IBM Learned From Both Successes and Failures
Secondly, Palmisano said, IBM has been able to survive not only its failure, but its successes.
"The Valley is a bone pile of companies that had extraordinary initial success, but were not able to achieve a second act," Palmisano said. "IBM, in the early '90s, held on to the mainframe-based business long after the industry and market had changed in ways that rendered the model obsolete. The problem wasn't the technology; the mainframe remains a highly valuable platform. The problem was the business and organizational models built around it.
"It took a very difficult struggle for IBM to change those. It is now, and has been for decades, a very healthy business for us now, thank you very much."
Palmisano also explained the company's strategy in selling the popular ThinkPad computer franchise to a Chinese firm, Lenovo, in 1992.
"It was by any measure the most recognizable brand for us, touching tens of millions of people," Palmisano said. "Yet we knew that personal computers were becoming increasingly commoditized, and that's not where we wanted to be. It's a good product, but our financials are much better today without it."
Don't Confuse Charisma with Leadership
Thirdly, Palmisano said, IBM has survived the changes of leadership that can throw a company off course. Palmisano is only the ninth CEO of the company, yet he has led the company for 10 percent of its existence.
"We have learned not to confuse charisma with leadership. IBM has faced this challenge (of following a charismatic leaders in founder Thomas Watson Sr. and his son, Thomas Watson Jr.)," Palmisano said. "Many historians believe that Watson Sr.'s most enduring contribution to business was his intentional creation of something that would outlast him -- a shared corporate culture.
"He showed that how the basic beliefs and values of an organization could be perpetuated -- how they could become its guiding constant through time.
"This is why we have focused much attention over the years on building talent. Betting it all on one person, or a small cadre of stars, is the opposite of building for the long term."