Broken Promises: An Unconventional View of What Went Wrong at IBM [Hardcover]

Daniel Quinn Mills (Author), G. Bruce Friesen (Author)

Book Description

Publication Date: June 1, 1996

Mills and Friesen examine what caused IBM to experience major financial losses and the need to reduce its staff by half. Virtually overnight, IBM went from being one of the most respected firms in the world to one widely condemned. This book describes how the company's violation of two well-established contracts led to its most serious problems. The first was its long-standing relationship with customers, where the implicit agreement was IBM's guarantee of high-quality technology and close-service support. The second was between IBM and its employees, with the implicit commitment to employee security. When IBM abrogated both contracts in the 1980s, its business began to fall apart. Quinn and Friesen describe IBM's experience in terms of broader historical and contextual patterns, and they look at the strategic tasks that IBM now confronts during its comeback. "Mills and Friesen argue their case cogently and clearly."-Washington Post Book World "Chock-full of penetrating analysis."-National Productivity Review "This insightful book is highly recommended for business executives."--Choice

Product Details

• Hardcover: 210 pages
• Publisher: Harvard Business Review Press; First Printing edition (June 1, 1996)
• Language: English
• ISBN-10: 0875846548
• ISBN-13: 978-0875846545
• Product Dimensions: 9.4 x 6.4 x 0.9 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 1.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #2,421,473 in Books (See Top 100 in Books)

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5 of 12 people found the following review helpful:

1.0 out of 5 stars What Happened to IBM?, June 22, 2005

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Acute Observer (By the Shore NJ) - See all my reviews

This review is from: Broken Promises: An Unconventional View of What Went Wrong at IBM (Hardcover)

This book presents one viewpoint on IBM during the 1980s and 1990s. The authors claim that a choice of IBM "could not be faulted" (p.9). [Was that because IBM, unlike some competitors, did not offer kickbacks to customers?] The authors claim IBM broke its promises of high-quality technology and excellent service to customers, and job security to its employees. But no company can guarantee jobs when losing money.

IBM's "incompatible small computers" may have deviated from the S/360 model, but followed industry standards of that era (p.11). One of IBM's mistakes was to listen to its critics (p.15), who could have ulterior motives. The world economy affects IBM (p.24). The discussion about personal computers missed the point (pp.35-40). IBM did not pioneer microcomputers and mass market them. It did give an imprimatur to what some sneeringly called "toy computers". The problem noted by T. V. Learson is common to bureaucracy (but didn't he retire then?). Did IBM really give away control of personal computers to Intel and Microsoft (p.62)? Such an opinion can only show ignorance of the history from 1976 to 1982. Chapter 5 talks about "loyalty". Can any corporation offer "employment security" (p.66) in a cyclical economy where management's first priority is to the share owners? No, but its a good idea. [The only way to guarantee job security is to be the owner-operator of your own business. But even then you can have problems.] The authors state IBM's hiring policy (p.68) but don't say how this was implemented. Did family connections ever trump this ideal? The "Open Door" policy is one way for top management to find out what is really happening, and avoid filtered feedback (p.69). Was there really no management favoritism (p.76)? Does "scientific management" work (p.77). Is "scientific management" just special pleading for the managerial class? Don't employees pay for management's mistakes (p.82)?

The authors say IBM's big mistake was to sell equipment rather than lease it. It brought in cash which was used to enlarge manufacturing plants (pp.90-91). But this plan soon failed; they liquidated their assets and squandered the money. No mention of the Board of Directors! The authors tell of IBM engineers forming "their own company" in 1967, but not of the venture capitalists behind them (p.92). The authors say IBM failed to drop "poor performers" (p.94), but don't explain any errors in hiring practices. The author's comments on page 104 show credulity. Watson Sr. sold cash registers, which recorded and tabulated money. Hollerith cards were a more general form of recording and tabulating data. Did IBM spend too much time on executive politics rather than profit and loss (p.123)? I don't believe the authors on the F/S project failure, since they overlook customer acceptance. Did customers want another new system that would obsolete all their existing software (p.130)? The story of Stalingrad sounds like an urban legend (p.131)! This all seems as if the authors didn't do their homework. Chapter 9 considers the advice of "Wall Street"; but Wall Street produces nothing, it profits from other people's money. Wall Street's own management is marked by failures, scandals, and mergers of failed firms. Wall Street's special pleading is listed (p.135); they have hidden agendas (p.136). Inflation is caused when the Federal Reserve (a private banking cartel) prints and distributes paper money for its purposes. The authors correctly question the wisdom of following Wall Street's advice. Wall Street can benefit by selling short, and promoting "high tech" stock to gain from a company's distress (p.149).

Chapter 11 asks about the future of large corporations, given the reports of financial losses for many old companies (p.179). I think the authors drew the wrong conclusions about IBM's selling and not leasing; its what they did with the money. Lloyds of London had "great losses" (p.183) on computer equipment that became obsolete. The comments on small vs. large staffs (p.185) overlooks the rate of administrators to production workers. This is called "bureaucracy" (p.187) but it could also be called "patronage". What about special relationships (like nepotism), or if personal whims decided on projects. Was there an abuse of overtime? Could an outside organization have members inside to influence policy?

Could anti-trust enforcement have prevented the IBM debacle? When difficulties arose, IBM did split away functions (like Lexmark). Real innovation comes from a small group (p.189). You can add the 1930 invention and patent of the transistor by a long-extinct company.