Values that can help shape the business model in a changing world
To celebrate its centennial, IBM has published a book with the laudable ambition of making the world work better. The Computing-Tabulating-Recording Company was founded in 1911 from the merger of four firms involved in data tabulation, time recording, scales and manufacturing. In 1914, Thomas J. Watson Snr was hired to head the company. He came up with the slogan, 'Think', that became the company's mantra and, in 1924, its name was changed to International Business Machines.
Watson was famous for his beliefs that guided staff behaviour. His son, Thomas J. Watson Jnr, succeeded him in 1952 and in less than two decades had transformed a punched card company into the global dominant player in computers. Today, it has 425,000 employees, and its research arm has produced five Nobel laureates and inventions such as the ATM, floppy disk, hard disk drive and the Universal Product Code.
The book is divided into three parts. Kevin Maney wrote the history of the science of information technology, a fascinating story of the emergence of the industry and the role of brilliant scientists and smart managers.
In 1928, nine out of 10 businessmen turned down Columbia professor Ben Wood's idea that simple computers can have limitless business potential. It was the genius of Watson Snr that recognised that idea and he set out to transform his business from simple tabulation in accounting to what became the computing industry.
My favourite part is Steve Hamm's section on 'Reinventing the Modern Corporation', examining how Watson Snr thought about running and building modern business, using and creating tools and structures that eventually became both global and universal. It is the energy, passion and vision of great leaders to mobilise the creativity of staff that make strong corporations.
Every corporate leader today should ask the four key questions asked within IBM: How does a company define and manage itself? How does it create value? How does it operate in a global economy? And, how does it engage with society?
Companies have their own differentiating identity and values. As Hamm incisively pointed out: 'Unless the company culture is sustainable - meaning it can continue to thrive if products change, markets change, technologies change and the dominant leader isn't in command anymore - the company itself isn't sustainable.'
In the late 1980s, IBM was the dominant player in the computer hardware business, but it became complacent. Lou Gerstner arrived in 1993 and, by 2002, he had engineered a major turnaround. As he said: 'Change doesn't happen unless you understand the culture of the organisation. What do people value? What do they think is right for the company?'
The final part of the book, 'Making the World Work Better', is on the true challenge of any company with global ambition. The move away from 'self-centred' values and profits towards the notion of a company as a platform for shared services and values was a major innovation when current chief executive Sam Palmisano launched IBM's global makeover. Integration of the corporation was through common values and processes, being able to bring global knowledge to bear on solving local problems.
The modern corporation today faces a multitude of transformative shifts - the seismic shift of economic power to emerging markets, of changing demographics, rapid urbanisation, dazzling technology, war, terrorism and natural disasters.
The conventional view is that the business of business is to serve the shareholders. The global financial crisis put paid to this idea. The idea that profits should be achieved irrespective of the consequences on society is irresponsible and flawed.
As the world changes, this is the time of fusion and experimentation. This is the age of social innovation - from activist philanthropy to social business, the idea that businesses should plough their profits back into business for social good.
'Making the World Work Better' forces us to rethink the way we work, how we consume the world's scarce resources and how we live and interact with each other.
We need to understand the planet we live in as a complex structure of interactions between human and natural systems. Jeffrey O'Brien identifies the process of mastering change and complex systems as a discernible path of seeing, mapping, understanding, believing and acting.
This coincides with my own experience that crisis is an event, but development is a process. Indeed, the trouble with conventional economic theory is that it is obsessed with perfect ideals that are divorced from a messy reality. Conventional theory does not teach you how to get to such ideals as a high-income, inclusive and sustainable society.
The challenge facing each of us, including the modern corporation, is how to execute and achieve these ideals. Understanding the world as a living complex system brings us back to the reality that progress is a cycle. We think, therefore we must act. But action may lead to unintended or undesirable outcomes. Therefore we must reflect, think, change and respond.
Great economies are built by great companies. This IBM centennial book is a must-read for all corporate and thought leaders on the role of the modern corporation in a rapidly changing world.
Andrew Sheng is president of Fung Global Institute