The test of time
Which of today’s technology giants might still be standing tall a century after their founding?
IT IS not, by any means, the world's oldest company. There are Japanese hotels dating back to the 8th century, German breweries that hail from the 11th and an Italian bank with roots in the 15th. What is unusual about IBM, which celebrates its 100th birthday next week, is that it has been so successful for so long in the fast-moving field of technology. How has it done it?
IBM's secret is that it is built around an idea that transcends any particular product or technology. Its strategy is to package technology for use by businesses. At first this meant making punch-card tabulators, but IBM moved on to magnetic-tape systems, mainframes, PCs, and most recently services and consulting. Building a company around an idea, rather than a specific technology, makes it easier to adapt when industry “platform shifts” occur (see article).
True, IBM's longevity is also due, in part, to dumb luck. It almost came unstuck early on because its bosses were hesitant to abandon punch cards. And it had a near-death experience in 1993 before Lou Gerstner realised that the best way to package technology for use by businesses was to focus on services. An elegant organising idea is no use if a company cannot come up with good products or services, or if it has clueless bosses. But on the basis of this simple formula—that a company should focus on an idea, rather than a technology—which of today's young tech giants look best placed to live to 100?
The most obvious example is Apple (founded in 1976). Like IBM, it had a near-death experience in the 1990s, and it is dangerously dependent on its founder, Steve Jobs. But it has a powerful organising idea: take the latest technology, package it in a simple, elegant form and sell it at a premium price. Apple has done this with personal computers, music players, smartphones and tablet computers, and is now moving into cloud-based services (see article). Each time it has grabbed an existing technology and produced an easier-to-use and prettier version than anyone else. This approach can be applied to whatever technology is flavour of the month: Apple has already shifted from PCs to mobile devices.
The animating idea of Amazon (founded in 1994) is to make it easy for people to buy stuff. It began by doing this for books, but has since applied the same idea to other products: music, groceries, mobile apps, even computing power and storage, which it sells on tap. The Kindle may resemble an e-reader, but it is just as much a portable bookstore. As new things come along, Amazon will make it easy for you to buy them. Similarly, the aim of Facebook (2004) is to help people share stuff with friends easily. This idea can be extended to almost anything on almost any platform.
Consider, by contrast, three product-based firms. Dell (founded in 1984) made its name building PCs more efficiently than anyone else and selling them direct to consumers. That model does not neatly transfer to other products. Cisco Systems (also 1984) makes internet routers. It has diversified into other areas, such as videoconferencing, but chiefly because it thought this would increase demand for routers. Microsoft (1975) is hugely dependent on Windows, which is its answer to everything. But software for a PC may not be the best choice to run inside a phone or a car. All these firms are wedded to specific products, not deeper philosophies, and are having trouble navigating technological shifts.
Other giants are still struggling to move beyond their core technologies. Oracle (1977) was originally a database company, which peddled databases as the answer to all its clients' problems. But in the past decade it has moved into other corporate software, and hardware too. Now it aims to provide entire computing systems. Google (1998) knows the importance of an idea. “Organising the world's information and making it universally accessible” is its motto, and it is putting that into practice on mobile devices through its Android software, which is spreading fast. But Google is still heavily dependent on a single product—internet search and related advertising.
The upshot: Apple, Amazon and Facebook look like good long-term bets. Dell, Cisco and Microsoft do not. The jury is out on Oracle and Google. See you in 2111—provided, that is, that The Economist (founded in 1843, with the idea of explaining the world to its readers) is still around too.