IBM’s Model for Growth

In an interesting story in its March 2005 issue, Fast Company describes IBM’s business development strategy. Building a Better Skunk Works examines Big Blue’s new-ish strategy of putting its best and brightest on risky new ventures, rather than keep them running the big, big-dollar, heavily staffed projects and divisions. IBM’s mission is to find “emerging-business opportunities,” or EBOs—areas that are entirely new to the company and can grow into profitable billion-dollar-plus businesses in five to seven years, Fast Company reports, and adds that, “The actual results have wildly surpassed all expectations. Since the program’s inception in 2000, IBM has launched 25 EBOs. Three failed and were closed down, but the remaining 22 now produce annual revenue of $15 billion, a figure that’s growing at more than 40 percent a year.”

Being huge helps, though it’s still a daring model. Of course, it chose a different course for its PC division. My colleague Ben Worthen’s been following the IBM/Lenovo deal in his Tech Policy Blog.

In other news, supply chain management continues to be a hot topic with the executive at large. A couple of posts ago I linked to a supply chain story in Chief Executive magazine. Stanford Graduate School of Business has recently released a paper by professor Hau Lee called “Mitigating Supply Chain Risk Through Improved Confidence.” Sounds appealing and easy, no? You gotta pay for the full report, but a summary is on the school’s website.

Lee has studied supply chain disruptions (think earthquakes, wars, dotcom bust and Y2K alarm), and written many case studies, which he draws upon to conclude that lack of confidence and panic lead people to make irrational business decisions. To regain confidence in their supply chains (and presumably rationality too), Lee observes, “companies need to share information about their markets, sales and production timetables with other partners across all supply and distribution channels.” Well, that’s not news, but more fuel in the fire.