The U.S. Experience

In the United States, the Ford Motor Company illustrates the effects of one of corporate amnesia’s causes—the flexible labor market—in the production of its Taurus model car (The Economist, 1996). The previous version of the car had been a big hit because it met the needs of big-car buyers better than most of its rivals. It then experienced a loss of its so-called design memory when it massively cut back on jobs in the recession of the early 1990s. As a result, the new model was largely reengineered from scratch. Having forgotten what its customers wanted, the result was a model that failed to capture the buyers’ imagination.

The price of forgetting—specifically how often dominant companies complacently ignore the effects of mature markets and new technologies —is illustrated at IBM, another of the United States’ more successful companies (Utterbach, 1994). In the 1980s a smug Remington yielded dominance of the typewriter market to the electronic age—and to IBM. Almost immediately IBM made the same expensive mistake by reacting inappropriately to a technology that threatened its own core business. On the surface it simply misjudged one of its product’s life cycles; but in reality, it mishandled the emergence of personal computers, vastly underrating the impact that they would have on its larger mini and mainframe businesses. A better memory of how Remington reacted to similar conditions might have encouraged IBM to give its originally independent PC unit a longer life and avoided the United States’ biggest annual corporate loss of $4.9 billion in 1992. In fact, a slightly longer sighted memory may have helped IBM to avoid the crisis in the first place. Before the computer age really took off, IBM always perceived itself as a service organization that provided information technologies to large companies. It is arguable that the company’s problems occurred when it began to believe that it was a computer company. It regained profitability when it returned to its first principles and finally departed barely profitable PC making in 2004 when it sold out to Lenovo, China’s leading PC maker, for $1.75 billion, catapulting the Chinese company into third place in the world’s PC market.

For a while Apple Inc., which built itself on a culture that challenged employees to build cutting edge and affordable computers with a distinctive look, also lost its organizational memory as it ran through four chief executive officers in as many years (Abrahamson, 2000, p. 79). It subsequently successfully resurrected the past with iMac by reminding the public of the groundbreaking Apple II and Macintosh when the company’s founder, Steve Jobs, returned to lead the company. In effect, Jobs served as the organization’s memory.