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Startups can learn several lessons from IBM's strategy. Firstly, it's crucial to adapt to market changes. IBM recognized the need to participate in the price war to stay competitive. Secondly, investing in technology can provide a competitive edge. IBM's billion-dollar investment in a new technical architecture greatly increased their product's profitability. Lastly, leveraging existing resources and capabilities, like IBM's size and experience, can be instrumental in implementing strategic changes.
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IBM had been a pioneer and the dominant player in the "mainframe" world for years. Come 1992, however, the space was much more competitive and IBM was struggling. It seemed unthinkable to lower prices at a time when the business was already losing so much money. But Gerstner was convinced this was the only way. What he saw that others did not was that IBM was "milking" a dying product line. The days of premium pricing on their mainframe were dwindling, and it was a matter of time before competitors inched them out. The only way to stay in the game was to participate in the price war. Luckily, IBM also had a trick up its sleeve to maintain profitability through the price changes. Several years prior, IBM had made a billion-dollar investment in new "technical architecture" for its mainframe product. IBM's size and many years in the business enabled them to make this crucial investment that greatly increased the product's profitability relative to competitors.
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Learn from one of the best turnaround leaders of our time, Lou Gerstner of IBM. Take a page from Gerstner’s playbook on how to reinvigorate a quickly...
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