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How Big Blue avoided extinction

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In September 1999, IBM’s then-CEO Lou Gerstner learned that Big Blue had failed to capitalize on 29 separate technologies the company had developed.

Why, he wondered, was IBM missing market opportunities? Should the company bring in more new blood, i.e., people unencumbered by years of the company’s culture, to develop new lines of business?

An internal analysis revealed that the same strengths that allowed the company to exploit mature markets made it difficult to explore new spaces.

So in 2000, the company founded its Emerging Business Organization (EBO) initiative, which added $15.2 billion to IBM’s top line in the ensuing five years.

IBM now puts experienced managers—not new blood—at the top of the new business units. The previous practice had been to put younger leaders at the helm, those who were less steeped in the “IBM way” and more likely to take new approaches.

Those leaders often failed.

A manager-leader needs connections and credibility internally to get help from the rest of the organization. A newcomer can’t always get that help.

— Adapted from “How Did IBM Avoid Becoming Extinct?” Bill Snyder, Stanford Graduate School of Business News.

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