A textbook case in how to drive change, IBM has been so
consistently successful that it is almost boring. Even more surprising
is the size of its workforce in contrast to other tech firms: IBM has more employees than Microsoft, Intel, Dell, Cisco, Apple, Amazon and Google all put together. Furthermore, only HP pulls in more revenue than IBM.
What’s the secret to IBM’s success?
In an interview with Steve Lohr,
Sam Palmisano, the retiring CEO, says that the firm’s pursuit of
excellence around four dimensions—ground rules—shaped the strategy and
focus over the past four years. Palmisano boils his ground rules down to
- Why would someone spend their money with you—so what is unique about you?
- Why would somebody work for you?
- Why would society allow you to operate in their defined geography—their country?
- Why would somebody invest their money with you?
These questions cut new territory in the business world in a number
of differing ways, providing especially relevant insight into the 21st
century orientation to talent management, careers, and socially
responsible businesses. The third, why society allows you to operate in
their geography, was rarely considered in the past. Today, although many
ignore the question and social responsibility, more are beginning to
take notice and get involved. Indeed, Rosabeth Kanter
points out six strategic reasons for serving, a highly relevant
necessity in today’s world. Palmisano not only read speeches and memos
from the founder, Thomas Watson, but he had lunch regularly with Watson
Jr., once a month. The Watsons, he says, always defined I.B.M. as a
company that did more than sell computers; they believed that it had an
important role to play in solving societal challenges. It’s
old-fashioned, but it’s motivational, he says.
The second, “why would someone work for you,” has become a
significant matter in the battle for brainpower in a day in which the
so-called talent war has gone global, along with talent shortages. It’s a
reminder that although all kinds of employees are out of work, more and
more businesses are having a difficult time accessing needed talent,
even in states like Michigan. Skills shortages are widespread. Dan
Pink’s comment back in 2001 is even more relevant today: “Talented
people need organizations less than organizations need talented people.”
Palmisano found that social responsibility resonated with the young
people IBM is recruiting.
A couple of times a year, Mr. Palmisano
speaks to groups of elite students whom I.B.M. is trying to woo to its
research labs. The pitch, he says, is that I.B.M. is a place where you
can make a difference and do deep science.
“You can change the world, and you can compete for a Nobel prize,” he says, referring to I.B.M.’s five Nobel winners.
(Eighty-seven percent of the candidates who were offered jobs by I.B.M. Research this year joined the company.)
Mr. Palmisano’s appeal to young technologists is just one example of an answer to one of his four questions.
The first question, why someone would spend their money with you,
goes straight to the heart of business strategy. This is an issue that
has gotten much attention since Drucker, and continues to be the
beneficiary of much thinking, refining and focusing.
Viewed individually, these questions are not especially unique,
excepting the talent focus, but together they are a phenomenal set of
ground rules. My response when I first read the ground rules was, “my
god, this guy is really a thinker, a great thinker. Not just the typical
business yeoman who performs in workmanlike fashion to achieve the
company’s objectives.” Taken together, his ideas are client focused, but
at the same time, they force a scintillating inward focus upon the
operations of the firm. They impact the culture, the strategy, the
workforce morale, the commitments of its employees, finances and the
clients’ expectations. It’s no wonder that Warren Buffett, who normally
shuns technology, to accumulate $10 billion of shares, amounting to a
stake of 5%.
"The hardest thing is answering those
four questions,” Mr. Palmisano says. “You’ve got to answer all four and
work at answering all four to really execute with excellence.”
Finally, it should be noted that Mr Palmisano was not bred a techie,
but came up through the ranks of IBM sales with a Johns Hopkins history
major. His thinking is highly indicative of the strengths of that liberal arts background.
History people are weaned on the big picture, and thrive on the
intellectual ideas that initiate and maintain change in a sea of
competing ideologies. This critical tool is especially useful for
analyzing the sequence of events leading up to massive changes and
reformations, and adept at forecasting the consequences of ideas for
good or ill. History is one of two or three fundamental critical tools
of global human thinking and analysis, and Palmisano’s thinking reflects
that background. It’s paid off superbly for the firm over his CEO