Jon Iwata leads IBM's marketing, communications and citizenship organization. This global team is responsible for market insights, the marketing of IBM’s portfolio of products and services, communications and corporate affairs, and stewardship of the IBM brand, recognized as one of the most valuable in the world. Jon and his team have led the development of IBM’s “Smarter Planet” strategy, which describes the company’s view of the next era of information technology and its impact on business and society.
Jon is a member of the IBM Operating Team, responsible for day-to-day marketplace execution, and the IBM Strategy Team, which focuses on long-term issues and opportunities. He is vice chairman of the IBM International Foundation. Jon joined the communications function of IBM in 1984 at the company’s Almaden Research Center in Silicon Valley. In 1989, he joined IBM corporate headquarters in Armonk, New York. He was appointed vice president of Corporate Communications in 1995 and senior vice president, Communications, in 2002. He assumed his current role on July 1, 2008.
Jon is a member of the Technology Committee of the Museum of Modern Art and is a trustee of the Arthur W. Page Society. From 2006-2007, he served as chairman of The Seminar, a professional group consisting of chief communications officers. He holds a B.A. from the School of Journalism and Mass Communications at San Jose State University.
Jon is co-inventor of a U.S. patent for advanced semiconductor lithography technology.
September 13, 2009
Interviewer: Cinda Kostyak
Videographer: Karen Mozley-Bryan
Interviewer: It’s September 15th, and we’re in Chicago. I’m sitting with Jon Iwata from IBM. I want to thank you for spending some time with us this afternoon. I know that you’ve been busy with the Page Society conference. Why don’t we get started and we’ll talk about your early career. You graduated from San Jose State with a communications degree. Could you just talk about your early career and how everything progressed to get you to where you are today?
Iwata: Yes. Well, let’s see. I was fourteen when Watergate happened and like generations of young idealistic people, we found out about Watergate, and when we found out about Watergate through the work of, among others, Woodward and Bernstein, who were romanticized as ‘uncoverers of truth.’ So when you’re fourteen and trying to figure out what you want to do, fourteen, fifteen, sixteen, and I was interested in Liberal Arts, writing, and what not, I thought this is a very noble thing to do for a living as a profession: investigative journalism. I was all fired up and off I went, and I ended up at San Jose State in the Journalism program. My intent was to become a reporter—an investigative reporter.
A couple of things happened. One is I was late to that game because a lot of people were turned on to journalism suddenly and the market was being flooded with hopeful reporters, but that was one consideration. I took as an elective class a PR course taught by Dennis Wilcox, who is also a Page Society member. To be honest, my view of the PR people was these are my future opponents. I didn’t understand what this field was and I thought I would sit through this one elective course with my arms folded and with a mixture of disdain and pity for these people. But it was 1982 at this point and I was assigned through the semester to follow and report on the Tylenol case, which was unfolding at that very time. What I was astonished to find, as was everybody, it’s so famous now, was the decision made by J&J to voluntarily withdraw Tylenol. And of course they weren’t compelled to do so; they weren’t required to do so, and I was so impressed by that, that I looked more deeply into this thing called public relations to find out if you could get a major in it and you could get a job in it. So all of these things came together in 1982, I guess, and it caused me to change my major from Editorial Journalism to Public Relations, because of these things. So that’s what I got my degree in. It’s actually in Public Relations from the School of Journalism and Mass Communications at San Jose State.
I took an internship as required by Wilcox at IBM and I had no idea that they needed communications people in corporations and it turns out that IBM has hundreds and hundreds of them, even more so from then. Based on that internship at IBM, I was offered a job in a position full-time and I started off technically as an intern in 1983 and I became a regular employee of the company in 1984.
Interviewer: And go on, were you called a PR person, a corporate communications person?
Iwata: IBM calls the function Communications, and in that, what would one recognize? One would recognize “media relations.” Today it’s “external relations” because it’s media analysts and other influencers, but there’s an external facing side of the function and there’s an internal facing side of the function, which turned out to be the lion’s share of the people and the resource was IBM communicating to its own employee base, and crisis management and so forth. But roughly speaking I would say two thirds of the function was—and I’m thinking still is today—aimed at employees and of course, the relationship management with the outside world. So I came into an unusual part of IBM, which is the Research Division, the laboratories. One happens to be out in San Jose where I’m raised and San Jose State University is, so I took my internship there and then I became a regular employee in a three person communications department at this research laboratory. Normally that would be like a backwater in the company, but because it’s one of a small number of our flagship research labs, it was fantastic because here I was, fresh out of school and for five years I was with this laboratory and it was great. Why? Because it was basic research; it’s not product development. Therefore it’s not all confidential. It’s more like a university environment and we were making news or trying to get coverage externally all over the world based on scientific breakthroughs and colorful scientists and all of that. Internally, we were a source of great stories for IBMers all over the world to read about. You knew what was coming out of the laboratories of IBM. So I learned a tremendous amount about everything; the profession, as well as technology, and the importance of corporate culture. I was having a great time there.
An unusual sidebar to my career happened during that five-year period at the Almaden Research Center in San Jose. Like a lot of our laboratories at IBM, Almaden is multi-disciplinary, so it had housed six or eight hundred scientists, but they all don’t do one thing. So you have an arm over here doing computer science; you have another arm over here doing aspects of physical science, materials, chemistry, and magnetism. Over here you have people at the time working on printer technologies and inks and things like that; you had the mathematics department. Like I said, it was very much like a university environment with many parts of the campus. When you’re part of a three person team covering all of that and trying to explain that to the outside world and to the inside world, one of the things you end up doing, of course, if you were effective, is you have to learn enough about every one of these disciplines, technologies, projects, to explain it and to make it accessible, understandable and relevant to people, which was great learning and great fun if you like that kind of thing, and I very much do.
