"IBM Global Business Services, through the IBM Institute for Business Value, develops fact-based strategic insights for senior executives around critical public and private sector issues."

1. IBM Global Business Services
IBM Institute for Business Value
Strategy and Change
Succeeding
in the new
economic
environment
Focus on value,
opportunity, speed

2. IBM Institute for Business Value
IBM Global Business Services, through the IBM Institute for Business Value,
develops fact-based strategic insights for senior executives around critical public
and private sector issues. This executive brief is based on an in-depth study by
the Institute’s research team. It is part of an ongoing commitment by IBM Global
Business Services to provide analysis and viewpoints that help companies realize
business value. You may contact the authors or send an e-mail to iibv@us.ibm.com
for more information.

3. Succeeding in the new economic environment
Focus on value, opportunity, speed
By Saul Berman, Steven Davidson, Sara Longworth and Amy Blitz
The final months of 2008 unleashed sudden and sweeping economic change
in the global economy. Amid debates over how long and broad this period
of change will be, one thing is clear – a major transformation is underway
and “business as usual” responses are not likely to succeed. Based on our
experience, our previous studies, an analysis of early winners of this period,
as well as longer-term winners from historical economic transformations, we
advise CEOs and business leaders to focus more than ever on value, to exploit
opportunities presented by the current situation and to act on both quickly.
Navigating the economic seemingly rock-solid companies in financial
transformation services, retail, real estate, automotive and
The growing uncertainty and its widening other sectors, starting with Bear Stearns, then
impact create an urgent need for action. This Lehman Brothers and cascading through the
paper offers our perspective on what business global economy. And this trend is global, with
leaders need to do to succeed in the new many manufacturing companies, for example,
economic environment, To provide guidance, closing in Shenzhen, China, and US, European,
we have identified patterns in the chaos of Japanese and Korean auto manufacturers
2
economic transformations such as the current facing major losses. Already, Ssangyong,
1
one. On the gloomy side, many companies the South Korean automaker majority owned
without the cash reserves or fundamental by China’s SAIC Motor Corporation, filed for
3
strength do not survive such periods, as bankruptcy in January 2009. And many other
we have seen with the dramatic collapse, troubled companies are surfacing as well in
bankruptcy or threat of bankruptcy facing diverse sectors in Europe, Asia and North
America.
1 Succeeding in the new economic environment

4. On the positive side, history shows that even the emerging industries of that era, notably
periods of tremendous dislocation produce movies, radio, automotive and electricity.
4
winners. Looking back to the panic of the Today, many of the early winners are focused
1870s – a period similar to the present with on value-oriented customers, entertainment
a mortgage bubble leading to a financial and opportunities in such industries as life
collapse and an extreme tightening of credit sciences, telecommunications and the envi-
7
– those with cash, like Rockefeller, Gould and ronment, as well as “flight” sectors like gold.
Carnegie in the United States, seized oppor-
tunities to establish dominance in oil, steel, What separates the winners from the rest
railroads and other then emerging industries.
5 of the pack in times like these? What strate-
And while some financial institutions collapsed, gies and characteristics can be emulated
a new generation of innovative banks like and applied today across diverse industries,
Deutsche Bank was established on the back regions and competitive positions?
6
of the new industries. Likewise, during the
1930s, those who succeeded focused on
22 IBM Global Business Services
IBM Global Business Services

