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What Media Companies Can Learn From IBM’s Turnaround

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Simon Waldman is Group Product Director of LOVEFiLM, and author of “Creative Disruption: What you need to do to shake up your business in a digital world” [FT Prentice Hall]. He blogs here, and tweets as @waldo.

Imagine a business in trouble. A lot of trouble. It is being disrupted by new technology. It has become bureaucratic and bloated.
After decades of healthy profits, it is losing money and revenues are going backwards; its share price is tumbling.

What do you think the chances are that in 17 years’ time, the company would be worth six times as much, and would have delivered 31 consecutive quarters of growth in earnings per share? Yes, the chances are slim, but this is exactly what has happened at IBM. The company this week reported income up by 12%, and, despite a relatively lukewarm reception by Wall Street, now has a market cap of $182 billion, compared to $29 billion in 1993.

I have just published a book (Creative Disruption: What You Need To Do To Shake Up Your Business in a Digital World) that looks at how the internet disrupts businesses, and what they have to do about it. After 15 years in newspapers, most recently as Director of Digital Strategy at the Guardian Media Group, I wanted to see how other businesses have coped with similar turmoil and share those experiences. And, I think any business facing this challenge today has plenty it can learn from what happened to IBM nearly 20 years ago.


8 Responses to “What Media Companies Can Learn From IBM’s Turnaround”

  1. Content business should of course remain content businesses, they simply need to ensure their infrastructure is such that new distribution channels can easily, scalably emerge: newspapers, to web, to mobile, to tablet, to IPTV…. The good news is these days, you don’t have to be first. You just need to do it properly.

  2. Dave Gould

    Great article.

    Let me suggest that the parallel for a media/newspaper company is a re-invention of our sales organizations. We need to better leverage our strong local relationships to offer more digital services and agency-like guidance. The small business that is buying the occasional print/digital package is probably getting mediocre results. They need a marketing consultant that can help them with all areas of their business marketing. Newspapers have the relationships and some of the products. They need to build out more products and services and hire people who can help local businesses with strategy.

  3. Jack Black

    Tell them it was on the X, back in 66. Check with the fuzzbox and keep converting cash to ice and stash it away. Say you are in media, losing your shirts and trying to turn it around. Watch out for turncoat guys with silly bailout schemes trying to steal your ice girls. I gotta split, so until later, keep late. Fashionably so!

  4. I’ve always been amazed that IBM could make this transition too. While there is a lot of focus on the cutting of fat, less understood is the value added. “Avoiding the ax” is not the reason that people changed the way they did business. Gerstner had to articulate a reason that made sense. Didn’t he get the company to realize that they had been in the service business instead of the server business? In other words he converted IBM from a hardware company into a consulting company.

    What is the parallel for a media company?

  5. Lou Gerstner Fan

    Wow – original thought alert – so you just re-hash Lou Gerstner’s book – “Who Says Elephants Can’t Dance?” – and find replace “Big Blue” with “Traditional Business dealing with Digital Media”.

    Here’s an idea – go read Lou Gerstner’s book everyone and learn from someone who actually did it.

  6. Meena Shah

    Absolutely fantastic thought provoking post here Simon.
    I would say we can all learn something from the IBM story. Even as individuals. In a time when many people are also finding themselves in hard times. It’s important to not throw in the towel so easily, or think you now need to be someone one else to survive.
    Take a leaf out of IBM’s book. Reshuffle yourself, reposition yourself in the market and maybe pull the purse strings a bit tighter. But never lose yourself chasing the next big thing. That’s what sustainability is all about.
    This story just goes to show once again like so many stories, anything is possible.
    It’s also important to realize that no man is an island. IBM turned to Lou Gerstner and my advice will always be to turn to the experts for advice and guidance if you are facing hardships. Nobody does it alone.

  7. Excellent post Simon.
    I’m looking forward to reviewing your new book.
    I was at the front of rapid intense core transformation myself – the points you make here resonate very closely with my advice to the book publishing industry:
    – Digital / falling print sales are catalysts for change – use them to drive change at every level of the business
    – Business needs new vision – if the current vision is no longer relevant – what vision is there? – who is on / off the bus – is it being communicated effectively?
    Improve your understanding of business drivers – ensure everyone understands the drivers and how they can contribute / increase traction on these
    – Restructure the business / roles to align with the newly articulated mission – the business needs to look “out” not in
    – Put your best people on your biggest opportunities – move bums on seats to get new momentum and fresh initiatives in the business
    – Create a culture of “initiative” not “fear” – recompense the bold
    – Experiment and budget for downturn – things are going to get a lot worse – don’t be meek – bring sales down then bring your costs down in line to preserve your margin and some headroom – its in the nature of digital media to go niche (but more diversified product lines)
    – A clear business focus works best when you divest all non-core activity – you can always come back to it in more prosperous times
    – Put technology at the heart of the company
    – Promote (or recruit if you need to) a digital marketing expert to your board – they know how to lower the cost of reaching customers more cost-effectively using digital marketing practices (learning these intensively myself)
    – Put time aside for redefining your business purpose and structure – no matter what anyone says, the future is DIGITAL — how will your digital plans compensate for the downturn in print sales? match numbers to the vision – keep the headroom and preserve / improve the margins
    – Work fast and don’t waste time trying to preserve the existing – get advice from others

  8. Entrenched people with a status quo mentality don’t reinvent – they rather watch the sink ship or sink with the ship due to pride.

    BTW, it’s funny you failed to mention or acknowledge IBM turnaround has more to do with jumping into the outsourcing business than anything they done with technology. IBM started helping companies turn their IT department into outsourced “IBM consultants” and fired the newly IT converts after six months and replaced with with lower quality and foreign workers at a fraction of the salary.

    So reading your love of IBM, maybe the media should have their editors and staff transition to employees of an outsourcing firm, get fired after 6 months to be replaced by outsourced writers and editors in the Philippines who works on $2/hour wage scale.