IBM Embraces Crowdfunding Internally

We have all become familiar with popular crowdfunding platforms such as Kickstarter over the past year.  Now IBM provides us with an interesting example of how a company can put the concept to work inside the corporation.  For years, IBM has tried to nurture innovation through various special structures and processes, recognizing that traditional resource allocation processes in large, complex organizations often stifle breakthrough ideas.  For instance, David Garvin and Lynne Levesque wrote a famous Harvard Business School case study about IBM's Emerging Business Opportunities program developed by Bruce Harreld and others about a decade ago. 

Now, IBM has brought crowdfunding inside the firm to nurture innovation.  At this point, they are focusing particularly on ideas that can improve the way work gets done internally.  It will be interesting to see if they apply the concept to product innovation as well.  Here's an except from an article in Fortune about the new program:

As with Kickstarter, IBM employees can get involved by submitting an idea, by critiquing it and suggesting improvements, or by investing in it. Submitters set a funding target to cover the cost of basic coding, architecture, and testing. They can also enlist teams of IBMers who volunteer their expertise to help develop projects that interest them. Employee backers support proposals they like by voting in $100 chunks (up to a maximum of $2,000 per employee) that come out of a $300,000 fund supplied by the CIO Lab.  "Once the total amount of support reaches $25,000, we fund the project and move forward with it," says LeGoues. 

IBM reports that more than one thousand employees have participated, and twenty proposals have been funded to date.  I'm encouraged that a large firm such as IBM would embrace this novel concept and apply it to their work.  Large firms often struggle with innovation for a wide variety of reasons, as we all know.  Leaders at such complex firms must find special ways to surface new ideas, vet them, and fund the best ones.  Perhaps crowdfunding in this way may become a key tool for supporting intrapreneurship in large organizations.  

IBM: What explains the sustained success?

IBM serves as a rare example of a very large organization that went through a near-death experience and came back to become one of the most successful and admired companies in the world.  If you look at the top 10 most admired companies on Fortune's original list in 1983 and compare it to today's list 30 years later, only 1 company is in the top 10 in both years - IBM.   In the middle years, of course, the company nearly did not survive.  Lou Gerstner led a remarkable transformation during the 1990s.

What accounts for IBM's remarkable sustained success over many decades?  One answer may be found in a quote from CEO Ginny Rometty in the current issue of Fortune magazine.  She says, "To be 100 years old, you can never define yourself by a product."  What an astute observation.  Too many firms become defined by a particular product that becomes very popular and profitable.  Then, as  the world changes, they can't adapt and newer, better products pass them by.   In IBM's case, they have not let a particular product become paramount.  They have been able to move beyond one generation of technology and embrace a new wave, and they have done that multiple times.  It's rare.  One wonders whether that "defined by a particular product" phenomenon serves as an explanation for the struggles of firms such as Blackberry.  

IBM's Palmisano: Charisma vs. Leadership and the Role of Culture

IBM CEO Sam Palmisano gave a speech recently at the Computer History Museum in Silicon Valley.    He offered his view on how companies can achieve enduring success:

 "We have learned not to confuse charisma with leadership. IBM has faced this challenge (of following a charismatic leaders in founder Thomas Watson Sr. and his son, Thomas Watson Jr.) Many historians believe that Watson Sr.'s most enduring contribution to business was his intentional creation of something that would outlast him -- a shared corporate culture. He showed that how the basic beliefs and values of an organization could be perpetuated -- how they could become its guiding constant through time.  This is why we have focused too much attention over the years on building talent. Betting it all on one person, or a small cadre of stars, is the opposite of building for the long term."



I agree wholeheartedly with Palmisano's remarks.   I found these comments particularly interesting though because of the challenges that IBM endured in the late 1980s and early 1990s.  Many would say that corporate culture served as one of the causes of IBM's struggles during that time.  The culture had become a barrier to high performance and to necessary change.  Fortunately, IBM has transformed its corporate culture during the tenures of Gerstner and Palmisano.   The firm didn't throw out its old corporate culture entirely.  However, it embraced new ways of working. 

In his book, Gerstner wrote, "I came to see, in my time at IBM, that culture isn't just one aspect of the game - it is the game."   He extolled the three basic beliefs or values that Thomas Watson, Sr. had established as the foundation of the company's culture: 1. Excellence in everything we do. 2. Superior customer service.  3. Respect for the individual.  However, Gerstner noted that, "What the Beliefs had come to mean - or at least, the way they were being used - was very different in 1993 than in 1962, when Tom Watson introduced them."  In short, the culture had become rigid, while the world changed dramatically around them.   Gerstner and Palmisano didn't throw out these core values... they brought them to life again, but in a way that fit the new context in which IBM competed.  

To his credit, Palmisano didn't just maintain the culture and the organization that Gerstner put in place.  He has continued to evolve the culture during his tenure, enabling IBM to thrive in a very dynamic industry while many younger, allegedly more agile firms have floundered.  


If you are interested in IBM's history and culture, you might take a look at the book the firm put together for its 100th anniversary.  The book is titled, "Making the world better: The ideas that shaped a century and a company."