Mistakes

The Anti-Midas Touch

This sudden shift in culture not only freaked out their customer base, but caused a massive upheaval within IBM itself. There were restructurings and layoffs, which smacked as reactionary and premature. Workers had always been told that lifetime jobs were nearly a mainstay at IBM and that the corporate culture was so well established that massive change was likely never to happen. After all when you are the Mercedes of American businesses, all you should have to do is a small tune-up here and a small adjustment there and the ride would stay smooth and even. Unfortunately, the decision was made to slap a Volkswagen engine under the hood to see if it could get better short-term mileage with the use of cheaper replacement parts. As you can imagine, it was a disaster.

One of the most coveted things in the industry is customer loyalty. Companies work years to cultivate such trusting relationships, and IBM was turning their backs on those relationship with the wave of a wand. These customers had committed in full to the IBM way. They had built their own business around the infrastructure that IBM had become famous for and now felt that IBM was abandoning them on a whim. They were suddenly, painfully realizing that their investment had been compromised and the promises made broken by this new line of silver-tongued managers. They loyalty that had existed for so long between IBM and their employees and IBM and their clients was summarily shattered, and IBM would never be the same.

Oops, They Did It Again.

Instead of promoting workstations tied to mainframes, IBM decided to venture into a new concept, the Personal Computer. It would be a more stand-alone machine, not so dependent on the mainframe architecture as those machines they made in the past. Perhaps they saw it as a new and separate revenue stream. After all, they had pretty much saturated the hardware market on the big end, now they could sell a completely new product and make a lot of money as customers, both new and old, were shown the benefits of these stand-alone machines. The problem was, IBM had spent decades convincing people of the need for interconnectivity and interdependency with their mainframe solutions and now they were introducing a product that flew directly in the face of their established vision. For the first time consumers started seeing cracks in the facade and it worried and confused them. IBM had lost their focus and they did so while the world was watching.

No company had really been able to compete with IBM before because the target was far too big. Now, competitors had a lock on this new technology. Unlike mainframes, IBM did not have a huge head start with PC’s, and they had made the fateful decision to outsource the CPU and OS technologies to other firms instead of handling it all in house. Over time both Intel and Microsoft obtained the rights to share their technology with others, and before you knew it, there was a new market in PC clones, one that would prove an absolute disaster for IBM.

Compaq would hit them head on and do quite well, and PC’s Limited would expand into the behemoth that is now referred to as Dell Computers. These smaller companies were faster and more responsive to industry changes, and thanks to the broken trust between IBM and their customer base, they were able to penetrate the market in rapid fashion. After all, if IBM had shown no loyalty to them, why should they show loyalty to IBM by purchasing these new PC’s exclusively from them?

IBM looked like a prize fighter staggering against the ropes. Strategies came and went like passing fads discarded by fickle consumers. Instead of having a solid long term strategy, they fought round by round, trying to address surprises as they came. Thanks to the increasing hits in the marketplace, their vision became blurred. They were being “Rope-a-doped” by the competition and no longer had firm legs to stand on. They were being out-boxed and out-maneuvered by a faster, younger opponent, and to this day, many people consider IBM to be punch-drunk. They have bought and killed so many companies and squandered so many opportunities that by all rights they should be out of business. Somehow they have managed to pick up the pieces and continue on. Still, instead of setting a shining example, their legacy may be a demonstration of what not to do in the business world.