100 years later IBM still placing big bets
By Heather Travis
October 25, 2011
Companies don’t last for 100 years by being stagnant. In order to survive and thrive the changing business environment, companies have be adaptive and be willing to cut loose any ideas or products that are tethering you to the past, says Bruce Ross, president of IBM Canada.
Now celebrating its centennial anniversary, IBM is the quintessential adaptive company. Commonly identified with computers and e-business solutions, IBM has taken on many forms through the years. IBM evolved from a small business making scales, time clocks and tabulating machines to what it is today – a globally integrated enterprise.
Ross, a University of Western Ontario alumnus, took Faculty of Engineering professors and students on a trip down memory lane Oct. 12 as part of IBM’s Centennial lectures. Ross dropped by his alma mater to discuss how the world has changed in the past 100 years and how it will change in the decades ahead.
“A couple things engineering taught me: one was a deep curiosity for how things work and how they can work better; and two, was solving problems,” Ross says.
While IBM has stood the test of time, it hasn’t been an easy road for the company. Many difficulty decisions needed to be made through the years in order to continue to stay relevant.
“No product should be expected to serve its clients for more than a decade. You should never expect that whatever you make is going to last in perpetuity,” Ross says, quoting Thomas Watson Jr., former president of IBM. “Success is fleeting and corporations are expendable.”
In order to stay ahead of the curve and avoid becoming extinct, IBM kept focused on innovation. But with every new idea, IBM put it to the litmus test of its three core principles: how to avoid commoditization; having the fortitude to make big bets; and thinking about culture as a competitive tactic.
“We started in 1911 and back then we were making food processing equipment like meat slicers … the furthest thing from computers that you could possibly think about,” he says. “The progression of technology and innovation is always something that we’ve always done.”
IBM was one of the last companies to jump on the bandwagon of developing personal computers (PCs). “We didn’t see it coming,” he says, noting after IBM got on board, they were extremely successful. “We were also willing to get out of that business,” he adds.
Even though PCs made up about $10 billion of IBM’s revenue, in the early 1990s IBM stopped making PCs because of how difficult it was to make money, he says. “It’s not just about understanding that your business is becoming commoditized, it about the ability to understand when you really need to get out of it.
“We avoid commoditization by making sure we understand where the market is going and we align our research to where it is going,” he says.
This difficult decision sent a ripple effect through the financial markets at a time when companies like IBM were expected to grow their revenues, not shrink them.
But IBM has a careful understanding of its business model and a keener sense of where the market is going in the future. It also means the company knows how to make big bets and stand behind these decisions.
One of the biggest bets IBM made was shutting down four of five key business areas of the company in the early 1960s to focus on the System/360 computer.
Another piece of the puzzle is IBM’s way of looking at culture and seeing it as a way to turn a good company into a great one. This means differentiating the company through culture systems thinking (seeing the environment as a system of systems which can affect businesses); a culture of analytics (e.g. the Watson computer that won Jeopardy) and culture of working for a higher purpose.
“What are the problems we are all trying to solve? In the end, we are trying to make a better experience for all of us on the planet,” he says.
For more information on how IBM has changed over the past 100 years, click here.
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