IBM trying to promote internal cycle of growth

IBM Corp. is working to promote a “virtuous cycle of growth” within its operations, according to a senior Big Blue executive. The hope is that increased employee productivity results in collaboration which in turn stimulates innovation which then drives productivity and so on.

“We’re trying to strike a balance at IBM,” Linda Sanford, senior vice president for IBM’s On Demand transformation and information technology, said during a speech at analyst AMR Research Inc.’s Executive Leadership Conference in Boston this week. “We’re automating and simplifying [business] processes to give employees back time to collaborate and create breakthrough innovation.”

In her role at IBM, Sanford is responsible for continuing Big Blue’s move to become an on-demand business, initiated by IBM Chairman and Chief Executive Officer (CEO) Sam Palmisano in 2002, she said. Her work includes creating both the necessary IT infrastructure and the culture to support her on-demand transformation mission.

Instituting cultural changes is one of the hardest parts of her job, according to Sanford, particularly in the area of increasing collaboration.

IBM has nearly 330,000 employees, 42 per cent of whom are mobile workers. Close to 55 per cent of Big Blue’s work force have been with the company for less than five years with many joining the organization through acquisitions.

To help encourage staff to work with each other across business units and geographic boundaries, IBM has put in place its enterprise portal On Demand Workplace, a central repository of information that is receiving one million hits per day on its home page, Sanford said.

The portal contains what IBM calls Blue Pages Online a directory of all of the company’s staff, not only listing their contact details, but their background, their experience, which IBM customers they’ve worked with and which Big Blue competitors they’re familiar with, she added. “The basic idea is to make IBM seem like a small company,” Sanford said.

Also within the portal is ThinkPlace, a place for staff to submit innovative ideas. IBM already has plans to implement more than 300 ideas it has received from ThinkPlace including creating Green Pages, a directory of IBM customers listing their needs and requirements, according to Sanford. “Our intention is to open up On Demand to our suppliers, partners and customers,” she said, adding the portal was designed with that goal in mind. Sanford didn’t provide details on when this might occur.

“We’re redefining what it means to be a 21st century business,” Sanford said. “We’re evolving from a multinational to a globally integrated company.” IBM is undoing the work it embarked on post-World War II to establish “self-contained IBMs” around the world, she added, a model that has served the company well for decades, but is now obsolete and too expensive.

“We no longer need to replicate IBM from floor to ceiling,” Sanford said, pointing to the centralized structure the company is putting in place, for example, by cutting the number of purchase order processing centers from several hundred to three, one in Shanghai, one in Bangalore and one in Budapest. The factors that are now making global integration possible include employees’ high level of skills around the globe, the strong growth in developing markets, world trade agreements and a global networked infrastructure, she said.

IBM is working to continue changing the mix of its IT spend, according to Sanford. Previously, the company spent about 90 per cent of its internal IT budget on maintaining its traditional IT infrastructure and 10 per cent on IT innovation. That mix is more like 70/30 now, she said. “We’re not done yet,” Sanford added.

One area IBM is focusing its attention on is operational innovation, according to Sanford. “We need to reinvent what we do and how we do it,” she said. Business processes are one of the biggest areas of frustration for IBM employees. Big Blue is addressing the issue by eliminating, simplifying, automating or sourcing out to partners some of the business processes its staff are dealing with, Sanford added.

For instance, she cited the work some of her team had done to assist IBM’s software sales force. “The deal size was getting smaller, so they needed more smaller transactions,” Sanford said. “They were used to go hunting bear, now they have to hunt rabbits.” Trying to find new smaller size customers was equivalent to the sales people trawling through phone directories or trying to sell door to door, she added.

Sanford’s team, the sales people and IBM’s research and business intelligence software units all got together to develop a tool, On Target, to aggregate customer data and create algorithms to suggest how best to locate sales prospects and which IBM software to sell them. “It’s improved our salespeople’s efficiency,” she said.

So far, sales staff have reported an 80 per cent reduction in time spent on locating prospects as well as a 50 per cent increase in those prospects yielding sales opportunities, according to Stanford. “It’s a reusable asset for other groups,” she added.

IBM started On Target with 60 sales people in Canada and has since rolled it out across the U.S. The plan is to have the tool in 10 European countries by the end of this year and also to take it to Asia, she said.

Tony Friscia, president and CEO of AMR Research, agreed that reinventing business processes was a smart move. “It’s less about product innovation and more about process innovation,” he told conference attendees.

Friscia gave the example of the chemical industry when companies had to react to regulations requiring them to track waste management. While some firms simply complied by putting in tracking systems, the more innovative companies set about trying to come up with ways to eliminate waste altogether.

The same approach can be applied to U.S. public companies working on complying with the Sarbanes-Oxley (SOX) rules, according to Friscia. “Most companies are spending money and getting nothing back,” he said. “It’s like Y2K. But the smart companies are looking to innovate” by overhauling their business processes as they move to SOX compliance, Friscia added.

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