One of the things that happened because of that, and I do think it’s extremely valuable, is I ended up getting a patent.
Interviewer: I was going to ask you about that.
Iwata: Oh, you knew about the patent.
Interviewer: Yes, I knew about the patent.
Iwata: The patent came about because a sister laboratory in IBM had a breakthrough invention called a scanning tunneling microscope, and it was the first device in the world that could look at individual atoms on the surfaces of anything. Obviously, it’s not an optical microscope. They won the Nobel Prize in 1986 for it. This is a group in Switzerland, but since it was the Nobel Prize, and it was such an exciting story because you could look at atoms, everybody wanted to know how this thing works, because it’s not an optical microscope. So I had to learn about how it works, the principles, and I had to explain it over and over and over again. Well, it turns out that if you sort of reduce it -- I won’t bore you with how the thing works -- but when you really explain or understand how this device works and sort of divorce yourself from the fact that it’s being used as a device to look at atoms, if you kind of change it in some ways, could it not be used for something very different? Because I had the benefit of looking across disciplines; it turns out that in almost every scientific endeavor there is a kind of a Holy Grail search. Everybody wants to have a unifying theory or the smallest this, or solve the problem that, or whatever. This team over here, which doesn’t talk to this team over here, is trying to make computer chips more powerful and smaller and smaller, so it’s kind of a scaling challenge. They use all kinds of materials, lasers, and all kinds of things.
Well, the patent came about because I was talking to these scientists over here one day and I said let me ask you a couple of questions. I drew the scanning tunneling microscope. I said see this device over here. It works on the basis of these principles, right. They said ‘yes, that’s right.’ ‘And if you change the voltages and the technology in these ways, would you not be able to use it—not to look at atoms—but to move atoms, and if you were able to move atoms you could then use it to build extremely small features in computer chips?’ They thought about it and they said there’s no reason why it wouldn’t work that way. I was done; I was just very happy to make this connection and as I walked out of the room they said, wait, come back here, what are you going to do with that? I said nothing; I just wanted to know whether it would work. They said that is a novel idea and you should file a patent for it. Well, I have a PR degree from San Jose State University. But they said it’s a novel idea. It will work. It’s new thinking. They assisted and the lawyers got involved and I got a patent.
I think how it relates to the course of my career later was the value of lots of things. Multidisciplinary thinking, huge. I’ve seen it over and over again and it doesn’t have to be in the sciences; it can be in the sales people not talking to the product people or the lawyers not talking to the HR people; or our people not talking to the finance people; or Europe not talking to Japan. The more you’re able to source different points of view and opinion, sometimes insights occur and solutions occur that would not otherwise be surfaced. So I learned that very early in my career.
So [I spent] five years in the research laboratory; five wonderful years of learning. At IBM, one of the jokes in the old IBM Company was that IBM stands for I’ve Been Moved. As much as employees joke about it, they get moved around a lot because the company believes in development of its people and it believes in moving them from division to division or geography to geography so you’re always learning, which is a wonderful thing if you’re up for it. I had just got married. I joined the company in 1984 and got married in 1986, so we were newlyweds and there’s this pull to come to New York because that’s where the lion’s share of communications jobs were and are today. We had no interest in moving from California. But the company kept at it, different job opportunities came up, and we finally accepted a two-year assignment. It was a two-year assignment because if we didn’t like New York we wanted a way back. That was 1989, so after five years of doing a job in the research center, I was moved to corporate headquarters. That was 1989 and I’ve been there ever since.
So it’s now my 25th year at IBM. When you talk to most IBMers who have been with the company for twenty-five years and you say how many jobs have you had, they’ll say twenty-three or twenty-eight. If you say how many managers have you had, they’ll say eighteen to thirty. For me, truly I’ve worked in two parts of IBM, the laboratory and corporate, and I’ve worked for five people over twenty-five years. Kay Keeshen, a wonderful manager who hired me – she managed two people out in California, a couple of executives in New York, and then Lou Gerstner and Sam Palmisano – Lou, the [former] CEO, and Sam [the current CEO], my current boss. So I’ve had a very strange career. I don’t know whether it’s been a good thing or not, but it’s been the case.
So I come to New York, I was in the internal communications department with a huge focus on employee communications. I started writing for a couple of the flagship publications, print, that went to employees. One was a management publication. I don’t know how many managers we had at that time, but to give you perspective, today we have about 42,000 managers. So it’s within that range. So we had this management magazine. It aspired to be like an internal Harvard Business Review, thinking on management. Then we had a flagship employee magazine called Think. Think went all over the world. It was translated; it was a big thick glossy magazine. It came out six or eight times a year. It was a great honor to be kind of like a cub reporter on both of those.
I came to corporate and started getting these writing assignments in 1989-1990, and after about a year or two—eighteen months—the company started talking to me about staying permanently in New York, which I was told was going to happen. We liked New York; a couple of mild winters; the company was doing great seemingly; and we decided to stay. The job that I was offered as a permanent position was in media relations supporting the president of the company; not the CEO, but the president. He was kind of the de facto chief technology officer named Jack Kuehler. The reason why they sort of thought that would work for me was because of my background in the Research division, not afraid of technology and so forth. I took that job and decided to stay in New York, still in corporate headquarters.
But round about 1991-1992, shortly after we decided to stay, the company went into a period of great difficulty. Now also this was during the recession under the first President Bush in 1991-1992. Like the recession right now, everyone suffers, so at first it looked like our financial difficulties and slumping sales and slumping profits were due to the recession. But by well into 1992, it was clear that while others were coming out of the recession we were not only not coming out of it, we were sliding even more severely into trouble. At first, people on the outside were very timid – the press, the analysts – to even suggest that IBM was in decline or in trouble because the company had done so well for seventy something years. But after quarter after quarter after quarter of declines of one type or another, we started to get a lot of pressure and scrutiny about what was really happening at IBM.
