Power was once a peer to X86 technology along with a number of now obsolete processor platforms, but as those others dropped off and X86 became dominant, Power continued. Yes, it had to hit above its weight class in order to compete and remain relevant, but it did, and it continues to have some of the most loyal and outspoken customers today who appreciate what Power uniquely brings to the table.
The reason it has sustained speaks to both a weakness in X86 execution which allows for competing technologies to exist and a level of continued focus and execution by IBM that has enabled the technology to continue long after many thought it would be obsolete.
Let’s look at the surprising success of IBM Power this week on top of IBM’s latest announcements surrounding the platform.
The benefits of heretical technology
Heretics have opinions that are at odds with what is generally accepted, whereas most humans prefer compliance. But heretics often make the greatest advances by moving faster than the speed of sound, circumnavigating the globe (and actually arguing there was a globe), and coming up with electric cars in an internal combustion world. Even advancing alternative forms of energy generation generally has come from heretics.
IBM has historically been a heretic. It advanced computing when most of its peers argued in the 1940s and 50s that the computer market was tiny. It dived into personal computers using a partnering model instead of vertical integration. It both drove lock-in as a model, then was one of the first companies to throw that model out. And finally, after defining itself as one of the most proprietary vendors in the technology market, IBM flipped completely to become one of the strongest supporters of Linux and open-source technology. IBM is unique in that it has not only played the heretic, it has done so against constructs that IBM itself created.
Being a heretic grants an unusual amount of freedom in terms of where you focus. It also creates the potential for unprecedented advancement because you don’t have most of the market fighting against change, as the market generally does. You can pick your customers, and while you are unable to fight massive technology wars, you are able to attack opportunities that haven’t emerged or may be little more than ideas, like quantum computing and advanced Artificial Intelligence (AI), both of which IBM seemed to grasp first at scale.
You don’t worry as much about the competition because it doesn’t focus on you, so you don’t need to worry as much about it. Instead, you focus on a relatively small group of customers and focus like a laser on what they want that they aren’t getting from the more generic platforms. This builds deeper loyalty, creates less customer churn, and, as a result, allows you to enjoy what should be a much more stable income source as a result.
The downside of being a heretic
If being a heretic is so wonderful, what’s the downside? Why isn’t everyone a heretic? In a way, when computers first came to market, everyone was kind of a heretic. Interoperability wasn’t a thing, companies were all vertically integrated, and customer switching costs were massive. The overall market was a tiny fraction of what it is today, and the level of market inefficiency was extremely limited to market growth.
Heretics can’t slipstream other vendors. They must carry the demand generation responsibilities themselves, market expansion is more difficult (offsetting the benefits of low customer churn), and they not only have the potential benefits of forging their own paths, they carry the risks that come with that, as well. It takes a special kind of company and leadership to be a heretic. Companies like Tesla, Apple, and IBM are few and far between as a result. And both Tesla and Apple are starting to look a lot less heretical of late as the companies’ products increasingly seem to look and act like those from other firms emulating them.
When I first started following IBM, it was by any measure the status quo and so massively dominant you could argue it was the tech market. Highly proprietary, it didn’t even sell its own offerings. Instead, it had an operating strategy that in many ways emulated the As-A-Service world we are quickly becoming today.
But, after a near-death experience in the early 1990s, IBM evolved into its old, heretical self again, challenging a status quo that no longer wanted it by providing capabilities like interoperability and open source, things the company had previously fought against.
And this goes to the core of why IBM continues to be successful even though it lacks the size and power it once had. The company went back to its Thomas Watson, Jr. roots and followed his advice to be willing to change everything but who they are. IBM was, and is, one of the strongest, customer-focused companies in the market. And by focusing on customers and not competitors, it has been able to sustain the mainframe and Power as unique in the market and still highly valued by customers who want to be treated well more than they want to buy from the lowest bidder.
Ironically, the lowest bidder customers (who dominate most markets) tend to be disloyal, relatively expensive to maintain, and are often dissatisfied with their choices. So much so that companies like EMC put in place programs to aggressively avoid them. IBM, in contrast, has chosen a heretical model that seems to provide a similar outcome. Thus, being a heretic works for IBM and the customers it serves.