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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Background

IBM was incorporated in 1911 as the Computing Tabulating Recording Corporation (CTR), which manufactured punch card data processing equipment. On February 14, 1924, CTR changed its name to International Business Machines Corporation.

The company's founder and President Thomas. J. Watson believed that the new name was more in keeping with its growing business portfolio and wider range of business-related products. IBM set up its first research facility in 1945 in Manhattan.

IBM Research occupied a very important position within the company. Over the years, IBM Research invented products that became the foundation of the IT industry. FORTRAN, Reduced Instruction Set Computer (RISC) architectures, relational databases, token-ring networking, the cursor and magnetic disk storage were all developed at IBM Research.

However, IBM marketed very few of these products. In 1969, the US government started an antitrust inquiry on the premise that IBM was trying to monopolize the markets for general-purpose electronic digital computer systems and specifically, the market for computers designed for business.

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This inquiry continued until 1983 and left the IBM weakened by acting as a distraction and clouding its decision-making. Some analysts felt that IBM would have been able to see the potential in many of its inventions, had it not been for the inquiry. The company was also afraid to take bold decisions for fear that these decisions may compound the charges against it.In the 1980s, IBM's culture, reflected bureaucracy and rigidity.

The company took a very limited view of its market and business activities and operated within this narrow sphere. There was also lack of communication and understanding between the research wing and the business side of the company. Due to this, IBM lost a number of opportunities and failed to commercialize many of its inventions.

The 1980s were a period of decline for IBM, and by the early 1990s, analysts had begun writing off any chances of revival. In 1993, IBM posted a loss of $4.97 billion for the year 1992, which was at that time, the largest single-year corporate loss in US history.

In 1993, Gerstner took over as CEO from John Akers (Akers). Under Gerstner, IBM made a number of changes in its business operations and culture...

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