5. Succeeding in the new economic environment
Focus on value, opportunity, speed
Businesses that are Lessons from early winners We then studied each of these companies and
To help answer these questions, we identified the strategies that led to their success. From
performing well – even
early winners in the current period, beginning this, we identified patterns in their strategies that
in these economic straits
with large US-listed companies whose stock allowed these companies not just to survive the
– are employing three appreciated by at least 5 percent in 2008, at economic transformation but to thrive in it. We
common strategies: a time when the S&P declined by 37 percent.
8
then looked beyond this group of standouts to
focusing on value, In all, 61 companies emerged as early winners. companies that performed well in Europe and
exploiting opportunity Demonstrating the power of strategy over Asia in 2008 and found similar patterns applied.
industry trends, these companies span In brief, early winners focus on value, exploit
and acting quickly.
diverse sectors, with 31 percent in services, opportunity and act quickly (see Figure 1).
22 percent in financial services, 12 percent in
While some of the early winners were simply in
health care and 12 percent in basic materials,
the right place at the right time (notably a few
followed by energy, capital goods, utilities and
gold companies), most demonstrate the power
transportation. Moreover, those who won in
of having a strategic vision that can thrive in
2008, won big, with their stock appreciating
even the toughest of times.
by an average of 24 percent, well above our 5
percent hurdle.
FIGURE 1.
Firms that outperformed the S&P 500 in 2008 share three common strategies.
Average 52-week stock price change of Strategies employed by top
top performers* versus S&P 500 in 2008 performing companies
24% 1. Focus on value
2. Exploit the opportunity
3. Act quickly
+64 %
S&P 500
Change Top performers
-40%
* Performance period spanned December 21, 2007 to December 18, 2008. Criteria for top performers (n=61) included those with market
capitalization greater than US$1.4 billion and a 52-week stock price appreciation of more than 5 percent.
Source: IBM analysis of data from Google Finance.
3 Succeeding in the new economic environment

6. Overall, the early winners: vations in its broadband services and mobile
Focus on value via sustainable strategies communications offerings in 2008, including
that emphasize long-term value. For example, the world launch of its Next Generation
Dutch Rabobank Group, along with several Network, which aims to provide ubiquitous
11
other commercial banks in our 2008 data services on full IP-network infrastructures.
sample, performed well by avoiding high- Act quickly, with the agility to respond ahead
profit, high-risk offerings such as sub-prime of, or at least to keep pace with, rapid changes
mortgages, and instead held to low-risk in the new economic environment. Barclays,
9
lending principles. Companies targeting for example, acted swiftly – leaping regula-
value-oriented customers also did well. While tory and other hurdles – to acquire Lehman
several including McDonald’s provide offerings Brothers assets by September 23, 2008, just
at very low prices, others including Netflix and days after Lehman’s September 14 collapse.
Strayer Education (an online service) are using Within hours of the acquisition, the screens
technology in innovative ways to slash prices wrapped around 745 Seventh Avenue in
by introducing revolutionary new business Manhattan switched from the Lehman name
10
models. 12
to Barclays’ blue logo. Equally decisive was
Exploit opportunities presented during Tesco’s move in 2008 to introduce a new
downturns, including growing through low-cost Discount Brand line to avoid losing customers
13
acquisitions and stock buy-backs. Another to lower-cost competitors.
key area of opportunity is growth through
Succeeding in the new economic
innovation, transforming existing industries or
introducing new offerings in emerging indus-
environment
Based on our analysis, our experience, as well
tries. Early winners in this area spanned life
as several of our previous studies on related
sciences/biotech, electronics, environmental
topics, we define key elements of the three
quality and telecommunications. For example,
strategies successful companies deploy well
Japan’s Nippon Telegraph and Telephone
in times of uncertainty (see Figure 2).
continued to introduce groundbreaking inno-
FIGURE 2.
To thrive, not just survive, companies need to take action on three fronts.
1. Focus on value 2. Exploit opportunities 3. Act with speed
1.1 Do more with less 2.1 Capture share 3.1 Manage change
• Cut costs strategically • Disrupt weaker competitors • Overcome the “change gap”
• Conserve working capital • Focus on growth markets 3.2 Empower leaders
• Protect cash reserves • Acquire bargain-priced assets • Establish strong, aligned
• Increase flexibility, 2.2 Build future capabilities leadership
responsiveness • Protect and acquire critical talent • Communicate strategy clearly
1.2 Focus on the core • Establish corporate infrastructure and often
• Create value for clients for growth 3.3 Manage risk
• Reduce non-core costs • Invest in innovation • Reduce risk and increase
• Shift from fixed to variable costs 2.3 Change your industry transparency
1. 3 Understand your customers • Understand your place in new
• Target value-oriented customers environment
• Reduce complexity • Pioneer new industry approaches
• Exploit new revenue models
• Cultivate strategic partnerships
Source: IBM Institute for Business Value.
4 IBM Global Business Services

