IBM Successful turnaround through brand communications

When talking about the most valuable brands in the world IBM is always included. According to the well-known Interbrand ranking, the IBM brand is one of the top five of the world’s most valuable brands, only surpassed by Coca Cola and Microsoft. Considering the hard times the company had to go through only a few years ago, literally walking on their last leg, this is an amazing success story. The company has not only managed to prevent the demise of a once great corporation and come back to business but it came back even better and stronger, reviving the glow of the old times.

IBM is one of the companies with a very long and rich history. It incorporated already in 1911 as the Computing-Tabulating-Recording (C-T-R) Company and was formally renamed International Business Machines Corporation in 1924. Starting out as a manufacturer of machinery ranging from commercial scales and industrial time recorders to meat and cheese slicers along with tabulators and punched cards, it has undergone massive transformations over the years. We regard the refocusing of the global IBM brand as an excellent example of how to manage B2B brands and furthermore as one of the cornerstones of the successful turnaround of the then struggling company. So let’s have a look at those changes and how IBM managed to rebuild and strengthen the IBM brand as we all know it today.

CRISIS TIME FOR THE IBM BRAND

IBM was performing very well in the 70s and early 1980s. They were renowned for their own strong corporate culture and employee selection procedures. High value had been placed on consensus-based decision making, which, however, turned out to be a tremendous weakness in the fast-moving mini computer industry of the late 1980s and 1990s. Slow and bureaucratic processes are not particularly conducive to corporate risk taking which was necessary at that time, and still is today. Back then the world made first steps towards a commercial environment where rapid decision making and entrepreneurial risk taking are indispensable. If the culture of a company discourages and complicates such behavior, it easily and quickly can drop out of the running. This happened to IBM when it found itself outflanked by then-small companies like Atari, Apple, Commodore, HP, Compaq Computers, Osborne, Tandy, or even Microsoft.

The following numbers clearly circumstantiate this: In 1981, IBM introduced its first PC and managed to increase its market share to 41 percent by 1985 – only three years later the market share had dropped to 28 percent. The blame for this loss was partly seen in IBM’s unfocused marketing strategy that left their brand vulnerable to cheap competitors’ clone products. In 1993 finally, the struggling company hit its negative peak by producing an US$8 billion loss, which many marketer even regarded as the final nail in the slow-moving mainframe behemoth’s coffin. The IBM brand and global brand image was in deep trouble as well. The brand had not only lost its strength from previous years, but almost became irrelevant. Critics began to see IBM as an elephant, and some as a dinosaur.

Today, IBM is leading the pack again. It practically owns e-business and solutions and dominates technology services, which now account for almost half of its revenues and more than half of its profits. Most incredible is the fact that many customers, employees, stakeholders, and Wall Street now describe IBM as nimble. It is not by chance that the very successful turnaround of the struggling IBM has been attributed in part to the rigorous refocusing of their well known global IBM brand and branding strategy.

REDEFINING IBM

In 1993, the former RJR Nabisco CEO and former president of American Express, Louis V. Gerstner, Jr., took over IBM. Lou Gerstner set out to transform IBM from a lumbering hardware manufacturing company to a customer-focused service business. This redefinition from a product oriented to a customer and market oriented “builder of networks” also implied a renewed attention to brand management and advertising.

One of Gerstner’s first decisions was to shift huge amounts of resources to rebuild the IBM brand. The company chose to dial up its master brand. This required serious adjustments for the product-marketing teams. The umbrella quality reputation that the IBM name provides for all of its products and services is far more valuable than specifications of individual products. An organization like IBM can provide customers with numerous synergies and benefits. During the 1990s, IBM extended its brand portfolio relevance to take advantage of a market opportunity in information technology services and the Internet. Great market opportunities aligned to IBM’s core competencies were further drivers of the subsequent brand repositioning. As part of the strategy to reinvigorate the IBM brand the company fired its 70 global agency partners and consolidated all its global advertising business with Ogilvy & Mather (O&M) in 1994. This consolidation resulted in integrated and more effective marketing communications and uniform branding at a much lower total communications cost. Since then the company strongly invested in marketing and brand building which enabled them to make over the IBM brand image. The new IBM was positioned as a company that understands the needs of its business customers and that can provide a total portfolio of products, services and consulting advice. The 360-degree marketing communications strategy developed by O&M included TV, print, outdoor, events, sports sponsorships, online and non-traditional media to communicate its brand positioning.

