MOUNTAIN VIEW, Calif. – In a speech commemorating IBM's 100th anniversary, chief executive Samuel J. Palmisano said companies need to deliver value, collaborate broadly and embrace change to survive the long haul.
Only a handful companies have lasted as long as Big Blue. Just two of the top 25 U.S. industrial firms of 1900 remained when IBM turned 50 in 1961, and only six of the top 25 Fortune 500 companies of that year remain in business today.
"We're off to the best year in 100 years and our stock is at a 100-year high even after the sell off today," said Palmisano in a talk at the Computer History Museum Thursday night.
Linking research and development is one key to success, said the IBM CEO. "You have to turn discovery into profits, that’s the fundamental role of a company," he said.
In an era of crowd-sourcing, Palmisano lobbied for the importance of basic research as fundamental to success. "Today we need deep science more than ever, serious highly institutionalized research and collaborations that are multidisciplinary," he said.
"Competition is a wonderful stimulant, but it's not sufficient," Palmisano said. "The wild West of competition needs to be complemented with collaboration even between competitors," he added.
The IBM executive quoted a 1962 speech by Thomas Watson Jr. highlighting another key pillar of success.
A company must be prepared to change everything about itself except its core beliefs, Watson said. That means companies should never define themselves by a product, technology or a business model, but only by their corporate values, said Palmisano, only the ninth chief executive in IBM's history.
IBM has not always embraced change boldly, the CEO said. "In the '90's we held on to the mainframe business model long after it was obsolete," he said.
When it finally did jettison the "old mainframe model of entitlement" it meant slashing the IBM workforce from 412,000 to 214,000 people. "That’s structural change," said Palmisano.
"We're back to 426,000 people today, so there's life after a change of business model," he said. Indeed, "in our last quarter our mainframe business was up 50 percent, so it's hardly dead," he added.
More recently IBM jettisoned its hard disk drive and PC businesses when they became commodities, selling them to Japan's Hitachi and China's Lenovo respectively. "The key is don’t get wedded to your successes in a business model or technology," he said.
Not all of IBM's history was glamorous or high tech. The company sold clocks and cheese slicers in 1914. "We had one hell of a cheese slicer," Palmisano quipped.
It also had bombs like the PC Junior and OS/2 operating system.
"We haven’t been known as a marketing company," said Palmisano. "There's an old joke that IBM products aren’t launched, they just escape from the lab," he said.
"We have another principle that’s called 'Sam wants his money back,'" he joked.
For example, the artificial intelligence researchers that got millions to build the Watson system that beat human contestants in "Jeopardy" are gearing up to make their return on that investment. Their work will be productized next year for applications in finance and a physician's assistant, he said.
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