How do you define your legacy when the numbers stack up against you? Ginni Rometty, former chief executive and chair of IBM, is confronted by this conundrum every day.
Rometty and some who worked closely with her say she was pivotal in transforming the century-old US company: reinventing half its portfolio of businesses; building its cloud computing division; and establishing its leadership in artificial intelligence and quantum computing.
But critics counter that she was too slow at taking decisive action to move an old-world tech company into AI, the cloud, and data analytics. IBM’s business customers were moving from in-house products managed by the company to outsourced services in the cloud, where rivals Amazon Web Services, Microsoft and Google parent Alphabet were ahead.
Additionally, IBM struggled to turn breakthroughs with Watson — the company’s Jeopardy-playing computer — into profitable ventures.
At one point, the company achieved a stretch of 22 consecutive quarters of falling revenue. Unadjusted for dividends, IBM’s share price fell 25 per cent over Rometty’s eight years at the helm, when the broader US stock market rose more than 150 per cent.
“Do I wish it would have been higher? Of course I do,” she says, in an interview by video call. When companies have to adjust to shifts in tech, there is usually one change — and “we had four or five”, she argues. “We could have ceased to exist if we did not do something. It was a big job and it took time.”
How much is Rometty’s story linked to IBM’s own? For a lifer who spent 40 years at IBM, the two are intrinsically linked. But, in her new book, Good Power, she tries not to dissect every business decision. Instead, she offers part memoir, part lessons in leadership, and part big ideas for business from one of the world’s most prominent female chief executives.
For a long time, Rometty revealed little about her personal life and distanced herself from those who drew attention to the challenges of being a female leader in a tough business environment. The book now sheds some light on her background, her working life, how to leverage her “power” for good and the need for business to embrace a skills-based workforce.
Rometty was the oldest of four children and had a middle-class upbringing in Chicago. But her family life “imploded” when her father walked out, forcing her mother to work multiple jobs, while also going to night school. Rometty looked after her siblings. “Even before my dad left, I believed that self-reliance, self-sufficiency, and independence were traits women needed so we never had to rely on someone else,” she writes.
Her personal story is compelling. It is one of hard work, resilience and perseverance. It may have helped her withstand the critics who focused on high executive pay (Rometty earned more than $130mn over her tenure) while IBM was making huge lay-offs, outsourcing work and experiencing falling sales.
After graduating from Northwestern University with a degree in computer science, she joined carmaker General Motors, which had helped pay for her tuition and earned her loyalty. It was in Detroit that she met her husband, Mark Rometty, who has helped her to “handle setbacks and challenges”.
In 1981, she started as a systems engineer at IBM. She worked her way up, to head global sales, marketing and strategy, and was known as a good salesperson, storyteller and communicator. These are skills that she calls “a science” in her book — and that she had to learn. She set out to portray herself as someone “in control”, from how she spoke to how she dressed.
In 2012, she became chief executive and chair of IBM.
Those more generous to Rometty would say she was dealt a tough hand by her predecessor Sam Palmisano: being forced to orchestrate an improbable turnround, yet hampered by the financial road map he had drawn up. In 2010, Palmisano said IBM would deliver earnings of at least $20 a share five years later, while generating $100bn in cash flow. In 2014, Rometty abandoned his plan, which she describes as “an inhibitor”, even as IBM stayed committed to increasing and paying out shareholder dividends.
“Our challenge was to find that balance between being in service of our existing clients and surviving as a business,” Rometty writes in the book, acknowledging the ensuing identity crisis: “Who is IBM now? What should we become?”
In her eight years at the top, IBM divested assets that were bringing in $9bn in annual revenue, which included semiconductor manufacturing and some lower-profit services and software businesses. “I did all this knowing that it meant no growth for the company at a time when the investment world was clamouring for it,” she writes. IBM also acquired 68 companies, including open-source software pioneer Red Hat — spending a total of $133bn on deals, R&D, and capital expenditure. She says in the book these were the “right long-term choices”. However, revenues never recovered in the way she had hoped.
While Rometty believes she initiated a strategy that will prove beneficial for IBM’s future, even under new chief Arvind Krishna IBM has yet to regain its previous status. “My job was to transition [IBM] and reposition for growth . . . I had to do what had to be done,” she comments in her interview.
But, while her tenure at the top of IBM may prompt criticism, less controversial is her stance on building a skills-based workforce. She campaigns for employers to hire recruits on wider criteria than just university degrees and higher education credentials — an approach that would also help to boost employee diversity.
Bosses, she argues, should encourage staff to build skills that keep them and their employers relevant in the marketplace. Employers should say: “I can’t promise you employment but I can promise you employability.”
This advocacy for skills has become a mission in Rometty’s life beyond IBM. Ultimately, she uses the book to tell her story in her own words: what motivated her; how she aimed to employ the “power” she had as a force for good; and her plans to continue doing so.
As she tells the FT: “If you don’t define who you are, someone else will.”