There are a lot of reasons why the company lost its way and it’s been written about. I can certainly comment on that, but just to finish the narrative, the biggest decision that caused everything to start to unravel was a decision by the CEO at that time, John Akers to abandon full employment. You’ve got to picture that here is a company that was founded in 1911 by Tom Watson, Sr. and had never laid off a single person in its entire history despite the great depression, two world wars, recessions, but also a company that started off making clock scales, and cheese slicers and they went on to punch cards, vacuum tube calculators, manual typewriters, electric typewriters, photocopiers, and electronic data processing equipment. You can just imagine a company that has had to reinvent itself not once or twice or five times or ten times. No company today could probably do that without having along the way to lose people, if for no other reason, that your skill needs change. Somehow IBM was able to do that as part of its business model and DNA and not lay off anybody in all that time.
So the pressure inside the company for John not to be the CEO to abandon full employment was tremendous. By the way, Tom Watson Jr. was still alive. The Watsons never had a huge holding of IBM, but nevertheless, their shadow loomed large over the company. But it could not be sustained and John probably waited too long for very understandable reasons, but the pressure was building, building, building because we were losing money. By the time we started the first layoff or initiated the first layoff, we had already reported several quarters of losses, the stock was on the skids, cash flow problems, market share declines, all of that. So it was obvious that this was not sustainable, so we finally did it. So he began to lose the inside of the company too.
The outside world was beating up first on the company, then beating up on John, and then on the inside of the company, with not one layoff, but two then three, closing of facilities, all of these things. The whole time when I was at corporate headquarters, it was just a never-ending series of setbacks and cuts and abandonment of one thing after another. So it felt like, and it was, in freefall. So John had one more master plan; he had several, but because we are part of the corporate staff, we always tried to help the CEO convey the plan, the strategy, and make people believe that it’s going to work. In his case, it will work this time. And he had a plan to essentially split the company up and change the culture radically. We put it out there, but it was too late. So in December of 1992 John Akers announced that he was stepping down. So quarter after quarter of disappointing financials IBM stock—bluest of the blue chips—lost, I can’t remember the value, but it probably lost about 80 percent of its value, which was unbelievable. We had AAA and the bond rating was dropped to one notch above junk. People did not know it at the time, but we were borrowing money to pay the dividend, which was a really bad idea. There was talk in corporate headquarters that we wouldn’t have enough cash flow to make payroll. This is unbelievable, well maybe not these days, but it was a spectacular decline.
Then to top it all off, to have your CEO basically be fired, I guess, was unbelievable. So let me just spend a minute on that day, which was preceded by a few things. We’re on a fiscal calendar, so we normally would announce fourth quarter results in January, but we had preannounced results a few times because of our disappointing financials. Usually when we put out a piece of news like that, it was accompanied with, “…therefore we’re going to have more job cuts or factory closings or something.” We had another one of those in December of 1992 and whatever it was, it was another round of cuts and another data point that we were still in freefall. The press, which had been really boring into the company and John himself for many months, now really smelled that something was going to happen at the top. For us it was inconceivable that they could be right because there was no precedent for it. So our jobs were—aside from trying to get people to believe in the turnaround plan—was to sort of fend off the speculation. To give you an idea of the scrutiny, the Wall Street Journal had two full-time reporters on the IBM beat. We have one reporter today who covers like fifteen technology companies, which is pretty normal for a large company. But at that time, we had two reporters who got up every day and all they did was cover IBM. Fortune and Business Week and everybody were covering this story. So Fortune magazine, which by the way, the year that I joined IBM in 1984, on the cover was The Most Respected Company in the World survey. They started that survey in the 1980’s and IBM was the most respected companies for three of the first four years. We were always up in the top five. That was in 1984 when I joined. In 1992, they had a cover of dinosaurs and they had three toy dinosaurs on the cover. The biggest one in the center had IBM on its chest and the two other dinosaurs were Sears and General Motors. Here we are in Chicago and the Sears Tower isn’t even the Sears Tower anymore and we all know what’s happened to General Motors. From 1984 to 1992, not very long, we went from most respected to an example of everything that had gone wrong in American business.
But after that pre-announcement in December of 1992, the New York Times, on the front page, not the front page of the business section, but the front page of the newspaper above the fold, which used to matter, “The IBM Era is Over.” It was a brilliantly written, actually very well reported story by John Markoff, a good friend and person who has covered technology for many, many years. It was like when the New York Times does when it observes that the Cold War is over, or it observes something else. They just declared that our time had passed. We had ceded leadership of our industry to Microsoft, Intel, and Apple, and others not just because of what happened the day before, but because it was the culmination of so many obvious things that we were no longer leading the industry. That was the equivalent of an obituary for a company because while we weren’t in Chapter 11—and we never did go into Chapter 11—something had been passed to some other companies. So you can imagine in this period of time, you have an external narrative saying we were a failed company that had lost its way, become too bureaucratic; too arrogant; too many mistakes; too many missteps; now zeroing in on John Akers; all the mistakes he made; and not right for the job. Inside the company, we had abandoned full employment, so the employees were afraid, angry, and here we are trying to communicate with everybody.
So a few days after that New York Times story, the Fortune story, another pre-announce, and all of this stuff, there was a regularly scheduled board meeting. We have two boardrooms then and today. One is our corporate headquarters building in Armonk, New York, which is about forty-five minutes outside of New York City in Westchester County. We have been there for many decades. We had one room there. Then we have a large building in Manhattan, and we have a sister corporate floor there and a board room there. This meeting happened to be in New York City. I remember being on the floor with the other media representatives, and this was going to be a pretty standard board meeting. The only thing we were expected to announce was some news on the dividend either being reaffirmed or cut again or something. It had already been written up and we were just waiting for the board to formally approve it and then we would get a phone call from the secretary saying go ahead and put it out on the wires; very standard.
