Road to a Smarter Enterprise: (1) Start a movement, (2) Establish clear transformation governance, (3) Transformation requires a data-driven discussion, (4) Radically simplify business processes, (5) Invest in transformative innovation, (6) Embody creative leadership.

1. George Mattathil -
5/19/2011
The Road to a Smarter Enterprise
Six Principles for Successful Transformation
© 2010 IBM Corporation

2. IBM’s strategy
A decade ago we saw change coming and took decisive actions that have
enabled IBM to turn today’s disruption into opportunity.
Changes Changes in Changes
in world information in client
markets technology needs
© 2010 IBM Corporation

3. In response, we changed our business mix and model
Business Model, Operating Model and Workforce Transformation
Remixed our portfolio toward services, Shift in geographic mix…
software, and integrated solutions…
 2009 revenue:
 Exited commoditized businesses: – 22% Asia Pacific
– PCs – 35% Europe, Middle East, Africa
– Hard disk drives – 43% Americas
– Printing Systems
 Growth markets share of geographic revenue:
 Strengthened position in: – Growth markets accounted for 19% of IBM’s total
– Business Consulting geographic revenue in 2009
– Service-Oriented Architecture
– Information on demand  Strong Performance in 2009…
– Virtualization
– Open, modular systems – $18.1B pre-tax earnings, up 9%
– $95.8B revenue, down 5%
 Acquired over 60 companies in last 5 years
Pre Tax Income & Free Cash Flow ($B)
– to complement and scale our portfolio of products and
offerings Revenue ($B)
EPS
34% 42%
41% 42%
2003 2009 Software
Segment Segment
Profit Profit Services
34 Mix
Mix
Hardware & – $10.01 Earnings Per Share, up 13%
25% 16% financing – Strong performance in services, software and growth
markets
© 2010 IBM Corporation

4. Improved performance has allowed us to invest in future
sources of growth and provide record return to shareholders
…while continuing to invest in R&D—
more than $56 billion from 2000 to 2009.
© 2010 IBM Corporation

5. IBM’s ongoing transformation journey
The “Smarter” phase of our transformation is beginning
2003
Sharing & partnering
2006
Globally integrating
 Consistent set of
processes worldwide 2010
 Leverage best practices Making things smarter
 Standardize and reduce  Right skills, right
waste place, right cost
 Governance and  Rationalize support
performance discipline functions for greater
efficiency
 Instrumented, interconnected,
 Radically simplify intelligent
processes
 Enable growth and productivity
 Optimize the whole system
© 2010 IBM Corporation

6. Start a
movement
© 2010 IBM Corporation

7. Start a movement
 IBM engages workforce through
―jams‖ and social media
– Exchanging ideas
– Moving the culture
– Capturing the imagination
 ValuesJam reestablished IBM’s
culture and brand for the 21st
century
 WorldJam generated 35 ideas
leading to $500M in savings
 InnovationJam established 10 new
businesses within IBM, forming
basis of the Smarter Planet
agenda
“Jams have helped change our culture
and the fundamental way we collaborate
across our business.”
- Sam Palmisano, Chairman & CEO, IBM
© 2010 IBM Corporation

8. Establish clear
transformation
governance
© 2010 IBM Corporation

9. Establish clear transformation governance
 IBM establishes high-level
governance councils to guide GIE SVP Forum
key process and IT
transformation initiatives
– Cross-unit representation Enterprise Process GIE Shared
– Aligns business and Owner Board Services Council
transformation strategy Incentives, Order-to- IT, HR,
– Consistent metrics Cash, Hardware Product Marketing/Comm,
Mgmt, Business Partner Finance, Legal, ISC, Real
 Good governance ensures the Enablement Estate, Sales Ops
business value of transformation
investments gets measured and
delivered CIO Operating Team
Members: CIO Leadership Team & ITD, AS Partners
Brands & Geographies
Brands: STG, SWG, GBS, GTS, IGF / Geo: NA, NE, SW, Japan, GMU
© 2010 IBM Corporation

