Case Study: IBM Growth Markets Strategy 2015 – Emerging Markets Strategic focus

IBM changed its corporate structure in 2008 by dividing its markets into Growth and Mature Markets moving away from the earlier geography based segmentation and this change is necessitated by the fact that emerging market countries have different Information Technology (IT) needs and usually IT spending grows more than twice as quickly as those countries’ gross domestic product. IBM Growth Markets Unit headquartered in Shanghai, China includes 152 emerging countries spread across Asia-Pacific, central and eastern Europe, Latin America, Middle East and Africa. China, Brazil, India, Russia (BRIC Countries) are the major countries that contribute significant revenues (40% of Unit Revenues) in this unit. IBM Growth markets make up 22% of IBM's revenue in 2011, and the company expects to increase that to 30% by 2015 as per its roadmap. In 2011, Growth Markets Unit revenue increased 19%, contributed 11% incremental revenues at constant currency compared to 2010, around 40 countries grew at double digits at constant currency and nearly 60% of growth markets revenues came from outside the BRIC countries. IBM's success in growth markets is essential part of the company's five-year strategy to add $20 billion in new revenue by 2015. IBM is also investing more than US$1 billion in growth markets for developing the business partners and also spending heavily on the marketing initiatives which are mostly co-marketing efforts with business partners to increase revenues.

IBM is making significant investments in more than 100 emerging countries in terms of building critical infrastructure; developing strategic industries and responding to massive demographic shifts, such as rapid urbanization and these emerging countries are expected to drive more than 60% of global GDP growth by 2015. Virginia Rometty as soon as she took over as IBM CEO in January 2012 appointed James Bramante as senior vice president in charge of Growth Markets Unit which highlights the importance of this unit in its 2015 strategy. According to IBM First Quarter FY 2012 results, Revenues from the growth markets increased 9% (up 9%, adjusting for currency) and 40 countries had double digit revenue growth at constant currency. Revenues in the BRIC countries - Brazil, Russia, India and China - increased 10% (up 11%, adjusting for currency). The Growth Markets are driving growth for IBM as mature markets are facing economic slowdown and the European Sovereign debt crisis is also having significant impact. To further enhance the growth markets revenues IBM is aggressively opening branch offices beyond the large cities and BRIC countries particularly in African countries.

IBM had been investing in BRIC countries for past many years and its investments in these countries and other emerging nations even during the Global Financial Crisis 2008 has been delivering consistent revenues and is fueling growth for the company.  IBM had set up R&D facilities in India, Brazil and China and these facilities are capable of innovation in the fields of natural resources technology, transportation and logistics, infrastructure and clean technology and also have significant number of employees working in these geographies. IBM is also working closely with Governments in BRIC and other emerging markets in range of projects covering infrastructure, energy, utilities, etc. The BRIC revenues are significantly contributing to the company’s overall profitability. IBM is investing heavily in Africa and it aims to increase its presence from 24 countries to 35 countries by 2015. In Africa, IBM is investing in areas like financial services and is working with five leading Kenyan banks on infrastructure projects and helping Safaricom, through a partnership with Vodafone; provide its M-PESA mobile money service to more than 15 million customers. Bharti Airtel is working with IBM to deliver next-generation mobile phone service across 16 African countries, from Ghana to Tanzania offering voice, data and digital services.

Growth Markets are essential part of 2015 road map and with mature markets slowing down, these markets have been driving both revenue and profitability growth since past few years and are expected to continue to fuel revenues in future too. But the current macro economic volatility due to European Sovereign Debt crisis is a major concern that is having significant affect on BRIC countries and other emerging countries along with US, Japan, UK and other developed countries. There has been cutting down of growth estimates for countries, reduce in spending increase in austerity and there has been rise in inflation, interest rates and fall in incomes for people. But IBM is well invested and prepared for facing adverse macro economic volatility and is expecting to keep up its growth particularly with boost from emerging countries IT Spending. IBM will maintain its 2015 financial roadmap with focus on four growth markets of analytics, cloud computing, emerging markets and "smarter planet" and will constantly shift to higher value operations, as well as drive new markets around new customers. 

IBM 2015 Road Map continues the drive to higher value—with the expectation of at least $20 operating (non-GAAP) EPS* in 2015.Key objectives for 2015:

Þ      Software becomes about half of segment profit Þ      Growth markets approach 30 percent of geographic revenue Þ      Generate $8 billion in productivity through enterprise transformation Þ      $70 billion of capital returned to shareholders Þ      $20 billion in spending on acquisitions * Excludes acquisition related and non operating retirement related charges

Source: IBM Annual Report 2011

Discussion Points:

1. What will be the affect of European Sovereign Debt Crisis on IBM revenues?
2. Will IBM be able to keep up its Growth Markets revenues and profits?
3. With BRIC countries slowing down what will be the affect on IBM growth?