7. How and where 1. Focus on value For companies with a global presence, now is
1.1 Do more with less the time to drive robust optimization efforts to
companies cut costs
Cut costs strategically. Traditional bring down costs by locating activities in the
has a long-term
approaches often involve spreading the pain right place using the right level of resources
effect – far beyond the of cost reductions evenly across business and slashing duplication. Figure 3 illustrates
current downturn. units and geographies. This may appear how companies can take a more strategic
fair and might minimize disputes within the approach to cutting costs, driving revenue and
management team, but it avoids the difficult improving profits.
and important decisions that will drive future
Conserve working capital. Clearly, given
success. Significant cost reductions are
current restrictions on credit, companies
better accomplished through more strategic
need to focus on reducing working capital
decisions to exit whole activities, businesses
in their businesses if they have not done so
or markets. Both revenue and cost need to
already. Proactively managing working capital
be considered. Leaders need to preserve
involves driving down inventories, accounts
key investments that will drive future growth.
receivable and accounts payable. Inventory
For example, many global companies are
analysis needs to examine each item’s profit-
driving higher cost reduction targets in mature
ability, its value to the company, as well as the
markets to invest more heavily in emerging
associated variability, velocity and volume
markets. Others are considering significant
to enable significant inventory reductions.
business model innovations involving, for
Addressing accounts receivables can improve
example, more partnering or outsourcing to
cash management by, for example, adjusting
provide up-front savings and greater flexibility.
processes to focus on accounts that chroni-
cally pay late versus those that pay on time.
FIGURE 3.
Cost reduction opportunities should be evaluated in a strategic context.
• Price
Increase revenues
• Volume
Repurchase Increase
shares revenue
Increase operating • COGS
margin • SG&A
Total • Channels
Create value Use competitive
shareholder Capital Reduce costs • Process R&D
return internally advantage
• Product R&D
Decrease working • Inventory
capital • AP/AR
Invest Optimize
externally assets
Decrease capital • Utilization
expenditures • Decapitalize
Dividends Leverage
technology
Decrease cash tax • Debt/equity
paid • Tax location
Source: IBM Strategy and Change consulting practice.
5 Succeeding in the new economic environment

8. Protect cash reserves. In a credit crisis, 1.2 Focus on the core
cash is central to survival and strategic flex- Create value for clients and preserve
ibility. It serves as a buffer against lean times differentiation. It is critical to cut spending on
and enables the strategic acquisition of low-value activities, and redeploy it to invest-
undervalued, perhaps even bargain-base- ments that generate growth, margins and true
ment priced, assets. Of course companies differentiation. Being able to accurately identify
that do not have strong cash reserves today where value is generated at all levels of the
cannot reinvent history to create them; but organization – from divisions to specific prod-
a value-based reassessment of the port- ucts or offerings to particular customers – is
folio may reveal opportunities to generate an essential first step. But for those without
a greater return through divestment or liqui- strong financial systems or good manage-
dation, especially when weighed against ment information this could be a complex task.
investment opportunities to improve or However difficult, the benefits are clear. Here
expand core businesses. Leaders should also again, Ford has cut costs and raised capital
explore alliances or partnerships that provide through borrowing and divestitures, including
15
access to cash or cost-effective capabilities, Jaguar, Land Rover and Aston Martin.
particularly if their preferred strategies require Similarly, UK grocer Waitrose has performed
significant investment. well in terms of customer growth by leveraging
its strong reputation for high-quality food
Increase flexibility and responsiveness. while controlling the average cost of a shop-
Companies must understand how vulnerable ping basket by offering deeper discounts on
they are to declines in demand and revenues, commodity products.
16
and develop the flexibility in their capacity
and cost base in order to cope. They need Strip out non-value-add activities and
to engage in active scenario modeling to reduce non-core costs. Companies need to
evaluate how far production cost breakeven understand which activities contribute strategic
points must be lowered and capacity reduced value. As part of this, companies must rethink
(or used differently) to prevent losses. In doing initiatives, have more-regular capital review
this, companies must also plan for the upturn cycles and examine initiatives as an entire
by avoiding cutting too deep, so that they can portfolio not only to “trim the fat” on a project-
ramp up quickly once conditions improve. This by-project basis, but also to cut entire projects
requires a strong understanding of industry or groups of projects, allowing no “sacred
trends, competitor performance and behavior, cows.” This approach requires a commitment
as well as underlying economic conditions. to eliminate weak businesses and divest
Companies must also develop more sophisti- where needed, moving non-core activities to
cated sense-and-respond capabilities. In the shared services or to outsourced solutions. For
automotive industry, for example, Ford Motor example, many companies are reprioritizing
Company has sidestepped many of the chal- large-scale technology investments. They are
lenges others in its industry face by cutting also reducing the cost of managing today’s
factory capacity to match decreased demand, systems to free up investment for more stra-
announcing in 2005 the closing of 17 facto- tegic IT projects.
ries and the elimination of 50,000 jobs, many
14
through buyout and early retirement.
6 IBM Global Business Services

