had just begun under the former CEO. Though the spin off strategy designed to create 10 separate IBM companies, akin to the Baby Bell creation AT&T went through, probably would have provided a temporary level of stock valuation increase which was sorely needed at the time, Gerstner instead “recognized the greater value in keeping it [IBM] whole.” This effort to leverage the organization into a vertically integrated solutions company is what set the stage for IBM’s comeback.

Gerstner chose this path in part because he joined IBM with what he called the “mindset of a customer.” As an example, in IBM Redux (1999, HarperBusiness) Doug Garr “recounts the tale of an IBM supplier that wanted to return an overpayment of $20,000.” Unfortunately, no one at IBM would accept the money because to do so “would have required someone to take responsibility for the error.” This form of denial was due in large part to “a culture that had been inbred for 40 years and sustained by success.” The fuel for this culture was an over-reliance on hiring candidates fresh out of school and promoting almost entirely from within such that the results was a “workforce with a very unique set of business practices.” To change such a system caused much consternation among many of IBM’s workforce but it was a necessary step in order to facilitate change.

Garr points out that the “paternalistic, cradle-to-grave employment model of post-war Japan” was really modeled after the “personnel practices of IBM founder Thomas J. Watson.” Gerstner reversed this “family” approach with a series of “tough love” initiatives designed to encourage the desired behaviors. In doing so, Gerstner initiated a 60% increase in variable pay (pay for performance) and substantially increased the number of employees eligible to participate in stock option programs. In 1996 he doubled the number of stock option eligible individuals, doubled it again in 1997, and tripled the number of participating employees in 1998. This most certainly forced a cultural revolution of sorts within the IBM workforce for better and worse almost simultaneously.

In this article, Gerstner picks at the hierarchical issues of organization structures and argues that any enterprise need only think about three things “strategy, decision-making, and processes.” Gerstner then states that Strategy should be centralized or common and decision-making and process development should be pushed as far out as possible toward the organizational person actually touching the customer. Quite a change from the IBM of old which Garr describes as a “Soviet-style bureaucracy.”

Lastly, Gerstner also set about to change the IBM culture in a myriad of more minor ways as well. For instance, the R&D Division’s motto changed from “Famous for its science and technology and vital to IBM” to “…vital to IBM’s future”. A small shift to forward looking from a rearview reverence, but telling in the change it sets up over time.

All in all, a well-done article on a success story that is not without its controversy.

Resources

Teresko, J. (1999, December 6). Driving success at new blue [Online].
Available: http://www.industryweek.com

Fatehi, Kamal. "International Management: A Cross-Cultural and Functional Perspective." Prentice Hall. 1996.

The Lure of Global Branding

My article of choice this week was only available in a summary form on the Internet. However, since I enjoyed it, I chased down the full text in the off-line world and summarized it below.

Titled The Lure of Global Branding, this article discusses the potential for global branding to become a key weapon in a firm’s successful international arsenal. Just as Fatehi suggests that organizational structure can become a tool for the management of an international firm, so too can branding set the stage to unify a firm’s assets when properly employed.

Of course the strength of any branding tool as a management weapon depends on many implementation issues. The article suggests at least three common areas of consideration all companies must do in striving for a global branding implementation.

· stimulate the sharing of insights and best practices across countries
· support a common global brand-planning process
· assign managerial responsibility for brands in order to fight local bias

Taken point by point, these global branding issues could correlate just as well with almost any multi-cultural management quandary. Regardless of whether it is branding, product development, or channel management, the international firm must involve team members across countries, support a common process, and assign management responsibility to fight the country by country, segment by segment silos that develop without such global reinforcement.

As with most weapons of choice however, the problem for branding management is how to “balance the need to leverage global strengths with the need to recognize local differences.” In doing so, one of the key issues is whether or not the brand’s slogan, or for that matter, the firm’s name can successfully translate across cultures. In a given example IBM, in Argentina adjusted their “Solutions for a Small Planet” tag-line to read “Solutions for a Small World” thus fitting better with the market’s word usage in Argentina. Akio Morita on the other hand, in choosing the name for the company that would become known worldwide as Sony, specifically recognized that the collection of letters that comprise “Sony” could be pronounced nearly the same all over the world. He also liked the perceived reference to “sunny,” and its root in the Latin word “sonus” for sound. Whether a firm brands for a single global approach or adjusts as needed as IBM did, it would be a grave mistake to forget to check key elements of any branding campaign against cultural and language differences in potential markets.

At the same time, companies who “stampede blindly toward creating a global brand without considering whether such a move fits well with their company or their markets, risk falling over a cliff.” Perceived economies of scale may prove difficult to capture, the influence of neighboring markets may be negative or simply elusive, and the requirements demanded of the management team may prove too difficult to secure. Thus, as is true with most management tools, the implementation of global branding must be weighed carefully and then executed with swift care and precision.

Though the master Sony brand has a solid global presence, Sony is currently struggling with just such an implementation issue as it works to position the Sony brand for equal success in the global online world. Of course, this must be done in conjunction with, as opposed to in conflict with, the aggressive local efforts surrounding the Internet in each market and market segment. All truly international firms must recognize and embrace the power and the challenge of global branding in both the off-line as well as the online worlds.


Resources

Aaker, D. & Joachimsthaler, E. (1999, November-December). The lure of global branding. Harvard Business Review, 137-144.

Aaker, D. & Joachimsthaler, E. (1999, November-December). The lure of global branding [Online]. Available: http://www.hbsp.harvard.edu/products/hbr/novdec99/99601.html

Fatehi, Kamal. "International Management: A Cross-Cultural and Functional Perspective." Prentice Hall. 1996.