Wisdom of Crowds @ IBM – Decade of Jamming and Impact on IBM

The concept of Jams in IBM evolved from the Jazz musicians doing jam sessions where musicians who never met before come together collaborate and create music. In IBM jams, employees & stakeholders spread across the globe that generally do not interact with each other, involve in the discussion and exchange of ideas around a specific topic or a set of topics and influence the company’s point of view on new markets, promising technologies, and emerging problems. A typical Jam lasts 72-hours, with people signing on despite their busy daily schedules for 30 minutes, or an hour at a time and the platform is a set of interlinked bulletin boards and related Web pages on IBM’s intranet, with centralized systems & control and seeking substantive answers to important questions and people will be motivated with a sense of participation and of being listened to, as well as generate valuable new ideas.

The first was known as “World Jam,” that was from May 21 to 24, 2001 and event started out as a scientific experiment with an invitation for all the 300,000 employees to participate and which had 53,000 visits to the home page, 6,000 employee comments and replies posted, 6 million hits in just three days. The event was possible as IBM had a globally distributed intranet in 165 countries that all of the company's 300,000 employees can access. Employees accessing their intranet were directed to a special World Jam link and directed to one of 10 forums that addressed problems ranging from work/life balance to sales tactics. Every forum had a moderator with his bio displayed and who moderated discussion and he/she nominated “best practices” in their areas, which were then voted on by attendees and the World Jam culminated with 10 Great Ideas. World Jam had questions like “How do you work in an increasingly mobile organization?” and “How do we get IBM Consulting into the C-suite?” etc.

In 2002 Jam focused on exchange of ideas about good management and the event was "Manager Jam," a 48-hour real-time Web event in which managers from 50 different countries swapped ideas and strategies for dealing with problems shared by all of them, regardless of geography. Some 8,100 managers logged on to the company's intranet to participate in discussion forums.

In 2003, IBM used the Jam solution to reexamine the company's core values since their inception nearly 100 hundred years earlier. IBM invited all 319,000 employees around the world to engage in an open "values jam" for 72 hours and hosted Intranet-based online discussions on key business issues with 50,000 employees. The discussions were analyzed by sophisticated text analysis software (eClassifier) to mine online comments for themes. Through ValuesJam, employees determined that IBM actions will be driven by three values: Dedication to every client's success, Innovation that matters, for IBM and for the world and Trust and personal responsibility in all relationships. Over 220,000 employees downloaded the "values manifesto" created as a result of the ValuesJam.

In 2004, another World Jam was conducted during which 56,870 employees exchanged best practices for 72 hours and generated 32,622 discussions and replies. They focused on finding actionable ideas to support implementation of the values previously identified. A new post-Jam Ratings event was developed to allow employees to select key ideas that support the values. Participants developed tens of thousands of ideas, which were later analyzed and distilled to create 191 proposals. Employees were then invited to rate the ideas. Senior management committed to action on 35 of the top-rated recommendations.

In 2005, Canadian government, UN-HABITAT and IBM hosted Habitat Jam for over three days. Tens of thousands of participants included urban specialists, to government leaders, to residents from cities around the world and discussed issues of urban sustainability. People from 158 countries registered for the jam and shared their ideas for action to improve the environment, health, safety and quality of life in the world's burgeoning cities. Over 8,000 ideas were distilled to 70 core ideas and these ideas shaped the agenda for the UN World Urban Forum, held in June 2006.

During IBM's 2006 Innovation Jam the largest IBM online brainstorming session ever held IBM brought together more than 150,000 people from 104 countries and 67 companies. As a result, 10 new IBM businesses were launched with seed investment totaling $100 million. The “Innovation Jam” took place in two three-day phases and the businesses that were created Smart healthcare payment systems, simplified business engines, 3-D Internet, Real-time Transaction services, Digital Me, Intelligent Utility Networks, Integrated Mass Transit Information system, Branchless Banking for Masses, etc. IBM's corporate-wide Smarter Planet initiative was launched in 2008 and the Smarter Planet initiatives came into being as a result of the Jam.

2008 Innovation Jam was dedicated to describing the “Enterprise of the Future” around four areas: Built for Change, Customers as Partners, Globally Integrated, and The Planet and its People and during four-day period, there were nearly 90,000 logins and 30,000 posts. Tens of thousands of people participated in the conversation from all around the globe including employees as well as customers, suppliers, partners, and industry analysts. It was designed to discuss more deeply the findings from IBM’s Global CEO Study 2008, in which more than 1,100 CEOs from a wide variety of regions and industries disclosed their aspirations. Jammers read through roughly 1.5 million pages. The average Jammer read 76 pages and spent just under two hours in the Jam, returning to the Jam on average eight times. The jam concluded that transparency, efficiency and adoption of corporate stewardship where in work with public sector.

In 2009 IBM conducted the Smarter Planet University Jam. Nearly 2,000 students and faculty from more than 200 universities from 40 countries took part in the Jam along with top IBM experts, clients and business partners. Students around the world brainstormed on topics including the skills students need to be competitive in the globally integrated economy; environmental protection, water management and conservation; fostering pollution-free and inexpensive energy; and providing advanced healthcare as the world’s population continues to grow rapidly, especially in developing nations. Results included need to create a new model of university education around smarter campuses, need for academia, government, and industry to work together and included initiatives like smart water management, smart healthcare, smart grids and cities.

