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Toward a Brighter Future

To meet customers’ demands, the company would start off the decade by introducing new technology: the lock autograph recorder, the first complete school time control system, and the Electric Accounting Machine (IBM Archives: 1920s, 2009). C-T-R also acquired two more companies: Ticketograph Company of Chicago and Peirce Accounting Machine Company (IBM Archives: 1920s, 2009). They developed The Carroll Rotary Press in 1924 which produced punch cards (IBM Archives: 1920s, 2009).

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Due to the diversity in the company’s functions, C-T-R changed its name to what is currently known as International Business Machines Corporation (IBM Archives: 1920s, 2009). To their surprise, the 1930s continued to be prosperous. When the rest of the United States was suffering through the Great Depression, IBM continued to grow (IBM Archives: 1930s, 2009). Watson recognized the need to take care of his employees. So, IBM became one of the first companies to provide its employees with group life insurance, survivor benefits, and paid vacations (IBM Archives: 1930s, 2009).

He also continued producing new machines even though demand was low. This ended up being a wise business decision when the company landed a huge government contract to maintain employment records for 26 million people after the Social Security Act of 1935 (IBM Archives: 1930s, 2009). Watson also recognized the need for education for his employees. In 1933, the IBM Schoolhouse was opened to provide education and training for employees (IBM Archives: 1930s, 2009). Yet another technological advance was made with the implementation of the International Proof Machine (IBM Archives: 1930s, 2009).

The beginning of the 1940s would take IBM in a different direction due to the war. Because of the World War II, IBM began producing bombsights, rifles, and engine parts for the US government (IBM Archives: 1940s, 2009). Again, valuing his employees, Watson took one percent of the profits from the sales of the ordnance items and established a fund to help the widows and orphans of IBM war casualties (IBM Archives: 1940s, 2009). Technology was advanced again when IBM produced the Automatic Sequence Controlled Calculator (Mark I), the first step towards computing (IBM Archives: 1940s, 2009).

They also introduced the Selective Sequence Electronic Calculator, the 604 Electronic Calculating Punch, and the Card-Programmed Electronic Calculator (IBM Archives: 1940s, 2009). The 1950s would prove to be an era of technological change for IBM. In 1952, IBM introduced its first large computer based on vacuum tubes called the IBM 701 (IBM Archives: 1950s, 2009). They went on to introduce the IBM 7090 which was one of the “first fully transistorized mainframes” (IBM Archives: 1950s, 2009).

In 1957, IBM entered the computer disk storage system market with the production of the IBM 305 Random Access Method of Accounting and Control (RAMAC) and introduced a new computer language called FORTRAN (IBM Archives: 1950s, 2009). IBM’s leadership changed, when Thomas J. Watson, Sr. passed his title onto his son, Thomas J. Watson, Jr. (IBM Archives: 1950s, 2009). Under new leadership, the 1960s showed even more change. Thomas J. Watson, Jr. transformed IBM from “a medium-sized producer of tabulation equipment and typewriter into a computer industry leader” (IBM Archives: 1960s, 2009).

According to IBM Archives: 1960s (2009), the younger Watson also changed the way IBM sold its technology. Gone were the days of package-only-selling. Watson decided that hardware, services and software needed to be offered individually. The result was a multi-billion dollar success. IBM also introduced the System/360 which was the first large “family” of computer to use interchangeable software and peripheral equipment. The 1970s would turn out to be another decade of change. Leadership changed hands for a second time when Thomas J. Watson, Jr. stepped down in 1971 (IBM Archives: 1970s, 2009).

He would be replaced by T. Vincent Learson only to be replaced again by Frank T. Cary in 1973 (IBM Archives: 1970s, 2009). Cary led IBM into the personal computing era by introducing the floppy disk (IBM Archives: 1970s, 2009). IBM also introduced a supermarket checkout station and the IBM 3614 Consumer Transaction Facility (an early ATM) (IBM Archives: 1970s, 2009). IBM entered a new era in computing in the 1980s. According to IBM Archives: 1980s (2009), IBM catered to the needs of consumers, small businesses, and schools with the production of the IBM Personal Computer (PC), the first small computer.