The board meeting was supposed to be around ten or eleven in the morning, so we’re kind of standing around and my colleague, Rob Wilson—who had the beat for financial relations—was waiting for the call. Well the call never came. We waited, and we waited, and we waited, and nothing from the board or the secretary. So hours went by and we kept checking, saying no word and the board is still in session. So it seems to me around one or two in the afternoon—the board was supposed to be done at around eleven in the morning—so like one or two in the afternoon our boss comes in and says, “I just got a call from Mary Lee Turner,” who is the vice president of communications at the time and reported to John directly. She said that she is sending the helicopter to Armonk, where we were and that, “You, Rob, and I, [the head of media relations] should go down to New York City because we have to help communicate something.” So they all packed their stuff up and we all looked at each other and we didn’t talk very much, but we feared the worst—and it was the worst—because the board had accepted John’s resignation, and the CFO was being terminated. He never returned to the building as far as we know except maybe in the dead of night. My boss or the executive I supported, the president, was becoming a vice chairman, but essentially stripped of his responsibilities and the board was initiating for, the first time in our history, a search for a CEO, most likely from outside the company.
So we were headless from that day until when our new CEO arrived. We were headless for about two or three months. For me, those were the roughest and the most awful months because what can you communicate? You can’t say anything about your strategy. You can’t say anything to your employees about what’s going to happen. I can’t even tell my wife whether I’m going to have a job, which was a small consideration given everything else that was happening. So everybody, your competitors, the press, the analysts, they can say whatever they want, and they did. So they destroyed poor John’s reputation because think about it, the CEO and the CFO and the president of the company were basically all sort of lopped off and we had no head. The board can’t talk about it; they’re not going to talk about this sort of thing. So for two or three months we were just sitting ducks.
So things couldn’t get much worse. During that period of time there was enormous speculation, of course, of who would be selected to turn around IBM. In hindsight, there were some really laughable names that were suggested in the press, which I won’t name, but looking at actually what kind of CEOs they turned out to be, they were probably not up to the task. But the press, whether they were being fueled with just rumors or the headhunters or; certainly I don’t think leaks from our board, but they started to coalesce a list and there were sort of the top three and then the next five and then some long shots. Of course, just sitting around like a normal human you would start having your own point of view and lots of water cooler gossip about who might lead IBM and what it would mean if that person got it or that person got it. By the way, as the board was doing its interviews and its own search, occasionally somebody who was on the list would sort of make a comment publicly that they weren’t interested in the job, so either they were not actually interested in the job or the board had not contacted them or whatever. So enormous handicapping was going on here.
I remember I was in California visiting my family and I got a call from Rob, my colleague Rob, and he said the board has made its decision; we do the deed in an hour; announce; you’re not going to believe who it is. Who is it? So I started going down the list. Is it John Sculley at Apple? Is it Bill Gates, which actually had been rumored? Is it this one? Is it that one? Nope. Nope. Nope. Nope. Nope. I think I was down to number twelve or thirteen and I said Oh no; Oh no it’s not this guy, Gerstner. Lou Gerstner? Yep. Oh my goodness. I said Oh, why even go back to New York. This man is coming to us from RJR Nabisco; this is the cookie man, and the cigarette guy; and before that he ran a part of American Express. He had no technology experience, never ran a big company except for this kind of conglomerate thing; all consumer. And we weren’t the only ones saying it. The press was saying they were handicapping each one. And then Rob said that’s not the worst of it. I said what do you mean? He said he’s bringing his own communications leader. I said what happened to Mary Lee? He said she’s out. We’re working for this new guy already. We haven’t even named Gerstner and his guy is calling all the shots. He’s telling us how we’re going to announce it; he’s writing the press release. I said who is it? He said it’s David Kalis. I said what’s he like? He said he’s kind of strange, and he’s in charge; believe me, we’re all working for him. So I hung up the phone and said, “we got this guy who has no experience in our industry and we have a new functional leader—wow!”
Well, I think everyone should know about the turnaround that Lou Gerstner led; remarkable. And the fact that his first personnel decision, his first hiring decision was his head of communications; even before he showed up for work says a lot about how he felt and feels about communications. Everything changed. Everything changed. So Lou arrives April 1, 1993, and David Kalis arrives with him and David is his own person. For people who know David, he’s a very private man; he’s very shy, he has a temper, who doesn’t? But the thing about David that I can now see very clearly, and we saw it very quickly, was that he was a pro. Up until then, the head of communications at IBM was never held by a professional communicator. It was held by executives who were being rotated through a corporate staff experience on their way to something else. Mary Lee Turner, who was the head of the function when I came to corporate was actually a sales person who was being groomed for something else, and then her predecessors going back many, many years, as it turns out, were these other kinds of executives. But the professionals of the function rose to be key lieutenants, but they never ran the function. Up until then it seemed perfectly normal for that kind of arrangement, but then we saw the difference when David arrived. David was a close adviser to Lou. David was obviously trusted by Lou. David took control. He insisted on things that were so obvious, but we didn’t have them – coordination, consistency, professionalism.
