The Transformation of IBM
IBM had a very good year in 1990. John Akers had guided his company through three major rounds of corporate restructuring since 1985, and he was proud of IBM's accomplishments. Recent product introductions were being hailed as technical breakthroughs with great market potential, the stock price had recovered, and internal morale was improving. Akers was determined that IBM be viewed as the world-class competitor in its field, and all the signs were pointing in the right direction-profits were growing again and IBM remained the market share leader in each of its businesses. But after an outstanding fourth quarter, Akers had to tell his shareholders in March 1991 that operating profits would be down sharply in the latest three months as a result of lower sales in the U.S. and Europe. Concerned about the magnitude of the downturn, the competitive Akers was growing impatient with the time it was taking to transform IBM, especially the vexing problems of meeting deadlines and getting the organization to be aggressive in solving quality issues and delivering on commitments. Akers challenged his senior management team: “How do we respond to this latest decline? Should we restructure ourselves to anticipate lower growth? And how do we improve our execution?" Akers made it clear that all options should be on the table.
History of the Company
IBM's first president was the legendary Thomas J. Watson Sr. After joining the Computing Tabulating and Recording Company in 1914. Watson changed the company's name to International Business Machines in 1924 and began building one of the most successful corporations in modern history. Among Watson Sr.’s most prescient strategies was seeing the whole world as IBM’s market. Between World Wars I and II. the company erected plants in Germany, France, and the U.K. and established agencies in Latin America and Asia. From the beginning, national companies were run by locals and given leeway in deciding product mix and pricing policies. Over the years, IBM's established global presence gave it a huge international installed base and the capability to tap the best human resources worldwide. Perhaps most important to Watson Sr. was his belief that people were IBM’s most valuable assets. He replaced foremen with managers who were instructed to treat workers with respect, listen to their ideas, and encourage innovation. IBM provided its employees with healthy paychecks. free insurance. and numerous benefits. Watson developed the principle of continuous learning and brought teachers into the company to help workers improve their education. Watson Sr. and his successor, Thomas Watson Jr., went on to create a work environment that rewarded Winners and sought the highest possible standards of performance. To build organizational excellence, IBM developed its "contention management” style. Every staff unit would be asked to “concur” or “non-concur" with each operating units plan. Dual teams were also set up to present conflicting views on key issues, after which a “shoot-out” would take place before top management. To further harness its human resources toward the development of a new product or technology, IBM established 1
multiple groups to focus on the same project. Management then chose the winning project. This competitive, results-oriented environment produced functional excellence. IBM became especially strong in marketing and distribution; it outmaneuvered its competition with a superior sales force that built close ties to corporate data processing managers. The IBM brand name became so powerful in the postwar period that it became a cliche to say that "no one was ever fired for buying IBM.” Service, in particular, became a fetish for IBM. The company won customers by standing prepared to perform any amount of assistance the customer needed.
SySteml360 Despite all of these advantages, many analysts in the late 1950s viewed IBM as a conservative company that...
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