The company understood that in order to achieve real change they had to reach not only their customers but also and maybe even more importantly, their employees. Therefore the company developed advertising aimed at changing the perceptions of both sets of constituents. To educate and empower their employees was one of the major steps towards the new IBM.

Part of IBM’s massive reorganization strategy has been to put 235,000 employees into 14 customer-focused groups such as oil and gas, entertainment, and financial services. This way a big customer will be able to cut one deal with a central sales office to have IBM computers installed worldwide. Under the old system, a corporate customer with operations in 20 countries had to contract with 20 little Big Blues, each with its own pricing structure and service standards. At IBM, new reps receive extensive initial training and may spend 15 percent of their time each year in additional training. IBM has now switched 25 percent of the training from classroom to e-learning, saving a great deal of money in the process. Frontline employees can spend up to US$5,000 to solve a customer problem on the spot.

The global brand manager (GBM) was an individual charged with creating a global brand strategy that leads to strong brands and global synergy. At IBM, the slot was called Brand Steward , reflecting the role and position of building and protecting brand equity.

“One of IBM’s key media strategies is to deploy traditional media in radically new ways. For example, IBM is using video online to communicate its brand message to an audience of IT and business decision-makers. It has partnerships with ESPN.com, CNN.com and other Web sites to deploy interactive video interviews with key IBM executives and other content to connect with its target audience. When we are trying to reach loyalists for a given server platform, it wouldn’t be economical to deliver the message using traditional TV. IBM also uses sports sponsorships and huge events to build its brand. As the technology provider for the U.S. Open tennis tournament this year, IBM delivered real-time scoring on a large interactive billboard in Times Square, as well as on traveling vans in New York. It is a real live demonstration of our business consulting and technology expertise”. During the middle to late 1990’s, when many firms were attempting to be relevant to the Internet and the emerging network world of business, IBM was a trend driver with its e-business position. The company ultimately spent over US$5 billion building the eBusiness “label” after its introduction in 1996, and related all its business units to that context. Sam Palmisano, who became the new CEO of IBM in 2003, had a difficult act to follow. IBM had achieved a dramatic turnaround under Lou Gerstner during the 1990s, in part by making the synergy and technology of the organization work for the customer. Palmisano’s strategy was based on a new value proposition: On Demand. The core idea was that IT systems and resources would be available on-demand, when needed. All IBM business units were charged with delivering the value proposition. In 2003, IBM created in addition another subcategory, eBusiness on Demand, which means that firms would develop an IT system that would encompass suppliers, customers, and partners and deliver information and computer resources on demand, when needed. The creation of responsive products and services throughout the firm to meet this set of customer needs was unreachable by competitors.

This other big shift was the enlargement of the service offerings. Currently, almost half of IBM’s annual revenues come from global services. To fulfill its service promise, IBM has had to develop new skills and become more customer focused. The US$3.5 billion acquisition of PriceWaterhouseCoopers? Consulting in October 2002 has further provided valuable strategic and operational expertise.

Today IBM has left the field of personal computer production. The last part of the huge industrial project of the last decade has been sold to one of their joint venture partner in China. Lenovo paid US$1.25 billion for the other part of the JV and the distribution system and the distribution rights of the IBM brand for the next 5 years. The exit of the foremost leading PC manufacture shows that IBM has learned from its mistakes.

