What IBM and GE Have in Common?

Many of us perhaps remember the book "Who Says Elephants Can't Dance" by Louis V. Gerstner, Jr. He is remembered as a leader who shook the "Elephant" that was losing ~8 billion annually and transformed IBM into a services company.

Just eliminating waste and fixing the corporate culture through forcing the organization to become externally focused, has delivered substantial results during his term which include ~ 8 billion profitability, ~20 billion top line growth and ~10 times stock value.

As a great leader for that period at IBM, he eliminated the internal arrogance and excessive-dysfunctional committees and brought humility & common sense to the organization.

But today, IBM is back again to a struggling technology giant status!. While it is still making money, IBM has been with declining revenues and gross margins over the multi-year period.

IBM has lost its technical mojo during the then required transformation for survival. It failed to recover and rebuild itself back as a product company. Transforming IBM at a point in its difficult history, perhaps needed to find an opportunistic and interim path to becoming a services company.

But getting back and becoming a leader in its original game is essential for long-term sustainability. Unfortunately, the recovery and rebuild to become a product leader for today's market haven't been executed at a pace which is required to reclaim the product leadership.

GE, another iconic institution, under the leadership of Jeff Immelt declared itself in 2011, "Waking up as Software and Analytics Company". Over a decade, this over-infatuation of digitalization without having the laser focus on its own industrial products and constant value creation to its customers resulted in distractions and eroded the value of the enterprise by ~150+ billion with shrinking profits and margins.

Creating an Industrial software company was the right strategy. But over the course of the transformation journey, GE forgot the very basic fact that, its customers buy their industrial products and not just Software and Analytics!. The software and analytics are just essential enablers to provide efficiency and better user experience for their industrial products as the world are getting connected with better digital experience.

Unfortunately, a lot of organizations are on a hype journey of digitalization because, simply following the most changing and shining object in the market is cool, both internally and externally!.

I have made an attempt to articulate the five basic principles, which might be helpful to avoid getting carried away in this hyped-world of Digitalization!.

• 1: Digitalization has to be simply understood as a natural extension for what the enterprise provides to its customers.
• 2: Digitalization of an industrial/product company has to have the primary focus on its products and customers. Digitalization is simply making the entire customer journey better and compelling. Watch out for getting carried away with digitalization hype and losing your product focus and innovations.
• 3: It is absolutely true that a highly connected, obsessive miniaturized and experience-driven technology market, offers additional revenue opportunities with digitalization. But don't get carried away with those little opportunities because those are just extensions of what you are good at with your customers.
• 4: It is indeed possible to find totally new business models using digital technology (eg: Uber, Airbnb etc.). If there are new great ideas, simply consider those as a new business and invest & build as a separate business.
• 5: Digitalization cannot be a one-time surgical fix by simply having a "highly visible initiative" and investing heavily until the honeymoon end! The pace of change and obsolescence in digital are extreme!. Hence digitalization has to be internalized organizationally like any other core product development with agility, thought leadership, rigor, and passion for long-term sustainability. In other words, you need to start thinking like a semi-software company!.

Source for financial performance metrics are from public sources on internet