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Today's economic environment challenges organizations to focus on their current business while also positioning themselves for future opportunities. It emphasizes the need to focus on - and invest in - those areas of the business that deliver the most value. Delivering today's results while exploiting opportunities requires a portfolio approach. The concept centers on enterprise-wide differentiation: allocating more resources in some areas of the business and less in others based on market pressure and allocating different types of resources to different areas of the business depending on the opportunities and needs of specific segments. While intuitive, the implementation of such a model can be difficult. It is easier to deliver, for example, uniform cost reduction targets across operating units, but that often means cutting both value and nonvalue-added areas of the business.Box 1 [Figure omitted. See Article Image.]
Graphic 1 [Figure omitted. See Article Image.] As a case history of this approach, more than a decade ago, at the end of the dot-com boom, the IBM business model was facing challenging times with the continuing decline of its mainframe business and the commoditization of the firm's personal computer market. The steps IBM took to resurrect itself provide meaningful lessons for other multinational corporations looking to pursue higher margins, globalize their operations, and change and reduce their cost structures. IBM broke down internal barriers to drive integration and help ensure the company and its global workforce and culture kept transforming and moving in the right direction.[2]
To succeed and maintain a competitive edge, today's executives must ensure they are not just transforming at the top but throughout the organization. As they work to achieve this, senior leaders may find insight in the IBM story. Its transformation may well provide guidance on where to focus change and how to accomplish it successfully across the enterprise while delivering consistent and differentiated performance.
The issues facing many mature companies are not new: stiffer cost competition, commoditization of products and slower growth in their traditional markets. The current economic and business environment makes addressing these issues increasingly urgent. Agile companies, however, will likely persevere and - in the end - use this economic cycle to their advantage.
So how can large companies effectively respond to and take advantage of the...