Will Tough Measures Toughen Big Blue?

No corporation has symbolized U.S. industrial prowess, management skill, or global reach better than ibm. Amazingly, for a long time, Big Blue was able to maintain effective control even as it swelled to a $67 billion organization operating in 137 countries. That was a tribute to ibm management, which trained its workers carefully, demanded superior performance, and rewarded them with the implicit promise of lifetime employment.

But the decline of the mainframe computer, the company's bread and butter, has turned many of ibm's long-standing strengths into liabilities. The hugeness that once gave it unparalleled economies of scale -- and profits -- became a burden. Slow decision-making turned what might have been market-leading products into laggards. And with margins dropping, ibm's blue-suited legions began to look less like indispensable assets than unneeded fixed costs. Now, says ceo John F. Akers, nothing less than a "New ibm" is needed to turn the company around. Although his plan does not come close to producing a New ibm, it does set the company in the direction it must take. Akers says he will give each product division the freedom and flexibility it needs to move ahead quickly with new technologies. If that's not enough, he hints, some businesses -- possibly even the entire personal-computer operation -- could be set up as independent companies. The company has unequivocally ended lifetime employment. Those employees who contribute to profits will share in them -- and those who don't measure up will be eliminated. To ibmers, that might seem a harsh and abrupt departure from Big Blue tradition. But to Akers, it's what is needed to unleash the true power of ibm at last. Wall Street is skeptical and has sold the stock down. If Akers is wrong, ibm will remain a rudderless behemoth too big to manage. If he's right, a stronger ibm, more than almost anything else, could shore up America's competitiveness in information technology. The challenge now will be holding true to the course.

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