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When Strategies Go Bad – Part 1 – IBM

By Dana Baldwin, Senior Consultant

Note: This post is a part of a series taken from Dana Baldwin’s article When Strategies Go Bad previously published in Compass Points in April 2004.  In this part we will introduce the series and discuss what happened with IBM.

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How many times have you read an article in the newspaper or seen a report on television news about a company which appeared to be doing very well, but which recently had come on hard times? Lately, this has happened more often than we remember it occurring in the past. But, this is not just a current phenomenon; it has happened many times in the past, and is happening now only with a little more frequency, or so it would seem.

In former IBM Chairman Louis V. Gerstner’s book, Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround, you will read about the tremendous rebirth of IBM. Under Gerstner’s leadership, IBM virtually reinvented itself, pulling up from near ruin.

What happened to Big Blue? In the 50s, 60s and 70s, IBM was the 800 pound gorilla in the computing marketplace. IBM set the standard for performance, sales capabilities, service, innovation and market leadership. Things were done the IBM way: Blue suit, white shirt, red tie, black wingtip shoes, black briefcase. There were prescribed ways to sell IBM systems, and conformity was demanded of everyone. Why, after all these years of success, did IBM require turning around? Much of the responsibility for this goes back to the type of market intelligence IBM listened to during the late 70s and early 80s.

When IBM sought market intelligence, they went to their best resources – or so they thought. They contacted the people who used and managed their systems in the many installations around the country. In essence, they talked with people who had a vested interest in preserving the IBM way of life: Large systems which require lots of highly trained, highly paid systems people. Self-reinforcing market intelligence told IBM what it wanted to hear.

The thought that personal computers and distributed processing could replace main frames was totally alien to the IBM way, and talk of this type of future could cost a person a job if the wrong people heard it. A friend who worked on a special project for IBM during the roll-out of the IBM Personal Computer said the resistance within the company was palpable and obvious. The consequence was that while IBM developed and sold desktops and later, laptop computers, the heart and soul of the company remained committed to main frames. This resulted in a lack of real commitment on the part of IBM to the PC, which allowed other companies to clone their machines and to push IBM from the initial position of dominance to near irrelevance in a short time.

All this happened while IBM was still primarily focused on their large systems, and resulted in the near-meltdown of IBM. While this statement is extreme, it reflects what happened to IBM because they did market research in too restricted a manner, resulting in bad information on which they based their future course and direction. Lesson: Be sure that your information sources reflect fully and accurately the true characteristics of your market place, and not one which tells you what you want to hear. Failing to listen to the true intent of the market can lead to poor investments in developments, direction and strategies.

In the next part of this series we will discuss what happened to Global Crossing.

To learn ways to take your strategic planning to the next level please listen to our webinar:  Why my strategic planning isn’t working.

M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at: baldwin@cssp.com

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