9. Investment choices Shift from fixed to variable costs. Shifting and pricing innovation can outstrip an orga-
from fixed to variable costs requires a clear nization’s ability to manage the operational
should center on
identification of and focus on core activities. complexity it creates. With margins threatened
activities that
The need for more flexible costs and capacity by falling revenues, operational complexity
differentiate and drive is leading some companies to look afresh that does not create customer value cannot
revenue growth. at their business and operating models and be tolerated. Companies should examine the
consider outsourcing some functions that case for simplifying product portfolios, pricing
they previously chose to keep in-house. For structures and the number of promotions, and
example, a significant number of multina- cease offering customizations that customers
tional companies are considering increased will not pay for – even if making these changes
outsourcing of their IT development centers requires investment.
in India and China. More holistic sourcing
strategies, from workforce management and Are you ready?
contract labor to strategic partnering, are also
Have you taken urgent steps to protect revenue,
key here.
conserve cash and reduce costs while developing
1.3 Understand your customers and implementing a more strategic approach to
Target value-oriented customers. Another such issues?
strategy likely to succeed in this environment Do you know which businesses, markets,
is to rebalance offerings to serve new, more products and customers contribute the most
value-oriented customers. Eight of the 61 early value, growth and profit to your business? Which
winners have business models that center are not aligned closely to your business strategy
on offering very low-cost goods and services and should be cut?
in diverse sectors spanning retail, entertain- Have you reviewed and prioritized your initiatives
ment, education and fast food. And this can so that you can not only survive but also seize
be a long-term strategy for success in good the opportunities presented by the new economic
times as well as in bad, as companies like environment?
McDonald’s have demonstrated.
Are you making your costs more flexible? Are
Reduce complexity. As they focus on you considering new workforce management
their core activities, companies should take strategies or innovative business models to
the opportunity to reduce or eliminate the achieve this?
complexities that may have crept into their Have you reassessed your partnering strategy
businesses during the good years, including and relationships? Are you clear about which
customization or extensive variations to a partners are strategic and which are commodity-
product or service that the customer may not based?
value or understand. In telecommunications
and banking, for example, the pace of product
7 Succeeding in the new economic environment

