Recast the Hardware? Easy. Now Try the Mind-Set
January 2 2005 by Chief Executive
A SUBSTANTIAL internal cultural shift is under way at I.B.M. so that it can remain a leader in innovation and better serve its customers, says Linda S. Sanford, the senior vice president in charge of the company’s efforts at transformation. Here are some excerpts from a recent conversation with her:
Q. Why are companies pushing so hard to transform themselves?
A. Going for growth is a very big piece of this. About a year ago, we published an extensive study we did on 450 chief executive officers from around the world, representing multiple industries. It showed that the top item on the C.E.O. agenda is growth. Most of those C.E.O.’s felt that growth was going to come from innovation. Therefore, creating a climate or environment inside their businesses that stimulated, encouraged and rewarded innovation was really critical.
Q. What resistance is there inside I.B.M. to continuous change?
A. The framework that we use has three dimensions. The first focuses on our business processes — what we do and how we do it. We step back and take a look at whether those processes need to better reflect the marketplace. That could involve eliminating some steps or automating them or just completely doing them in a different way. Another element is technology as an enabler of those process changes to make us more flexible and responsive.
The third is culture, meaning the people side of the business. Quite honestly, that is the most difficult. It affects the rate and pace at which any company transforms itself. When I spend time with clients, sharing ideas about transformation, we spend 90 percent of our time on culture change.
Q. How are you trying to transform I.B.M.’s culture?
A. Our customers are looking for integrated solutions rather than just buying pieces — a piece of hardware, a piece of software and a piece of services. They want solutions to business problems they’re trying to solve. By definition, that requires I.B.M.’ers across various business units to work together, to cross the boundaries of their business units, to emerge from their silos, if you will, to bring themselves together to bring an integrated solution to the client. It’s all about collaborating.
Q. Samuel J. Palmisano, I.B.M.’s chief executive, has run what you call internal “jam sessions” focused on I.B.M.’s values and on other issues. What are the sessions all about?
A. Our values have been in place since Thomas Watson Sr. started the company almost a century ago, Sam decided it was time to re-examine those values and kicked off the “Values Jam.”
It was a three-day event. It was a live debate. We did it on our corporate intranet. At the heart of that jam was the question of “What should we preserve from old I.B.M. culture and what do we need to change?” About 50,000 employees logged in and posted 10,000 comments. We had a range of comments, sometimes very emotional. They ranged from direct criticism to constructive debate.
Q. Were there really disagreements within I.B.M.? Doesn’t the company have a very cohesive culture?
A. We have a whole different composition of people than we once had. We have 320,000 employees spread across 170-plus countries. About 40 percent don’t come to the office every day. They either work in a client’s office or they work at home or they’re mobile. And 50 percent of us have been with I.B.M. for less than five years.
Q. What have you done to link people together within I.B.M.?
A. We have created a very extensive database that includes a profile of all the employees across the corporation. It’s much more than just name, rank and serial number. It gets into a person’s prior work history, papers they have written, patents they have received, customers they have worked with and competitors they know. It’s powered by a very good search engine.
So I, as an employee, may be in a customer meeting and I may need expertise; I can go onto the intranet and search by key words. If I need someone with financial services expertise located in France, for example, I just type in three or four key words, hit the search button and I get back a list of all the experts across the I.B.M. company. It also will give me all methods of contacting them, including phone number, cellphone, e-mail address and their instant messaging. It will signal whether they are online, so I can quickly send them an instant message.
Q. Which aspect of I.B.M.’s own transformation is most relevant to your customers?
A. You need to have the demonstrated and visible support for change from the leadership team. With us, it starts very clearly with Sam. He’s very visible and very passionate on this topic. He grew up in I.B.M.. He knows how hard it is to change decades-old ways of doing things.
At the same time, you cannot dictate change. You have to set some guideposts. You need to unleash the creativity and ideas of your people. They are closest to the action. They know what works and what doesn’t. You need to create an environment that fosters collaborative behaviors.
Q. Is one implication of this process that there is a lot of potential for further innovation in the economy?
A. Absolutely. What you’re really stimulating here through the cultural change is a set of values. From collaboration will come real breakthrough innovation. It becomes a virtuous cycle of growth.