This was the first time that IBM had to rely upon outside vendors for components. IBM partnered with Intel for its processor chip and Microsoft for its operating system. Leadership changed again when John F. Akers came on board in 1985. He focused on “streamlining operations and redeploying resources” (IBM Archives: 1980s, 2009, ¶3). IBM Archives: 1980s (2009) went on further to explain that IBM made considerable investments in research which produced four Nobel Prize winners in physics.

IBM also introduced the IBM token-ring local area network in 1985 which allowed PC users to exchange information and share printers and files within a local area. The 1990s would show to be a challenging era for IBM. Because of the tug-o-war between the PC revolution and the client/server revolution, IBM was lost (IBM Archives: 1990s, 2009). They found themselves in unfamiliar territory – desktop and personal productivity instead of business applications within an entire organization – which resulted in net losses of $8 billion (IBM Archives: 1990s, 2009). Something had to be done. In 1993, IBM brought on Louis V.

Gerstner, Jr. as chairman and CEO (IBM Archives: 1990s, 2009). According to IBM Archives: 1990s (2009), Gerstner made a dramatic effort to stabilize the company by rebuilding IBM’s product line, downsizing the workforce, and making significant cost reductions. Since customers were focused on integrated business solutions, Gertner decided to play upon IBM’s strengths – their expertise in solutions, services, products, and technologies. He articulated IBM’s new vision – “that network computing would drive the next phase of industry growth and would be the company’s overarching strategy” (IBM Archives: 1990s, 2009, ¶5).

IBM developed its services segment of the company by acquiring Lotus Development Corp. and Tivoli Systems Inc (IBM Archives: 1990s, 2009). They also demonstrated their computing potential with the production of Deep Blue, the IBM RS/6000 SP – the first computer closest to approximating human intelligence (IBM Archives: 1990s, 2009). Having successfully transformed itself and turned its business around, IBM exited the 20th century as a leading information technology innovator. Restructuring Big Blue Entering the new millennium, IBM recognized that the old way of doing business was not working for them.

They needed to restructure the organization based on current trends in the computer market. The first step in their restructure process was to create a vision for the company. According to IBM Press room (2009), their values shape everything that they do, so they determined that their actions would be driven by the following core values: 1) dedication to every client’s success, 2) innovation that matters, for our company and for the world, and 3) trust and personal responsibility in all relationships. These values were based on all stakeholders for the organization: employees, clients, and investors.

The next step in the organizational change process is to understand who IBM’s clientele is and who their competitors are. “IBM’s clients include many different kinds of enterprises, from sole proprietorships to the world’s largest organizations, governments and companies representing every major industry and endeavor” (IBM Press room – Background – United States, 2009). Their clients are in the industries of financial services, public, industrial, distribution, communications, and small and medium business. IBM’s competitors are equally important. They are in direct competition with companies such as Hewlett-Packard Co. Microsoft Corp. , and Oracle Corp (Finkle, 2009). By understanding who you are in business with, it is easier to get a better picture of what changes need to be implemented to get where the business needs to be. Another important step to the restructuring process is understanding the need for change. What forces are causing the need for change? In IBM’s case, the majority of the forces causing the need for change are external. An external force of change is a force that comes from outside of the organization – beyond management’s control – including the economy, technology, and social/political forces (Organizational Change, 2007).

Economic and technological forces require IBM to investigate the market and find new advantages to their products and services in order to remain competitive with the competition. After determining the force of change, the next step in the change process is selecting an appropriate method of change. IBM has taken a combined approach to change management. To begin with, IBM has taken a structural approach to change by reengineering – creating processes, systems, and structures that meet customer needs (Organizational Change, 2007).

IBM reviewed the business which was a mixture of many aspects of the computer industry ranging from software to services. They decided that the commodity hardware segment of business which was comprised of personal computers, printers, and PC hard drives was not profitable (Finkle, 2009). They ended up selling the PC group to Lenovo in late 2004 (Fuhrmann, 2009). IBM has also started “investing in growth regions of the world and driving productivity through global integration” (Fuhrmann, 2009). As another part of their refocus, they also decided to add more software, consulting services, and system integration activities (Teresko, 2009).