10. 2. Exploit opportunities markets, raising growth targets as they do so,
2.1 Capture share even in these uncertain times. Many business
Disrupt weaker competitors. For those with leaders are also reviewing how they segment
a clear vision for their companies and indus- and organize to engage their customers,
tries – and the financial resources to act – the with the growth/mature market distinction
current downturn will clearly create opportu- becoming more important.
nities to set the change agenda rather than
Acquire bargain-priced assets. Companies
respond to someone else’s, to gain share and
with significant cash reserves have the oppor-
to build key capabilities. Bold moves, disrup-
tunity to buy attractively priced assets that
tive strategies and positioning to win in a
support their overall strategies. Several of our
globally integrated economy are all part of the
early winners are focused on acquisitions or
path to success. Reaching out to and under-
stock buy-backs, taking advantage of current
standing the needs of customers, both current
bargains. Overall, we are seeing substan-
ones and those who may consider shifting
tial merger and acquisition (M&A) activity
from competitors in such unusual times, will be
throughout the global economy, particularly in
an important element of the strategy. Business
financial services, such as the acquisition of
partners should also reassure customers
Lehman Brothers segments by Nomura and
that they are allies in this era, seeking to 19
Barclays in late September 2008. We also
help reduce the impact of the current market
expect to see M&A activity in pharmaceuticals
uncertainty. A friend in need is a friend for the
as well as in other sectors. For both acquirers
long term. And before considering strategies
and targets, it is important to act quickly:
such as developing lower-cost products with
for example, UK frozen food retailer Iceland
fewer features, it is important to understand
profited from its acquisition of 51 Woolworths
fully what the customer truly wants.
stores in January 2009 after its previous higher
20
Focus efforts on growth markets. For bid in 2008 was rejected.
companies seeking growth, markets in Asia,
2.2 Build future capabilities
Central and Eastern Europe, the Middle East
Protect and acquire critical talent. Despite
and Latin America are currently proving fertile
extreme market pressures, leaders must
ground, offering stronger opportunities for
balance tactical concerns of today with a
expansion than mature markets in Western
clear focus on the longer term. To build future
Europe or North America. Vodafone, for
capabilities, it is important to stay focused
example, has performed very well in recent
on human capital issues, such as keeping
years by selling assets in saturated markets
and motivating top performers, recruiting
such as Japan and Belgium and investing in
new talent at potentially lower cost and lever-
growth markets such as Romania, India and
17 aging a global workforce. Top performers are
Turkey. Similarly, Tesco has maintained strong
the people who have the flexibility to move
growth at the group level by following an
somewhere else if they are not convinced a
international portfolio approach to investment,
company has the right strategy and execu-
which has generated strong gains in Hungary
18 tion capabilities to survive and succeed. It is
and Malaysia. Facing slowing growth in
important to engage these top performers,
mature markets, many business leaders
communicate the strategy effectively and give
are redirecting investment toward emerging
them a role and stake in the company’s future
success.
8 IBM Global Business Services

11. Amid economic Establish the corporate infrastructure to 2.3 Change your industry
seize future growth opportunities. When Understand the impact of the current
chaos, once-in-a-
markets turn, the best returns often go to transformation on your industry, and profit
lifetime opportunities
those companies that respond quickly. Recent from it with innovative new business models.
often emerge. years have shown how long it takes to build Business leaders must assess whether their
the structures, capabilities, processes and industries are apt to consolidate, grow, shrink
systems to seize growth market opportuni- or even die. They must also understand how
ties. Now is the time to invest for the mid-term. competitors, suppliers, consumers and others
Many Chinese companies, for example, are are responding to the economic changes,
currently establishing the governance, orga- and whether barriers to entry are increasing
nization structures, human capital, processes or decreasing. From this analysis, busi-
and systems to enable them to run on a ness leaders should gain insight into where
truly global basis. Likewise, many banks, a opportunities for new business models are.
sector clearly under fire, are investing in new Two-thirds of the CEOs who participated in our
assets and upgrading core banking systems Global CEO Study are implementing signifi-
in order to increase operational effective- cant business model innovations; Figure 4
ness and improve transparency for the long outlines the specific types of business model
term. A focus on forward-looking IT invest- innovation they are pursuing.
ments (funded by reductions in maintenance
costs for today’s systems) will be essential for Pioneer new industry approaches and
enabling business agility. standards. Goldman Sachs, Morgan Stanley
and other venerable investment banks have
22
Invest in innovation. Several of the outper- become bank holding companies. This
forming companies in 2008 are focused on subjects the companies to far more govern-
innovation, primarily in life sciences, telecom- ment regulation, but provides access to
munications, electronics and environmental government guarantees. In another example,
quality. By carving out a niche in a downturn, Rolls-Royce plc has designed an innovative
companies can establish long-term domi- new aircraft engine that uses fuel more effi-
nance beyond the current turmoil, a strategy ciently and, more importantly, can be scaled
IBM, for example, used effectively in the 1930s. up or down, allowing the company to compete
By investing in R&D during the depths of the across a far wider range of aircraft than its
Great Depression, IBM was well-positioned competitors. In fact, Rolls-Royce is the only
when the recovery began and customers one of the three main engine-makers with
21
needed complex data management systems. designs to fit the three newest airliners under
Today’s early winners – from Netflix and development, the Boeing 787 Dreamliner, the
Nippon Telegraph and Telephone to others in Airbus A380 and the new wide-bodied version
23
life sciences/biotech and environmental quality of the Airbus A350.
– are already demonstrating the power of inno-
vation in a downturn.
9 Succeeding in the new economic environment

