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Icons of Progress
 

A Business and Its Beliefs

IBM100 A Business and Its Beliefs  iconic mark
 

In December 1914, Thomas Watson Sr. called together top managers from across the Computing-Tabulating-Recording Company for the first time. C-T-R had been formed by a series of mergers in 1911. In May 1914, Watson was brought in to run it—to recast a messy little conglomerate into what, eventually, would be renamed IBM in 1924.

The C-T-R managers expected their new boss to issue orders about what to do. Instead, Watson asked them what he should do. He didn’t talk about product lines or strategy. Instead, Watson preached unity of purpose. “We want you all to get together and everybody have their shoulder to the same wheel and push in the same direction,” he told the group, according to the meeting’s notes.

Corporate cultures usually flow from the CEO downward, but from the start C-T-R—and later IBM—took a different path. It intentionally built a culture that flows up from its people. The culture is not centered on products or businesses, but on a set of shared beliefs about the company’s place in the world and how to act in achieving that.

More than anything else, this has been the key to IBM’s vitality over a century. A business built on beliefs can absorb change as long as the beliefs remain intact. IBM has spent 100 years seeking to remain faithful to its core beliefs—even when technologies shift or the global economy moves to a fundamentally different model.

When Watson Sr. took charge of the company, it was making clocks, scales and punched-card tabulating machines. In the decades since, IBM has been in a range of information-related businesses, including typewriters, vacuum tube calculators, magnetic tape drives, disk drives, memory chips, relational databases, ATMs, mainframes, personal computers, supercomputers, consulting, IT services, software and analytics. Along the way, IBM expanded from operating in one country to serving clients in more than 170 countries.

To be sure, the beliefs have evolved with the times, but they have remained remarkably consistent through multiple generations of products, markets and employees—and around the world. In 1962, Thomas Watson Jr.—the son of Watson Sr. and, at the time, IBM’s chairman—stood before a lectern at Columbia University in New York City, addressing an audience of future leaders. IBM had just turned 50, and Watson was invited to offer his thoughts on what half a century of corporate life had taught his company. He zeroed in on IBM’s basic beliefs.

“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,” he told the audience. “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.”

Watson Jr.’s speech was captured in a short book, A Business and Its Beliefs, which went on to become a crucial text for IBM, and an often-taught document in business schools.

The world, of course, never stops moving on. Forty years later, when Sam Palmisano became IBM CEO, he and his team identified daunting shifts that were about to play out in technology and the global economy. They realized, Palmisano recalls, that if IBM was going to capitalize on those shifts, it would have to transform itself—again. IBM had just emerged from a profound transformation and financial turnaround in the 1990s.

“Quite honestly, I wondered if the management team and our employees in finance were ready to take this on,” Palmisano says. “This is why we decided, nearly a decade ago, that returning IBM to greatness required getting back in touch with our DNA. So, one of the first things I did as CEO was to initiate an effort to reexamine our core values.”

That effort turned into IBM’s “ValuesJam,” an online, three-day event that allowed any IBMer anywhere in the world to weigh in on what IBM should stand for and how IBMers should operate. The jam kicked off on July 29, 2003, with a bang—but not the kind most corporations would welcome. The pain of the company’s struggle back from the brink in the early 1990s was still raw, and many comments were harsh. Some executives wanted to shut the jam down but Palmisano wouldn’t hear of it. And as the discussion continued and grew, other viewpoints came in, and the picture of IBMers’ perspectives deepened.

When it was over, the discussions had included tens of thousands of IBMers, and the exploration of what defines them became both increasingly concrete and less generic. IBM analysts went to work mining the aggregate text from the jam for key themes, distilling a set of IBMer-generated corporate values. They were not only about ethics, but also about identity. The new values were announced to employees in November 2003. Although created in a very new way, for a very new world, they are strikingly familiar—in keeping with the tone set by Watson Sr. in 1914:

  • Dedication to every client’s success
  • Innovation that matters—for our company and for the world
  • Trust and responsibility in all relationships

Since ValuesJam, IBMers’ values have been integrated into the company’s policies, processes and daily operations in many ways, as the company looks to become the enterprise it aspires to be. A subsequent event, WorldJam 2004, identified dozens of policy and practice changes that were adopted, and launched ongoing programs to turn the values into vibrant reality.

