In 1914 IBM was making tabulating machines, scales for weighing meat and cheese slicers. Its President, Thomas Watson Sr, decreed three corporate principles for the company:

  1. Respect for the individual
  2. The best customer experience
  3. Pursuit of excellence

These informed the company’s culture and informed its success throughout most of the twentieth century as it moved into developing electric typewriters and other office machines, including computers.

In the 1990s IBM suffered the worst reversal in its history as it struggled to keep up with the revolution of personal computing. It had to fight its way back and in doing so transformed itself from a mainframe maker into a robust provider of integrated hardware, networking and software solutions.

In 2002 Sam Palmisano became CEO. Palmisano was a long-time IBMer. He believed in the basic beliefs posited by Watson nearly a century ago but to be successful in a new century, he felt they needed an update. He asked 300 members of his senior executives about how they could modernise these principles before opening up the discussion further through a survey of 1000 other employees. These employees were selected to reflect the different levels, locations, functions of the business, which employed around 400,000 people in around 170 countries. He wanted to get a sense of how different parts of the organisation would articulate the company’s values too. He was also aware that a high proportion of his staff were scientists, engineers and consultants and that more than half had University degrees, saying “smarter people tend to be more cynical.”

Out of this initial research grew propositions for change that were debated online over a three-day period, during which Palmisano was present to answer questions or make comment. 50,000 employees took the opportunity to contribute to this discussion. Subsequently the content was analysed to develop a revised set of corporate values. These are:

  1. Dedication to every client’s success
  2. Innovation that matters for our company
  3. Trust and personal responsibility in all relationships

Commenting on the update the Harvard Business Review (2003) said: “Earth shattering, no, but imbued with legitimacy and packed with meaning for IBM.”


  1. What kind of leadership style did Palmisano exhibit and why do you think this? (2 marks)
  2. Why are values important to an organisation and why are these values important to IBM? (4 marks)
  3. What do you think are the advantages/disadvantages of the approach taken by Palmisano to the updating of the IBM Principles? (4 marks)
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