One of the things that happened when IBM had full employment, well we didn’t let anybody go, but you also couldn’t let anybody go. What happens is that you kind of dump people in certain parts of the business. You can’t dump people into the research laboratory too easily. Sales people have to sell. So it turns out that communications was one of the dumping grounds of IBM. You don’t know it at the time; you don’t like to think that. But in hindsight, it was full of people who weren’t professionals and who didn’t really choose to be there; good people, really nice people, hard working, but they really weren’t experts at communication. So David really changed our function under Lou’s leadership. What were some of the things he did? Because John Akers has sort of this Hail Mary strategy I mentioned earlier, was to kind of break the company up, not spin out units, but give the different parts of IBM more autonomy. If you just let the genie out of that bottle a little bit, because people want to do their own thing any way, and John actively encouraged it for years. Well, that meant that everybody was communicating and sending out messages and doing things as they saw fit, but it was a train wreck in terms of coordination and consistency and speaking with one voice. So David insisted that we start to coordinate our messages. It was very logical, but hard to do. He insisted on people being accountable for the output of their work.
Let me tell you a quick story about the coordination of messages. We announced Lou’s executive compensation for coming to IBM the same day we announced a round of layoffs in a different part of the company. It was the lead item on the NBC Evening News with Tom Brokaw that night. The juxtaposition of Lou getting this compensation package for coming to IBM and this round of layoffs. The next morning David declared that henceforth nothing is being communicated to the outside world unless it is coordinated by a team in corporate headquarters. Secondly he insisted that our press releases actually make news. Now, that sounds kind of obvious, but if I think back upon the work of media relations prior to David’s arrival, we celebrated the fact that we got a news release through the system, approved by everybody, lawyers, and everybody signed off on it, and that it got issued. Of course we wanted to see whether we actually got any articles from it, but it was a kind of secondary consideration because we can’t control the press, but we can control press releases and press events. So the culture of communications was very much oriented toward rewarding activity.
Of course, all of these press releases are streaming past David every day and he had had enough because he couldn’t understand most of these press releases because they were so poorly written. That’s why we’re not getting any news for most of the things that we’re pumping out there. So one day he just plucks one of these press releases out and he looks in the corner and it says for more information, contact so and so. He said where does this person work? Oh, a different building up the road. He said please give me the address. So he gets in his car and drives up to one of these big complexes that we had and finds this person in this big group of media relations representatives cranking out these press releases. He introduces himself to this person and says, “Can I ask you a couple of questions?” And he holds the press release up. She said yes. “Let me read the headline to you.” David reads the headline and says, “what does this mean?” And she said, “well actually IBM announced this today, the new product of XYZ, and it has this kind of claim to it; the fastest throughput scalable, best availability, whatever.” [He said], “What does this mean?” It became clear after stumbling around for a minute that she didn’t really know. “OK, well that’s fine; let me read you the lead.” Then he reads this lead paragraph. He said, “What does that mean?” and she couldn’t explain it. He said, “It quotes a mid-level executive. Do you think this quote is actually going to show up in the press anywhere?” Because it’s a typical canned quote. She said, “Probably not.” David said, “If you don’t think this is understandable, actually not going to generate news and the content is not going to show up in the press, why would you ever put your name on it?” Of course, she was devastated by this, and the word got out that David had done this quote “drive-by-shooting.” He only did it once, but people were jolted into realizing; they may not have approved of his method, but they were jolted into realizing that we were confusing activity for results. It’s something that I still use to this day, that term that David taught us.
Big companies suffer from this: conference calls, meetings, check points, coordination, running around, making PowerPoint presentations, all of this stuff, and at the end of the year or the end of the day you say what did I actually do? Put into one column activity and put into another column outcome; we were way out of whack. So these were really basic things, but what they were all indicative of, and this was an eye-opener for me, is that we weren’t professionals. We might have been professional IBMers, but we weren’t professional communicators. So David insisted on it and we went on a talent binge; we hired from the outside. We moved people around; took chances on people internally.
Interviewer: So where were you in this whole thing?
Iwata: I was still at corporate as I am today. I was in media relations, still doing my thing and kind of observing David not in a harsh way, I think he gets that rap, but it was just kind of funny that he was so surprised that this very large function of people weren’t very skilled. He was just trying to coordinate things, insist on results, quality, impact, all of the things you would normally do. So at first I was very unhappy about the fact that David was so critical, because here are these outsiders coming in, we’re the IBM Company and he’s just sort of passing judgment that we don’t know what we’re doing. He never said that, but you could tell by his behavior that he didn’t think much of us. After a while, you realize A) he’s right and B) he’s teaching us things. So my career started to move, I’m down below David at least three levels as part of the media relations department. I’m not a manager even; I’m a representative.
One day I got called to a meeting for the IBM annual report, which was the responsibility of an entire department of people. They didn’t do investor relations. They didn’t do anything except prepare and execute the annual report, which today is the responsibility of one half of a person. In hindsight again, a department of five people, what do they do for a whole year getting ready to do an annual report, but any way that was IBM then. Well I got called to this meeting along with about thirty or forty other people and we cram into one of our conference rooms and David was sitting there and he said I want to talk about the annual report and I have invited some other people to offer their views or just to sort of observe our discussion. And what happened is that we went around the table: what is the theme of the annual report; people talk. What is the design going to be; people talk. What is the paper going to be; people talk. Different people talk. What is the distribution strategy going to be; different people talk. This is a giant committee and he didn’t say a word [but] you could tell by his body language he thought this was not a good way to do it. So he started going around the room saying what do you think the theme should be? And we were all very respectful of each other so people would say I agree with so and so. David said no I’m not asking you to comment on their view; what do you think? Oh I think this. Well, I’m sitting there and he comes around to me and whatever the question was, he said what do you think? I wasn’t critical of my colleagues, but I said well, actually I think this is a time for IBM to say this kind of thing, whatever it was. So he thanked everybody and then left the room.
