Bob's Gutsy Leadership Blog

IBM: A Lesson in the Elusiveness of Objectivity

In its recent quarterly earnings announcement, IBM noted that the division built around Watson, the generalized artificial intelligence tool, experienced a revenue decline of -1% versus year ago.  This is after a disappointing +3% growth in the prior quarter.  The CEO of the company continues to tout Watson as the savior of IBM.  Also, the company continues to field a very heavy advertising program behind Watson.  The fact is, it appears Watson is out of gas, but the company keeps hyping it.

Stepping back, a leader needs to be skeptical when the facts are showing they should be skeptical.  That kind of objectivity is not exhibited by the current CEO of IBM.

A leader who was consistently very objective over his career was Jack Welch.  After the 1979 Three Mile Island nuclear reactor accident occurred, the management of GE’s Nuclear Power Division (NPD) continued to be unrealistically optimistic about the future of nuclear energy.  In 1981 when Jack Welch was a fairly new CEO at GE, he held a two-day review of GE’s NPD.  As Jack started his review, the first thing he uncovered was there were no new orders for nuclear reactors since 1979, generating big losses for GE’s NPD in 1980 and 1981.  Jack stated that he believed there would be no new nuclear reactor orders for many years, given the incredibly negative publicity around the Three Mile Island incident.

After debating that issue, Jack asked the team to put together a plan based on the assumption that there would be no new orders for the next seven years, requiring the organization to come up with a completely new business model.  He pointed out that NPD did have fairly robust services and fuel business serving the 72 active reactors that were in operation at the time.

After doing a thorough analysis, the division realized that by downsizing and reconfiguring their organization they could develop quite a profitable fuel and services business.  Jack liked the proposal and had them implement it and by 1983 that team had net earnings of $116 million.

IBM and GE provide some valuable reminders for leaders:

1.) Success Breeds Bias – Once we start to achieve some success with a particular plan, we tend to lose our objectivity and become protective of that plan, even as circumstances change.

2.) Fresh Perspectives are Necessary – We should seek out people who can provide an untainted look at the set of facts and give us an objective assessment.  Don’t wait for it to be your boss!

3.) Put Adequate Attention Against the Worst Case – Constantly revisiting your situation and evaluating the worst case is a must.  Most importantly, we need to research the factors that might put us in that situation.

The lesson is clear; strong leaders constantly push for objectivity in all aspects of the business.

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