Irving Wladawsky-Berger

Do We Need to Go Through a Near-Death Experience in order to Successfully Reinvent Ourselves?

A few weeks ago I participated in the BIF-3 Collaborative Innovation Summit in Providence, RI.  BIF-3 is sponsored by the Business Innovation Factory, a community organization whose mission is to "explore business model innovation through a series of experiences designed to get ideas off of the white board and onto the ground as quickly and cost effectively as possible."

I was interviewed on-stage by Walt Mossberg, the renowned journalist whose Personal Technology column has appeared in the Wall Street Journal for sixteen years.  Walt has received numerous awards for his writing.  In fact, I was there this past summer when he received a Visionary Award from SD Forum, a Silicon Valley business and technology community, which every year honors industry leaders who have pioneered innovation and fostered the spirit of entrepreneurship.

Walt started out by asking me how IBM has changed the way we work with new research ideas, since, in his opinion, fifteen years ago or so little innovation was coming out from IBM compared to the present.  IBM's transition over the last twenty years is something I have been reflecting on quite a bit recently, especially given my recent retirement from full-time responsibilities with the company, as well as the seminar I am teaching this semester at MIT.

On Demand Five Years Later - a Personal Reflection

A couple of weeks ago I participated in an IBM sponsored Chief Information Officer (CIO) conference in New York.  At the conference, IBM announced the results of a recently concluded survey with more than 175 CIOs from leading companies around the world.  "CIOs see themselves at the nexus of a radically reshaping business landscape and believe their unique end-to-end view of business allows them to see first-hand the role of technology as an enabler and source of competitive advantage, and they want a greater voice in capitalizing on that opportunity."  They see their role evolving beyond just technology to strategy creation and business transformation. 

Apparently their CEOs agree.  The survey reveals that the CIO is increasingly a valued member of the senior leadership team and is significantly involved in strategic decision-making.  To help address this changing role of the CIO, IBM also announced the creation of a new Center for CIO Leadership.  This Center will serve as a kind of global learning community of business leaders, academics and other experts from around the world, focusing on the practical research and executive development needed to advance the CIO profession so they can have more influence and impact on the overall business.

I am really happy to see IBM take these steps, given my personal interest in the matter, including the graduate seminar I am currently teaching at MIT on Technology-based Business Transformation.  And as I was preparing the presentation I gave at the CIO conference, I could not help but think how far we have come in the last five years in appreciating the increasing integration of IT into all aspects of business.

Social networks and Organizational Governance

This past July I spent a week at Imperial College in London, most of it working in the Innovation Group where I have an appointment as adjunct professor.  During one of the meetings, we had a fascinating discussion on why it is so difficult to make changes in the UK health system.  My colleagues pointed out that if you look at the organization of the healthcare system in the UK, you can identify two main levels of management.  At the operational level, you have all the hospitals, doctors, nurses and others delivering health services to their clients.  At the strategic level, you have the publicly funded National Health Services (NHS), which is charged with overseeing public health care across the UK, reporting to the Department of Health.

In a typical company, they pointed out, there is a layer of middle management whose primary responsibility is to act as a kind of gear box between senior management and the organization’s operational activities.  Generally, middle management is responsible for monitoring the activities of their subordinates, reporting back to upper management, and carrying out the strategies formulated at the senior management level. 

But when an organization is so complex, distributed and fragmented, like the NHS, you have a large gap between the senior managers at the top of the organization and everyone else performing their daily operations of delivering health services.  There is virtually no middle management.  So the NHS can formulate strategy after wonderful strategy to improve the quality and productivity of healthcare in the UK, write great papers and give compelling speeches. But then the strategies fall into the organizational abyss. There is no one to carry out the strategy and oversee the needed changes.  Doctors, nurses and administrators will continue to do what they always have done, given the semi-isolation from the top caused by the middle management gap.

I found this hypothesis really intriguing, and have been wondering ever since to what extent it applies to complex organizations in general, as well as what to do about it.  I wonder if the hypothesis applies not just to incredibly complex systems like healthcare, but to all forms of complex enterprises, especially those that are doing business around the world and are attempting to improve their global integration.

The Complex Chemistry between Brands and Customers - Some Personal Experiences

People have very complex relationships with companies and the products and services they offer.  Businesses, and those involved in non-profit activities like foundations, the arts, charity and health care, as well as those offering entertainment, including sports teams, spend considerable time, energy and funds on their brands - "the symbolic embodiment of all the information connected to the product [that] serves to create associations and expectations around it."

The relationship between a brand and its customers is a complex one indeed, full of emotional connections and chemistry.  And like any relationships involving emotions, associations and expectations, they need to be carefully nurtured.  Once established, brand relationships can be extremely helpful to a business - especially if the company runs into serious problems in the marketplace.  I am convinced that the close relationship we had established in IBM with our loyal customer base was a key factor that helped us survive the near-death experience we faced in the early 1990s.

Let me illustrate this complex chemistry by discussing some of my personal experiences with brands.  Given the time of year, let me start with a subject that some may consider frivolous - baseball.

Welcome to Adam Smith's World

For about twenty years, since its launch in the mid 1960s to the late 1980s, IBM's mainframe business - the S/360 family, later renamed S/370 - enjoyed a commanding position in the IT industry.  So successful and profitable was the S/360 that in 1969 the US Justice Department filed an antitrust suit against IBM.  In 1986, for example, IBM was the most profitable company in the Fortune 500, with more than 400,000 employees around the world.

Then everything changed.  Rapid advances in microprocessor technologies in the late 1980s opened the door for new competitors to attack the mainframe with less expensive, client-server, UNIX and PC-based platforms.  We knew what we had to do - transition the mainframes to exploit CMOS microprocessor technologies and introduce IBM's own client-server platforms.  However, these new CMOS-based platforms, along with the software and services around them, commanded significantly lower profit margins than the mainframe margins to which we had become accustomed.

So we had to lower costs and expenses significantly, close factories, lay off people and take a number of additional, very painful actions in order to adapt to the new environment.  By 1994, we had lost almost $16 billion in the previous three years, and our employee population had fallen to 220,000. A plan was initiated that was leading toward breaking up the company into a loose federation of baby blues.  We were very close to ending IBM as a major company.

Welcome to Adam Smith's world.