IBM, Still Going at 100 Years 3

This series was inspired by IBM's 100th birthday as a corporation.  Although thousand-year-old firms exist in Asia, both the Wall Street Journal and USA Today pointed out that this is quite an achievement in the short-term Western world.  The first article in this series explained some high-level business goals about being customer focused, managing vendor relations, and helping all employees grow their careers as rapidly and as effectively as possible. This article discusses a number of detailed business strategies which are known to be effective in economic combat once employees have the proper customer-centered ways of thinking.

The Company Community

Every business must mold its people into a united tribe and keep their focus on turning the entire tribe into the best possible company in the world.  If management just educates employees, they take their training to the first firm that offers more money.  Making employees part of a community that genuinely cares about them tends to make them stick by the business even if management has to hold payroll for a while.  IBM did that very, very well - they taught everyone to take great pride in being an "IBM-er."

Management is the art of getting extraordinary performance from ordinary people.  Company spirit helps.  People would rather be a part of something more grand and more glorious than themselves.  People carry within them great stores of loyalty, affection, and trust, ready to fling at the feet of someone who cares enough about them to be worthy of trust.  IBM people feel special just because they work for IBM.  People who feel special perform better and are worth more.

Building a community is a lifetime project.  Award ceremonies, picnics, and pep rallies go a long way.  Chiefs should mingle with Indians and level with them.  Trust works both ways.  If the business doesn't trust employees with information, how can employees trust the business with their careers?

Building a community gives opportunities to teach about markets and competitors.  People must realize that everyone is sucking on the same straw and competitors have their straws in the same glass.  You never miss the water until the well runs dry, but it's too late then.  Informed employees can help look for a new glass before the first runs out.  If people understand the business, they can acquire skills which increase the value of their work.  The more people know, the more opportunities the business can find.

All businesses need new to look for new opportunities all the time because complacency kills.  As the Bible says in two places:

Yet a little sleep, a little slumber, a little folding of the hands to sleep: so shall thy poverty come as one who traveleth, and thy want as an armed man.  Proverbs 6:10-11, 24:33-4

Using Good People

Once good people are working together, management can teach the universal business strategies:

Don't Whine

When a business goofs off and lets overseas competitors get ahead, government help is the last thing a business needs.  Import restrictions push up prices which hurts customers.  How can customers stay competitive in their markets if government helps a business overcharge?  The key staying profitable, or to staying employed for that matter, is to figure out how much more you can give for a dollar, not have the government or a union help you grab more dollars for what you give.

Trade limits are like rent control - they work for a while, then destroy the market.  When employees and vendors overcharge, factories move to other countries to stay competitive.  How will US Steel and the UAW get the business back now that so much automobile production has moved overseas?

The secret of dealing with competition is to offer better products for less.  Whining about unfair competition is bush league, no matter how big the whiner.  It's never a good idea to ask the government to keep your customers from buying whatever they want to buy.

He that withholdeth corn, the people shall curse him: but blessing shall be upon the head of him that selleth it.  Proverbs 11:26

Microsoft recently asked the US Government to sue Google on the grounds that Google was monopolizing the Internet search business.  In so doing, they conceded that for all their money and technical skills, they couldn't compete without government help.  How did their employees feel about Microsoft throwing in the towel?  Will it make the best and brightest want to work for Microsoft?  Or will that make it easier for Google to hire the best people?

Appreciate The Factory

What with capital equipment, work in progress, and accounts receivable, 75% of a manufacturer's money is tied up in the factory.  If product development fails completely, management can motivate the sales force, work hard in the plant, and survive for a year or three.  If the plant fails, the firm is up the creek right away.

Should management really put the best engineers in product development and ignore manufacturing?  Any turkey can build something once.  It takes real brains to crank out 10,000 a month at low cost, each one customized for one particular customer.  Put brains where the bucks are.  That means the plant.  Americans used to be able to grind it out.  Remember the "Arsenal of Democracy"?  Liberty ships, 30 days from keel to launch?  We were using Rosie the Riveter because the men were at war.  Maybe women belong in factories...

Make Manufacturing And Design Work Together

Design engineers and plant people would rather fight over turf and point fingers than fix problems, but the turf problem is easy to resolve.  Engineering's job is to teach manufacturing how to make products.  If manufacturing doesn't know how, it's engineering's fault by definition.

Anything done once is engineering's job, anything done more than once belongs to manufacturing, but engineering must show them how.  Manufacturing makes things to sell today, engineering figures out how to make things to sell tomorrow.  Teaching manufacturing to make new products is what engineering is for.  Both parties are in sales development.  Manufacturing supports today's sales; engineering supports tomorrow's sales.

Keep Knowledge In The Family

Low labor costs make it seem profitable to send manufacturing overseas, but there are pitfalls.  When production moves, foreigners soon learn our design and engineering secrets.  That reduces US operations to distribution channels.

The classic Asian strategy is to manufacture goods for sale under American labels, build volume, achieve low costs, drop-ship to customers in America, and then open their own sales channels.  Wal-Mart has kept the Chinese from copying that because Wal-Mart never lets the Chinese know who the customers are.  Chinese factories ship only to Wal-Mart who takes the goods from there.  They'd have to build their own channels from scratch to compete.

Apple has their Chinese factories ship directly to customers; the Chinese know who the customers are.  If a business keeps manufacturing under its own control, it's harder for competitors to get enough volume to compete.  Teaching technology to people who aren't members of the community fragments the strength of the business:

Every kingdom divided against itself is brought to desolation, and every city or house divided against itself shall not stand.  Matthew 12:25

The company pays good, hard money for its employees' work because their work has great worth.  Ideas that valuable should never be discussed outside the family - telling tales out of school is always in poor taste.

Chinese and Japanese manufacturers had such low labor costs and such low regulatory costs that it became fashionable to move factories overseas.  IBM dealt with this problem by selling off the PC business to the Chinese and focused on consulting services which are hard to offshore.  By giving up most of their manufacturing and moving software development overseas, however, they gave up a great many American jobs. 

The next article in this series discusses more essential strategies if a business plans to survive as long as IBM has.