Assignment Task
IBM’s History of Leadership and Transformation
IBM’s 105-year history as arguably the world’s premier technology company is a story of numerous transformations, enabled by a culture that helped it thrive in the midst of powerful technological and societal changes, even while most of its competitors came and went. In 1911, Charles Flint formed the Computing-Tabulating-Recording Company (CTR), the predecessor to IBM, out of the merger of three companies, hiring Thomas Watson as CTR’s General Manager in 1914. The company sold cash registers, meat grinders, scales—the business machines of the day. Watson became President in 1915 and began to shape the modern IBM, focusing on the tabulating division. In 1924, he changed the name to International Business Machines Corporation. Watson led considerable growth while building a strong corporate culture around family and a sense of community, with a one-word motto: “Think.” In 1956, Watson’s son, Thomas Watson Jr., became CEO and invested in new computing technologies that would revolutionize the industry, including the System 360 series of mainframe computers in the 1960s, a “bet-the-company” $5 billion risk that paid off with IBM dominating the computer world for over a decade. At one point, 70% of computers worldwide came from IBM. (A U.S. antitrust suit ensued from 1969 to 1982.) Watson Jr. also changed the management structure from highly-centralized to a more tiered structure, empowering managers at lower levels to make important decisions after rigorously debating options. He codified a set of formal values and ethics to guide IBM as a company—IBM’s Basic Beliefs—which included an emphasis on social responsibility and diversity. Watson Jr. was memorialized in many tributes, including his name on IBM’s state-of- the-art research center.
Almost 30 years later, in 1984, IBM, headquartered in Armonk, New York, earned $5.5 billion in profits on $46 billion in revenue. But performance lagged under John Akers, who became CEO in February 1985. An IBM-lifer, Akers embodied the blue suit-clad, white-shirted IBM salesman image. But the computing industry was moving away from sole dependence on the mainframe and towards minicomputers and PCs, with California’s Silicon Valley becoming a rising force. While IBM had developed a pioneering PC in 1981 in a startup-like environment in Boca Raton, Florida (in part in reaction to Apple’s formation in 1977 by Steve Jobs and Steve Wozniak), it had ceded to West Coast growth companies Microsoft and Intel what would prove to be the most valuable pieces of the PC industry: the operating system and microprocessor. In 1992, Akers’ final full year as CEO before retiring in January 1993, IBM lost $4.96 billion on revenue of $64.52 billion, laying off one-fourth of its employees and shuttering 10 manufacturing plants. This was a low point. Would it be broken up, or declare bankruptcy? IBM had a piece of nearly every tech field and faced no big competitors that did everything it did, but it was being nibbled to bits by niche competitors in new tech areas while continuing to depend on its dominance in mainframes.
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