In February 2011, IBM conducted Social Media Jam with over 2,700 participants from 80 countries representing corporations, academic institutions, nonprofit organizations and government agencies. Jammers discussed on key issues and generated new ideas on the major themes: Building the social business of the future, developing participatory organizations through social adoption, using social media to understand and engage with customers, determining what social means for IT and Identifying risks and establishing governance. Report synthesizing the 2,600 discussion posts and more than 600 tweets from the Jam highlight that ROI on social media is quantifiable, adoption is slow, increasing focus of integrating social activities and business processes is essential for success. Discussions touched upon the problems with email, how to create incentive for the sharing of knowledge, social networking’s involvement in government and how the culture of a company must shift to embrace social and an increased focus on integrating social activities and business processes.

Jams are not easy to conduct and one of the major issues is motivating the employees to participate in the jamming sessions. It takes planning, training, promotion and technology infrastructure to make employees and stakeholders participate actively. IBM is spending and had spent millions of dollars on the jam sessions and ROI from the Jams will be long term. Technology plays a critical part as Jams generate volumes of data and the conversations and posts need to be analyzed real time. The whole process has to be centrally controlled and the management should have necessary tools and training to analyze the data and use it in decision making. IBM has developed analytical and decision making tools during the various jams and successfully utilized the tools in understanding the values, sentiments and opinions of employees and other stakeholders.

Regional jams are another option where jams are conducted in countries in the local languages so that employees and other stakeholders can express their opinions more easily and effectively. IBM India on the occasion of IBM Centennial Year celebrations conducted an India specific jam in February 2011 and the highest response was in the area of building a smarter nation followed by personal career problems and complaints about company indifference. IBM India employees feel many of India's problems could be solved with technology as they IBM using technologies across the world as part of its Smarter Planet. IBM has seen great success through its adoption of jams and converted this jam technology into a solution and selling it to its clients.

Discussion Points:

1. How to use technology like Jam in collaborating with employees and stakeholders to understand their opinions and involve them in organizational strategy?
2. How to motivate employees and stakeholders to actively participate in jamming sessions?
3. Jamming involves costs in terms of technology and promotion costs. What should be the ROI strategy?
4. How to analyze the data and what tools should be used?
5. What should management do and how to implement the ideas from the jams?

Social Media @ IBM – IBM Social Media adoption in the organization

IBM was the first company to embrace social media and use it successfully in knowledge management and communication with employees and clients. IBM had encouraged its employees to use internet since 1997 when most of the companies were not allowing their employees use of internet. Social Business @ IBM is an internal site that has interactive, educational and social programs which explain  IBM’s social business transformation and  educates and enables IBMers in external social media participation. Employees take personal responsibility for their social media activities and the company has set rigorous guidelines (IBM Social Computing Guidelines 2008) and objectives for its social media strategy. IBM uses forums, Blogs, wikis, Jams, hashtags, and face book styled internal social networking sites in their organization. For further reading- Social Media @ IBM

IBM developerWorks is a web-based resource and social network for millions of developers and IT professionals worldwide. It has library of over 30,000 articles, receive three and a half million page views and 1Million visitors per month. It has both encouraged the growth of the open standards development community while driving down IBM support costs. Beehive has created a sense of community at IBM and help employees make new connections, track current friends and coworkers, and renew contacts with people they have worked with in the past. Over 65,000 employees have joined the site.

IBMers started blogging since 2003 and have 17000 individual blogs and more than 100,000 users that have software project discussions to discussions about IBM’s business strategies. Through BlogCentral, IBM Employees can share their ideas by creating their own blogs, or subscribe to each other's blogs via RSS. Completed in 2005, the IBM wiki platform “Wiki Central” allows any IBMer to create a wiki with two broad benefits: collaboration and knowledge-sharing. Due to Wiki central usage by employees to collaborate and share IBM had seen a measurable decrease in e-mail traffic in those areas of between 30 and 40 percent.

IBM started the jam concept globally in 2001. Jam is like a massively parallel conference. Employees post views and suggestions on the company's intranet on issues ranging from their careers to possible innovations and how to take IBM forward. Recently in February 2011, IBM hosted Jam and report synthesizes the 2,600 discussion posts and more than 600 tweets from the Jam highlight that ROI on social media is quantifiable, adoption is slow, increasing focus of integrating social activities and business processes is essential for success. For further reading- Social Media @ IBM

IBM is following a decentralized social media approach and controls the internal social media through the employee-created guidelines. IBM does not regulate employee social media activity and instead encourages employees to collaborate and share and drive innovation. Employees are educated about the guidelines and policies and are provided the necessary social media platforms. IBM has integrated social media as an integral part of its business.

For detailed article please click here: Social Media @ IBM adoption