IBM: From Inventor to Innovator|Business Strategy|Case Study|Case Studies

IBM: From Inventor to Innovator

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Case Details:

Case Code : BSTR136
Case Length : 11 Pages
Period : 1970 - 2004
Organization : IBM
Pub Date : 2004
Teaching Note :Not Available
Countries : USA, Global
Industry : Information Technology

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Fall of a Giant

Despite having a world class research facility and talented research teams, IBM's track record for commercializing its inventions in the 1970s and 1980s was poor. The company failed to take advantage of the work done at its laboratories and consequently lost out on a number of opportunities. Many smaller companies that were set up around IBM's neglected inventions during that period, went on to become market leaders.

Notable among these were Oracle Corp. (Oracle) and EMC Corporation (EMC). In later years, when IBM eventually realized the potential of the products it invented and began commercializing them, it found it difficult to catch up with its competitors.

In the early-1970s, IBM engineer Edgar Codd (Codd) had developed an algorithm defining relational databases that involved tabulating large amounts of data and using operators to manipulate the data. However, IBM management felt that this innovation did not mesh well with the broader corporate strategy and did not sanction its development...

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Cultural Transformation

Culture was the single biggest reason for IBM's decline. Therefore, changes in culture formed the core of IBM's transformation. Under Gerstner, IBM's new strategy was to use processes and culture to regain advantage.

Before the transformation, IBM Research was organized more like a university laboratory than the R&D unit of one of the largest technology companies in the world.

Researchers worked in an academic environment and were rewarded for the number of papers they published and awards they won, rather than for commercial innovation. Academic excellence was valued and IBM Research even had its own system of recognition. Researchers were given titles of Master Inventor, Distinguished Engineer or an IBM Fellow, which was the highest level of recognition.

IBM Fellows had the freedom to conduct research in any topic of their choice and most of these people came out with outstanding innovations...

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