10. Transformation
requires a
data-driven
discussion
© 2010 IBM Corporation

11. Transformation requires a data-driven discussion
 IBM applies leading-edge
business analytics to turn raw
data into operational advantage
– Territory optimization analysis
puts sellers over the best
opportunities Every day, 15 petabytes of new information
– Real-time data analysis are being generated -- 8x more than the
information in all U.S. libraries. Smart
improves manufacturing yields
enterprises turn this raw data into
– Matching engine aligns competitive insight
services staff to open
positions
 Over the past four years, the Market Alignment Program has contributed over $1 billion in
revenue, applying analytics to sales management
 With the Resource Analytics Hub, Global Business Services has improved productivity of
consultants by 18 percent and reduced unassigned resources from 8 percent to 3 percent
© 2010 IBM Corporation

12. Radically
simplify
business
processes
© 2010 IBM Corporation

13. Radically simplify business processes
 Created end-to-end process
improvements to smooth
global integration
– Simplified, standardized process
across business units and geos
– Developed hundreds of Lean Sigma
process experts
 Process transformation improvements
yielded $500M in productivity gains
in 2009
– Sales Transaction Hub coverage up
by 6%, giving time back to sellers
– Hardware Product Management
“With processes, our mantra is radical
reduced features & options by 35% simplification – eliminating, standardizing and
automating work that adds to complexity and
hinders integration.”
- Linda Sanford, Senior Vice President,
Enterprise Transformation
© 2010 IBM Corporation

14. Invest in
transformative
innovation
© 2010 IBM Corporation

15. Invest in transformative innovation
 IBM applies collaborative technologies
to accelerate transformation and
engage employees
– Converted intranet into robust
social computing
– Broad social media portfolio
connects global, mobile, multi-
generational workforce
Lotus Connections
– Clouds for research, analytics,
& storage – 80% of internal
development testing supported
by cloud
 More than 100K IBMers – sales,
developers, marketing – tap into
BlueInsight, the world’s largest
analytics cloud for better client insights
© 2010 IBM Corporation

16. Embody
creative
leadership
© 2010 IBM Corporation

17. Embody creative leadership
 Leaders must create the climate and
culture that fosters successful IBMers at our Best: Our Competencies
transformation Embrace challenge Build mutual trust
– Created a collective leadership group Partner for clients’ Influence through expertise
of 300 executives to integrate the success Continuously transform
company and lead by IBM’s values Collaborate globally Communicate for impact
– Refreshed core set of competencies Act with a systemic
perspective
Help IBMers succeed
for all IBMers
– Assigned senior leaders to growth
markets to develop new leaders
 IBM’s Corporate Service Corps has
deployed hundreds of high-potential
employees to short-term assignments in
emerging markets to work on economic
development projects
© 2010 IBM Corporation

18. The Road to a Smarter Enterprise
Six Principles to Consider
 Start a movement
– Engage the workforce
– Jams and social software are great enablers
 Establish clear transformation governance
– Appoint business, process and IT leaders to councils
– Key decision-makers must have accountability for results
 Transformation requires a data-driven discussion
– Analytics can improve operational performance
– Enable fact-based decisions
 Radically simplify business processes
– Design processes from viewpoint of users, not process owners
– Establish standards & eliminate process steps that don’t add value
 Invest in transformative innovation
– IT doesn’t create transformation, but can be great accelerator
– Experiment with new ways to stimulate work environment & fuel new thinking
 Embody creative leadership
– Takes new approach to lead global, multi-generational workforce
– Leadership competencies must evolve for new realities
© 2010 IBM Corporation

19. Trademarks and notes
IBM Corporation 2009
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service names may be trademarks or service marks of International Business Machines
Corporation in the United States, other countries, or both. A current list of IBM trademarks is
available on the Web at ―Copyright and trademark information‖ at
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Intel logo, Intel Inside, the Intel Inside logo, Intel Centrino, the Intel Centrino logo, Celeron,
Intel Xeon, Intel SpeedStep, Itanium, IT Infrastructure Library, ITIL, Java and all Java-based
trademarks, Linux, Microsoft, Windows, Windows NT, the Windows logo, and UNIX are
trademarks or service marks of others as described under ―Special attributions‖ at:
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 Other company, product and service names may be trademarks or service marks of others.
 References in this publication to IBM products or services do not imply that IBM intends to
make them available in all countries in which IBM operates.
© 2010 IBM Corporation