MGT71904 Strategy and Innovation Assessment 1, 2026 | Taylor’s University

Dear Students,

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ASSIGNMENT OVERVIEW

Students will critically analyse the case study provided to evaluate the theoretical and practical drivers of a successful organisational turnaround. By applying advanced strategic frameworks, students must assess whether the principles established in the case remain effective in today’s volatile business environment or if modern disruption necessitates a shift in approach. This culminates in the development of a strategic roadmap for a modern firm, requiring students to synthesise complex theories into actionable insights for long-term sustainability and competitive advantage.

This assignment consists of ONE (1) part:

Part A – Question 1.A

• Submit your critical analysis within the answer box provided in this document.
• Upload the entire document in PDF format as part of your assignment submission.

Learning Alignment

MLO 1: Critically evaluate theories and concepts of business to meet strategic objectives.

PART A 

CASE STUDY

IBM’s Strategic and Cultural Transformation Under Lou Gerstner

Introduction

In 1993, IBM faced an existential crisis. Once the undisputed leader of the global technology industry, the firm was rapidly losing relevance amid structural shifts in computing. Agile competitors such as Microsoft, Intel, and Compaq had unbundled the industry, outperforming IBM in software, microprocessors, and personal computing respectively. Financial losses were severe, and prevailing market logic suggested that IBM’s vertically integrated model was obsolete.

Lou Gerstner’s appointment as CEO marked a decisive turning point. Rather than dismantling IBM into independent units—a widely endorsed strategy at the time—Gerstner chose to retain the firm’s integrated structure. This contrarian decision became the foundation for one of the most enduring corporate turnarounds of the late twentieth century.

Strategic Problem

IBM’s decline extended beyond competitive positioning or technological disadvantage. The organisation had become internally fragmented, with autonomous business units prioritising internal optimisation and power struggles over customer value creation. Core organisational values—such as collaboration, customer focus, and accountability—had eroded, resulting in misaligned incentives and strategic incoherence.

Gerstner identified that IBM’s fundamental challenge was not technological capability but organisational culture. Without addressing deep-seated beliefs and behaviours, any strategic restructuring would fail to produce sustainable results.

Transformation Strategy

Cultural Realignment and Value Reorientation

Gerstner prioritised cultural transformation as the central lever of change. He reframed IBM’s identity around shared values, particularly integration, customer centricity, and collective accountability. Internal competition, once a source of innovation, had devolved into destructive silo behaviour and was actively discouraged.

Consistent with theories of normative control and values-based leadership, Gerstner reinforced these principles through persistent communication, symbolic actions, and personal leadership. Senior managers were expected to model customer-oriented behaviour, reinforcing trust and credibility across the organisation.

Strategic Vision Anchored in a Keystone Change

Although initially sceptical of grand vision statements, Gerstner articulated a unifying strategic direction: IBM would shift from selling proprietary technologies to delivering integrated solutions aligned with customers’ business processes.

This keystone change redefined IBM’s value proposition and required coordination across previously autonomous units. By focusing on customers’ “stacks of business processes” rather than IBM’s product portfolio, the firm created strategic coherence and enabled cross-functional collaboration. This approach aligns with systems-level change models, where a single pivotal shift catalyses broader organisational transformation.

Stakeholder Alignment and Power Dynamics

Gerstner systematically built coalitions to support the transformation. Large enterprise customers, dependent on IBM’s stability and integration capabilities, became strong external advocates. Internally, former rivals such as application developers were repositioned as strategic partners, expanding IBM’s ecosystem.

Resistance, however, was actively managed. Executives who benefited from internal rivalries or resisted collaboration were removed, demonstrating a deliberate use of power to enforce alignment. This highlights the political dimension of change, often understated in normative models of transformation.

Conclusion

The significance of IBM’s turnaround lies not merely in its immediate financial recovery, but in the institutionalisation of a culture capable of navigating systemic industry shifts. While the 1993 crisis was precipitated by a failure to adapt to an “unbundled” market, Gerstner’s intervention proved that a vertically integrated model could thrive, provided it was underpinned by strategic coherence and a unified value system.

Ultimately, the IBM case suggests that organisational transformation is a non-linear process rather than a finite project. For leaders, the primary takeaway is that sustainable change is achieved when shared values and trust are forged into the organisational fabric. Strategic transformation, therefore, is better understood as a continuous journey of alignment and an ongoing effort to ensure that the internal mindset of the organisation remains in harmony with the volatile external environment.

Reference

Satell, G. (2020, February 23). How to create change that lasts. Digital Tonto. https://digitaltonto.com/2020/how-to-create-change-that-lasts/

Question 1.A Individual Task

Work Required

From a strategic business perspective, critically analyse the IBM case study by applying business strategy theories to determine why the transformation succeeded and whether those same strategies work in today’s market.

Your critical analysis should address the following points:

Strategic Interpretation of the Case Study

Apply at least TWO strategic frameworks to provide a theoretical explanation for IBM’s shift. These may include, but are not limited to:

• Market-Based View
• Resource-Based View
• Transient-Based View
• Knowledge-Based View
• Relational-Based View

Evaluate the extent to which cultural transformation and organisational capabilities, rather than technological innovation alone, contributed to IBM’s strategic renewal.

Evaluation of Contemporary Relevance

• Assess whether the core strategic principles used by IBM are still effective today, or if they have become obsolete due to the speed of modern industry cycles.
• Consider the impact of globalisation, digital transformation, VUCA conditions (Volatility, Uncertainty, Complexity, Ambiguity), and other relevant contemporary factors in shaping strategic decision-making in today’s business landscape.

Strategic Implications & Sustainability

• Discuss the practical implications of IBM’s transformation beyond Gerstner’s tenure.
• Discuss the mechanisms that ensure strategic and innovative change remains sustainable while preventing a return to organisational silos.

Assignment Guidelines

Your analysis should demonstrate a deep understanding of strategic theory and its practical implications for achieving sustainable competitive advantage. Where appropriate, you may include additional relevant points beyond those described above. 

Your critical analysis should be submitted in the answer box below and should include, in addition to the points listed above, the following:

• Introduction
• Conclusion

 When preparing your response, ensure you address the following aspects:

• Compliance with the required structure
• Coherence of sentences and grammar
• Quality of the content
• Appropriate APA in-text citations and references

Usage of Gen AI

• You may use Gemini, Claude or ChatGPT to conduct exploratory analysis and structure initial ideas, but the interpretation, synthesis, and final judgement of arguments or analyses must be your own.
• You may use Grammarly, QuillBot, or Scribbr Paraphraser to refine the language structure and verify grammatical accuracy, while maintaining your unique writing tone.

Reference List:

Insert ALL references here for Question 1.A  

-END-

MGT71904 Assessment 1 Rubrics (Jan 26)

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