So we walked back to our offices. I called out the other media-relations people and I was laughing and laughing saying the annual report team is doomed, doomed. This guy, David, is so unhappy with this big committee. We were all talking over each other, there’s no consistency; it’s a big bureaucracy; they’re in trouble; and I was laughing. Half an hour later David, who never comes down to that part of the building, comes over and does that with his finger and I go into my office and he sits in front of me and puts his big size twelve shoes on my desk and says—I’d never met him face to face—and he said, “I hear you’re the technology guy.” I said, “Well that’s part of my responsibility.” He said, “You understand this stuff?” I said, “I’m not afraid of it; I like it; I enjoy learning about it.” “What did you think about that annual report meeting?” I said, “Well, it’s a lot of moving parts; a lot of moving pieces.” He said, “I agree; nothing great comes out of the committee; I’ve disbanded the committee.” I said, “Oh, OK.” He said, “You’re in charge.” I said, “What does that mean?” “You’re in charge. Great things come from vision and leadership. I like what you said in the meeting; you’re in charge. Congratulations.” He got up and left.
I kind of staggered out in the hall. By the way as soon as he leaves, all the other people come out, what was that about? So I tell them this. But what does that mean? I don’t know. He meant it. He just said from now on you’re in charge. And I guess that meant that the five-person department was going to report to me, and they didn’t know what it meant either but I said OK, let me try. So we put out a miserable annual report, but the next year it got better and so forth. So David said all right, that was pretty good. That was certainly a lot better than what it was going to be. And my recollection is—now that I see what David’s pattern was—he liked to sort of try people out. Sometimes they were little assignments or just questions he’d ask. He rarely formally announced reorganization. He would first sort of test somebody out and then it was kind of obvious where things were going to go. So I ended up being in charge of the annual report in addition to my little old media relations beat area. And then the speechwriters were having a very hard time connecting with Gerstner and since I was interfacing with Gerstner a lot with the annual report—given that it is his document—David eventually said you are now responsible for the speechwriting staff. So I’m taking the speechwriting staff. And then if I fast forward to months later, quarters later, he declared that internal communications was not working out well and he said you try it and I ended up being responsible for internal communications.
If I fast-forward probably four or five years he ended up having essentially two direct reports, Rob for media relations, which is the only thing Rob had great passion for, he’s fantastic at it, and I had “other” which was speech writing, annual reports, internal communications and so forth. That’s how he chose to evolve the function and find people. Now he’s since retired, of course, and Lou had the company under his control for nine years. David believes in certain things that I now believe in. He believes in [results, not activity]. He believes in organizing around talent. So you don’t know how to organize unless you can size up the talent you’ve got. One of the things I learned from David, which I practice today, is you can go with a perfect organization chart, but if you don’t have talent and the people who can actually make that work what’s the point. It’s better to surround yourself with as much talent as you can get; find out what people can do; want to do; and then keep changing your organization around people’s strengths and their aspirations and keep everybody learning.
So at any given time, David’s organization never made a lot of sense. It wasn’t symmetrical; it wasn’t very logical, and my organization is very similar. It drives HR crazy because I don’t have very neat boxes. But it makes for a very effective and diverse organization.
Interviewer: So you’ve had marketing communications added to your job title.
Iwata: That happened last year.
Interviewer: Right. So where it used to be called public relations, it’s now marketing communications. So all those silos of corporate functions have not necessarily disappeared, but are they overlapping more now? What does this mean to the classic idea of what public relations is [compared] with what you do now?
Iwata: Well, communications, the story I’ve been telling resulted in a very, very strong communications function by Lou’s retirement in 2001 or so. I succeeded David as head of communications, reported to Lou for not a very long period, because he was getting ready to leave as well, and here comes Sam Palmisano my new CEO, and I was head of the function since 2002. Communications was, and is, at IBM very strong. In fact our biggest problem is that we can’t hang on to everybody, because they get recruited to other companies, and we’re very proud of that. But we really went from being the gang that couldn’t shoot straight to a very effective team. Even before the marketing thing happened, we knew though heading into the new century, things were changing in the world. We got started to sort of evolve ourselves beyond even how strong we became. What do I mean by that? Well, even before, the world now uses terms like “social media”, we knew that the Internet was going to change the way people got information and interacted. We didn’t have the right vocabulary down but we knew that it wouldn’t be enough to have relationships with the twenty-seven key reporters that we knew, broadcast and print and so forth. So we better get ourselves retooled to start to reach other kinds of people.
We started to do that, so when the Internet came along and then bloggers came along and then podcasting came along, and now social media, that was very controversial especially with the media relations people because they believed that what could possibly, the Washington Journal, Business Week, Forbes, Fortune will always be the primary influencers in the world, our world. Well, look what’s happened. Business Week is up for sale today for one dollar; not an issue of the magazine, the whole company, because McGraw Hill is just in trouble. Every newspaper’s circulation is declining and we all know that today. I’m very proud of the fact that years ago we got started and affected cultural change within communications to get ready to embrace new ways of doing things. I believe that the primary reason why my boss, Sam Palmisano put marketing together with communications and asked me to lead the combined entity a year ago was because we had consistently brought to him new ideas and new ways of doing things and he was not seeing that from the marketing profession, which is by any measure ten times the size of the communications organization. So that happened last year and I said it’s being driven mostly by the external changes in the world.
You need to coordinate across everything today; advertising, sales promotion, web sites, press, analysts, and the like, but you also need to put the inside of the company together with the outside; the culture and the brand. By and large, for marketing professionals internal considerations are a blind spot. They are focused on the market place, on customers present and future, on competitors, and on the product that servers are trying to get people to buy. You talk to them about the culture of the company or you might say the internal audience meaning we want employees to be brand ambassadors; we talk about the culture having to be the underpinning of our brand, and it’s not interesting to them. But that’s no longer inseparable in this new world that we’re moving into because every employee can blog, every employee can talk about what they’re doing. The world now knows how corporations behave and treat their people and what kind of citizens they are and what their executives are paid and they factor those things into considerations about private services that they buy. So for all those reasons, I think it makes sense to put these things together.
