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How Can a Company Innovate for 100 Years?

Stocks in this article: IBM

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Kevin Maney

NEW YORK ( TheStreet) -- IBM (IBM - Get Report) turns 100 this June. For the centennial, the company asked me to research 100 years of computing history and IBM's role in it. (A decade ago, I wrote a biography of Thomas Watson Sr., who built IBM -- so I knew my way around the corporate archives.)

IBM

Remarkably, IBM has contributed major innovations at every stage of computing. It created the first disk drive, the first widely-used computer language (FORTRAN), and the first relational database. It drove development of the bar code and airline reservation systems. Recently, it built a computer that could beat champions on a televised round of Jeopardy!.

IBM hasn't been on top of every development -- it came late to the personal computer and the Web, for instance. But the company is vibrant and relevant today because it has always stayed in the mix, creating new technologies time and again.

So, what can be learned from this? I looked at the historical sweep of IBM and computing, and picked out five key lessons that might help any company that wants to be enduringly innovative.

1. Really (gulp!) cannibalize.

By the end of World War II, IBM was getting one-third of its profits from making and selling punched cards. The rectangular cards had been the way companies had stored data for nearly 60 years, and they were a significant part of IBM's culture. But as data processing became more important to business, companies got overrun by cards. They set aside whole floors of buildings to store cards. Pressure built to find a solution.

At the time, magnetic tape was a new, untested technology. Bing Crosby had broken ground by using it to record his radio show. IBM thought it could be adapted for data, but this was truly a radical idea. It threatened IBM's cherished card business. It also meant asking corporations to put critical data on an electronic medium -- for the first time, a customer wouldn't be able to hold the medium in his hand and see the information (the punched holes!) in front of him.

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