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Corporate longevity: the lessons from IBM’s 100th birthday

Tuesday, June 14, 2011
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There’s lots of press coverage of this corporate milestone, with commentators wondering what conclusions can be drawn from the exceptionally long life of this business giant.  In particular, it’s interesting to think which of today’s technology champions will be around in 100 years.

According to The Economist IBM’s secret is that it is built around an idea that rises above any particular product or technology.  Its strategy is to package technology for use by businesses.  At first this meant making punch-card machines, 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.  The basic formula is that a company should focus on an idea, rather than a technology.

Three other big IT companies have followed this approach:
- Apple takes the latest technology, packages it in a simple, elegant form and sells it at a premium price. Apple has done this with personal computers, music players, smartphones and tablet computers, and is now moving into cloud-based services.  Each time it has grabbed an existing technology and produced an easier-to-use and prettier version than anyone else.
- The animating idea of Amazon is to make it easy for people to buy stuff.  It began by doing this for books, but has since applied the same idea to other products: music, groceries, mobile apps, even computing power and storage, which it sells on tap.
- Similarly, the aim of Facebook is to help people share stuff with friends easily. This idea can be extended to almost anything on almost any platform.

The article then points to three other firms who are product based:
- Dell made its name building PCs more efficiently than anyone else and selling them direct to consumers. That model does not neatly transfer to other products.
- Cisco Systems makes internet routers. It has diversified into other areas, such as videoconferencing, but chiefly because it thought this would increase demand for routers.
- Microsoft is hugely dependent on Windows, which is its answer to everything. But software for a PC may not be the best choice to run inside a phone or a car.
All these firms are wedded to specific products, not deeper philosophies, and are having trouble navigating technological shifts.

Also see The secret of Big Blue’s longevity has less to do with machines or software than with strong customer relationships – The Economist and IBM at 100: From typewriters to the cloud - BBC.  The second link contains a video clip and it includes this quote, which summarises the market orientation of the business:

“Twenty years ago IBM would create some technology it thought the marketplace needed, and then go and sell it to people.  Now we’re customer-led, we’re asked by our clients for what they want from us, and we’re producing solutions rather than specific products to link together the complicated global infrastructure we find around us these days.”



 

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