“We kept the future and sold the present”
IBM is an ongoing study of organizational culture change and transformation. It gave birth to the modern IT industry and has lasted more than a century by reinventing itself many times.
In 1911, several small businesses merged to form the Computer Tabulating Recording Company to manufacture the business technologies of the day: cash registers, punch card equipment, and automatic meat slicers.
In 1924, the president, Thomas Watson, Sr. Changed the name Io intentional Business Machines. IBM built the first social security system in the 1930s, giving birth to the modern IT industry and becoming the leader in historychanging technology. For that century, it was one of the largest single suppliers of IT to companies worldwide.
But in 2012, IBM was losing ground. Despite having $100 billion in revenues, 1 million plus shareholders, and over 350,000 employees in more than 10 countries – sales were flat! Clients and technology were changing so fast that IBM had to transform to maintain itself.
The new CEO, Ginni Rometty, knew IBM had to completely reinvent itself without losing its core identity. It had to attain a balance between being in service to existing clients and competing as a business. Competitors had no legacy / core identity to protect, so they were fast and lean. IBM had to be more nimble and build new skills en masse. To contend with cloud computing, the rise of data, mobility and social media, IBM needed a new technology platform, tech innovation and pipeline, plus divestiture of businesses no longer core to the mission and / or unprofitable. To survive and thrive, IBM had to transformer its culture.
Rometty knew for the culture to change, beliefs had to change. Her approach was: Building belief is key – A never ending effort – A long term commitment. She advanced a few strategic beliefs:
1. It is a new era of computing – driven by data, the cloud and AI – and IBM has to be a bigger part of it.
2. IBM clients were changing – reinventing their companies from the inside – and wanted help with their own digital transformation
3. IBMers had to evolve- learn new skills and ways of working with clients and each other
4. IBM had to divest of some products, reimage some, and create some
She advanced a company wide slogan was: BE ESSENTIAL.
Rometty launched her new position with a live video broadcast companywide. Her intention was to “paint reality and give hope”. Her directive was to aspire to “Be Essential” to clients and societies of the world at large. She Invited people to email with feedback and ideas. Then, for three months, she travelled the globe for town halls with employees, stating the purpose and beliefs. She hosted client roundtables with more than 200 CEO and CIO customers, and asked them for feedback.
On the ORGANIZATIONAL level, Rometty asked:
Who is IBM now?
What should we become?
What do we keep?
What do we let go?
What do we build on?
What do we add?
(even if it hurts!)
One of her hard decisions was what to do with IBM’s revered semiconductor business. Though a huge part of the history of IBM, it was no longer cost effective. She said it was hard to divorce ourselves from history – to say goodbye to something we’d birthed and nurtured. For two months, two teams come together to reimagine the process. There were heated arguments – which Rometty considered vital to the process. Conflict can breed progress as much as collaboration can, as long as it is done respectfully, she advised. The end result was outsourcing. They found the right high-end manufacturing partners and negotiated contracts.
On the PERSONAL EMPLOYEE level, she asked:
How do we change?
How do we encourage people to change?
How do we give people permission to change?
How do we create a concrete new way of scorekeeping to support new behaviors and skills?
Rometty sent each senior vice president (over 100) a handwritten letter describing three things she admired about them. In some, she suggested ways they could grow. In return, she received a lot of emails offering suggestions on what she could do to improve the company. She followed the recommendations, making appropriate changes.
Rometty embodied the necessary elements of cultural transformation – from visioning to collaborating to problem solving to active listening to…
REFLECT:
Identify the effective actions / skills Rometty used.
APPLY:
Rank yourself on the skills Rometty used.
Create a plan to improve on your less effective areas.
Good Power, Ginni Rometty, Harvard Business Review Press, 2023.
