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Change Management Case Study Ibm Logo

Monday, April 25th, 2016 - 9:42

This report continues the IBM Center’s long interest in leadership, transformation, and the use of innovative public-private partnerships. It explores how NASA leaders have leveraged public-private partnerships to replace the space shuttle, while developing new policy mechanisms to enable private companies to take over cargo and astronaut transport to the International Space Station (ISS). The author focuses on the evolution of this
partnership strategy, from its formulation and adoption during the George W Bush Administration to its augmentation and fulfillment under the Obama Administration.

In the past decade, NASA has seen the shuttle retirement, completion of the ISS, the start of a commercial cargo and crew service to the ISS, the end of one major rocket development program, and the decision to develop a different, giant rocket capable of taking astronauts and cargo to deep space—the Moon, an asteroid, and eventually Mars Indeed, viewed historically, NASA and its political masters have initiated and sustained a transformative decision-making process for human spaceflight exploration, with Mars as a destination.

A prime reason that NASA has sought innovative public-private partnerships in the evolution of the shuttle program involves current fiscal realities. Ultimately, NASA wants to concentrate its limited resources on deep-space exploration and cede lower-Earth orbit to a burgeoning commercial space sector. Achieving these two goals requires transformational change. The shuttle successor partnership with the private sector can initiate such change. This is indeed a case about transformative change—a radically new way of performing an existing government task.

The report documents and analyzes how leaders from both executive and legislative branches worked together to achieve transformational change in spaceflight. From this effort to launch a transformative mission for NASA, the report draws key lessons learned on such diverse yet interconnected disciplines as leadership, change management, and public-private partnerships. Key lessons include:

  • Engage and align key actors early
  • Understand the nature and degree of change
  • Establish a complementary leadership team
  • Recognize that transformation takes time
  • Adopt a general strategy of what needs to be done

Leadership, Change, and Public-Private Partnerships: A Case Study of NASA and the Transition from Space Shuttle to Commercial Space Flight is the seventh report prepared by Professor Lambright for the IBM Center. In 2012, Professor Lambright identified two outstanding government leaders, Robert Gates and Dr. Francis Collins, who both led transformation initiatives in their organizations. Lambright’s research for the IBM Center also includes leadership case studies of three recent administrators of the National Aeronautics and Space Administration: Dan Goldin (2001), Sean O’Keefe (2005), and Michael Griffin (2009).

We hope this new report will provide insights to present and future government leaders seeking to transform their organization through the pursuit of public-private partnerships and other new initiatives to address changing missions.

We decided to study the organizational changes that occurred in IBM from 1993 until 2002 in priority, then from 2002 until today. We will focus on changes on the whole organization. Indeed, in 1993 IBM was in a critical situation since it experienced an $8 million loss in 1993, and a $16 million loss from 1991 to 1993. There was clearly a need for strategic evolution that would require a radical change in the whole organization. The main object of this case was to change the whole organization of IBM in order to stabilize it, to make it profitable, and to enable it to recover its past reputation.

In order to do so, Lou Gerstner was appointed as the new CEO. Gerstner came from another company and this may be the key of the success of this organizational change since it had no bias regarding the company and could thus think out of the box easier.

The first radical strategic decisions made by Gerstner were:

-        To sold low profitable businesses like the Federal Systems division in order to generate cash to avoid bankruptcy.

-        To shrink the workforce (393,000 in 1990, 225,000 in 1995)

-        Not to split IBM in different companies, but keep it in order to benefit from its size, and to develop its competitive advantage by providing solutions by integrating different technologies, software and services

-        To make IBM more customer oriented

-        To create synergies of cost

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To sustain this strategic switches, these organizational changes were implemented:

-        Creation of integrated operating units instead of competing geographical units and rival product divisions, in order to offer suited solutions to their customers, and to realize synergies of cost by eliminating redundancies in the operations (financial systems…)

-        Make processes network enabled in order to make employees work together

-        Creation of global industry teams and breaking up of the customer base into 12 groups

-        End of the formal dress code to fit with the changes in customer profiles in the 1990’s compared to the 1960’s or 1970’s

-        Make change accepted by the creation of Senior Leadership Groups to focus the attention of employees towards the topics of leadership and change

-        Make employees work together rather than competing between themselves by a reward system based only on the whole company’s performance for top executives, and on the performance of the business unit for employees, and creation of a variable part of the salary based on performance.

The results of this organizational change proved to be excellent. Indeed, Lou Gerstner and its team managed to avoid bankruptcy and to keep IBM as a unique company. IBM made a $3 billion profit in 1994 ($8 billion loss in 1993). This good result was due to the success of IBM to become customer oriented, to align to their customer need, thanks to the new organizational structure that enabled teamwork, more efficiency, and synergies of cost.

 

Adrien.

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