Wang Laboratories Case Study PDF

One Man’s Values Force a Company Into Bankruptcy: The Story of Wang Laboratories The story of Wang Laboratories makes for great theatre. Through the leadership and vision of a Chinese immigrant named An Wang, Wang Laboratories rose to $3 billion in sales before it went through bankruptcy proc...

One Man’s Values Force a Company Into Bankruptcy: The Story of Wang Laboratories The story of Wang Laboratories makes for great theatre. Through the leadership and vision of a Chinese immigrant named An Wang, Wang Laboratories rose to $3 billion in sales before it went through bankruptcy proceedings in the early 1990s. The crash of the once high-flying computer company left unresolved many of the questions surrounding publicly held companies which were run as family businesses and the obligations that managing families had to employees, customers and shareholders. After leaving Shanghai and earning a PhD at Harvard, An Wang invented a magnetic storage device which became the centre of computers prior to the advent of the memory chip. By 1964, his company had scored a huge market success with the first version of the desktop calculator. Wang personally oversaw the development and market introduction of this product. With its success, his judgement of products and markets would go unchallenged as he took his company to public ownership and numerous sales records. Since he quickly understood the importance of the commodity-like qualities of calculators (low margin, many competitive models with similar product features), he created a new product called the Wang Word Processing System. Aligning Wang Labs hardware and word processing software gave the company an early and formidable lead in the software word processing wars which are still raging. Between 1977 and 1982 the company experienced unprecedented growth thanks to the word processing system. During that period its sales grew tenfold and the number of employees rose from 4000 to 25 000. Wang’s optimism about his company’s potential was neatly captured by his belief that he would overtake IBM by the mid-1990s. During his company’s highly successful 1977–1982 run, he ignored his advisers’ warnings that he should emulate IBM and produce an all-purpose computer which would run a variety of software besides Wang Labs products. Wang’s specialised word processors and midsized-computers were soon to be smoking rubble due to the 1980s onslaught of personal computers developed first by IBM and soon copied by a host of lower-cost producers. Wang’s market share plunged and once-loyal users of Wang products complained that they wanted computers which were compatible with the products made by other computer makers. They were no longer willing to buy Wang’s proprietary equipment which worked only with Wang software. The computer hardware and software markets had changed so dramatically that Wang Labs never recovered from the erroneous judgement of its founder. Another critical An Wang mistake was traceable to Chinese tradition. He wanted a corporate culture which reflected his Chinese, family- centred beliefs. ‘As the founder, I would like to maintain sufficient control so that my children might have a chance to demonstrate whether they can run the company,’ he wrote in his autobiography. In a management decision which symbolised his traditional values and his willingness to ignore the advice of the company’s board of directors, he appointed his son Fred as president of the company in 1986. Many board members expressed privately their belief that Fred lacked the experience and maturity to handle the job. An Wang responded to the critics of his decision by saying: ‘He is my son, he can do it.’ In Fred’s short three-year tenure in the job, the magnitude of An Wang’s error became painfully clear. During this time, the company did not introduce a single new product and it accumulated nearly $1bn in new debt. By 1989 cash reserves had vanished, creditors resisted lending the company any more money and An Wang made a very tough decision. He fired his son. A year later An Wang died and analysts predicted the imminent failure of the once highflying computer company. Most agreed that the Chinese tradition of keeping the business, regardless of its size, in the family was a fatal mistake. Richard Miller, a former high-level General Electric executive took charge of Wang Laboratories and he immediately took steps to make the Wang Labs culture more flexible and adaptive. He sold non- core businesses, initiated the company’s first lay-offs and led the company into the production of compatible personal computer manufacturing. In a deal struck with IBM, Wang Labs agreed to resell IBM machines in exchange for cash. After investors poured $25 million into this joint venture, funding was curtailed and Miller had no choice but to take Wang Laboratories into bankruptcy. That decision spelled the end of Miller’s tenure as company CEO. In early 1993, Joseph Tucci was recruited from Unisys Corporation to lead Wang Labs. By 1993, the company had lost over $2bn and demand for its products was at an all-time low. Tucci recognised that Wang’s tradition as a maker of integrated hardware and software was over. He is now trying to reconfigure the company as a provider and servicer of imaging software capable of storing computerised documents. Presiding over a company now made up of 1800 employees, he knows that he still must deal with the anti-change culture which was built by An Wang. An Wang was a brilliant analyser of markets and developer of products. He built a successful company with a culture that revolved around his personal values and beliefs. That strong culture and its rigid values developed over 40 years of leadership under Mr Wang. Many would argue that what made Wang Laboratories so successful also caused its downfall. 1. Using the argument of culture fits, develop reasons why the culture in Wang Laboratories became dysfunctional. 2. Use the symptoms of organisational decline to prove that Wang Laboratories was headed for bankruptcy. 3. How closely does Wang Laboratories conform to the life-cycle theory of organisations? Please explain.