IBM Pushes the Limits of Business on the Internet

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In the months leading up to the late '97 launch of IBM Corp.'s "e-business" campaign, Irving Wladawsky-Berger hunkered down with Ogilvy & Mather and IBM's corporate staff to plot strategies, marketing and advertising.

That's to be expected of a top IBM marketing executive. Except that Mr. Wladawsky-Berger is a scientist and the chief thinker of IBM's Internet strategies, not a corporate marketing honcho.

The fact that IBM drew heavily on the expertise of a brainy wizard of the Web helps explain why IBM's e-business effort is so smart. E-business is a business strategy, not an ad campaign. The strategy works because it permeates the organization, with advertising reflecting how customers' businesses are changing.


"Successful advertising means capturing the nuances," says Mr. Wladawsky-Berger, general manager of IBM's Internet Division. "That's what differentiates you from being just the next company saying the Internet is cool. . . . If you get the right thinking and the right concepts, the advertising follows naturally."

That sort of thinking has given IBM focus, consistency and leadership in Internet marketing--ingredients that make IBM Advertising Age's pick from the technology industry for interactive marketer of the year.

The company's print and TV ads, the benchmark in tech branding, turned "e-business" into a defining phrase of Web business when IBM adopted the mantra in a global TV and print campaign that began in October '97.

"It's a business strategy which requires a marketing strategy to help customers understand it," says Abby Kohnstamm, senior VP-marketing. "At its heart is IBM's fundamental view of what's happening with business and what's happening with Internet technologies."


At a time when e-commerce was the rage, IBM adopted e-business to define broader opportunities by harnessing networks: integrating supply chains, managing knowledge over networks and using technology to allow internal collaboration. E-commerce--buying and selling goods--was only part of the picture.

E-business is a broad term that befits IBM's array of information technology [IT] solutions: servers, consulting, collaboration software from Lotus, e-commerce software, HotMedia technology for rich-media Web ads. E-business is real business for IBM, which had '98 revenue of $82 billion. Mr. Wladawsky-Berger says more than one-quarter of revenue is related to e-business products and services.

"In all honesty, our expectation is down the line, this is IT," he says.

Mr. Wladawsky-Berger is making extensive use of a road map metaphor to help IBM employees, partners and customers plan e-business excursions.

"You will see in '99 a fairly fundamental shift away from helping to sell the notion and power of e-business to how you actually do it--and why you should do it with IBM," Ms. Kohnstamm says.


Mr. Wladawsky-Berger says non-technical businesspeople, such as marketing executives, can understand e-business even if they don't understand the technology. What is more important, he believes, is that executives "have an appreciation of what is easy (and) what is difficult so they can pragmatically do what is easy and choose wisely on the difficult side."

IBM, with its soup-to-nuts offerings, positions itself as the company that can help customers take the easier road.

Consider what IBM has learned by working with customers on what happens to Web-site traffic when a site advertises on TV vs., say, The Wall Street Journal or radio, to be prepared for traffic bursts, Ms. Kohnstamm explains.

IBM uses such information to manage its site, which covers 500,000 pages, gets nearly 8 million page views a week and 1 million customer e-mails a year.

Helping drive that traffic is a huge Web ad effort: With its plan to boost global Web spending from $45 million last year to $60 million this year, IBM could surpass Microsoft as the top Web advertiser.


IBM's leadership stance is demonstrated by the decision to restrict Web advertising in North America effective June 1 only to sites that display a clear statement regarding privacy. The move has drawn widespread support as a smart private-sector response.

"We have both a business motivation and a corporate, philosophical motivation to be a very vocal, assertive advocate on privacy on the Web," Ms. Kohnstamm says. IBM intends to expand the policy to other regions.

IBM is deploying its increased Web budget through a smaller band of Web shops, the result of a decision to consolidate. IBM last fall reviewed more than 100 agencies before paring the list to five. That review followed earlier consolidation of IBM's general advertising at Ogilvy & Mather Worldwide, New York, as well as reviews of direct marketing and trade-show management.


Ms. Kohnstamm's strategy: Build long-term relationships with partners that intimately know IBM's business. The payoff: IBM delivers a well-integrated message across media with a positive, consistent image of IBM and its role in e-business.

The kicker: IBM's integrated approach is darned efficient.While ad budgets at rivals are soaring, IBM has held combined ad budgets of IBM and software companies Lotus Development Corp. and Tivoli Systems between $600 million and $700 million. IBM has made cuts in old media to pay for the new media.

"We've got a strategic integration of our messages and offerings," Ms. Kohnstamm says. "Holistically, it just has much more impact."

It wasn't automatic that a technology giant could port its products and image to a new era. Mr. Wladawsky-Berger argues that customers and Wall Street are more demanding and less forgiving of IBM than of young, scrappy rivals when it comes to products and earnings.

"When we say how great we are, the market expects us to perform," he says. "A brand new company just has to be cool. If we show up and we say `electronic commerce' or `advanced Internet,' the expectation is the bloody thing is going to work."

The good news is e-business is now mission critical--playing to IBM's forte of delivering heavy-duty computing solutions.

Mr. Wladawsky-Berger believes it is possible to be both mature and cool, comparing IBM's enduring performance to that of the Rolling Stones.


"I never thought of ourselves [before] as the Rolling Stones of IT," he chuckles.

IBM Chairman Louis V. Gerstner Jr. began preaching "network computing," a dry precursor to sexy e-business, in 1995, and IBM set up the Internet division in late 1995. Even then, Mr. Wladawsky-Berger notes, it was unclear where the market was headed.

"We said, `Boy, this Internet thing is hot, this is a big deal, we need to play here,'|" he recalls. "A major thing we did is ask, `What is the relevance to our customers?' Just saying your children can surf the Web--what do you say after that? What is the relevance to IBM and what we do for a living?"

In '96 and early '97, IBM began to work with customers to take existing business processes and make them accessible to employees, suppliers and customers through the Internet. Mr. Wladawsky-Berger brainstormed with Ms. Kohnstamm's team and O&M executives to make sure marketing and Internet plans were in sync.

There were missteps: IBM's reputation took a hit in 1996 when glitches felled its much-hyped Web site at the Summer Olympics. In developing e-business a year later, IBM was careful not to overpromise capabilities.

"Before Abby was willing to commit to the major marketing campaign," Mr. Wladawsky-Berger says, "she wanted to make sure . . . that this wasn't just us coming out with a great slogan, that this was truly a marketing strategy that had legs."


Ms. Kohnstamm bought in big-time. The result was IBM's largest single marketing campaign--first budgeted at several hundred million dollars--to introduce the "e-business" line and logo. The term popped up in 197 news stories in the year before IBM's campaign. In the year that followed, it appeared in more than 1,600 stories--and in later ad campaigns from companies such as Hewlett-Packard Co.

Ms. Kohnstamm cites three goals for the e-business positioning: become the "thought leader," present IBM as the only "end-to-end solution provider" and hammer home that IBM has had more e-business engagements than anyone else. (IBM itself this year expects to buy $12 billion in goods and services over the Web; it has reduced paper invoices from 5 million to zero.)

Ms. Kohnstamm isn't worried that others have latched onto the e-biz buzz.

"We're less worried about owning the phrase than to be the thought leader in where it's been and where it's going."

IBM's e-business pitch is everywhere. Says Ms. Kohnstamm: "There's practically no piece of marketing that comes out of this company anymore that isn't integrated into it."

E-business as usual.

Copyright May 1999, Crain Communications Inc.

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