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A business and Its beliefs
A business and its beliefs
IBM is a company built not on products and services but, rather, on ideas and values
In 1961, a veteran IBMer wrote Thomas J. Watson Jr. a letter to remind him of a promise made but never kept decades earlier during his CEO father’s tenure. The company had pledged to send its entire sales team to Europe as a reward for doubling annual revenue during the Great Depression.
Amid a faltering US economy, IBM had kept its people working, building machines despite flagging demand, investing in research and development, and launching new products even though it wasn’t clear when, or even if, customers would again be in a financial position to buy. Doubling revenue was no small feat, yet by 1941 the company had done it — seven years after that promise. But with the war raging on the Continent, traveling to Europe had become too risky. The trip, sadly, would have to wait.
Reading the letter, the younger Watson understood what had to be done. Certainly, war was justification enough for canceling the trip 20 years earlier, but it hadn’t cleared the company of its obligation to the early sales pioneers. This was, after all, a company that respected its people, a longstanding tenet of the company under both Watsons. The following summer, Watson Jr. sent 187 salespeople who had met their quotas two decades earlier, and their partners, to Europe on the company dime — the promise now fulfilled.
“I knew that I had to make good on the promise and was glad of the opportunity,” he wrote in 1963 in a short book that would become a crucial IBM text and an exemplar for business students examining corporate culture.
A Business and Its Beliefs codified a basic set of principles — a “way to be,” as Watson Jr. described it — that had guided the company for decades. These standards, all rooted in serving people and doing excellent work, would further enable IBM to transcend shifts in politics, economies, markets and products over time — and even rebound after near collapse. Through more than a century of radical business change, innovation and reinvention, the company remains committed in aspiration and deed to these core beliefs.
Think!
Thomas J. Watson Sr. had a vision for the company from the outset. When he joined the Computing-Tabulating-Recording Company in 1914, agreeing to the task of weaving a fractured conglomerate of three companies into a unified, functioning whole, he knew he would need to fix the culture first. He set out to build one based not on products or even markets but, rather, on the aspirations and abilities of its people.
“Think!” he urged the staff in the company’s Endicott, New York, offices at his first meeting there as C-T-R’s leader. That simple exhortation would become the legendary mantra for a broader corporate ethos, anchored by characteristics like curiosity, persistence and achievement. “I believe in getting behind the individual and backing him up, helping him to strengthen himself … and bringing out the best there is in him,” Watson Sr. said.
While leaders often shape companies in their own image, he championed a new breed of free-thinking worker capable of adapting to fast-changing markets, one who would buck company norms and respond to challenges with novel ideas and enthusiasm. He recognized, too, the company’s responsibility to encourage and nurture them. His son Watson Jr. called them “wild ducks” and made it a priority to “try not to tame them.”
For the company, personal growth was rooted in education. At that first Endicott meeting, Watson Sr. instructed staff to open an on-site business library. In 1918, 70 managers enrolled in the first executive training program. In 1932, he opened the IBM Schoolhouse to provide education and training for employees. He regularly spoke about “leaders as helpers,” reminding his managers that they “are all assistants” — to their staff, to customers and to each other.
Today, the company spends hundreds of millions of dollars annually to further educate and develop IBMers. Ingrained in IBM’s DNA, education is also now one of its major business services lines.
In service of the customer
In supporting creative thinkers, educating staff and following through on its commitments to all employees, IBM was living the value of “respect for the individual.” Watson Jr. summarized two other basic beliefs of the company: excellence in your work and service to the customer. On the latter, the elder Watson told IBM executives in 1929 that “all is lost without service.” In 1949, the company ran a series of now-famous ads in most newspapers across America, stating simply “IBM means service.” It began to present awards of the same name each year to top performers in customer service.
It would turn out to be prescient guidance for the company six decades later, when rising competition and commoditization of the personal computer and mainframe markets threatened IBM’s leadership in hardware, which it had sustained for decades. Through a period of profound transformation in the 1990s, led by Louis V. Gerstner Jr., the company’s first external CEO hire, IBM shifted its portfolio to a more balanced mix of integrated, high-value service offerings. Gerstner articulated a vision for the company around a “service-led model,” implementing in strategy what Watson Sr. had expressed decades earlier.
When Sam Palmisano took over as CEO in 2003, he and his team identified new opportunities for the company in the global economy, but recognized that to capitalize on them, IBM would need to transform itself — again.
As in the past, its leadership focused first on culture. The previous decade had taken its toll on IBMers, many of whom questioned whether company values, rooted in the Watsons’ basic beliefs, had survived the near-death experience of the 1990s. Palmisano, too, wanted to know. In 2003, he kicked off an employee-feedback process that resulted in IBM’s ValuesJam, an online forum inviting IBMers from all over the world to weigh in on what the company should stand for and how its employees should operate.
What emerged from the thousands of responses was a set of guiding values, similar to those the Watsons had preached for more than 60 years: dedication to every client’s success, innovation that matters “for our company and for the world,” and trust and responsibility in all relationships.
Through the ebbs and flows of business over recent decades, the company has maintained its values as a guiding force during constant technological change. In her farewell letter to IBMers in 2020, outgoing CEO Ginni Rometty summed up the way in which the values will continue to serve as a North Star for her successors and into the future. “We internalize these values and share a belief in the fundamental promise of technology,” she wrote. “Of course, this culture existed long before I joined the company and will endure long after I’m gone.”
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