April 29th, 2012
(written by lawrence, however indented passages are often quotes)
Inspiration is inspiration and it can not be turned into a process or a procedure or an algorithm. Inspiration does not repeat: each moment of inspiration is wholly unique, a one time event in the story of the human species. This fact plays out in every aspect of life, from art, religion, science, and also in business.
The reason IBM can’t deliver is also explained well by Steve Jobs. It’s IBM’s maniacal fixation on process, once a strength but now a cancer.
“Companies get confused,” Jobs told me. “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.”
In this instance content means the deliverable, whether a product or service. IBM smugly thinks it knows so well how to do things that they can export their entire business model to cheaper labor forces in less expensive places to do business. While this is correct to a very limited extent it has been embraced as religion in Armonk.
IBM seems to believe it is cheaper to replace a skilled worker with two or three unskilled workers to do the same job. That is like hiring nine women to make a baby in one month. While it looks good on paper it is not practical and is not working. The language barrier for IBM’s Indian staff is huge, for example. Troubleshooting, which was once performed on conference calls, is now done with instant messaging because the teams speak so poorly. Problems that an experienced person could fix in a few minutes are taking an army of folks an hour to fix. This is infuriating and alarming to IBM’s customers.
IBM’s five year plan ending in 2010 was supposed to double EPS from just under $5 to about $11. (Today it is closer to $13.) During the last five years there was an accelerated push of jobs offshore for cost reasons, high attrition rates, and longer product release cycles. The next five year plan for 2015 is to again double EPS to about $20. Can this be done? Probably, but the particular way they are going about it is also likely to destroy IBM.
IBM’s biggest money maker is its Global Services business, which also employs the most people. Ten years ago Global Services was an even larger part of IBM but the company is now making a lot less on its contracts, and the turnover of business is brisk. It is in Global Services where you see the most jobs being shipped offshore But the problem is the offshore teams often lack the skill and experience to do the work, problems mount, customers like (most recently) The Walt Disney Company get upset and leave.