If you told Frank Cary – CEO of IBM in 1980 – that eventually his $26.2 billion revenue company with 341,000 employees would be overtaken by a 40-person upstart with less than $8 million in revenue, he’d have likely considered the notion ludicrous in the extreme. IBM’s decades-long technological dominance seemed unassailable. Yet by late 2014, Microsoft had eclipsed IBM’s revenues. Agile, innovative and more in tune with a rapidly changing environment, the once-tiny start-up surpassed the incumbent.
The IBM/Microsoft story is a parable of corporate hubris, and the story of an organization with a hide-bound structure designed to compete in an earlier era versus the forces of disruptive innovation. Its lessons can be applied in many circumstances – indeed, to Microsoft itself vis-à-vis competitors such as Google. But it also can serve as a powerful cautionary tale in defense acquisition policy: In the Department of Defense (DoD), technological dominance is often taken for granted despite the high-profile roll-out of a “third offset strategy.” Indeed, the argument of the day is over whether many of the organizational structures designed for a different age have outlived their usefulness. The IBM/Microsoft analogy works pretty well, except for an important distinction: The stakes are radically higher in defense acquisition reform. Read more….