June marked the 100th anniversary of IBM. Here is what The Economist had to say about Big Blue’s longevity: “IBM’s secret is that it is built an idea that transcends any particular product or technology. Its strategy is to package technology for use by businesses… Building a company around an idea, rather than a specific technology, makes it easier to adapt when industry platform shifts occur.” Based on this idea, the weekly argues that Apple, Amazon and Facebook are well-positioned to reach the 100-year mark, while Dell, Cisco and Microsoft are in a more precarious situation.
A detailed analysis of IBM’s longevity is provided in the briefing in the same issue. It is hard to fathom now, but IBM’s business started with punch cards in the late 19th century. The business has witnessed three significant platform shifts so far:
- in the late 1940s, “when electronic “calculating machines” and magnetic tapes came along”,
- “from costly mainframes to “distributed” computing systems in the late 1980s,
- much more recently, to computing as a service performed in data centers and delivered over the network (cloud computing).
IBM has become focused on services (its services arm employs more than half its workforce of over 425,000) and less hierarchical. It also endeavors to make “the output of its 3,000-strong research division… relevant to its business” and “ditch[es] businesses that are about to become commoditized” to keep its profit margins high. But in the end it is clear that the main ingredient of IBM’s success is its “human platform”, built upon “close relationships between customers and supplier”.
In a provocative article, The Economist also compares IBM to the Carnegie Corporation (which also turned 100 in June) and asks: “Has the multinational business or universal philanthropy done more for society?” Or, echoing Sam Palmisano in a new book celebrating IBM’s birthday: “One simple way to assess the impact of any organization is to answer the question: how is the world different because it existed?” You might argue this question applies to people too, and the article indeed compares Andrew Carnegie with Thomas Watson Sr, who ran IBM for four decades. The Economist’s verdict – read the full article for interesting historical facts – is that “in the first 50 years, the impact of the Carnegie Corporation on society dwarfed that of IBM… in their second 50 years the two institutions’ impact has arguably been reversed.” The article also raises the question of the appropriate maximum age for a foundation: is 100 too old? As an example, “the Gates Foundation will have to be wound down 50 years after the second of Bill and Melinda Gates dies.”
Bill Gates, mentioned in passing as “the Andrew Carnegie of today, [who] is busily giving away the fortune he earned in business”, is also the focus of another Economist article, that one from June 2010, about his attempt with Warren Buffett to convince other billionaires to take the “giving pledge”, “promising to donate 50% or more of their wealth.” As of mid-2010, 4 other tycoons had followed Gates’s and Buffett’s lead. By The Economist’s calculations, “half of the total net worth of the American billionaires on the 2009 Forbes 400 list is over $600 billion.”
Returning to IBM, an October 2010 article from, you guessed it, The Economist again, describes its impressive track record in corporate volunteering through the IBM Corporate Service Corps, which is portrayed as a “corporate version of the Peace Corps” and is supposed to involve 500 IBMers a year, albeit for much shorter engagements than the Peace Corps. Those activities also help IBM polish its brand name and maintain good relationships with key actors in foreign markets. Companies that have followed IBM’s lead include Novartis, Dow Corning and FedEx.
For more information on IBM, I recommend Lou Gerstner’s book, “Who said elephants can’t dance?”
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