A company overtaken by the pace of change

NO ONE doubted that turning round the world's largest capital goods manufacturer would take time. For John Akers, that time ran out yesterday, writes Larry Black.

The crisis that IBM faces today was barely on the horizon in 1985 when Mr Akers became chief executive. The huge company dominated almost every aspect of business computing and its vast spending on research and development, financed by steady profits from its mainframe business, seemed to guarantee its continued success.

But change came fast to the industry, as feverish competition transformed hardware manufacturing into a commodity business. Power and profitability shifted to nimbler companies that had either established monopolies in key niches - like Intel in semiconductor chips - or mastered the software and service aspects of information technologies, like Microsoft and Apple.

Mr Akers, who took office attempting to undo the decentralising efforts of his predecessor, himself started shedding bureaucracy and employees as early as 1987. But sales of mainframes - which still accounted for half IBM's profits as recently as 1990 - collapsed far sooner than anyone predicted, sweeping away the company's financial cushion.

Mr Akers' appeals for market responsiveness and productivity went largely unheeded among managers accustomed to dictating to customers, suppliers and competitors from a position of strength. His decision to break the company into 13 semi-autonomous units seems in hindsight to have been inevitable, and his successor is expected to spin off several divisions as stand-alone firms.

According to Richard Shaffer of Technology Partners, a consulting group: 'IBM almost always has the right idea. It just moves too slowly.'

(Photograph omitted)