IBM Campaigns

The IBM brand essence, “magic you can trust” captures the inspirational aspect of their products and services, combined with the trust generated by the company’s heritage, size, and competence. Because of its varied markets however, IBM uses several taglines: “Solutions for a small planet” is relevant for a customer seeking solutions and inspiring to those with a global vision, while “e-business” positions IBM as the dominant choice for those seeking help with e-commerce. IBM used the e-business subbrand to make an association it owned, technological leadership, more dynamic, relevant and contemporary.

In 2001 IBM and Ogilvy & Mather were awarded a gold trophy in the Computer Software category for the Software Evangelist campaign. The campaign, designed to promote IBM’s e-business software, included television and print ads. It also marked the first time IBM touted itself as a software provider. The campaign tag line was “It’s a different kind of world. You need a different kind of software.” The campaign helped IBM become the number one provider of “middleware” – a “fundamental building block for e-business”—and contributed to the company’s US$13 billion in software revenue during 2000.

IBM ENTERS THE SMALL BUSINESS MARKETPLACE For years the perception many business people had of IBM was that of a big business, white shirts and doing things the corporate way. Realizing that small businesses thought of IBM as irrelevant to them, the company decided to break down that perception by providing services that appealed directly to small businesses. IBM managed to successfully re-brand itself for the small business marketplace

IBM counts small to midsize businesses as 20 percent of its business and has launched Express, a line of hardware, software services, and financing, for this market. IBM sells through regional reps as well as independent software vendors and resellers, and it supports its small-midsize push with millions of dollars in advertising annually. Ads include TV spots and print ads in publications such as American Banker and Inc. magazine. Many companies are systematically measuring customer satisfaction and the factors shaping it. IBM, for instance, tracks how satisfied customers are with each IBM salesperson they encounter, and makes this a factor in each salesperson’s compensation. IBM’s Business Partner program provides a great example of how to get comparable third-party leverage in a B2B complex purchase model. IBM’s PartnerWorld? program provides extensive support to the channel in key value-added areas such as marketing and sales, education and certification, technical support, and customer financing. Partners can access this support on-line, over the telephone, or through their channel sales manager. All of these investments are designed to help the channel understand the IBM brand and better promote IBM’s products and services, even though many IBM Business Partners also partner with Sun, Dell, and EMC.

Visionary companies hold a distinctive set of values from which they do not deviate. IBM has held to the principles of respect for the individual, customer satisfaction, and continuous quality improvement throughout its history.

Further readings in: Philip Kotler, Waldemar Pförtsch Business-to-Business Brand Management, Springer Heidelberg, New York 2006

USA http://www.amazon.com/exec/obidos/ASIN/3540253602/wwwpfoertscco-21/

Germany http://www.amazon.de/exec/obidos/ASIN/3540253602/wwwpfoertscco-21/

HISTORY OF IBM IS SHOWN IN A PERMANENT EXHIBIT THAT PROVIDES A SELECTIVE DECADE-BY DECADE/YEAR-BY-YEAR OVERVIEW OF IBM HISTORY

The character of a company -- the stamp it puts on its products, services and the marketplace -- is shaped and defined over time. It evolves. It deepens. It is expressed in an ever-changing corporate culture, in transformational strategies, and in new and compelling offerings for customers. IBM's character has been formed over nearly 100 years of doing business in the field of information-handling. Nearly all of the company's products were designed and developed to record, process, communicate, store and retrieve information -- from its first scales, tabulators and clocks to today's powerful computers and vast global networks. IBM helped pioneer information technology over the years, and it stands today at the forefront of a worldwide industry that is revolutionizing the way in which enterprises, organizations and people operate and thrive. The pace of change in that industry, of course, is accelerating, and its scope and impact are widening. In these pages, you can trace that change from the earliest antecedents of IBM, to the most recent developments. You can scan the entire IBM continuum from the 19th century to the 21st or pinpoint -- year-by year or decade-by-decade -- the key events that have led to the IBM of today. We hope that you enjoy this unique look back at the highly textured history of the International Business Machines Corporation.

http://www-03.ibm.com/ibm/history/history/history_intro.html