VI ConsultingT

VI ConsultingIBMTegan HasikGreg SandersTerry TateJared LeonardChris AlversonSaeed AlyakoubTu Pham

Enterprise Information Systems Integration and Consulting

Drivers of Change Demand for Services

Rate of demand of services is constantly fluctuating

Firms must be able to keep up with changes in demand

Rapid Technology evolution.

Technology is constantly evolving and can become quickly outdated

Firms must be able to keep up

Economic Conditions

Industry is positively related to economic conditions


Key Survival Factors Skilled Workforce/Technical Expertise

Firms rely heavily is skilled individuals to create and implement products

Without a skilled workforce firms will quickly become obsolete

Access Capital

Innovating and creating new products is very expensive

Companies must invest large amounts in research and development

Innovative Services

Technology changes are rapid, must be able to keep up in order to be relevant.


Overall attractiveness of the industry Industry is only moderately attractive

Competitive Rivalry is very high, several large, distinguished firms

Firms in the industry require a large amount of capital, Larger firms can operate at an operating loss for some time to expel smaller competitors.

Industry 5 years from now.

Industry revenues were 191 billion in 2013 and are expected to more than double by 2018

Workforce expected to grow 25%

The Firm Strategy

Mission Statement To be dedicated to every clients success

To focus on innovation that matters

Develop trust and personal responsibility in all relationships

Vision Statement Shift Business focus to data, cloud and engagement services

Spread innovations through IBM and all of it’s subsidiaries

Open business relationship and collaborate innovation

Value Proposition IBM creates value for its customers by offering business enterprise applications

and solutions. By partnering with IBM, value is created for the client with unmatched experience in the technology industry, a proven reputation for innovation and a guarantee of an open partnership with a trusted company.

Goals Product/Market Focus

Goals Focus on Innovation that matters

Maximize earnings per share

Create lasting and trusted business relationships

Be a leader in cloud computing software.

Product Focus / Market Focus - Broad

Industry performance Vs. Firm Performance

Industry Performance Industry has been growing at a constant rate

Improving economic conditions have allowed industry to expand

IBM IBM’s revenue has steadily declined over the past several years

IBM’s debt to equity ratio is higher than the industry average

Significant free cash flows allowing company to quickly repay debt

Industry performance Vs. Firm Performance

Organizational Health

IBM over the last 3 years has experienced a decline in operational performance.

IBM has also experienced a decline in organizational health due to policies such as mandatory layoffs each year

IBM is in Quadrant 2 for the past 3 years and currently. Firm is likely to move to Quadrant 4 if conditions do not improve.

Quadrant 2Complacent OrganizationX= Past and Current State

Quadrant 1 Desired State

Quadrant 4 CrisisY= Possible Future State

Quadrant 3Troubled Organization

Firm Capabilities

Customer Capabilities Ability to attract and retain customers

Operational Capabilities Access to capital

Ability to service worldwide

Service in 170 countries

Innovation Capabilities Ability to implement new products

WATSON

Alignment between Environment and Strategy

Good Fits Demand for service DOC with global market focus

Services are demanded all over the world, and IBM can provide it to them.

Economic conditions DOC with market focus

Regardless of economic conditions, IBM’s enterprise data software will be required.

Gaps Outsourcing skills with skilled workforce KSF

IBM’s strategy to outsource work doesn’t match the skilled workforce KSF

Marketing versus competition with marketing KSF

IBM isn’t marketing their product well to match up with the KSF for marketing

Rapid Technology revolution DOC with innovation speed

IBM isn’t innovating the market like they used to

Alignment between IBM’s Strategy and Organizational Capabilities Good Fits

Access to capital capability with small business acquisition strategy

IBM is able to purchase smaller firms due its large revenues.

Gaps Marketing with vision statement and strategy

IBM’s vision to spread innovation that matters is hindered by their inability to market themselves.

Innovation capabilities with current acquisition strategy

IBM has the ability to create and innovate but is purchasing other companies innovations instead.

Innovation capability with IBM’s bulky management structure

Slow to introduce products that are already on the market.

Key Problems/Issues faced Firm

Marketing Public perception of IBM is that they are an outdated, old company

Innovation No longer thought of as a company that is a leader in innovation

Bulky management Company slow to react to changes in environment because of excess

management layers

Declining Revenue Several years of declining revenue

Projection of Future Performance

IBM’s market performance will likely experience little to no growth over the next several years

Changes will be required in the future to prevent further decline and to close strategic gaps

Proposal 1

Focus of closing Marketing and Innovation Gaps. Commitment to innovation

Create an innovation department & focus on R&D

Bring Back Outsourced

Invest less in buying other companies, invest more IBM

Marketing Campaign for brand image

Huge marketing campaign that focuses on history and futuristic products

Update Website

22nd century logo

Proposal 2

Focuses on closing speed of adapting and marketing gaps Revamp Operating Structure

Diversify Board of Directors

Reduce layers of management

Examine operating procedures for efficiently

Market current and Upcoming Products

Remind public what IBM stands for

Market WATSON

Partner with industry leaders

Selected Proposal

Proposal One! More feasible to do. Doesn’t require cutting, or restructuring,

management

Changes to Current Organizational Capabilities

Operational Capabilities 1. Reduce outsourced operations by bringing operations in-

house

2. Invest more in research and development


Customer Capabilities 1. Update marketing campaign to attract and retain more

customers

2. Update website and logo to build better brand image and recognition


Innovation Capabilities 1. Create innovation department.

2. Acquire less technology companies and focus on IBM’s original innovations.

Departments Affected by the change

Marketing department

Innovation department

Human Resources department

Income Statement with New Strategy

Cash Flows, NPV, & Sensitivity Analysis

Financials

Cost $12.3 B Subtracted $608 M from Acquisitions Cost

Added $300 M 1st year to R&D for Innovations Dept

Costs decrease after 1st year to $150 M

$458 M Savings per Year in Years 2-5

Revenue Growth Rate 2015 -7.3%, 2016 4%, 2017-2018 15%

NPV $31.5 B

Q&A

Thank you for your time and hope you accept our partnership

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