Big Blues

After years of having IBM’S bureaucracy stifle its personal computer (PC) efforts, in 1980 CEO Frank Cary had finally had enough. He authorized a development team to work off-site, away from IBM’s ponderous organizational structure, with the manager reporting directly to him. This classic entrepreneurial approach gave IBM the machine it needed to challenge upstarts like Apple, kicked revenue and earnings into overdrive, and helped IBM produce the greatest profits of any company in history. For its first few years in the PC business—before the bureaucracy reasserted itself—IBM actually got the PC right.

But as the PC’s runaway success generated huge profits it also undermined the core mainframe business. The computer industry was changing rapidly, and to capitalize on its early PC triumph IBM would have to change with it. Its inability to do so is the central tragedy in the whole sad story. This strategic failure created a tremendous window of opportunity for companies like Microsoft (whose dealings with IBM form a significant thread in the narrative). Ironically, IBM’s executives saw most of their problems coming: they just could not quite bring themselves to do anything about them. Flush with success, IBM squandered its energies on internal power struggles and bureaucratic gridlock.

IBM does not officially cooperate on books, but Carroll had extensive access to IBM management while covering it for THE WALL STREET JOURNAL—and many former IBM employees decided that airing the company’s mistakes would give it a healthy shaking up. This gives his story a considerable human dimension: indeed, much of it is presented as much as a play of personalities as of market forces. IBM’s rise and fall is one of the most spectacular stories in contemporary business, and BIG BLUES does it justice.