Tuesday, January 3, 2012

The Four Questions of I.B.M.

The former chief of I.B.M., Samuel J. Palmisano, boiled down his guiding framework into four questions - -
  1. Why would someone spend their money with you - - so what is unique about you?
  2. Why would somebody work for you?
  3. Why would society allow you to operate in their defined geography - - their country?
  4. And why would somebody invest their money with you?
The point of the questions - - focus thinking and prod the company beyond its comfort zone and to make I.B.M. pre-eminent again.  The pursuit of excellence in those four dimensions shaped the strategy.  To focus on doing unique work, with higher profits, meant getting out of low-margin businesses that were fading.  I.B.M.'s Smart Planet effort is an example of shifting the hub of innovative thinking to services and software - - with the goal of solving huge and global societal challenges. 

For a 100-year old plus company, I.B.M. has never lost its appetite for innovation.  Established businesses are built for efficiency rather than innovation.  Efficiency depends on predictability and repeatability - - on breaking tasks down into their component parts and holding employees accountable for hitting their targets.  Companies that venture down the innovation path are crossing the markers of unpredictable and uncertain.

I.B.M. also demonstrates that "big is beautiful."  Big companies, like an I.B.M. have huge advantages over small ones.  They can invest more money in research and bring a wider range of skills together.  This may be essential to solving huge problems - - such as our overdependence on fossil fuels or shortages of clean drinking water.  They can also bring new ideas to market much more quickly than small companies.

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