Global CIO: Sam Palmisano Reveals Secret Behind IBM's Century Of Success

"I firmly believe that any organization, in order to survive and achieve success, must have a sound set of beliefs on which it premises all its policies and actions. Next, I believe that the most important single factor in corporate success is faithful adherence to those beliefs. And finally, I believe that if an organization is to meet the challenges of a changing world, it must be prepared to change everything about itself except those beliefs as it moves through corporate life."

And then Palmisano added his own perspective on that comment from the man whose father founded IBM:

"Let me repeat that last line: 'be prepared to change everything about itself except those beliefs.'

"Tom Watson was not talking here about ethical precepts. For him, a company's beliefs were about its identity—what makes it distinct—what shapes its decisions and behaviors. If you could codify and sustain that core, it would ensure that the company remained unique and differentiated, decade after decade."

And then Palmisano spoke of the power of relentless, customer-centric innovation:

"In IBM's case, the need for continual forward movement is part of our business model. IBM's value proposition is to create and provide innovative solutions to our clients—solutions they can't get from anyone else. And because the frontier of what is truly innovative keeps moving, that compels us not to sit still. It is a constant reminder never to define ourselves by the things we make, no matter how successful they are today."

At the top of this column, I noted that IBM used to make PCs. Indeed, while IBM was in that business for only 20 years, its PCs forged unprecedented levels of connections with individuals, as Palmisano noted: "It was by any measure the most recognizable brand for us—and arguably the only brand that touched individuals: tens of millions of people. For all these reasons, the idea that we would divest the PC business was, for many—pardon the pun—unthinkable."

Yet that's exactly what IBM did because it foresaw the looming commoditization of the PC business and resolved across the company to put those core, long-term beliefs and culture spoken about by Watson 50 years ago ahead of the short-term "unthinkable" consequences.

Here's Palmisano's rationale for that momentous decision: "We are innovators. In 1981 the PC was an innovation. Twenty years later it had lost much of its differentiation. It was time to move on—to the future.

"Of course, every great company holds unique beliefs. But translating those beliefs into action: that is what separates the company from all others, and that is what keeps those beliefs alive. And that translation happens not in the realm of strategies or process—but of culture.

"In this light, IBM's history can be seen as a century-long journey to create—and continually recreate—a culture.

"Indeed, this was arguably Thomas Watson Sr.'s most enduring contribution to the world: the notion that an organization can—and must—undertake the intentional creation of a culture based on its beliefs or values."

In closing, three final quick thoughts:

1) "Of the top 25 industrial corporations in the United States in 1900, only two remained on that list by 1961—one of those because it had absorbed six others from the original list. Two companies had disappeared, and the remaining 15 had slipped far behind."

2) "Of the top 25 companies on the Fortune 500 at the time of Watson’s lecture [1962], only four remained in 2010."

3) I urge you to read Palmisano's entire speech—you can find it here.

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