The New York Times’ profile of IBM’s outgoing CEO, Sam Palmisano, is an interesting study of how an established business can make well thought out long term plans through asking some basic questions.
Under Palmisano, IBM moved a large part of their business from manufacturing and distributing computers to more Internet based products and services.
A key part in IBM’s reinvention was recognising the PC hardware business was in decline as commoditisation of the computers and associated components eroded margins.
To counter this, IBM looked at the areas where they believed the margins would be for the next decade and decided they lay in “on-demand” computing – what we now call “cloud computing”.
What is particularly notable with IBM’s move to the cloud is this renting time on mainframes was the mainstay of their business up until the 1990s so the culture of reliable, accessible services backed by well priced plans is something not unknown to IBM.
Having decided on the on-demand computing strategy, IBM then looked at who would buy their hardware division. Here they acted strategically and rather than selling to the highest bidder – someone like Dell or a private equity firm – they sold to China’s Lenovo which enhanced IBM’s standing within the Chinese markets.
The notable thing with all of these plans is that they were made strategically and executed without the dithering we see at other companies struggling with similar issues. Yahoo! and HP being the two standouts in this area.
While smaller businesses can’t execute on the same scale companies the size of IBM can should they choose, Sam Palmisano’s thinking was guided by four key questions;
- “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 four are something all of us could ask of ourselves and those around us. The answers to those questions are will guide what we do, where we do it and how we do it.
For IBM, the future is fascinating as a new CEO comes in and they apply their investments in cloud computing, consulting and data mining to bigger picture projects like the Smarter Planet initiative.
How this works for IBM and the other large technology companies remains to be seen although it’s quite clear that unlike many of their contemporaries, IBM’s management has a vision of where their business fits in the 21st Century.