12. FIGURE 4.
CEOs are focused most on reconfiguring their businesses to specialize and collaborate.
Types of business model innovation considered
Multiple types
20% Enterprise model
innovation Industry model
39% Redefine an existing industry, move into a new industry
or create an entirely new one.
Revenue model
Change how revenue is generated by introducing new
Industry
model pricing models.
innovation Enterprise model
18% Reconfigure the business by rethinking what is done
Revenue model in-house and what is done through collaboration and
innovation partnering.
23%
Source: “The Enterprise of the Future: IBM Global CEO Study 2008.” IBM Corporation. May 2008.
Identify and exploit new revenue models. With strategic partnerships, companies need
New pricing models are emerging, particularly a more collaborative approach aligned with
in digitized supply chains. In electronics, for the overall strategy and focused on the longer
example, the ongoing transition to a digital term. In the case of commodity-based rela-
supply chain has substantially reduced tionships, now may well be the time to drive
inventories and thus the potential downward down cost and look for alternatives. For those
pressure on prices caused by over-supply. relationships that continue, a shared sense of
Indeed, the strength of supply chain manage- engagement and interdependence, a tight-
ment in this sector is expected to make the ening of collaboration, can help companies
impact of the downturn shorter here than it manage demand volatility and risk, and enable
might have been otherwise. Other examples of innovative new business models. For example,
digitized supply chains include Netflix for film Indian telecommunications leader Bharti Airtel
and Apple iTunes for music, as well as Strayer has been able to grow quickly using a radical
24
for education. partnering strategy and business model.
Similarly, Lenovo was able to establish its full
Cultivate strategic partnerships. Partnering global presence much more quickly through
is a quick route to business model innovation. its purchase of the IBM PC business than
In the current environment, it’s particularly 25
through organic growth. In another creative
important to differentiate between strategic partnering strategy, companies like Nintendo
partners and those offering more easily are using Web 2.0 approaches to engage
replaced commodity goods and services. customers in new product development and
26
customer service.
10 IBM Global Business Services

