Bucking the Odds for an Entire Century
Palmisano cited some statistics about a company being in business for a long period of time and remaining successful, despite the odds against it.
"Of the top 25 industrial corporations in the United states in 1900, only two remained on that last in 1961 (IBM's 50th year), and one of those because it had absorbed six others from the original list," he said. "Two companies had disappeared, and the remaining 15 had slipped far behind.
"Figures like this remind us that corporations are expendable, and that success at best is an impermanent achievement which can always slip out of hand."
Palmisano cited a recent Harvard study of 6 million companies and how long they lasted in business. "Only 1 percent made it to 40 years, so you can imagine how rare it is for anyone to make it to 100 years," he said.
Why has IBM succeeded for so long, while other talented and respected IT companies like Univac, Wang, Burroughs, DEC, Tandem, Apollo, Silicon Graphics and Sun Microsystems have come and gone?
"One reason is that we haven't done the same thing for 100 years," Palmisano said. "And another would be that we have done exactly the same thing for 100 years. That is the first lesson from our first century.
"To put it simply, this enterprise has always moved to the future. Continual forward movement is, in fact, inherent in IBM's value proposition -- it's our business model. The frontier of what is truly innovative keeps moving, and you've got to move with it -- you can't sit still. If you sit still, especially in technology, the ramifications are disastrous."
Change Has Been Constant
IBM has always changed its product line. It may have started by making cheese slicers ("I'm told that in 1914 it was a world-class cheese slicer," Palmisano joked) and graduated to cash registers, typewriters, calculators, spinning disk hard drives, mainframe computers, supercomputers, portable computers, software, services and much more, but its business model never changed.
"We've thought about this constant balance between change and continuity, and I'd like to share three essential areas that are relevant to the Valley and to our industry. First is the importance of the 'and' in R and D. Sometimes we forget that they (R&D) are different. Most of the innovation IBM has experienced came from deep research. You need both R&D, and you need to keep changing both," Palmisano said.
"Development is happening in ways that are increasingly collaborative -- from open source, to social media, to crowdsourcing. The broader point is that a deep commitment to R&D means that it's not only important to innovate, but it's as important to innovate how you innovate."