IBM is well on its way to becoming the next Sun Microsystems, Wang or Digital Equipment Corp (DEC.) Despite an incredible legacy, today IBM is irrelevant in the marketplace, and its sales have been declining for nearly a decade. Since 2000 the value of Apple has risen 14,900%, while IBM’s value has risen 5.7%.
This happened because IBM forgot its Value Proposition. Instead of focusing on how it could add value to customers by aligning with trends and bringing new solutions, IBM’s leadership focused on the internal operations of the company and how to manage costs. Instead of investing in solutions, it bought back shares. Instead of creating revenues, it managed earnings. It forgot that the sales dog wags the earnings tail – and focusing on the tail let the dog get very sick.
IBM’s leadership failed to look at its markets and trends. Lou Gerstner came in from outside and turned around a failing IBM in the late 1980s by refocusing its Value Proposition on the overwhelming need to manage the tools of automation. But Rometty looked at how to “engineer earnings” and treated customers as an afterthought, thus missing market shifts in hardware, software and solutions. As leaders we must remain focused on external markets and invest in trends or our companies will become as irrelevant as IBM