History Of Ibm And Analysis Of Its Company Culture

Preamble

IBM (International Business Machines) is an American information technology company based in Armonk, New York but operating worldwide. As of 2018, it has operations in over 170 countries with over 350,000 employees and a net income of US$ 8.72 billion.

The company, affectionately nicknamed “Big Blue” owing to its iconic blue 8-bar logo deals with the production and sale of computer equipment, middleware and software. It also has in cloud computing, providing hosting and consulting services as well as being a major computer research organization.

The company operates through five divisions: Cognitive Solutions, Global Business Services, Technology Serrvices & Cloud Platforms, Systems and Global Financing.

History of IBM

IBM can trace its origins to the 1880s, when 4 predecessor companies were pioneering technologies that would form the core of IBM’s operations. These companies were: the Computing Scale Company of America; the International Time Recording Company; the Tabulating Machine Company and the Bundy Manufacturing Company. The technologies in question included the dial recorder and a time clock that used a paper tape to record a worker’s arrival and departure time at work.

On June 16th, 1911, noted financier Charles R. Flint orchestrated the amalgamation of the 4 companies to form a fifth holding company, the Computing-Tabulating-Recording Company (CTR). AT this point, the 5 companies combined had 1,300 employees and operations in 6 cities in North America. Each company was allowed to operate using their established names under the parent company until it was done away with in 1933. Of the four, the most notable technologically was The Tabulating Machine Company which specialized in the development of punched card data processing equipment which would go on to become the industry standard for the next 80 years of computing data input. Charles Flint headed the company until the diversified businesses became difficult to manage.

At this point, he hired Thomas J. Watson, Sr. who became General Manager of CTR in 1914 and later President in 1915. Watson quickly initiated a series of business practices that proved effective; including generous sales incentives and a passion for instilling company pride in every worker. His fresh take proved successful. During the first four years of his tenure, revenues doubled to US$ 2 million and the company expanded into 4 more continents. In 1924, Watson oversaw the dropping of the name CTR in favour of the more ‘expansive’ International Business Machines (IBM). By 1933, most of the subsidiaries had all been merged under the new name.

In 1952, after almost 40 successful years at the helm, Watson Sr. stepped down to pave way for his son Thomas J. Watson Jr., who was named President. He hit the ground running, as in 1956 the company showcased the first practical example of Artificial Intelligence. In 1963, IBM waded into space exploration, helping NASA track the orbital flights of its astronauts. In 1964, the company’s corporate headquarters shifted from New York City to Armonk, where it stands to this day. In 1969, IBM engineers developed magnetic stripe technology, which would lay the foundation for the global credit card industry. In 1971, Watson Jr. head a heart attack and subsequently retired. Vincent Learson stepped up to succeed him, but quickly retired after two years as he attained the age of 60, precipitating his mandatory retirement. Frank T. Cary then took the helm.

The 1970s saw the company continue to develop pioneering technologies. In 1971, the company invented the floppy disk, which became ubiquitous for storing personal data over the next few decades. 1974 saw the company develop the Universal Product Code. This is a type of barcode that is widely used globally to track inventory in stores and supermarkets. Another highly significant invention was the IBM 3614 Consumer Transaction Facility, which enabled withdrawals, transfers and other account-related transactions by bank customers. This machine would be the precursor to Automated Teller Machines (ATMs).

The 1980s set the stage for what would lead to the company’s eventual decline in the early 1990s. In 1981, the President of IBM John R. Opel rose to the position of CEO. By this point, the company’s share of the computer market had dipped 32% from a high of 60% in 1970. Its stock market price had also declined by 22%. This turn of events came on the back of a long-running 13-year antitrust lawsuit starting in 1969 instigated by the Justice Department. The lawsuit took up a good portion of the company’s time and resources, causing it to fall behind to competitors such as Hewlett-Packard (HP) in the ballooning minicomputer market.

In 1982, the government dropped the lawsuit as IBM’s dominance of the computer business had waned. The company further fell behind due to a fateful decision to contract fabrication of components such as the operating system and microprocessor to external firms such as Microsoft and Intel. The overall result was that IBM ceded billions worth of market value to companies outside it. As a result, a personnel change came in 1985 with John Akers becoming CEO. However, despite his best efforts, he could not stem the decline of the company. Matters came to a head on January 19th, 1993 when the company posted a US$8.10 billion loss for the financial year ended 1992.

This represented the largest single-year corporate loss in the country’s history. Subsequently, hundreds of thousands of IBM employees were laid off, including the CEO. Louis V. Gerstner, Jr. took over as CEO in April of 1993, with his mandate being to turn around the company. He immediately sought to stabilize the company, implementing significant cost reductions and reversing the move to spin off IBM’s businesses into separate companies. 1994 saw the company return to profitability, posting a profit of US$3 billion. He also revived the IBM brand in public perception by focusing their advertising efforts into one clear message to customers. Gertner retired in 2002, paving the way for Samuel J. Palmisano to take over, a position he holds to date. In stark contrast, the 2000s and 2010s were fairly uneventful. In 2002 the IBM hard disk business was sold to Hitachi, and in 2005 the PC division was sold to Lenovo. In 2018 the company acquired Red Hat for $34 billion in one of its largest ever acquisitions.

Managerial Concepts of IBM

Over its over 100-year history, IBM has had multiple managerial strategies employed throughout its corporate structure. Most have been successful, but a good number have also brought the company to the brink of bankruptcy.

