Choosing to “Face” a Crisis, Every Day

Steve Lohr’s reflection on I.B.M. is one part happy ending and a second part cautionary tale.  I.B.M., a global leader in mainframe and computer hardware for much of its organizational life, was confronted with serious financial and industry challenges in the early 1990s.  These challenges would require layoffs, restructuring, and a drastic course change in strategy. 

Taken in full today, we continue to admire I.B.M. as an adaptive, ever-present giant in the computing world in large part because it handled financial and regulatory difficulties with an adeptness that is rarely witnessed in companies so large and so tenured.

Lohr tells us that I.B.M.’s success can be attributed to many strategic changes.  The company maintained its strengths in research, technical prowess and customer relationships, but applied those capabilities to new market segments.  A massive investment in research and re-training yielded its entry into the software, storage and services sector, and thus continued success in the industry. 

And yet the article leaves us with a haunting insight for companies like I.B.M.: “It’s really hard to move a company when it’s doing well and not facing a crisis.”

We can look to Facebook as an example of a company that leverages its short-term success to ensure long-term industry resilience.  In a heavily-regulated internet environment on issues of privacy, international law and marketing, Facebook seemingly has every reason to be hesitant about the future of social media and networking. 

And yet, Facebook buys start-ups with very little regard for risk.  Mark Zuckerberg has publicly acknowledged that he usually buys companies for their talent, not their business.  Since 2005, Facebook has purchased 32 start-ups and companies, all to acquire the brightest minds in direct ancillary markets.

And they weren’t cheap.  While many of the acquisition prices remain undisclosed, Facebook purchased Instagram for $1 billion and Face.com for $100 million this year alone.  These massive purchases are essentially hedged bets; Facebook has acknowledged that technology or taste can change at any time, and they must assume they are in crisis mode every day.

Both I.B.M. and Facebook, as well as other tech giants like Apple and Microsoft who face these challenges, are better fit to adapt because of significant product, position or cash advantages in today’s economy.  How then does a mid-level, stable firm in a highly competitive industry stave off failure as I.B.M. has?

Sources:

http://www.nytimes.com/2011/06/19/technology/19unboxed.html?_r=3&ref=internationalbusinessmachines&pagewanted=all

http://www.youtube.com/watch?v=OlBDyItD0Ak