13. Discontinuity will Outperformers expected even more change
Are you ready?
but were significantly more adept at managing
likely bring about What is your company’s competitive context
change than their peers. In a separate study
industry-changing (supply, demand, barriers to entry), and where
entitled “Making Change Work,” we found that
business models. do you fit?
companies that are good at change manage-
What new business models are likely to emerge 28
ment are really good at it. On average,
in your industry, and are you working to get project practitioners rated only 41 percent of
there ahead of your competitors? projects as successful. In contrast, the top
Are you watching other industries for concepts 20 percent reported an 80 percent project
and business models that could transform your success rate, nearly double the average,
market? and they did this by following a systematic
Do you have the right team – especially your top approach. They focused on:
talent? And do they believe in your strategy to
• Real insights for real actions – Striving for a
survive and succeed?
full, realistic awareness, understanding the
What capabilities do you need to develop to be upcoming challenges and complexities,
ready for the upturn, and do you have a robust and taking actions to address them
plan in place to develop them?
• Solid methods for solid benefits – Using
If you had the cash, which companies and assets a systematic approach to change that is
could you buy to change the game? Or could focused on outcomes and closely aligned
you be someone else’s acquisition target?
with formal project management methods
• Better skills for better change –
Demonstrating top management
3. Act quickly
sponsorship, assigning dedicated change
Finally, the new environment will favor the
managers and empowering employees to
fast and agile. Indeed, the urgency of the
enact change
current situation can actually provide a unique
opportunity to overcome organizational inertia • Right investment for the right impact –
and barriers to strategic transformation. Allocating the right amount for change
Transformation has never been easy, but in this management by understanding which types
environment it may be more possible than is of investments can offer the best returns, in
usually the case. terms of greater project success.
3.1 Manage change 3.2 Empower leaders
Overcome the “change gap.” We learned Establish strong and aligned leadership.
in the IBM Global CEO Study that eight out In this environment, speed is of the essence,
of ten CEOs anticipated substantial or very and strategy must be set from the top.
substantial change over the next three years, Leadership teams must make decisive “no
yet they rated their ability to manage change regrets” decisions and live with the conse-
27
lower, creating a change gap of 22 percent. quences, correcting course as necessary.
This is especially relevant for those cultures
that are very consensus-oriented, and find
quick and decisive action difficult.
11 Succeeding in the new economic environment

14. Communicate your strategy clearly and 3.3 Manage risk
often. The challenge in the current uncertainty Reduce risk and increase transparency.
is to set an achievable strategy and manage The issues of risk and transparency have
change quickly and effectively. Doing this come to the fore in the current period. To
well requires the repeated communication of address these issues, organizations must
simple goals, together with clear targets and apply analytics to improve decision making
strong follow-through (including the measure- and create greater predictive capability. They
ment of results). It also requires the dedication must also establish risk management gover-
and empowerment of high-ranking executives nance and processes. And they must integrate
to act as change leaders, able to seek and and rationalize business information into the
leverage experience throughout their organiza- overall risk management process. The recent
tions, and empower the layers beneath. It is unprecedented losses in the financial services
essential that these leaders align around an sector, as well as exposure to unseen threats
agreed vision for the future and a course of of criminal activity like the Madoff scheme,
action to achieve it. highlight compelling examples of the dangers
FIGURE 5.
Those who focused on all four facets of what we call the Change Diamond experienced an outstanding
increase in project success.
80%
Project success rate of individual facets Increase in project success due to
synergy effect of all four facets together
19 %
52% 52%
43% 43%
41%
Average
project
success rate
Real Insights: Solid Methods: Better Skills: Right Investment: Change Champions:
Awareness of Change Consistent use of Professional Change >11% Change Budget Combining All Four
Challenge Formal Methods Managers Facets
Source: “Making Change Work.” IBM Corporation. October 2008.
12 IBM Global Business Services

15. Especially now, the of poor risk management and lack of transpar- From surviving to thriving
29
ency. Our Global CFO Study confirmed that To be sure, some companies will not survive
ability to take requisite
risk management is increasingly a boardroom these uncertain times. For the strong, however,
actions depends
issue, with each member of the executive the current period may actually present rare,
on having superior team having a role and responsibility.
30
possibly once-in-a-lifetime opportunities. In
change management order to seize them, companies must first
capabilities, strong Are you ready? establish financial stability in the short term.
leadership and robust Does your organization have a consistent, tried But the winners will also invest for the medium
and accepted method for change management and even long terms. As preconditions for
risk management.
that is applied to every project? success with this, companies will need to
achieve:
Does your organization invest in building change
management skills that can be leveraged across • A robust understanding of how the transfor-
projects? mation will impact their industries as well as
Are there processes and technologies in place allied industries
that allow people to become involved in the • A keen appreciation of their own core
change, to access accurate information and to competencies and how these can be
provide feedback? leveraged to take advantage of emerging
Do your leaders share a common view of the opportunities and profitable innovation
future of the industries in which you operate? Of • Committed and aligned leadership with
your own and your competitors’ strengths and a clear strategy for creating sustain-
weaknesses? Do your leaders agree on where able competitive advantage so that their
your organization needs to go?
enterprise can move as swiftly as current
Do you understand the risks you currently circumstances demand.
harbor? Do you know how vulnerable you are to
changes in your current operating environment? While the final months of 2008 launched a
period of tremendous change and uncertainty,
How transparent is your current management
the good news is: even, perhaps especially,
information? Are you confident you are tracking
in times like these, winners do emerge. And
the variables that give you an accurate picture of
despite the noise, chaos and confusion,
the health of your company and the risks facing it?
there are patterns in the strategies winning
companies use to navigate such times. Based
on our experience, previous studies, and an
analysis of early winners of this period and
longer-term winners from historical economic
transformations, we advise business leaders to
focus more sharply than ever on value, exploit
opportunities presented by the current situa-
tion and act quickly in order to capitalize on
these opportunities.
13 Succeeding in the new economic environment

