Sunday, April 29, 2012

Big Blue and Big Government

In my most recent piece, I took issue with faulty analogies being used as a means of criticizing. So--like the good hypocritical conservative that I am--I'll now offer up my own faulty analogy...and use it to criticize.

Robert X. Cringely (nee Mark Stephens), writing at BetaNews, offers up the first piece in a series about IBM, its corporate culture, and--according to Cringely--its soon-to-be-realized downfall. It's an excellent article and I'm looking forward to reading the ones to follow.

The gist of it is that IBM wants desperately to increase its EPS (earnings per share of stock) and that it plans to do so mostly by getting rid of U.S. employees, some 78% of them according to Cringely. That's a fairly radical reduction, but it's a move not wholly unheard of in corporate America.

For my analogy, I'm going to compare IBM to the U.S. government. No doubt, some may be thinking they already get it, that IBM's "big plans" to improve itself by essentially reducing its size mirrors the conservative/libertarian idea of shrinking government. Of course, Cringely is arguing that this move will doom IBM. Am I going to argue that shrinking government will doom the U.S.? No, of course not. Because there's a piece missing here: IBM is pealing off productive workers, while keeping management and sales in place:
Reducing employees by more than three quarters in three years is a bold and difficult task. What will it leave behind? Who, under this plan, will still be a US IBM employee in 2015? Top management will remain, the sales organization will endure, as will employees working on US government contracts that require workers to be US citizens. Everyone else will be gone. Everyone.
Let that sink in for a moment. IBM will essentially convert itself from a product and information services creating corporation into a sales and marketing firm tasked with selling the same sorts of products as everyone else, manufactured overseas by the same basic groups.

And why does upper management at IBM think this is a sound plan? Why do they think this will translate into new-found success for Big Blue? Simply put, because they are delusional. As Cringley points out, they think they still have something special: process. Cringely quotes Steve Jobs from an interview in 1995, with regard to IBM:
If you were a product person at IBM or Xerox, so you make a better copy or a better computer, so what? When you have a monopoly market share the company is not any more successful. So the people that can make the company more successful are sales and marketing people and they end up running the companies and the product people get driven out of decision making forums. And the companies forget what it means to make great products. 
Sort of the product sensibility and the product genius that brought them to that monopolistic position gets rotted out by people running these companies who have no conception of a good product versus a bad product. They have no conception of the craftsmanship that’s required to take a good idea and turn it into a good product and they really have no feeling in their hearts usually about wanting to help the customers... 
Companies get confused. When they start getting bigger they want to replicate their initial success. And a lot of them think well somehow there is some magic in the process of how that success was created so they start to try to institutionalize process across the company. And before very long people get very confused that the process is the content. And that’s ultimately the downfall of IBM. IBM has the best process people in the world. They just forgot about the content.
By the way, insights like these are what made Jobs special, what gave him an edge, and what led him to such great successes. For this analysis can be applied to numerous other companies in numerous other industries. As Jobs notes, process is important, but it can't be the only thing. There has to be something more.

The problem is, as companies grow management grows. And great success means even greater growth, as management believes there is unlimited potential, often leading it to expand beyond the initial framework of the company. General Electric, for instance, used its resources to become a bank, of all things. "Why not?" said those at the top. "There's money to be made. We know how to make money (with our processes), so we can just apply them anywhere else with relative ease."

And eventually, the company is top heavy, but those at the top are sure of their abilities, certain that their decisions are sound and effective.

And that brings us to the top-heavy U.S. Government and those in leadership positions so certain of their processes, so certain that their leadership is sufficient (along with our money) to solve any and all perceived problems.

It's a powerful delusion, the idea that you have it all figured out, that the methodology of approach is all that is needed to assure success. The Healthcare legislation--Obamacare--is a perfect example of such hubris at work. All that matters is policy: the right policies--enforced, of course--will achieve healthcare salvation for all. Policies intended to create jobs and grow the economy are not much different.

The point is, success is not simple, is not a matter of simply following a template, even if that template has led to success in the past. For the company, this means having products that people truly want, first and foremost, as opposed to having a product and then making people want it. The latter can work, but when it does it is because there was always something there--product-wise--to make it happen. IBM assumes the latter is no longer necessary, and that it where it errs. For the government, this means not assuming policy is the tool to "fix" things, not assuming government control--over healthcare or the economy--means success as a matter of course.

And so ends my own faulty analogy.

Cheers, all.


  1. The first paragraph of your second quote, speaking of monopolies, beautifully explains why politicians (read "sales and marketing people") have replaced statesmen in government. It's their job to convince the customers they should be happy with a crappy product because there's no other choice.

  2. An excellent post today.

  3. Excellent article and easy to understand - for those of us that refuse to stick our heads up our proverbial backsides...for those that keep their heads where the sun doesn't shine, the sky can fall and they will never know it's happening until it lands directly on their ignorant heads.