In 2002, IBM acquired the consulting arm of PricewaterhouseCoopers which began the transition from a hardware products emphasis to a focus on services/system integration (Teresko, 2009). Another approach to change that IBM has taken is a task and technological approach to change – changes in job assignments and flow of work (Organizational Change, 2007). IBM decided to reduce spending levels and improve productivity by cutting jobs that added to overhead; they hired more consultants, sales staff, and other workers that directly bring in revenue (Finkle, 2009).

Leadership also changed hands in 2000 with the reins being passed to Samuel J. Palmisano taking over the position of president and chief operating officer (IBM Archives: 2000s, 2009). Lastly, IBM has also taken a human asset approach to change – a method designed to help individual learn and grow professionally and personally (Organizational Change, 2007). IBM formulated a knowledge management strategy designed to educate its employees to produce better quality and more efficiency (Powers, 2006). Some of the knowledge base systems include BluePages, Knowledge Point, Collaboration Central, and ThinkPlace.

All of these knowledge base systems were designed to give employees a place to find information, submit ideas, and collaborate with other employees (Powers, 2006). Staying Competitive In order to stay competitive in the ever evolving computer industry, IBM is going to have to remain proactive and create their future. According to Organizational Change (2007), the first step in remaining proactive and creating a future would be to exercise foresight – set a plan in motion and follow it religiously. IBM needs to strategize where they want to go, create a plan to get them there, and follow through the plan step by step.

Next, continuous learning is the second vital step to being proactive. In order to learn continuously, IBM will need “(1) a clear, strategic goal to learn new capabilities and (2) a commitment to constant experimentation” (Organizational Change, 2007, p. 42). There are three parts to continuous improvement: exploration, discovery, and action (Organizational Management, 2007). The key to any successful business is the ability to take risks and experiment in unchartered waters. For instance, everything in this era is “going green. ” One of IBM’s segments of business is data storage.

IBM could “go green” by inventing a data storage product that is comprised of fewer parts and requires less energy to operate it which would make it environmentally friendly. It would be a win-win for everyone. Another step in remaining proactive is creating advantage. Creating advantage is creating and dominating emerging opportunities in a particular industry (Organizational Change, 2007). IBM needs to make their products and services indispensible to their consumers. They need to come up with something that their competitors do not have or have not thought of yet.

They need to go into markets where their competitors have not gone. An example of how IBM could create an advantage would be by the acquisition of Sun Microsystems. IBM is currently contemplating on whether or not to buy the firm (Asay, 2009). Since both companies complement each other and IBM has been extremely successful in the software portion of its business, the merger could benefit to both companies. Additionally, IBM Software Group is also expanding its market into China, one of the fastest growing markets in the world (ChinaTechNews. om Editor, 2009). Both strategies would be more notches in IBM’s belt to dominating the software market. Furthermore, a company like IBM needs to create the future. In order to create a future, new markets need to be created (Organizational Change, 2007). IBM needs to shape the computer industry into its personal mold to create a competitive advantage. They already know what is currently offered and what customers would like to see in the future. However, they need to come up with new products/services that customers have not realized that they need yet.

Lastly, IBM needs to revisit the business tactics that the company was based upon when the senior Watson led the company and remember that their customers and their employees are the reason for their success. They need to keep up communication with their stakeholders and involve them in their efforts for continuous change. Hopefully by doing so, everyone will be less resistant to change, more productive, and have a more positive attitude. Investing in their employees is another good idea. By educating them, the employees will be more productive, quality will increase, and the end result will be happy customers.

Having happy customers means more profits. Conclusion With the world going through a recession, it is important that companies like IBM retain a competitive advantage in order to remain successful. IBM has been a successful global company for decades. They need to evaluate where they has come from, run with the current changes that they have made and plan for the future. With the correct changes and proper leadership, IBM can continue to flourish in the computer industry and steer its business in a path toward a brighter future. ?

References:

http://news.cnet.com/8301-13505_3-10198900-16.html

http://www.chinatechnews.com/2009/03/11/9189-ibm-software-group-announces-2009-china-strategy/

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