Thursday, December 20, 2007

Emerging Markets First, Traditional Markets Second For IBM

This week’s nugget was buried in a New York Times article by Steve Lohr on the lowering of IT-spending projections for 2008. The article contained the complete text of a memo by IBM’s CEO Sam Palmisano to the company’s senior executives. In the memo, Palmisano describes a major change in strategic direction – IBM “will focus first on how to capture all the growth in emerging markets, and then adjust our plans to serve the more traditional markets appropriately.” Palmisano underscores IBM’s continued investment in Brazil, Russia, India and China (BRIC), and announces a $1.6 billion initiative to capture growth opportunities in other parts of Southeast Asia, Eastern Europe, the Middle East, Africa and Latin America. A special emerging-market-based group will drive the initiative, which Palmisano expects to contribute significantly to the company’s revenues by 2010.

Palmisano deserves credit for recognizing the near-term opportunity “beyond BRIC” and providing strong leadership on strategic growth in “second-tier” developing countries. He has a proven track record of backing up past announcements with solid action. The number of employees in India, for example, has increased 40% to 73,000 in a year, reflecting the company’s rapid growth in the region. The BRIC countries have yielded a compound growth rate of 22 percent since 2004. Despite this success, Palmisano clearly understands the importance of bracing senior management for a strategic shift away from more comfortable traditional markets. “This is quite a change in mindset,” he says in the memo, “but that’s what is required to exploit today’s most exciting growth opportunities."

The overt change in focus by IBM and others (Cisco, GE, Microsoft, Nokia) presents an opportunity for regional offices to contribute more directly to the corporation’s strategic direction. With a spotlight on growth opportunities in their local markets, senior leaders in those countries (whether they are from the local area or moved there by the company from abroad) can contribute to company growth by influencing how products and services should be designed to meet local needs and preferences. For IBM to be successful in emerging markets, it will require a sustained commitment to innovation and understanding local markets. The details of Big Blue’s new emerging-market growth initiative will govern its degree of success, but the announcement alone is a bold step in the right direction.
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1 comment:

Anonymous said...

Having the foresight to invest in emerging markets is a great thing, but you do need cash to backyou up... i guess IBM has plenty of that!