Enterprise Transformation

By Dhirendra Kumar. Transformation is an essential driving force for today’s enterprises for their sustained growth and development. The business vision, specific to each enterprise, gives rise to variety of goals including simplification, cost reduction, better customer service, improved processes, etc. To realize each of these goals, it almost becomes imperative that an enterprise utilizes transformation as a core concept. An enterprise’s transformation objectives provide the anchor for consistent decision-making and execution of the processes (Kumar et al. 2012).

As technological developments are taking place, improved/newer products and services are developed and offered in the market to meet/exceed customer needs.  To support (offer, deliver and service) these products and services, resources (people, equipment, technology, etc.) transformation would be required.  So, a constantly transforming enterprise is always better equipped to handle the demands of customer needs and supply the satisfactory products. The approach to transformation is dependent on organizational culture, maturity, available resources and also the organization’s appetite for change. Transformation is of higher importance to small enterprises which survive mostly by providing customer services to products produced by larger enterprises. A small enterprise has to ensure that it is constantly updated about the technological breakthroughs that have been established by larger enterprises so that they can make consistent progress in the ever-competitive market (Kumar et al. 2012).

The following is an excellent example of a large corporation which is supporting the above concept; their transformation was started in 2003, going on currently and planned to continue through 2015:

IBM Corporation is going through their multiyear internal enterprise transformation and improving its ability to capitalize on talent, skills and market opportunities.  The success of this transformation has been demonstrated by IBM’s strong business results as presented in Table 1 (Standard & Poor’s report and Wall Street), where despite difficult economic times, the company has posted almost double-digit earnings growth every year.  Their earnings per share tripled between 2003 and 2011 from $4.34 per share to $13.06 per share.  According to Linda Sanford, IBM’s senior vice president of Enterprise Transformation detailed in 2010 that an aggressive strategy would drive to even more growth over the next five years (2011-15).  Sanford is committed to shave an additional $8 billion off of IBM’s $78 billion in total expenses by 2015.  A big reason for IBM’s success has been the deployment of business analytics, cloud computing and process improvements that have driven billions of dollars in cost savings and productivity improvements.  Besides delivering efficiencies across the business, the use of these technologies has been instrumental in supporting IBM’s pursuit of growth markets around the world.

Table 1: IBM’s Financial Statistics

Fiscal Year

EPS*, $ (US)

EPS Growth Rate, %

Revenue, $ Billion (US)

2003

4.34

89.131

2004

4.94

13.8

96.293

2005

4.91

91.134

2006

6.06

23.4

91.424

2007

7.18

18.5

98.786

2008

8.93

24.4

103.630

2009

10.01

12.1

95.757

2010

11.52

15.1

99.871

2011

13.06

13.4

106.916

2012

E 15.14

15.9

E 105.2

2013

E 16.65

10.0

E 108.03

*EPS: Earnings Per Share

 According to Darryl K. Taft, IBM has been on a journey to transform its business since 2003 and the following six principles are guiding IBM as it implements its latest, “smarter” phase of business transformation:

  • Start a Movement: IBM engages its workforce through “jams” and social software.  This exchange of ideas enabled the company to capture the imagination of its workforce and re-establish the core of its culture and brand for the 21st century.  IBM WorldJam produced 35 ideas that led to more than $500 million in savings and a new structure to bring decision-making closer to the client.

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  • Establish Clear Transformation Governance: IBM established key decision-making bodies to guide critical transformation and IT initiatives, taking a disciplined approach to determine what new initiatives to fund based on review of business cases.  Through active and integrated oversight, the company achieved strong alignment of its strategy with transformation goals and put consistent metrics in place to measure the business value of transformation investments.
  • Transformation Requires a Data-Driven Discussion: IBM is turning raw data into competitive insight across its business.  For example, the IBM Resource Analytics Hub provides up-to-the-minute access to a repository of information on IBM’s services workforce and current staffing requirements. The Hub has helped Global Business Services improve its measure of unassigned resources, or bench, from 8 percent to 3 percent.  The productivity of IBM’s consultants improved 18 percent from 2005 to 2009, enabling IBM to more aggressively pursue its growth objectives.
  • Radically Simplify Business Processes: End-to-end process improvements have been pivotal to IBM’s success at global integration of its operations.  During the past several years, IBM has developed hundreds of professionals with business process skills in Lean Six Sigma and other methodologies.  By standardizing and automating work across key global processes, IBM delivered $500 million in productivity improvements in 2009 and put itself in a strong position to support its growth initiatives worldwide.
  • Invest in Transformation Innovation: IBM applies new technologies to accelerate its transformation and keep employees engaged in the effort. The company’s intranet, the On Demand Workplace, has been transformed into one of the most robust social networking platforms in the industry. Social software—blogs, wikis, live chat, communities, even virtual worlds—are now an integral characteristic of IBM’s corporate culture.  IBM’s leadership in collaborative innovation has helped keep it No. 1 in the number of new U.S. patents for 17 consecutive years.  The company has also been an enthusiastic adopter of cloud technology as a cost-effective platform for development, research, storage and other uses.  The development/test cloud has accelerated the test environment setup process from one week to 1 to 2 hours.
  • Embody Creative Leadership:  IBM has an ongoing focus on developing 21st century global leaders as an essential element in its transformation success.  The company recently refreshed a core set of competencies for all IBM employees to provide guidance on skills development and set the inspirational direction for all employees.  The overall goal: develop and sustain a workforce that is equipped to capture new revenue in growth markets.

 

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