Magna started as a relatively small maker of individual auto components for automakers and suppliers. As the industry evolved and became more globally competitive, OEM auto companies and supply chain companies needed more pre-built and pre-assembled modules for many car technologies, such as engine systems, transmissions, cooling systems, brakes, suspensions, air conditioning and interior parts.
As many automakers tried to reduce their investments in backward integrated manufacturing, suppliers like Magna saw opportunities to start bundling auto part products into small product and service modules. As these changes continued, Magna moved into more and larger product/service bundles. Finally, it evolved into a product/service super-bundler, in some cases manufacturing, outsourcing and assembling the entire car. The details of the Magna product/service strategic transformation are unique, and it is critical for us to explore and understand it. Today, Magna is a diversified major global automotive integrated product/service supplier.
IBM evolved from a complex product-centric business into an extraordinarily complex product/service-centric business. The culmination of this has been business process outsourcing (BPO). Now, IBM offers enterprise customers (large global corporations) BPO, massive, multi-billion dollar outsourcing product/service bundled solutions for the customer’s entire IT and IS operations. IBM wants some of their large corporate enterprise customers to completely outsource their CRM to IBM, which requires a large and complex hardware/software/services bundle.
In another case, the company persuaded BP (British Petroleum Corporation) to outsource its entire finance and accounting function worldwide to IBM. The data from the oil giant now reside in IBM systems worldwide. In building up the IBM product/service portfolio, IBM added 180,000 new people to the company. By 2004, the IBM services part of the product/service portfolio had grown to $43 billion in revenue. To drive this product/service growth, IBM created IBM Business Consulting Services, a $13 billion group focused on super-bundled customer product/service solutions.