What IBM and Sam Palmisano Could Teach Apple, Microsoft and President Obama

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I attended a truly brilliant speech last night. It is now one of those that I'll likely take with me to the grave. It was done at the Computer History Museum as part of the rollout of its amazing Revolution exhibit. If you are into technology, this exhibit is a must-see.


The talk was given by Sam Palmisano, who is heading IBM as it passes its century anniversary. He is part of the reason IBM made it to the century mark because it very nearly didn't. But he spoke about what it takes to make it through 100 years and I'll remember both what he said and, more importantly, what he did, which is give IBMers hope. Hope is what is lacking at Microsoft and in much of the U.S. right now.


But there are two other lessons, one for Microsoft and one for the U.S. that could be pulled from this. Most interesting is that he had a message for Apple from what he learned from IBM's charismatic CEO Thomas Watson Jr. that could allow that company to defy the odds and survive 100 years itself.


Let's talk about hope, change and how Sam Palmisano and his team are creating magic at IBM. This magic is what a lot of companies and the U.S. need so desperately right now.

Making It to 100


According to Sam, only 1 percent of large corporations make it 40 years. He argued that this was largely because firms tend to think tactically. His subtle message seemed to be that most CEOs seem to focus more on their compensation than on the long-term survival of the firm, which is why that survival is put at risk. However, he acknowledged that wasn't the case with IBM's near failure; IBM had been designed not to make that mistake but had forgotten one of the key design elements that Thomas Watson Jr. had created. That design element, in the form of three unbreakable rules, had been lost.


Those rules are (paraphrased): Have a set of laws, don't break them and be willing to change everything else. These laws/rules/defining concepts aren't tied to ethical behavior, which is important, and they define the company. They lay out what the firm stands for, what it is in business for and, in effect, they are the soul of the firm. If you hold true to that, but are willing to change everything else, the firm can survive any industry change.


IBM slipped because it forgot its soul - one aspect of which was being a trusted partner to corporate buyers - and it was unwilling to change its business process from the mainframe model. Once it was back to being a trusted partner and had updated its business model, it enjoyed success again. The only exposure I see that it still has is that this is the first time in its history that it doesn't have something a user actually touches, which lowers its valuation. Even so, the company is trading higher than it has ever traded.


Microsoft forgot that it was created to empower users and forgetting that has put it at risk.


Investing in the Future


One of the most compelling things Sam Palmisano said was that there is so much focus on the present that few firms leave anything for the future. IBM spends more on R&D than any of its peers and 30 percent of that is focused on long-term projects that could define the IBM of the next century. It is constantly ensuring that there will be an IBM 100 years from now, which is how it made it through the first 100 years.


He also pointed out that the most important part of R&D is the "&" part. It does you no good to have research that is never developed. The company has to eventually drive the technology it creates to market, otherwise the benefit won't be achieved. IBM is currently working on a project that will revolutionize batteries and create new elements, and it is close to releasing technology that can identify and target viruses in the body. Watson, the computer that won "Jeopardy!," was created to showcase advancements in natural-voice interfaces and cognitive computing. A possible use for Watson could be for patients to explain their symptoms to it to be more accurately diagnosed remotely or on premise (the machine did win after all).


This is also a lesson for the U.S. Government, which is tightly focused on quarterly results. The stimulus and budgets cuts were tactical but with no apparent lasting benefit and they don't invest in the country's future adequately. They pretty much ensure that the U.S. will be an ex-superpower like England and France, which both made similar mistakes. Andy Grove, Intel's founder, who was in the front row at the event, has said that you can't save out of a problem; you must invest out of it. Both Intel and IBM increase their R&D during downturns in their fortunes and have emerged stronger afterwards.


IBM invested in its future and is more stronger than ever. The U.S. needs to learn that same lesson and I think IBM and I know Andy Grove are willing to help.


Wrapping Up: Message to Steve Jobs and Apple (and Every Other CEO)


The not-so-subtle message to Steve Jobs was this: Thomas Watson Jr. was also a charismatic CEO but, recognizing the problem, he worked tirelessly on creating a company that could survive without him. He made sure there were people like Sam Palmisano who could carry on, who could take IBM to new heights and could ensure that lasting legacy. Watson recognized that as wonderful as he was, he'd eventually be forgotten unless IBM survived. His immortality was inexorably connected to IBM's longevity and IBM itself was his monument to the future. This is something that could last for hundreds, if not thousands, of years.


Apple could also be such a monument, but it won't if it fails to outlive Steve Jobs. For Steve and every other CEO and president, the message was clear: Your lasting legacy won't be your big house, plane or cars. It will be whether you left the company better off than it was when you found it and whether you did everything to ensure its immortality.


Fame is fleeting; only a few dominant companies that were around when IBM was formed made it to their 50-year anniversary, and only six made it from 50 to 100. The firms that are around 100 years from now, and IBM plans to be one, will do so because of people like Sam Palmisano. Now that is a legacy Sam can be proud of and why I'll always remember this talk.


One final thing. What employees at IBM, Microsoft, Apple and every citizen in every country including ours want is hope. Sam Palmisano gives his employees hope and that is a gift that is truly priceless.