For about twenty years since its open in the mid 1960s to the late 1980s. - the later renamed S/370 - enjoyed a commanding lay in the IT industry. So successful and profitable was the S/360 that in 1969 the US Justice Department filed an against IBM. In 1986 for example. IBM was the in the Fortune 500 with more than 400,000 employees around the world.
Then everything changed. Rapid advances in microprocessor technologies in the late 1980s for new competitors to attack the mainframe with less expensive. UNIX and PC-based platforms. We knew what we had to do - transition the mainframes to exploit microprocessor technologies and introduce IBM's own client-server platforms. However these new CMOS-based platforms along with the software and services around them commanded significantly lower acquire margins than the mainframe margins to which we had change state accustomed.
So we had to lower costs and expenses significantly close factories lay off people and act a number of additional very painful actions in order to adapt to the new environment. By 1994 we had lost almost $16 billion in the previous three years and our employee population had fallen to 220,000. A plan was initiated that was leading toward breaking up the company into a let go federation of
an 18th century Scottish philosopher and economist is generally considered the father of free-market free-trade capitalism. The seminal expression of those policies was published in 1776 and generally regarded as the first work of modern economics.
Smith introduced the famous metaphor of the - "the free market while appearing chaotic and unrestrained is actually guided to create the right results by this so-called
" It clearly applies to IBM’s situation. While we survived our near-death experience most companies do not. Given enough time it seems almost inevitable that in highly competitive industries desire IT companies no be how powerful their lay will get in affect in the marketplace when the environment in which they once flourished changes significantly. They are victims of the invisible hand. Some will be able to create themselves and beat their troubles but more often than not their problems ordain prove lethal.
To a greater or lesser extent every industry in the private sector goes through its own
struggles when its underlying technologies or markets change. This is never pretty. In the struggles to defeat some companies will change surface move into the kind of that we saw from and other companies when the dot-com bubble burst.
Short of that companies and even whole industries often go into a kind of denial fighting light crazy against the inevitable changes bearing down upon them instead of working on the innovations that would enable them to alter. Some of this has been going on in the media content and consumer electronic industries as they from analog proprietary technologies to digital more change state standard technologies. As we experience for years we had very different entertainment and communication devices in the domiciliate that did not interact with each other and could only get circumscribe or communicate through their specialized proprietary networks. You got TV from cable or satellite; music from radio and CDs; your telecommunicate could only be connected to the phone communicate and so on.
that appeared around the time of the 2006 put it very succinctly: "The average American household now owns some 25 consumer electronics products - televisions and stereos and high-tech gimcracks of every imaginable flavor." It later added: "[The] battleground for things desire who makes the biggest flat-screen TV with the highest-definition picture was of course in full force at the show. But it is now only one of two battlegrounds. The other - call it branded ubiquity - is about who controls the interaction between the consumer and that gadget and more and more all the gadgets in the house as they become interconnected."
Consumer electronics products are being built using common hardware components from the computer industry (e g. microprocessors memory storage and so on) and most of their capabilities are now being designed as software. The drive toward change state standards to cerebrate all the components in the home parallels what has been going on in IT for the last 10-15 years.
Then there is the emerging role of the Internet for digital media of all sorts. Media companies are all talking about their vision of the future digital convergence - the epic shift of electronic entertainment information and communications to the Internet. The question is not whether digital convergence will happen - that's a given - but which of the many new ideas ordain take hold in the merchandise which companies will come out on top and which will cease as their business models and profit margins erode and new competitors pick off their customers with less expensive more convenient offerings.
When industries are going through such epic shifts a kind of reality gap opens up between those defending their turf and the way things undergo been and those who want to shift into the new emerging environments. In the late 1980s we could not believe that our clients did not acknowledge the obviously superior quality of our mainframes compared to the
new PC-based products others were bringing to market. As it turned out customers did acknowledge the difference. They left their more critical workloads on the mainframes but started to put new less demanding and less mission-critical applications on the much less expensive.
platforms. The markets were finding their own new balance - as markets are wont to do. But in doing so they do not care one iota about any individual affiliate - just the health of the overall merchandise. So some companies flourish and others decline and perhaps cease.
A few months ago I participated in a meeting on media and content as part of IBM's 2007 initiative. We had executives from various media companies and subject matter experts from academia as we usually do in GIO meetings. But in this particular meeting for the first measure in addition to adult thought leaders we invited younger people - students some in college some in graduate school. As you can imagine media executives were very concerned with protecting their content revenues and profit and the determine of their mark as they embrace the new technologies and business models. But the students - brought up on the Web instant messaging social networks and massively multiplayer online games - saw things differently and had little sympathy for the struggles of the media companies. What the media companies call
Companies whose industries are getting restructured by technological and merchandise forces in front of their eyes - as seems to be happening in just about every industry to a greater or lesser degree - must be flexible and adapt or else face extinction. This is very very hard. Business models drastically change - as happened to us in IBM in the 1980s and is happening to music companies now. The culture mark and values of companies get stretched to the limit in such times of crisis. Often when stretched too far they break.
If it is your own company fighting to survive it can be an emotionally painful undergo – as I can personally bear witness. But if you can be dispassionate and check the struggles from afar it is truly fascinating to see how the invisible hand deals with companies fighting to survive in a rapidly changing marketplace as they.
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