16. About the authors Dr. Amy Blitz is the Strategy and Change
Dr. Saul Berman is a Partner and Global Leader for the IBM Institute for Business
Executive of IBM Global Business Services Value. She has led major research initiatives
and leads the IBM Global Strategy and on issues related to strategy, innovation and
Change practice. He has over 25 years’ expe- economic development. Her work has been
rience consulting with senior management, featured in Harvard Business Review, The Wall
has published extensively and is a frequent Street Journal, MSNBC and other major media
keynote speaker at major conferences. He outlets. Amy can be contacted at ablitz@
was named one of the 25 most influential us.ibm.com.
consultants of 2005 by Consulting magazine.
Saul can be contacted at saul.berman@
Contributors
This paper would not have been possible
us.ibm.com.
without the substantial contributions of the IBM
Steven Davidson leads the IBM Strategy Strategy and Change team, notably Richard
and Change consulting practice for Growth Christner, Dan Barter and Ragna Bell who
Markets, including Asia Pacific and Greater helped steer the content development; Dave
China in particular. He also leads the IBM Lubowe and Eric Riddleberger who provided
Institute for Business Value in Asia Pacific. leadership and guidance throughout; Jim
Based in Hong Kong, he has 20 years of Byron for input on cost reduction strategies;
strategy consulting experience in Europe and and Anubha Jain and Madhulika Kamjula for
Asia, and works across industries to help data analysis and overall research support.
clients develop and implement strategies and
transformation programs in complex environ-
ments. Steven can be contacted at steven.
davidson@hk1.ibm.com.
Sara Longworth leads the IBM Strategy and
Change consulting practice in Europe, the
Middle East and Africa. Based in London, Sara
is particularly interested in the role of leader-
ship in transformational change, and has led
engagements for European, American and
Japanese multinationals to implement compet-
itively advantageous operating models. Sara
can be reached at saralongworth@uk.ibm.
com.
14 IBM Global Business Services

17. About IBM Global Business Services References
1
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clients with deep business process and long periods of time from Nikolai Kondratiev
industry expertise across 17 industries, using to Joseph Shumpeter and more recently:
innovation to identify, create and deliver value Braudel, Fernand, Civilization and Capitalism,
faster. We draw on the full breadth of IBM 15th-18th Century, Berkeley: University of
capabilities, standing behind our advice to California Press, 1992; and Perez, Carlota,
help clients innovate and implement solutions Technological Revolutions and Financial
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E. Elgar Publishers, 2002. Perez, for example,
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and Change transformation as the information revolution
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4
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15 Succeeding in the new economic environment

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because the crisis began in the US and so the Ibid.
16
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16 IBM Global Business Services

19. 26
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27
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and 3) Absolute profit margin average for 2003
and 2006. Companies that performed above
the average for those in the same industry
were tagged as outperformers; those below
the average were labeled as underperformers.
28
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17 Succeeding in the new economic environment

20. © Copyright IBM Corporation 2009
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