Large businesses are often seen as calcified entities that are agonizingly slow to change. So it was for many years with IBM. “Big Blue” was mocked as a place where men in white shirts and dark suits marched in lockstep to a relentless and unvarying beat. Beginning around 2000, that culture began to change. Led by chief executive officers Louis V. Gerstner Jr., Samuel J. Palmisano and now Virginia M. Rometty, the organization embraced process innovation, moving itself relentlessly toward the goal of becoming truly integrated on a global basis. In this interview, conducted at the SCOPE Spring conference in Atlanta, Carroll talks about IBM’s continuing journey, and where it intends to go next.
Q: What are some of the changes in world markets that you see?
A: Carroll: This has been a fascinating journey. Our previous chairman, Sam Palmisano, wanted us to become the premier globally integrated enterprise. We were having a difficult time comprehending what he meant – the first word in our name is “international,” which implies that we were already global. We were in 170-plus countries, but that meant we had almost 170 individual companies that were operating inside IBM.
In becoming a globally integrated enterprise, you don’t have to turn and shift all of your resources from one country to another, as you did when you were [built on] an international model. If you’re moving into a growth market, in the past it would imply that you’ve got to first grow the resources inside the [target] countries. In a globally integrated enterprise, you’ve got standards and talent aligned to support any country in the world. The first thing you do is establish the global connections to support the country you’re looking to serve. Then you determine the localized needs. In the past it would be the direct opposite. We’re much faster, much more nimble.
Q: How long has this particular initiative been underway?
A: Carroll: Since about 2002. First, Sam established the creation of the integrated supply chain. He saw the value of that from an overall operational efficiency standpoint. He also saw the value of using it as a catalyst for his vision of a globally integrated enterprise. From that we developed shared services inside of IBM, for finance, human resources, real estate, marketing, and our CIO’s office.
Q: What are some of the changes you’ve seen in information technology that have helped to enhance this project?
A: Carroll: Many times in the past, the approach we would take is that good IT could fix a bad process. We’ve been through enough of those lessons to know that’s just not true. Now, when we want to become more efficient or effective on behalf of clients and shareholders, we do process optimization first. The second step is optimization of the data – how it has to flow, how we can add common elements, what the meaning of the data is. We then use that for developing the architecture for an IT overlay.
With IT, you’re trying to automate efficiencies. But you can’t take it to a point where you lose your differentiation of value. There’s no one size that fits all.
Q: What are some of those changes you see in your clients’ world that are forcing you to take a new look at how you serve them?
A: Carroll: Our integrated supply chain had been aligned to be transaction-based. Around the globe, we could provide hardware, software and services, but they were under unique propositions. What clients are now telling us is that they’re looking for a total integrated value solution. We’ve been working for the past three to five years on applying the principles of the integrated supply chain to provide whatever services or support our clients may need. They are not so much interested in dealing with the subcomponents of IBM. They’re interested now in dealing with IBM as a total entity in providing that turnkey solution.
Q: That requires all the different disciplines to be on the same page – to present a united face to the customer. Which sounds like an enormous challenge in an organization the size of IBM.
A: Carroll: It is. What brings it all together is that in 2007, for the first time, IBM put out an earnings-per-share road map for 2010. It was a commitment to the investment community in terms of where IBM was going to be by that year. It involved actual numbers – and not just when, but how we would get there. Whether it would be organic growth, share repurchases, acquisitions divestiture, or productivity gains, the road map is broken down into sub-elements, so that all of us understood what that journey was to get to 2010.
The entire responsibility of our senior executive team is to make sure that we optimize the enterprise first to get to that journey, the earnings-per-share road map. Whatever takes place, rather than prioritizing on your geography, your region or your industry first, you prioritize on the enterprise, and then you work on the optimization points.
Now we’ve refreshed that to a 2015 road map. It creates this urgency because we have to recreate the company every five years. Rather than just setting a strategy that says we have to recreate, we’ve made a commitment: here’s the value of what we’re going to recreate, and how we’re gonna do it. It’s an incredible rallying point inside the company. You understand not just what the vision is, but the road map that you need to support getting to that vision, along with any adjustments to the road map that have to be made to meet that objective.
Q: What’s next on your agenda?
A: Carroll: To get us to 2015, we’re focused on the integrated supply chain, the delivery of end-to-end seamless solutions to our clients. We’re also focused on business analytics. We’ve talked a lot about that, but we actually practice what we preach. We use our research organization and our software within Smarter Commerce to develop business analytics capabilities inside of our supply chain.
Because of what we’ve been able to do with analytics, we can look back [in the supply chain]. When the volcanic disruption took place in Europe, everyone was focused on what was happening on the ground. We found that there was a different focal point for industries than there was for individuals who happen to be in those environments. So when we did the analytics with our research team, they told us to go focus on Hong Kong. We sat back and looked at it and said, why Hong Kong? That doesn’t make any sense. Then, when we went through the analytics, a light went on. What they were telling us was that you can’t focus [exclusively] on what the issue is; you have to look at how quickly you can address the issue once it lifts. Based on IBM’s products and our core clients’ set, what was appropriate was to make sure that we had ourselves aligned with all of the carrier services in Hong Kong – that we had the freight capacity, the crew and everything – so that as soon as it lifted, we could move product immediately. We focused on that instead of what was taking place in Europe. By doing so, we probably got in front of this by a couple of weeks from our competition.
We also found that this approach helped us to work through the terrible crisis that happened in Japan, and the flooding in Thailand. What business analytics has done is move us on this journey toward what I like to call a self-healing organization. You’re going to have things that will affect you anywhere in the world, but rather than waiting for someone on the East Coast or headquarters to tell you what to do, the organization goes immediately into a self-healing mode. Because we have the analytics to understand the dynamics that are playing out, we know the effect on the client network.
The second journey that our chairman, Ginni Rometty, has us on is as important as a globally integrated enterprise. It’s embracing the client experience – not just what the client expects from IBM, but how we deliver the unexpected. To really look at it from the client back: I think that’s as important and fascinating a journey as Sam had us on with the globally integrated enterprise.
Keywords: supply chain management, supply chain, international trade, global logistics, supply chain planning, supply chain systems, supply chain risk management, supply chain IT