Understanding IBM

Part 13. A Good Name

"Two things easily broken and not easily mended: fine China and a good reputation." - Ben Franklin

If there is one thing IBM has been concerned about in the last few years, that is its reputation. IBM has long had a reputation as the preeminent technological enterprise in the world of computers. (Considering it is the largest computer company in the world, with some $80 billion in annual revenues, this is not surprising.) However, several events in the last twenty years have sullied that reputation; for example, the dramatic loss of leadership and market share in the personal computer marketplace. Another example is the necessity of employee layoffs that for the first time in company history actually sent workers out onto the streets to fend for themselves. How did IBM react to these threats to its hard-earned reputation?

For one thing, they brought in a new CEO; for another, they hired a new advertising agency. While much has been made of the success and the dramatic changes implemented by Lou Gerstner, it is the changes prompted by the advertising strategy that have been largely ignored in the press. Just what is advertising agency Ogilvie & Mather's strategy, anyway?

O & M believes in the concept of "brand stewardship." Simply put, this means that brand name value must be maintained at all costs. Anything in a company's portfolio, or advertising, or product line that would tarnish its image must be carefully concealed or done away with. The value of a good name cannot be bought, but it can be lost. Once lost, it possibly may be gone forever. Therefore, unusual tactics may be necessary to prevent the loss of value of a trusted brand name.

Take for example the term "IBM PC" or "IBM compatible." What value could you place on that terminology? Having the company name used every time a standard personal computer is sold, or whenever a piece of standard personal computer software is sold, has incalculable value as subconscious advertising. It almost subliminally suggests that IBM is the standard-bearer in the computer world, that IBM is the "gold standard" by which all other companies must be measured. This is akin to calling a soda pop a "Coke" even when it may be made by a rival company.

Therefore, any product which would endanger IBM's reputation as a provider of industry-standard components must be done away with. However, in the case of OS/2 Warp, this simply can never take place: OS/2 is vital to IBM's high-end corporate clients, and thus it will remain a key feature of business products at IBM for decades to come. How then could IBM overcome this paradox, that a product which was technologically superior and vital to corporate success had been branded a "loser" in the marketplace by an attack-dog media? How could IBM discreetly avoid the OS/2 issue in public, yet maintain its prominence as a key corporate technology?

In this case, IBM chose to defuse the problem by capitulating to the Wintel model -- standardizing on Intel CPUs and Windows operating systems, despite the fact that IBM had its own superior operating system and also had a special deal with CPU maker Cyrix. By providing what the public had been brainwashed into thinking were required features of industry-standard PCs, IBM kept the term "IBM compatible" alive and well. Yet they continued providing elite clients with superior, non-Wintel products. This unfortunate bit of sleight-of-hand maintains the public view of IBM as "mainstream," which may turn out to be more valuable in the long run than to push superior alternatives but risk the deadly appellation "proprietary."

Most recent revision: January 27, 1998
Copyright © 1998, Tom Nadeau
All Rights Reserved.