A Hundred Years Of Achievement At IBM

Why has IBM succeeded for so long, while other talented and respected IT companies like Univac, Wang, Burroughs, DEC, Tandem, Apollo, Silicon Graphics and Sun Microsystems have come and gone?

“One reason is that we haven’t done the same thing for 100 years,” Palmisano said. “And another would be that we have done exactly the same thing for 100 years. That is the first lesson from our first century.

“To put it simply, this enterprise has always moved to the future. Continual forward movement is, in fact, inherent in IBM’s value proposition – it’s our business model. The frontier of what is truly innovative keeps moving, and you’ve got to move with it – you can’t sit still. If you sit still, especially in technology, the ramifications are disastrous.”

Change Has Been Constant

IBM has always changed its product line. It may have started by making cheese slicers (“I’m told that in 1914 it was a world-class cheese slicer,” Palmisano joked) and graduated to cash registers, typewriters, calculators, spinning disk hard drives, mainframe computers, supercomputers, portable computers, software, services and much more, but its business model never changed.

“We’ve thought about this constant balance between change and continuity, and I’d like to share three essential areas that are relevant to the Valley and to our industry. First is the importance of the ‘and’ in R&D [research and development]. Sometimes we forget that they (R and D) are different. Most of the innovation IBM has experienced came from deep research. You need both R and D, and you need to keep changing both,” Palmisano said.

“Development is happening in ways that are increasingly collaborative – from open source, to social media, to crowdsourcing. The broader point is that a deep commitment to R&D means that it’s not only important to innovate, but it’s as important to innovate how you innovate.”

Secondly, Palmisano said, IBM has been able to survive not only its failure, but its successes.

“The Valley is a bone pile of companies that had extraordinary initial success, but were not able to achieve a second act,” Palmisano said. “IBM, in the early ’90s, held on to the mainframe-based business long after the industry and market had changed in ways that rendered the model obsolete. The problem wasn’t the technology; the mainframe remains a highly valuable platform. The problem was the business and organisational models built around it.

“It took a very difficult struggle for IBM to change those. It is now, and has been for decades, a very healthy business for us now, thank you very much.”

Palmisano also explained the company’s strategy in selling the popular ThinkPad computer franchise to a Chinese firm, Lenovo, in 1992.

“It was by any measure the most recognisable brand for us, touching tens of millions of people,” Palmisano said. “Yet we knew that personal computers were becoming increasingly commoditised, and that’s not where we wanted to be. It’s a good product, but our financials are much better today without it.”

Don’t Confuse Charisma With Leadership

Thirdly, Palmisano said, IBM has survived the changes of leadership that can throw a company off course. Palmisano is only the ninth CEO of the company, yet he has led the company for 10 percent of its existence.

“We have learned not to confuse charisma with leadership. IBM has faced this challenge (of following a charismatic leaders in founder Thomas Watson Sr and his son, Thomas Watson Jr),” Palmisano said. “Many historians believe that Watson Sr’s most enduring contribution to business was his intentional creation of something that would outlast him – a shared corporate culture.

“He showed that how the basic beliefs and values of an organisation could be perpetuated – how they could become its guiding constant through time.

“This is why we have focused much attention over the years on building talent. Betting it all on one person, or a small cadre of stars, is the opposite of building for the long term.”