Interviewer: You were quoted by Matt Gonring, in the Journal of Business Strategy, and referred to the strong relationship between brand strength and performance, customer loyalty and employee engagement, and you created the Employee Engagement Program. Talk a little bit about that; how did the employees respond? Where is it now?
Iwata: So Gerstner believes that the calcification of IBM’s culture got the company into trouble and that of all the things he did to lead, changing IBM’s culture is what led us out of the woods. Yes, we did help him with that. I believe that even today most internal communications arms of PR functions or communications functions, what do they really do? They do corporate journalism. They create messages for the employees to consume. In that regard they really shouldn’t use terms like “employee engagement” or “culture change or “organizational transformation”. It’s treating the employees as an audience of message for management and that is necessary but it’s not sufficient. Obviously if the company is saying we’re changing your dental benefits, you need to know that; if we’re reorganizing the company you need to know that. If we’re about to launch a new product, you should know that. Fine. We need the ability to do that. What we did though, and Gerstner was so insistent that we do this; he said, “Well I don’t want anybody to just inform employees about what we need to become. You’ve got to help employees become that. You’ve got to give an example.” Well how? One thing he said is that we’re not a team. We’re not collaborative across our structures, the divisions of the company. And yet our business model promises integrated solutions for the customer. So yes, you’re doing a good job communicating that imperative, but you’ve got to come up with. Well, I thought to myself, and that was back in the 1990’s, you’re asking the wrong department. We’re the communications department; we’re not the “change-the-way-people-work department”. He said try it; come up with some ideas; and we did, under that kind of pressure and invitation.
So part of employee engagement was to engage the employees and not just communicate with them. We have an intranet; every company has an intranet. Most companies, even today, use their intranets to send messages. Well, starting around 1998, we said 98 percent of employees use the intranet every day to consume information. With a little bit of work, we can turn this into a collaboration platform so employees can, this is before Facebook by many, many years, employees could actually create content, share it with each other, find each other, get answers to questions without management having to answer them, help one another, and so forth. Today that is so obvious, but back then it was, wait, it was not built to do that. Well what do you mean it’s not built to do that? And I’m thinking about my patent now. It’s not built to do that; the Intranet is three years old. We don’t even know what it can do. So the intranet became this collaborative platform for us. Lou, and now Sam uses it, but it’s not just them anymore. All the employees use it horizontally with each other. The communications department pioneered that with us. So employee engagement went from communicating to employees to enabling employees to work in new ways. I think that was a big evolution in so called internal communications for us.
Interviewer: You were co-chair of the team that put together the Authentic Enterprise. Could you talk a bit about it and the kind of impact it’s having?
Iwata: OK, so more than two years ago Roger Bolton was president of the Page Society and one of the primary missions of the Page Society is to advance the policy role of the Chief Communications Officer (CCO). So Roger said, well, if that’s the case, then what is the future of the Chief Communications Officer? We should have a team go off and try to answer that question. Valerie Di Maria, who was at Motorola at the time as CCO, and I co-chaired that with nineteen team members. CCO is an agency people; great team, and we sort of dove into this question. Well, one of the things we quickly found out was in order to answer the question “what is the future of the CCO?”, we had to answer, “what is the future of the CEO?” So we had a firm go off and interview and it turned out a little over thirty CEOs, and before they could answer the question about the future of the CCO they wanted to talk of the future of business, what was on their minds?
This is now about 2 ½ - 3 years ago. They listed several forces of change that are pretty obvious today. One is the digital network revolution. From a CEOs standpoint they said it used to be just the press, either playing offense, like let’s get our word out, but then also defense. We just used to have to worry about the press, but now somebody over here we’ve never heard of has this powerful megaphone called the Internet; they’re on it for like nothing and people are actually paying attention to them. How are we going to respond to this new world? So the diffusion of media, mostly because digital commons emerging was one, and second was the expectation that corporations were changing. Perhaps there was a day when a corporation was expected to produce good product, make money, and not break the law. But now, the CEO is saying, I’ve got to worry about the environment; I’ve got to worry about my supply chain; I’ve got to worry about how I treat my people; I’ve got to worry about all of these things. That coupled with the prior concerns, the CEO is saying all of these stakeholders are exerting influence on us, but by the way, maybe we should take advantage of that, but I don’t know how to do that. The third was globalization. About the same time we were doing this work Tom Friedman’s book The World is Flat came out. Rather than being a screed about jobs moving to India, it changed the dialogue, at least in the United States, that globalization is going to have profound implications, good and bad, and we’d better figure this one out. So the CEOs were citing those three drivers of change.
We then asked the CEOs, and then we subsequently did a lot of thinking about this. So what are the implications of all of this to the CCO, who reports to you? And the CEOs by in large said (1) we need somebody to figure out how to have relationships across multiple stakeholders. Today we manage the government here, the press over here, universities there, employees over here, customers differently, but they’re all talking to each other now on the [Inter]net. They all have the same knowledge, so we can’t segment them and segment messages. They all know the same thing. How do we get hold of this thing and use it to our advantage? CCOs could help. Secondly they said, “help us figure out this new world of digital, gain mastery of it.” Someone is going to; the CCO could take a stab at it. Third—and this was wonderful to hear—values will be very, very important again. I need help to define values or reaffirm them and then get everyone to live them. Why? Because of this incredibly transparent world that we’re in. The only way that we can be sure that whatever the world sees, mostly through our people, they’re going to like what they see. I can’t do that unless everybody actually is living the values that we espouse. In some cases we need help even defining them.
