On the occasion of its 100th birthday, IBM (IBM, Financial) had a four-page in the New York Times and Wall Street Journal about its long admirable history. IBM is one of very few organizations that are 100 years old, and the article is on how it has such longevity.
Sir Thomas Watson has put it: “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 its beliefs.” A century of IBM corporate life has taught IBM employees the truth: “To make an enduring impact over the long term, you have to manage for the long term.”
The first CEO, Thomas Watson, had made a great contribution to IBM — the shared corporate culture. “This is why we have never defined IBM by what we make, no matter how successful the product or service… Values therefore force choice: Whom you hire. The ways you serve customer. How you develop talent at all levels. Which businesses you create, enter and exit, and when. How much risk taking you promote.”
In the economy recession, most of the firms have the temptation to cut investments in skills and R&D as they feel they must meet shareholders’ constant expectations for higher returns. But looking back on how Tom Watson did, he actually increased investments during the Great Depression. So in the recent down cycle, IBM protected its R&D and made acquisitions.
Things change, especially in technology businesses, and the winner today might be the loser tomorrow, or vice versa. IBM has recognized this and gave out its lesson: “You have to keep going to the future. Partly, it’s about creating new spaces to move into – investing in good times and bad. This requires a kind of institutional patience; upside benefits rarely come this quarter, or even next year. Sometimes, they never come.”
The example of IBM Personal Computer that contributed $11 billion in annual revenue was a breakthrough and was very successful business. However, IBM saw that PCs are not central their future, so it got out. “It’s not just about what you create, It’s also about what you choose to leave behind.” The article cited that IBM has divested over $15 billion revenue segments since 2000 due to its low margin. It invested $58 billion in R&D over the same period. The gross margin rose from 37% to 46.1%, and net income stands at $14.8 billion.
IBM listed its shares in 1915. If we bought 100 shares in 1915 and still held it now, it would worth $200 millions today.
The full article can be downloaded here.
The article of Benjamin Graham discussion on IBM can be read here.
Sir Thomas Watson has put it: “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 its beliefs.” A century of IBM corporate life has taught IBM employees the truth: “To make an enduring impact over the long term, you have to manage for the long term.”
The first CEO, Thomas Watson, had made a great contribution to IBM — the shared corporate culture. “This is why we have never defined IBM by what we make, no matter how successful the product or service… Values therefore force choice: Whom you hire. The ways you serve customer. How you develop talent at all levels. Which businesses you create, enter and exit, and when. How much risk taking you promote.”
In the economy recession, most of the firms have the temptation to cut investments in skills and R&D as they feel they must meet shareholders’ constant expectations for higher returns. But looking back on how Tom Watson did, he actually increased investments during the Great Depression. So in the recent down cycle, IBM protected its R&D and made acquisitions.
Things change, especially in technology businesses, and the winner today might be the loser tomorrow, or vice versa. IBM has recognized this and gave out its lesson: “You have to keep going to the future. Partly, it’s about creating new spaces to move into – investing in good times and bad. This requires a kind of institutional patience; upside benefits rarely come this quarter, or even next year. Sometimes, they never come.”
The example of IBM Personal Computer that contributed $11 billion in annual revenue was a breakthrough and was very successful business. However, IBM saw that PCs are not central their future, so it got out. “It’s not just about what you create, It’s also about what you choose to leave behind.” The article cited that IBM has divested over $15 billion revenue segments since 2000 due to its low margin. It invested $58 billion in R&D over the same period. The gross margin rose from 37% to 46.1%, and net income stands at $14.8 billion.
IBM listed its shares in 1915. If we bought 100 shares in 1915 and still held it now, it would worth $200 millions today.
The full article can be downloaded here.
The article of Benjamin Graham discussion on IBM can be read here.
