IBM’s System X and the Power of Marketing: Part I

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    The Struggle to Manage the Complexity of Modern IT

    In this two-part post, I’ll look first at why IBM is having a problem selling its X86 based servers even though, competitively, they appear to be the best solution. In the second, “IBM System X and the Power of Marketing, Part 2: Reality,” I’ll showcase its well instrumented win in the European Union that supports the second part of this assertion. I’m starting with the problem portion of this first because it is common for an engineering company to underfund marketing and the result can often be a loss of voice, which is at the core of IBM’s issues. IBM doesn’t have an inferior product—quite the contrary—the company has lost the ability to effectively control opinion about its brand and this is a common problem/mistake for firms in its class.

    Louis Gerstner’s Brilliance

    In my opinion, Louis Gerstner unfairly got most of the credit for the IBM turnaround because, actually, Jerry York, the CFO selected before he was hired, did most of the heavy lifting. One thing Gerstner does deserve credit for, though, is restoring IBM’s brand and market power. He was hired from outside the industry and came in with a unique perspective on marketing and its importance in a turnaround. He realized that perception was more powerful than fact and that he could more quickly change the perception of IBM than anyone could actually fix the company. In fact, IBM looked fixed long before it was fixed.

    To get there, Gerstner created the strongest marketing organization that IBM has ever had and iconic campaigns on broad media that made IBM almost a household word again. Over the time of his leadership, he restored the IBM brand from one that people avoided—it actually had negative value—to one of the most powerful brands in the world.

    At its peak, this organization made IBM the leader in ecommerce, years before the company had a truly viable solution—something that truly upset other engineering companies, like HP, that actually had better solutions. Like Steve Jobs, who was even more expert at the management of perceptions, Gerstner understood that if you could control how people perceived you, you could win in areas where you were outmatched. That was Louis Gerstner’s brilliance.

    Sam Palmisano’s Mistake

    Gerstner’s successor was Sam Palmisano, a very capable but more traditional IBM. Palmisano had clearly never learned the lesson that was taught to marketing people of his (and my) age. This story is iconic and is one of the first lessons I ever learned. It supposedly occurred between the CEO of Wrigley Gum, the leading confectionary company in the late 1800s, and a new college graduate. The graduate asked why Wrigley spent so much money on marketing given his firm was the market leader, and Wrigley responded with a question. He asked the graduate how fast the train they were both sitting in was going. The student answered “around 50 MPH.” Wrigley asked if the student thought that was fast enough. And the student said “Yes.” Wrigley then asked, “Why do they continue to shovel coal into the engine?” His point was that marketing is what enabled the company to stay in the lead.

    This is somewhat ironic, given that Wrigley, largely after a massive reduction in marketing, is mostly not remembered today.

    Palmisano dismantled IBM’s massive marketing program, and the unique power that Gerstner created was largely eliminated during the process. As a result, IBM doesn’t have the ability to fully defend its image, which is why it is being pummeled in the market for a non-event.

    The rumor of the Lenovo sale didn’t prove to be true, and no changes to IBM’s ability to execute occurred, yet it is clearly taking a beating in the market regardless of how good its solution is.

    Wrapping Up: The Recurring Mistake

    Engineering-driven firms often don’t get the importance of marketing, and that can be an incredibly costly mistake.

    I want to take special notice of this, because it is also a common mistake. Microsoft lost control of its image in the years after Windows 95 as a result of dismantling the marketing team that launched that very successful product. After that, Apple ate the company alive. Apple apparently lost much of this same skill as people departed after Steve Jobs’ death, and Samsung continues to take it apart as a result—with Microsoft’s unrelated help. (It is interesting to note that Microsoft hired Kathleen Hall to create a capability similar to what Gerstner did, and she has been impressively effective).

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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