Well we wrote all that up in the paper and published it. We called it the Authentic Enterprise deliberately, and I just gave a little talk across the street here [at the Page Society Conference]. I talked about authenticity because I think it has been misunderstood, you ask what has been the reaction? I think there’s been a very good reaction. There is some recommendation that the paper is somewhat controversial, which is good. But one thing that I’ve observed is that people have equated authenticity with ethics. I said to them yesterday in this little talk, we could have written a paper called The Ethical Enterprise, The Socially Responsible Enterprise, The Virtuous Enterprise, The Good Enterprise, The Uninvited Enterprise, but we didn’t. We called it the Authentic Enterprise; why? Because every company should be ethical; every company should not break the law; every company should do the right thing. But great companies not only do all of those, which I believe are table stakes, but great companies are also unique in some way.
Another way of saying it, is not every company values the same thing; so like what? Well, we value innovation; at least we say we do. Then an insurance company or a bank might say we don’t value innovation because we value risk mitigation. Another company might say we value team play in our culture. Other companies might say we value individual achievement. Those are perfectly good differences, but they also make for unique companies. So authenticity isn’t about doing good things. It’s about being clear about what you want to be distinctly in the world and then actually translating those words into action in the behavior of the company. So I think that the Authentic Enterprise gets talked up a lot if it does because it’s touched a nerve about lack of trust in corporations, which is very much true given what we’ve been through in the past ten years here. It also speaks to the change that’s required for us to navigate and capitalize on the new digital commons, which is very controversial. In some ways it means loss of control. When you think about it, we write the speeches; we write the talking points; we monitor interviews; we talk to reporters. No one else is authorized to talk to the press. The authorized spokesperson used to mean something. Well, the declining circulation of newspapers and the declining effect of prime-time television, we go with it. If people are [not] reading just Business Week, Forbes, Fortune, New York Times and so forth, and they’re getting more information and influence from other places we better map ourselves to that too. But it also means that we can’t control what a blogger writes or thinks and we one day will not be able to control, in our case four hundred thousand employees all expressing their point of view to the world. That gets back to values.
So a lot of work comes back to what do we value in our case at IBM and then what are the programs and operations that we have to put in place to ensure that employees are supported as we live what we espouse—what we aspire to be. I do think that this represents an expansion of the CCOs role and an expansion of public relations, but we do have to adopt and adapt new ways of doing things. I think that a lot of companies are well on their way to doing that.
Interviewer: For which of your accomplishments are you most proud?
Iwata: I can’t lay claim to the great team that exists at IBM in communications because I think that, as I recounted, was started by my predecessor and I only furthered that work. My career has been marked mostly by the near death of IBM and our coming out of it. So I think that I’m most proud of the work that I did in partnership with Lou Gerstner and others in changing our culture, and it wasn’t one thing alone. It was many, many things to change the attitude and behavior of a population of people. I am proud of that. Part of that was the power of having, in our case in IBM, articulate a strong point of view to the outside world, which is another way of saying if you say I want to be a leader, then by definition you have to be leading people or clients or employees somewhere. So you better have a good agenda, or a good vision, or a good plan to lead them somewhere.
So I will cite two things very quickly that I contributed to. One was the development in the 1990’s of a strategy called e-business, which we have subsequently galvanized the entire company around and took out to the world. It had an enormous effect on employee not just morale, but direction. More recently we have a strategy called Smarter Planet, which has a lot to do with where we think technology is going today. What the two have in common now that I think about it is they are both forward-looking platforms, which simultaneously allow IBM to talk about where the world is going, where business is going, where technology is going, and then finally IBM and our products and services. But those kinds of agendas and platforms are very, very powerful because they very clearly help articulate a point of view and people don’t have to agree with it, but they can rally around it. They’re very hard to build because they have to be true and they have to be multi-dimensional. I guess I have had a role of both in the 1990’s the development of e-business and right now the development of what we call a Smarter Planet. In essence we have delivered to the corporation not just a campaign, but strategy. I am proud of that.
Interviewer: Do you think that’s why the brand IBM is so trustworthy compared to how it was maybe in the 1990’s? Is it a result of all the work from the employees?
Iwata: Yes, we have the data on it and the reason why IBM’s brand is respected and trusted as you say is because of our transformation, not just once, but the ability of a company to reinvent itself. We’ll be one hundred years old in two years and unlike a company that is a hundred years old that pulls oil out of the ground or maybe makes cars or does banking, cars, by in large, are still four wheeled internal combustion engine things, right? Henry Ford would come back and recognize the basics of a car. J. P. Morgan would come back and recognize—he may not approve—but he would recognize what a bank is supposed to do. John Rockefeller would recognize an oil company for sure, largely unchanged. But Tom Watson, Sr. would not recognize what we produce. I would like him to say I absolutely recognize the IBM Company, and it’s the same company because he put into motion a company that was never defined by the products we make. I think that’s hard to do. We nearly died because once we forgot how to do that. But I think one of the reasons why we’re trusted today and admired is the ability to keep ahead of changing times. Our role in that communication is not just to sort of message that, although it’s a big part of our work. It’s to help identify those forces of change and then to mobilize the business to take advantage of them.
I will always be haunted by the collapse of the company, and I have much more appreciation for my parents who were children of the depression. They don’t believe in credit cards; they believe in cash. I say the world’s changed mom and dad; you can trust those things. They still remember what it was like as a kid and they can’t help themselves. I can’t help myself. I always think that something is going to come along to kill IBM. It doesn’t matter if we’re very successful again. Therefore I tend to try to keep an eye out on trends and their implications, Authentic Enterprise being an example of that for our profession. So, being on the leading edge of change and not victims of change, and not being victims of our own inaction, I think is an important lesson in my career and I didn’t set out to learn that one.
Interviewer: Well I want to thank you for spending some time with us today.
Iwata: Thank you for giving me the opportunity to talk here about it.
Interviewer: It was very interesting.
Iwata: I hope so. Thank you very much.