Out of the Blue

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Motivational perks aren't the only cultural common bond among "Baby Blue" companies. The most re-created aspect of IBM is another outgrowth of Tom Watson Sr.'s primary dictum: generous human-resources practices. Those include, for instance, "open door" policies (a direct homage to Watson's practice of making it known that any employee with an unresolved problem with his or her supervisor could bring it directly to the company chief) and the development, even at small companies, of clear review processes and career paths.

When Mike James, an eight-year IBM veteran, took over his father's law-publishing start-up, Barclay's Law Publishers, in 1989, his first step was to establish performance objectives, coupled with regular performance reviews, for almost every employee in the organization. "I think the most important component of the IBM training was management of personnel," he explains, adding, "the biggest issue in a small business is the fair treatment of employees and the hiring of the right people." Since then the company's revenues have nearly doubled, to $11 million, and it now employs 100.

In his new book, The Discipline of Market Leaders, Michael Treacy posits that leading companies excel by choosing to offer their customers the lowest-priced product, the superior product, or the product that best solves their problem. Until recent years IBM's success had always been undeniably based on products in the last category. "At IBM it wasn't necessary to have the best product line, but you had to solve the customer's needs," says 14-year IBM veteran Art Durham, current CEO of Opto Generic Devices, a manufacturer of motion-sensing products in Van Hornsville, N.Y.

The religion of providing solutions first and foremost is founded in another of Watson's basic beliefs: that you must listen to the customer. That notion is the gospel of scores of entrepreneurs who used to be with IBM. "One of the things we take from IBM is that we are a solution-oriented company, which is what IBM was in the old days, when it sold punch cards for companies to tabulate records or do payrolls," says McGurl of Bottomline. "It was a solution-oriented sell rather than a product, a box."

McGurl's Exeter, N.H., company sells automated check-printing systems to companies that write more than 50 checks a week. It has grown into a $15-million company since its founding, in 1989. Building a company from scratch has enabled McGurl to instill in it the notion of total customer service, which he saw drift away at his alma mater. He says that in his last years at IBM he "essentially became an order taker for each product and lost focus on how to add value for the customer."

That way of doing business contradicted the approach to selling he'd learned 32 years ago at Big Blue. "My training as a young IBM salesman was very much application oriented: we learned about inventory control; we learned about accounts receivable and the aging of accounts receivable and how even the early punch-card equipment prior to the introduction of early computers was all sold just on an application justification," says McGurl, who left IBM in 1984, when he was offered a generous severance package.

McGurl remembers his very first sale, to a garment manufacturer called Rosecrest Manufacturing, in Boston, in 1963. "The whole sale was understanding the cut-and-sold report and understanding the value of that information to management and then being able to show them how the computer could provide that information so they could make better use of their materials to produce better sportswear," he says.

That's precisely how he wants his salespeople to think today. "We are a solutions sell. Our application is check-disbursement technology. We are selling a better way to make payments and prevent check fraud," McGurl says. "Bottomline is successful because the application-selling idea is part of our sales team. That is how we train people to sell."

Bottomline drills into its sales force the story that the company's solution is "disbursement technology" -- hardware and software that make it easier and safer for companies to pay for people and things. The salespeople are given extensive product training so they can determine just what configuration would be appropriate to each customer -- as opposed to pushing the same product to everyone. "For each client we go out and figure out the requirements and then design a solution," McGurl says.

"I think IBM forgot that the users were most important. They thought they could dictate to people what they would use," says Dave Wenz, cofounder of Showcase Corp., in Rochester, Minn. Wenz is a former true Blue fellow who has thrived by building a company in a niche IBM defiantly neglected.

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