Reorganizing AT&T: From Vertically Integrated to Customer-Centric Organization (A)

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Once the decision to divest was made in 1982, AT&T moved rapidly to complete the reorganization by January 1984. In just 20 months, it completed the Herculean task of segregating about one million employees and assets of $150 billion among itself and the BOCs. AT&T reorganized itself by adopting a matrix structure with market segmentation overlapped by functions. AT&T, after the break-up, was established as a separate, unregulated company to sell equipment and long-distance communication and information services.

It was broadly divided into AT&T Communications and AT&T Technologies(Refer Exhibit III). AT&T Communications comprised of all long-distance telecommunication services of the old AT&T. AT&T Technologies comprised of Bell Labs (R&D), AT&T International (overseas sales), AT&T Information Systems (domestic marketing of telecom products, computers and other related services to businesses), AT&T Network Systems (supplies network telecommunications products), AT&T Technology Systems (produced integrated circuits, power systems & optoelectronic components) and AT&T Consumer Products (sold and leased telephones and other telecommunications products through retailers)...

Soon after the break-up, AT&T had to quickly revise its strategies because of rapidly changing customer preferences and intensifying competition from long-distance telecom companies such as MCI, ITT Long Distance, Skyline and GTE Sprint. AT&T also faced major problems in marketing its products.

Although sales people were aggressive and contacted key customers as often as once a week, many customers remained unimpressed. According to one customer, "They are still marketing under the old concept. Which is, we're the only one in the market and you got to do business with us." AT&T's management decided to respond by streamlining operations and speeding up product development. AT&T also began to lay more emphasis on marketing, both directly and indirectly through retailers such as Sears Roebuck & Co. The company also attempted to revamp its HR strategies to make employees independent and customer-responsive, not waiting for headquarters to give them instructions...

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