“I truly believe that none of our work since [the jam]—remaking IBM’s portfolio of products and services … globally integrating our company … even launching our Smarter Planet agenda in the depths of the global recession—would have been as effective or sustainable if we had not first gone back to basics, back to our roots, back to the foundation of our culture,” Palmisano says.

IBM’s values in the modern era, as throughout the company’s history, do not stipulate the market, or even a vision. They are about a way to be. The marketplace and technologies can continue to change; the soul of IBM and its embodiment—a distinctive kind of individual known as the “IBMer”—will not.

 

Selected team members who contributed to this Icon of Progress:

  • Sam Palmisano 

    Sam Palmisano
    “I feel that I've been handed something every CEO craves: a mandate, for exactly the right kinds of transformation, from an entire workforce.”

    Sam Palmisano is chairman of the board, president and chief executive officer of IBM. Since joining IBM in 1973, Palmisano has served in a series of leadership positions at the company, including senior vice president for the Enterprise Systems and Personal Systems groups and senior managing director of operations for IBM Japan. As the head of IBM Global Services, he built the largest and most diversified information technology services organization in the industry. During his decade as president and CEO, Palmisano has been a trailblazer in collaborative innovation by championing its use to transform not just internal corporate culture and product development at IBM and other companies, but also the process of real-world global problem solving by multiple stakeholders. Palmisano is a graduate of The Johns Hopkins University and an elected member of the American Academy of Arts and Sciences. In addition, he holds an Honorary Degree of Doctor of Humane Letters from Rensselaer Polytechnic Institute and an Honorary Fellowship from the London Business School. He has received a number of business awards including the Atlantic Council’s Distinguished Business Leadership Award in 2009 and the inaugural Deming Cup, presented in 2010 by the W. Edwards Deming Center for Quality, Productivity and Competitiveness at Columbia Business School.

  • Thomas J. Watson Jr. 

    Thomas Watson Jr.

    Thomas J. Watson Jr. was born in 1914, the year his father became president of C-T-R Company, which later became IBM. Watson brought IBM to the forefront of the technological age. Under his leadership, the company grew to become one of the most respected corporations in the world. Watson's professional career began at IBM in 1937. He left the company to serve in World War II as an Army Air Corps Pilot, attaining the rank of lieutenant colonel. After the war, he returned to IBM and was elected president in 1952. Four years later, he succeeded his father as chief executive officer, holding the office until 1971. During that time, IBM's gross revenue surged from US$892 million to over US$8 billion. A business legend, he was considered “the greatest capitalist who ever lived” by Fortune Magazine.

  • Thomas J. Watson Sr. 

    Thomas Watson Sr.

    After a modest rural childhood near Ithaca, New York, Thomas J. Watson Sr. got his start in business in sales. He worked first for himself—as a traveling peddler—and later at the National Cash Register Company in Dayton, Ohio, where he was a sales manager and ascended into the executive ranks over a decade-plus tenure. From NCR, Watson became general manager of the Computing-Tabulating-Recording Company (C-T-R), moving with his young family to New York City in May 1914 to lead the company whose name he would change to International Business Machines a decade later. As IBM’s founding chairman, Watson built a powerful tabulating machine business that became a business icon. Credited with defining IBM’s distinctive management style and creating its corporate culture, Watson also became the nation’s foremost celebrity businessman. His coining of the popular “THINK” motto solidified his lifelong success as a salesman and marketer. Watson brought explosive growth to IBM: At the time his death in 1956, IBM boasted nearly US$900 million in annual revenues—one hundred times C-T-R’s annual revenues when Watson took charge of the company in 1914.