By September 1999, IBM had achieved financial stability with steady revenue growth. But at only
5.7%, this growth was well below the red-hot technology industry average. When Gerstner learned
that funding for one of his key new-business initiatives in Life Sciences had been cancelled by line
management in order to contain short-term costs, he “blew his stack.” As head of corporate strategy,
Harreld was given the task of looking into whether other promising new growth businesses were
being abandoned. “I found a similar pattern across the board,” he said,30 and then Harreld set about
documenting the problem with detailed case studies. While IBM had plenty of great ideas and
inventions—in fact, IBM Research was granted more patents each year than any other company in
the world—Harreld found that managers had a difficult time launching and growing new businesses
that would commercialize these inventions and exploit growth opportunities arising in the
marketplace.
Harreld’s research showed that the majority of IBM employees focused on selling current
products, serving current customers, and executing current operations. In fact, the focus on flawless
execution and short-term results had intensified under the ruthless cost cutting necessary to survive
during the 1990s. In addition, while common operating processes were enabling improvements in
achieving the goal of “One IBM” in its current businesses, the innovation process continued to be
focused within the silos of existing lines of business. “If we attempted to start a potential business
and it didn’t fall within a natural line of business, it was hard to develop,” Paul Horn, senior vice
president of Research, recalled.31
A corporate venture fund that had been established to support internal growth opportunities had
also proved problematic. “We called it bowling for dollars,” Harreld said, “because managers from
[lines of business] tried to fund ideas with loose, back-of-the-envelope business plans.”32