In early 2000, Palmisano believed that IBM’s business opportunities were staggering in their scope
and scale. IBM’s experience in attempting to transform to “One IBM” provided a glimpse of both the
opportunities and challenges that IBM’s customers faced. It was clear that, while the emerging
networked technology platform was a critical catalyst, value creation would demand business
innovation on a scale that most enterprises were ill-equipped to handle. Over the past decade, IBM
had faced significant challenges head on and had made a commitment to nurturing innovation and
growth while also creating the foundation for flawless execution of its established businesses.
Executives at IBM believed that these capabilities would keep the company from spinning out of
control as it had in the early 1990s. Indeed, as Palmisano took the reins of the company, the dot-com
collapse and subsequent economic recession had caused the IT industry’s rapid growth to screech to
a halt. A Fortune article stressed the challenges Palmisano faced:
In early 2000, as Gerstner began handing him the reins by making him president and COO,
the dot-com bubble burst. By the time Palmisano became CEO, IBM’s revenues were down a
whopping $5 billion and still declining. Palmisano found himself steering a technology
company in the worst tech downturn in history