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INNOVATION / MICHAEL SCHRAGE

IBM Needs a New Management Style

January 28, 1993|MICHAEL SCHRAGE | Michael Schrage is a writer, consultant and research associate at the Massachusetts Institute of Technology. He writes this column independently for The Times

So IBM's Top Gun has been shot down. John F. Akers, the former Navy fighter pilot who presided over the decline of the world's largest computer company, has taken the hit and humiliation of a public resignation.

Now the feverish speculation begins: Will IBM's directors tap a Big Blue insider as boss in a desperate bid to defy the Peter Principle? Or will IBM's new chairman and chief executive be a real outsider, such as Ross (It's just that simple!) Perot? General Electric Chairman (Neutron) Jack Welch? Apple Computer's John (Pepsi Generation) Sculley? The headhunters probably haven't salivated this much since the halcyon days of Borneo.

Unfortunately, all the hoopla surrounding IBM's next chief executive misses the essential point. Holding IBM's leader responsible for the company's failures may feel just and satisfying, but it doesn't confront the issues that will shape IBM's future.

In reality, John Akers was more a symptom of IBM's problems than their cause. His generation grew up--and grew rich--during a time when technological innovation could be managed without disrupting existing product lines; a time when IBM knew more about information processing than its customers, and the "experts" believed that a growing marketplace would lift IBM along with its competitors.

It wasn't just John Akers' inability as a leader to rapidly respond to the tectonic shifts in the marketplace that led to his company's decline; it was IBM's inability and unwillingness as a business culture to face up to a Hobson's matrix of brutally unpleasant choices.

IBM too slow to move out of mainframes? Right--just listen to those institutional investors scream if IBM wrote down billions to scale back its most profitable business. IBM should ditch minicomputers and shift to client/server architectures? Sure--and thus abandon a loyal customer base that had invested billions in software to keep their systems running? Costs too high? That's easy. Simply fire hundreds of thousands of people despite a proud tradition of excellent employee relations. After all, GE's Welch did it.

While Akers can fairly be faulted for not swiftly grasping the poisonous nettle, perhaps his greatest failure was that he and his team actually tried to lead too much. He exhorted his people to practice "market-driven quality" and "listen to customers." Actually, IBM's inner circle led more than it listened.

So instead of being a company that took advantage of its astonishing wealth of talent by letting ideas and innovations freely percolate up from the bottom, IBM remained a command-and-control economy almost until Akers' bitter end. To this very day, it's unclear how IBM's year-old plan to turn itself into "a confederation of companies" is less an act of organizational liberation than a gesture of corporate self-dismemberment.

Ironically, IBM's outside directors--the one constituency that has failed to understand either IBM's culture or the customers it serves--now get to pick the company's next leader. What do they expect?

Remember, Pepsico's John Sculley went to Apple when it was still a relatively young and malleable company. Jack Welch, of course, grew up in General Electric so he knew everything about that giant company that was important to know. Whoever steps into IBM's chairmanship faces dimensions of technological complexity and global scale rivaled by only a handful of companies--Exxon, Royal Dutch Shell, Procter & Gamble, General Motors, General Electric and AT&T. Those companies, it should be noted, are all run by insiders.

Perhaps IBM's board might want to tell the company's top 12 or 15 executives that it is now their responsibility to design IBM's future. The board should authorize these people to go off and come back in 45 days with a coherent plan to split the company into more manageable parts without totally sacrificing the benefits of size and scale. These executives could use any resource in the global company to generate their proposal.

The result should prove enlightening. If the board found the plan appropriately rational and bold, the people who would implement it are already at IBM. If the plan required outside leadership, here would be a document that an outsider could use as a blueprint for action. If nothing else, the board would gain valuable insight into the chemistry of IBM's top cadre.

Of course, this will never happen. It's so much easier to hire the headhunters and search for the Iacocca of IBM.

All boards seem infected with the wistful belief that somewhere out there is our very own Jack Welch or John Sculley who will save us from ourselves. IBM's future--if it has one--must be bottom up, not top down.

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