Linda S. Sanford, Senior Vice President, Enterprise on Demand Transformation and Information Technology at IBM, espouses a recipe for growth that involves looking critically at a company's functions and letting go of those that don't add value.
Few companies have transformed themselves quite to the extent that high-tech leader IBM has. In the last few years, the Armonk, NY, company has restyled itself from a slow-growth manufacturer of computer hardware to a more nimble provider of services, software, and hardware.
At the forefront of those changes has been Linda S. Sanford, currently IBM's Senior Vice President, Enterprise on Demand Transformation and Information Technology. In her recently-published book, "Let Go to Grow: Escaping the Commodity Trap," Sanford tells how IBM and other companies -- including General Electric, Toyota, and Proctor and Gamble -- have achieved sustained growth. The key, Sanford says, is letting go of old ways of doing business, outsourcing non-value-added functions, and building what she calls "value webs" -- communities of highly collaborative partners.
Sanford recently discussed some of the ideas in her book with Managing Automation.
Q: What do you mean by letting go?
A: I'm suggesting that we all let go of business models and management systems that are not effective in today's ultra-competitive marketplace. The Internet, globalization, and deregulation have given rise to a situation in which many products and services have become commodities.
To compete in this environment, businesses need to find new ways to differentiate themselves. By fostering collaboration both within their firms and with outside business partners, companies will be better equipped to drive growth through increased productivity and innovation.
Q: In your book you say companies must start by componentizing their businesses. What do you mean by componentization?
A: The first step in letting go is identifying the things your business does well and those it could do better, either through process change or partnerships. By breaking an organization into components, the business functions a firm excels at can be shared companywide. If there's no advantage in performing an activity in-house, that business component should be passed to an outside specialist. This allows the company to redirect investments to advance its lead in other areas such as research and development and marketing. IBM has used this approach to improve our supply chain operations.
Until recently, for example, our global logistics operations were asset heavy. We owned warehouses, trucks, and fork-lifts which didn't provide us with the cost flexibility we needed to compete. So we outsourced it all. The end result was much greater flexibility as well as more than a billion dollars in cost savings, which we have invested in other parts of our business.
Q: Are all manufacturing processes suitable for componentization?