IBM turned 100 in 2011 and for a company that is that old is doing very well in this cutting edge technology world of today. For Big Blue, as it is fondly referred to, getting to where they are today has not been an easy journey and if there was ever a company that deserved to be where they are today, it is IBM. Over its 100-plus years of existence IBM has had to make a number of difficult decisions that have seen them acquire and divest off billion dollar companies while at the same time trying to fend off competition from the likes of HP and EMC, all angling for the same clients that IBM have been serving for years and years.
But in the midst of all this, IBM has risen to be the largest technology company by market capitalization with a share value of $217 billion dollars and annual revenues North of the $100 billion mark and all this with a work force of over 400,000 spread across the the globe. But how has IBM been able to pull this off and what recent decisions did they make to get them to where they are today? Here are a few things I believe IBM have done right and have got them to where they are today.
Over the 100 years IBM has been in existence, they have had only 9 chief executives, the most recent being Virginia Rometty who took over from outgoing CEO Sam Palmisano. This is a marked departure from what we are used to seeing in all these other “hip” tech companies that change CEO’s as if by coming and going fads. This trend by IBM has seen the company preserve continuity and sustainability and as any expert in management and leadership change dynamics will tell you, a CEO needs at least 5 to 7 years in order to effect any significant change to an organization and IBM have nailed this spot on.
The other interesting thing about the IBM leadership and succession structure is that more often than not, the new CEO is picked from an existing pool of veteran IBM employees who have been at the company for decades (outgoing CEO Sam Palmisano started off at the company as a sales man back in 1973 while incoming CEO Virginia Rometty is also a 30 plus year IBM veteran). This shows an interesting leadership structure that favours internal experience over external skills and qualifications.
This may be compared to the high churn rate in top management in most technology companies such as Yahoo and Google. This choosing of insiders often means that the incoming CEO is not only well versed in the inner workings of the company but that they also have the full support of the whole organization and top management through familiarity and popular appeal.
One of the biggest decisions IBM had to make in the recent past was walking away from what the company was initially known for, personal computers. When IBM decided to sell off its PC business, the dilemma was obvious. The PC business was bringing in $20 billion worth of revenues per year to the company and was delivering fairly good profit margins. The PC business also made IBM the largest computer technology company in the world with its competitors HP in a distant second.
But IBM have this way of trying to predict where the market will be in the next ten years and then trying to anticipate this market shift and so far, this has gone very well for them. Over ten years ago, IBM began talking about cloud computing, or as they called it back then, on-demand computing. This was a big reason why they decided to sell their PC business to Chinese giant Lenovo as they realized the market was shifting into a highly fragmented hardware market but a more unified cloud computing market and this pay gamble has paid off handsomely.
This critical insight and ultimate gamble is what has seen IBM become today one of the most established and influential cloud computing companies in the world while HP, who are the other computer behemoth are still struggling with the decision of whether to sell of its PC business or not while also caught up in smartphone and tablet wars. What’s more, IBM also realized that solving societal problems is always the entry point to business and this gave birth to their Smart Planet initiative that seeks to identify and create solutions for societal problems faced by governments and large organizations; the company currently supports over 2000 initiatives under its Smart Planet banner.
With these two critical aspects, it is easy to see how IBM has not only stayed profitable and on the upward curve, but has also beat HP to become the largest computer technology company in the world in a way that matters most, in stock valuation; investing guru Warren Buffet has also bit the bait, he recently raised his stake in IBM to over 5% or a $10 billion investment. HP and other technology companies such as Oracle and Microsoft have a lot to learn from Big Blue if they hope to remain around for the next 100 years and still retain a fresh pair of legs and excellent credibility in the global economic market place.