I fondly remember being a guest at a 100th birthday celebration – that of my client Hufcor, the worldwide leader in moveable partitions and walls to create flexible space. But Hufcor wasn’t always the leader.
A savvy new owner/CEO, Mike Borden, saved Hufcor from bankruptcy by pursuing an operational effectiveness strategy, process innovation and global expansion, which ultimately positioned Hufcor where it is today. At its centennial celebration, I observed the pride its stakeholders felt as they celebrated generations of Hufcor’s contributions to its employees and their families, its customers and distribution partners and the humble blue-collar town of Janesville, Wisconsin.
As IBM celebrates its well-deserved 100th year birthday this month, business leaders should study how this Fortune 500 giant (and mid-size companies like Hufcor) arrived at this momentous milestone. The $100 billion global technology leader, with its 427,000 employees, defied the odds. According to Arie de Geus, Living Company author, “A full one-third of the companies listed in the 1970 Fortune 500 had vanished by 1983 – acquired, merged, or broken to pieces.” Odds are even worse in today’s open markets.
Like Hufcor, IBM nearly faced bankruptcy when its leaders missed the shift from mainframe to desktop computing because they saw PCs as personal productivity gadgets rather than a transformative technology platform that would reinvent industries and much of the economy. When IBM’s core business in mainframe computers withered, forcing a cash crisis in the early 1990s, then CEO Louis V. Gerstner Jr., saved the corporation by moving IBM into software and services.
According to current CEO Sam Palmisano, former CEO and legend Tom Watson argued a company should reinvent itself every 10 years to drive the future. Tom Watson led in the Industrial Age. In the Information Age, reinvention must be an ongoing process of evolving individual business models as well as transforming the company’s portfolio of business models. Keeping business models or the portfolio the same is less and less viable as barriers to entry have melt away in most markets.
IBM has done both levels of change brilliantly. While open to change it also leveraged and enhanced its differentiating advantages. These include “strong, long-term customer relationships, deep scientific and research capabilities and an unmatched breadth of technical skills in hardware, software and services,” according to the New York Times. For example, today IBM delivers new value by bundling existing and new IBM technologies with its still evolving mainframe units to deliver cloud-based software and services in state-of-the art data centers.
It also exited many hardware businesses (most recently its PC business) as they commoditized, investing money to design and scale emerging businesses that capture opportunities created by macro shifts in the economy. The three major macro shifts of greatest interest to IBM today according to Palmisano are a rebalancing of global economies, a move to post-PC infrastructure like cloud computing and data analytics and, finally, customer demand for integrated solutions.
As a result, IBM shed the snake skin of an IT hardware company to become a global services organization helping its customers mine insight from data to generate break-through results, building a “Smarter Planet.” It’s helping its clients move their enterprise systems to the cloud. And it is doing this work in the 20 top growth countries, not just in Brazil, Russia, India and China.
Leaders say listen to the voice of the customer. But what about the voice of the business that represents the sweat, cheers, insight, luck, stress, innovations and teamwork of workers – often generations – that took the business to where it is today? This voice demands that leaders evolve the business to capture the waves of change for future success. This voice, I’d argue, is more important than the voice of the customer.
Palmisano reflects on this principle in a recent Forbes interview: “We don’t run IBM in quarterly cycles, even though there’s tremendous pressure to give quarterly guidance within a penny. I just feel it is wrong for the long term to run a company like that.” Instead, IBM leaders describe how IBM will be different in 3-5 years in terms that employees, investors and partners alike can understand and align around. Execution becomes building the company to the desired rendering.
As parents we nurture our children’s growth, helping them realize their full potentials. Less successful parents focus solely on physical survival and what their children can do for them. It’s a good analogy for separating true leaders from mere managers.