March 2, 1998

Big Blue's Big E-Business Plans By Lou Bertin isualize with me for a moment: You're an analyst and an organization approaches you with a business plan. The organization is looking to extend its presence in an emerging, high-growth market and bases its pitch to you, in part, on the following: Its parent company has deep corporate pockets that can withstand startup investment; It has a proven track record of succe ss in "unglamorous" related markets; The team pursuing the new market opportunity is headed by an executive with a proven track record of success in "relaunching" major product lines; The market segment being pursued has almost unlimited growth potential; The parent company is totally committed to the success of the new venture. As a colleague of mine would say, What could be wrong with this scenario? Plenty, if the organization in question is IBM and the market in question is the broad electronic- business category. What puzzles me is why this should be so. In a recent interview with InformationWeek, IBM chairman Lou Gerstner laid out an ambitious blueprint detailing IBM's pursuit to become the key supplier of software, hardware, and services for global electronic business. Given Gerstner's unquestionably successful performance in the incredibly challenging business of refloating a sinking ship -- a role that has stymied other capable executives (see Amelio, et.al. at Apple Computer, and Palmer, et.al. at Digital Equipment) -- one might reasonably think that observers, at minimum, would take a wait-and-see approach before launching into criticisms. This hasn't, however, been the case. A surprising and sizable portion of the response to Gerstner's pronouncements, in the form of letters to InformationWeek and comments made privately, has been strongly negative. Not skeptical, but negative. What puzzles me is why this should be so. In Gerstner, IBM has a leader who unquestionably has demonstrated his ability to achieve the near-impossible: ensuring that hundreds of thousands of employees and business partners are pulling in the same direction at the same time. In Irving Wladowsky-Berger, Gerstner has the person who was most responsible for reversing the fortunes of IBM's Enterprise Systems business, one of IBM's cornerstone revenue producers, and equally importantly, the heart o f IBM's corporate soul. Through IBM's legendarily strong relationships with its customers, Wladowsky-Berger has a ready-made (and pre- conditioned) base of initial prospects for IBM's E-business offerings. There are dozens of other factors that could be cited in IBM's favor -- the talent of its work force, a reincarnated culture that (unlike the past) rewards initiative, the freedom that comes with the ability to invest heavily in the future. Those three elements alone should be enough to make a strong business case in IBM's favor. Based on the public and private commentary that's followed the Gerstner interview, however, all of the objective detail can't overcome one highly subjective negative that, when boiled down, yields the following statement: "IBM is too big and too established to succeed in a new market." That line of thinking has been universal among those I've spoken with who are bearish about IBM's prospects. It's a strong opinion, honestly held by some people I've co me to know and respect over the years. From this perspective, however, it bespeaks arrogance that is utterly astounding. Stated another way, that thinking says that the lessons of the past mean nothing. That only the young and the hungry will thrive. That somehow new technologies and new ways of doing business are solely the province of the tiny and the nimble. To all that I say, What rot. This industry doesn't have a pretty history in terms of companies that are able to reinvent themselves and their cultures to reflect changing realities. There are some, to be sure, but the list isn't long. That, I think, accounts for a great deal of the skepticism about IBM's chances. Indeed, IBM itself almost fell victim to its own hubris and ponderousness. But simply because something happens only very seldom doesn't mean it never happens at all. And companies, like people, absolutely are capable of learning new lessons and of abandoning old patterns of behavior that had outlived their usefuln ess. One person who wrote us said, "Lord, help us!" in assessing part of Gerstner's strategy. The same, I believe, can be said to those who discount the value to any organization of lessons learned, sometimes the hard way, and experiences gained. As for sheer bulk, if I'm going to do one-on-one battle, I like my chances much better against someone my own size rather than, say, Shaquille O'Neal. The market is going to decide for us which camp was right and which camp was wrong. But handicapping a horse race solely on how a horse looks in the paddock on race day is a sure way to the poorhouse. Let the races begin. AuthorITies Archive Send Us Your Feedback Rich Levin: Run Time Rich fills you in on all of the latest products, issues, and trends in application development. Stuart J. Johnston: Redmond Watch As our eyes and ears in Redmond, Stuart gives his perspective on the latest events at Microsoft. Charles Pelton: Eye On I.T. Charles explores IT management issues and strategies th at business and technology managers face. Top of the Page

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