The Colossus That Works

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Univac, which became the name of the firm's computer division. But Big Blue knew far more about winning customers than did Univac. IBM, whose major products at the time included calculators and tabulators, recognized that potential buyers might be frightened by the cost and complexity of computers. When the company entered the market in 1952, it set a high priority on dispelling customer fears. Buyers were promised that IBM service engineers would keep a close watch over the machines and quickly fix any glitches. The salesmen were so knowledgeable and thoroughly trained that their very presence inspired confidence. Univac representatives, by contrast, were seen to dwell on technical details that customers could barely follow.

The race was over by 1956. IBM had won a staggering 85% of the U.S. computer market, even though its machines were considered to be technically inferior to Univac's.

Years later a Univac executive would lament, "It doesn't do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen." The Univac episode helped give rise to the belief that IBM's real strength is in selling while its technical prowess often lags. Says Kenneth Leavitt, president of CGX Corp., a Massachusetts-based maker of high-performance display terminals: "IBM tends to be a step behind in technology but very good at marketing.

There are all sorts of new technologies that IBM doesn't have the expertise to get." Such claims naturally make IBMers bristle. "This is a shibboleth cultivated by certain Wall Streeters," declares Paul Low, manager of the IBM plant in East Fishkill, N.Y. "Nobody who peeks inside any of our 29 laboratories could fall for that nonsense." Company spokesmen like to point out that IBM spent 53 billion on research, development and engineering last year, an amount that exceeds the total revenues of many of its rivals. The firm has also taken the offensive in a new advertising campaign that boasts of the more than 11,000 patents IBM inventors have acquired over the past 25 years.

Actually, IBM is skilled at blending both marketing and technical considerations. That goes a long way toward explaining how so huge a company has kept its edge in an industry where key breakthroughs are often made by blue-jeaned engineers working out of their garages.

What IBM seeks, above all, is products that sell. "They have tried to understand what the customer wants," says Stuart Madnick, a professor of management-information systems at M.I.T.'s Sloan School. "Often the customer didn't need or want the more advanced technology that others have produced. In many companies the technology has grown faster than the market can absorb."

IBM evaluates buyers' needs in fine detail. "IBM will Listen to almost anybody," says Joseph Levy of International Data, which analyzes computer-market trends. "It is one of our best customers." Big Blue subscribes to virtually every major computer market-research service and has a worldwide intelligence-gathering network that includes economists and market analysts.

The company takes equal pains in keeping the skills of its personnel up to date. Last year, for example, IBM invested more than $500 million on employee education and training. Most new IBMers spend much