What strategic error did IBM make that caused IBM to lose its leading position?

Answer 1

I worked for IBM in Boca Raton so my answer is related to the IBM PC business and not the mainframe or mid-range computer business which IBM still leads in market share. I feel the death of IBM's founder of the PC business, Don Estridge in a Delta Airlines crash in Dallas left IBM without the leadership to understand where the PC business would go over time. Don and his PC team did fail to see that Microsoft (Bill Gates) understood that over time clones would be built and the real money was the software - not the hardware. IBM gained significant revenue from PC DOS (the operating system for IBM PCs). Microsoft negotiated the rights to sell MS DOS for any clones that MIGHT come along; we all know that Microsoft was correct in their assessment that clones would come along. Don Estridge saw the PC as more than a standalone computer. He correctly anticipated that the PC would become an intelligent workstation and many functions would be completed by a host plus a PC. Many groups in IBM feared that the PC business would harm the more profitable areas of IBM. IBM dragged its heels producing more powerful PCs because of this. The IBM PS/2 line of computers was a dismal failure because the prices were high and customers didn't understand why a different bus architecture was needed. Microsoft let IBM sink many millions of dollars into OS/2 while Microsoft developed Windows. Even though many in the PC industry considered OS/2 a vastly superior product, Windows won out. IBM did understand, from the beginning, the power of the internet. Microsoft didn't. IBM leveraged their business model and unleashed its developer power and marketing experience to develop hundreds of software and hardware products for the web. NetCommerce is one of IBM's most successful software products. IBM also understood that the world wide web meant world wide opportunities and developed what some consider to the best consulting units around. IBM is more of a Service company today than it was in the past. So, did IBM lose its Strategic position? I think while it did in the PC business and suffered greatly, it bounced back in the Internet business. And for someone to assume that they lost "the war" is wrong. They lost a battle. A big battle, but it certainly was not a critical injury to IBM. IBM leads all corporations in patents. That is one measure of the health of IBM's future.