MIT Sloan Management Review

Corporate Strategy

The Decline and Rise of IBM

By D. Quinn Mills

July 15, 1996

WHAT LESSONS DO IBM’S FAILURE IN THE 1980S AND EARLY 1990S AND ITS APPARENT SUCCESSFUL COMEBACK HAVE FOR OTHER LARGE CORPORATIONS? IN AN EXTENSIVE study of the company’s history (only part of which is covered here), the author finds two factors that contributed to IBM’s difficulties: it ignored its commitments to customers to provide effective, high-quality technology and service support, and it broke its implied promise to employees to provide job security. Large corporations will survive only if they can avoid some of the hazards that IBM has faced.

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IBM is making a comeback. Although many observers had counted the company out — “It’s a dinosaur, an implosion, a wreck,” various commentators said — its revival was probable, even predictable, because cycles of decline and revitalization have been the company’s pattern through many decades.

Part of the pattern has been its slow confrontation of new technological approaches. Successful in its established ways, IBM finds innumerable reasons to deceive itself about the need to change. In times of major technological transition, it has had to jettison its top leadership to bring in people who are willing to break with the past.

Again, the pattern has repeated itself. A new chairman and a new top management team are redirecting the company. IBM is embracing an innovative approach to computing — networks — and bringing out products and services that fit into the new model. As Lou Gerstner, IBM’s chief executive officer, recently commented, “We are completely transforming the business to address the market for networked computer systems.”

But, significantly, Gerstner has not taken IBM on a new course as much as he is returning it to its roots. For decades, IBM had a strategy of supplying one-stop shopping for information services to large firms — a strategy I call “singleness.” The company strayed from that strategy in the 1980s, confused and angered its customers, and has now returned... To read the complete article, login or sign-up using the form below.

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