IBM is turning 100 years old on June 16. The company is commemorating its 100th anniversary with a year-long set of activities around the world. It is using the opportunity to reach out to many of its constituents in business, government and academia and engage with them in a variety of celebratory events, such as seminars and conferences. In addition, IBM Chairman Sam Palmisano is inviting all members of its extended family - employees, partners, retirees, families and friends - to pledge at least eight hours of community service during 2011.
If you look at the fast changing IT industry, it is hard enough to find companies that have survived thirty years, let alone one hundred. It is even harder to find a company that has survived this long, is in great competitive shape and continues to be among the leaders in its industry. So, as The Economist observed in 1100100 [100 in binary] and Counting in its June 9, 2011 issue:
“The firm’s centenary is an occasion to reflect on many things digital, but one question stands out: why is IBM still alive and thriving after so long, in an industry characterised perhaps more than any other by innovation and change? This is not just of interest to business historians. As IBM enters its second century in good health, far younger IT giants, such as Cisco Systems, Intel, Microsoft and Nokia, are grappling with market shifts that threaten to make them much less relevant.”
The Economist elaborates on IBM’s unique achievement by explaining why it’s so difficult for an IT firm to remain a leader for long:
“To grasp why it is so difficult for IT firms to stay on top, picture the computer industry as a never-ending enterprise to create digital “platforms”, both large and small. These are the foundations on which others build software applications or services. Every ten years or so, a new dominant platform emerges to elevate computing to another level. First came mainframes. This was followed by “distributed” systems: mini-computers, personal computers (PCs) and servers. And now there are computing “clouds” and mobile devices.”
“Migrating from one platform to the next, explains Michael Cusumano, a business professor at the Massachusetts Institute of Technology, means questioning everything a firm stands for: the technical skills, the brand, how money is made. So big companies mostly try to defend their existing domains rather than to explore and conquer new ones. Microsoft, for instance, remains firmly attached to its Windows operating system (see article). Only a few have managed even one platform shift, let alone, like IBM, pulled off three. And either of its first two could have easily done Big Blue in.”
In another article on IBM's Centenary in the same issue, - The Test of Time, - The Economist offers a succinct answer to how IBM “has been so successful for so long in the fast-moving field of technology”:
“IBM’s secret is that it is built around an idea that transcends any particular product or technology. Its strategy is to package technology for use by businesses. At first this meant making punch-card tabulators, but IBM moved on to magnetic-tape systems, mainframes, PCs, and most recently services and consulting. Building a company around an idea, rather than a specific technology, makes it easier to adapt when industry “platform shifts” occur (see article).”
A similar point is made by George Colony, chief executive of Forrester Research, who is quoted as saying: “IBM is not a technology company, but a company solving business problems using technology.”
I totally agree. IBM’s core competency is to leverage information technologies, science, engineering and systems thinking to solve complex problems in business, government and society in general.
When I first joined IBM in 1970, those complex problems were primarily commercial applications, like transaction processing and information management, leveraging mainframes and related products. Over forty years later, my work with the company revolves primarily around cloud computing, innovation in services, and Smarter Planet and Smarter Cities solutions. The problems being attacked have changed considerably, but the basic approach has remained the same: leverage information technologies, science, engineering and systems thinking to solve complex problems.
What does it take, - for IBM or any other company, - to not only survive the forces of creative destruction, but to be able to leverage those very forces to help transform and propel itself into the future? How can you innovate your way through a serious crisis, so you not only survive it but remain an important player in your industry? How can you turn survival into the driving force of innovation? I have thought a lot about these questions, especially in the last few years given my teaching responsibilities, and believe that you need three key capabilities.
First of all, you need highly talented people as well as the proper investments in R&D and innovation focused on looking out a few years into the future. Technical talent is absolutely necessary, especially for a company like IBM focused on highly complex problems. But it is not sufficient.
Increasingly, you also need excellent market strategist who can understand the market changes out there. You need people with deep knowledge of the key industry problems and opportunities you are working on with your clients. And, you need people with very good social and communications skills, so they can explain to all the members of your ecosystem - clients, employees, press, financial analysts, government officials, and so on, - what is going on and what you are doing about it. In today’s highly complex world, you need talented people with diverse skills, all working closely together as a well functioning team.
In my innovation talks I often say that a business needs to think of the technology and market changes battering us from all sides much as you might view the asteroids that significantly changed the environment long ago. Once the asteroid hits, the environment may be quite different, perhaps no longer favoring you no matter how strong a leader you previously were.
You never, ever want to first learn about the incoming asteroid when it is about to hit, and then have to improvise your survival strategy in the middle of a crisis. Talented people, especially in a company that seriously supports R&D and marketplace innovation, should have spotted the incoming asteroid years before, usually in the form of a major, disruptive technology or market shift, and should have been developing alternative products, services and market strategies based on the post-asteroid environment.
Another critical survival factor are the relationships and collaborations with clients, business partners, researchers, universities, software developers, entrepreneurs, open communities, and many others. This is particularly important if you are developing sophisticated, complex solutions. You must view yourself as part of an ecosystem whose members are working together to solve common problems, hopefully under your distributed leadership.
In fact, The Economist attributes the secret of IBM's longevity to its close relationships with customers. “The secret of Big Blue’s longevity has less to do with machines or software than with strong customer relationships,” is the tag line in the 1100100 and Counting article. It later explains:
“From the beginning, as a maker of complex machines IBM had no choice but to explain its products to its customers and thus to develop a strong understanding of their business requirements. From that followed close relationships between customers and supplier.”
“Over time these relationships became IBM’s most important platform - and the main reason for its longevity. Customers were happy to buy electric “calculating machines”, as Thomas Watson senior insisted on calling them, from the same firm that had sold them their electromechanical predecessors. They hoped that their trusted supplier would survive in the early 1990s. And they are now willing to let IBM’s services division tell them how to organise their businesses better.”
The third critical survival factor is to be in harmony with the marketplace. I was interviewed by The Economist, and it quotes me as saying that “The huge success of its mainframes had made the company ‘internally focused’.” Let me explain.
As often happens, our success made us arrogant. Hubris led us to believe that we were the marketplace, and therefore did not need to listen to or work closely with others outside the company, since our people had all the answers. And, as always happens when arrogance and hubris are involved, we were severely punished by the invisible hand of the marketplace and almost went out of business twenty years ago.
It took our near-death experience and a change of top management in 1993 for the culture of IBM to radically change. We finally accepted some very important realities: the marketplace is much more powerful than any single company. Even if you don't like the direction of the marketplace, you go against it at your own peril.
Innovation is much more effective when it is in harmony with the overall direction of the marketplace. And, especially if you are a company with the kinds of ambitious goals IBM has, innovation is absolutely critical, but that innovation will be a delutional fantasy if not aligned with the natural forces of the marketplace.
Turning 100 is a major achievement for any organization and institution. It is evidence that there is something in its DNA that has enabled it to continuously adapt to all the changes in its environment. But, it is also important to remember, that, sweet as the achievement might feel, it is no guarantee of future longevity and success.
For IBM, making it to the next 10, 20, 50 or 100 years will require a continued commitment to the fundamentals that got it here, all the while competing on the new problems of the day againts a fresh cast of competitors every ten to twenty years. This is tough, - very, very tough, - which is why we are all so proud to be celebrating IBM’s centennial.