Dynamic Capabilities

9926 Words Mar 2nd, 2011 40 Pages

Dynamic Capabilities at IBM: Driving Strategy into Action
(White Paper Draft)

J. Bruce Harreld Senior Vice President IBM

Charles A. O’Reilly III Graduate School of Business Stanford University

Michael L. Tushman Harvard Business School Harvard University

August 10, 2006

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2 Abstract In the past 15 years, the IBM Company has undergone a remarkable transformation from a struggling seller of hardware to a successful broad range solutions provider. Underlying this change is a story of foresighted strategy and disciplined execution—of connecting knowing to doing. In strategic terms, the IBM transformation illustrates the ideas behind dynamic capabilities, showing how the
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We then describe how the company’s brush with failure led to the evolution of the IBM Business Leadership Model and how a set of related strategic processes, including deep dives, Emerging Business Opportunities, the Strategic Leadership Forum, and the Corporate Investment Fund, are managed by IBM’s Strategy Group and involve 25,000 executives to help identify and capture opportunities across

Louis V. Gerstner, Who Says Elephants Can’t Dance? Harper Business, 2002; Paul Carroll, Big Blues: The Unmaking of IBM. Reed Business, 1993; Doug Garr, IBM Redux: Gerstner and the Business Turnaround of the Decade, Harper Collins, 1999. 2 M. Tushman, C. O’Reilly, A. Fenelosa, A. Kleinbaum and D. McGrath, “Toward relevance and rigor: Executive education as a lever shaping research and practice” Academy of Management Learning and Education, 2006.


5 140 geographies with constantly changing competitors and technologies. This process, while hardly perfect, has, in the words of former CEO Gerstner, “helped the elephant to dance.”

Strategy: Why it is so important—and often fails We suspect that every regular reader of the business press has, in one way or another, been steeped in the logic of strategy and competitive advantage. We have all been exposed to the notions of the five forces, core competencies, SWOT, “coopetition,” and a myriad of other frameworks for how leaders can help
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