THINK

One of IBM’s earliest managerial philosophies is the slogan “THINK” coined by CEO Thomas J. Watson. He believed that the ideal employee should take everything into consideration and reject any notion of being narrow-minded. This slogan alludes to the very nature of the company; in that one of its core advantages over other technology companies has been its ability to provide highly integrated solutions to its customers, rather than just selling individual components or parts. This has resulted in a very wide product portfolio as it is able to offer a host of products and services ranging from hard disks, printers and other hardware all the way to software offering such as cloud storage hosting.

This concept was key over 100 years after its inception as it formed the basis of CEO Louis Gerstner’s turnaround strategy. At the time the company management under John Akers had begun to employ a strategy of splitting IBM into autonomous business units, leading to fragmentation and resulting in the US$8 billion loss posted in 1993. Gerstner reversed this move once he came to power, recognizing the virtue of being able to serve customers with all-in-one solutions which would have been lost by splitting the company.

Employee Incentives and Affirmative Action

Thomas Watson introduced several employee incentives under his tenure. This saw IBM become one of the first American corporations to: provide group life insurance, offer survivor benefits to families of workers who passed away, offer training of female employees and people with disabilities as well as offering paid vacations and even hiring its first black salesperson in 1946. Additionally, it provides employees who are in same-sex relationships with health benefits. In 1928, IBM introduced the Suggestion Plan program, which gave employees cash incentives for contributing ideas on how to improve the company’s operations. It also introduced the Quarter Century Club, which sought to honour “IBMers’ who had attained 25 years of service. Watson believed that employees were most productive when they had a healthy support system surrounded by their families and communities.

Three Basic Beliefs

IBM’s three basic beliefs, otherwise known as the IBM Principles describe the three basic tenets that form the bedrock of the company’s management principles. They are:

• Respect for the Individual, in that the company would always strive to nurture an employee to develop his potential and make the best use of his abilities, as well as ensuring equity in pay and promotions based on merit.
• Service to the Customer, in that the company would ensure to give customers the best possible products and services, and that it would only seek profit only to the degree that they serve the end-user and satisfy their needs adequately.
• Excellence as a Way of Life, in that IBM would ensure that nothing would be left to chance in the pursuit of excellence. Every task in the business should be performed in a superior manner.

These three simple principles guide all IBM activities, by defining how ‘IBMers’ should manage the company, outlining their preferred mode of conduct, guide their employees and work in tandem with fellow employees, their customers and the surrounding community.

How Firms can Benefit

Integration and “THINK”

The phenomenon of vertical integration has manifested itself in architectural firms (moreso those in developed countries) for several years now. These new firms that have adopted this new way of thinking are called integrated practices. These bring together several experts in the construction industry under one roof, including architects, engineers, construction managers and contractors all working in tandem to offer a wider range of services to clients across the full lifecycle of the buildings they design. Firms that adopt integration discover that it greatly improves the efficiency of the building process, resulting in a better building as well as a satisfied client.

As opposed to the ‘over-the-wall’ method of construction in which an architect completes a design and hands it over to a contractor for construction, integrated practice recognizes that the ‘wall’ can be an impediment, preventing collaborative efforts between designer and builder and leaving the owner caught in between. In the United States, revenues for the top eight integrated design-build firms grew at nearly twice the rate of those for the top eight architecture-only firms between 2002-2007. Firms practicing integrated project delivery report return client rate of more than 75%, greater control over the construction process as well as higher returns.

Employee Motivation

Implementation of employee incentives and performance-based bonuses can bring a plethora of benefits to an organisation. Incentives can act as a means of inducement, spurring workers on to have a higher output and operate at higher efficiency levels. They also encourage self-motivation, vastly decreasing the amount of time spent on worker supervision as the employees are able to strive to achieve goals independently. Architectural firms can implement incentives for employees based on their performance in various projects assigned to them. If the employee meets his/her goals within a set amount of time, they are eligible for a monetary or non-monetary reward, as appropriate. This task-based model of incentives provides a continual source of motivation and can even foster positive competitiveness between workers. Also, providing workers with perks over and above their basic salaries and allowances can also aid in employee retention as it gives a particular firm an edge over other employers. Such benefits include health insurance, paid holidays as well as paid overtime hours.

Empowering of the Individual

For a long time, the very nature of capitalism has prioritised overall company output at the expense of the welfare of its employees. However, in this modern age, employees are clamouring for better working conditions and benefits. Now, more than ever, employees spend more time at work. It thus follows that it is vital for them to feel supported and be encouraged to thrive. Local architectural firms should strive to put the employee first. Prioritizing his/her rights and dignity and supporting their creative efforts can go a long way towards enabling company values to thrive and allowing actualization of great products. Ultimately, happier employees tend to be far more productive.

Conclusion

Over its 108 years of existence, IBM has proven its ability to stand the test of time and remain an industry leader in a sector as volatile as computer technology. The company has been successful in no small part due to its ability to stick by its core values, even in times of turmoil. Starting with Thomas J. Watson, Sr., past IBM chairmen have set the standard in terms of company principles. Their tenets have defined how IBM employees operate both within and outside the company.

IBM has illustrated the possibility for a company to remain profitable over the long term, by being able to constantly adapt to new situations over time, both in terms of personnel changes and in the prevailing business climate. It is for this reason that IBM’s success story stands as a valuable source of lessons for our local Kenyan architectural firms. Application of the teachings from IBM’s rich history would not only cause a positive shift in the built environment industry, but would also serve as a paragon for other industries in and around construction; and in so doing enhance the quality of living of all Kenyans cumulatively.