"I' In IBM Could Be Innovation; It's Reinvented Itself; "Innovation Factory' is a name of software it sells, and it's walked the walk
BYLINE: J. BONASIA
Innovation Factory is a new online software service showcased at a recent open house at the IBM Silicon Valley Lab.
The software aims to help employees, suppliers, partners and customers work together on new products and services. It relies on hot Web 2.0 technologies such as blogs, wikis, software tags and social networking. People can team up with their colleagues around the globe.
In many ways, the innovation factory concept is an apt metaphor for the larger history of IBM. Since being founded in 1911, the company has leaned on its research and development arm to reinvent itself time and again.
"IBM likes to think of itself as doing R&D for the world," said Dan Wardman, general manager of the San Jose, Calif., lab.
In the 1950 s and '60 s, International Business Machines became a pioneer in mainframe computing and disk storage. With these IBM products, businesses could quickly process huge volumes of transactions for the first time. Working closely with colleges, IBM also ushered in a new discipline that came to be known as computer science.
IBM switched from custom software to packaged applications in the 1970 s. It weathered the dawn of personal computers in the 1980 s. Some missteps took place along the way, but IBM always found some way to rebound.
Many Changes
"IBM has historically gone through a lot of changes," said Gina Poole, IBM vice president of innovation and university relations.
In the 1990 s, IBM transformed itself yet again. The hardware and software giant morphed into a services-oriented firm. It found that it could create more value by designing and building its many products into full tech systems for clients. Today, IBM draws more than half its revenue from services. The majority of its 329,000 employees work in services as well.
Recently the company has championed such innovations as open-source software, virtual reality and breakthroughs in computer chip designs. IBM was awarded 3,621 U.S. patents last year, an all-time record for any company. It's been the nation's No. 1 patent recipient for 14 straight years.
But patents don't always equate with real innovation. Most patents are not significant, just as very few books become best-sellers. So says Barry Jaruzelski, a consultant with Booz Allen Hamilton who developed the Global Innovation 1000 list. The roster ranks the world's top R&D spenders, in terms of total dollars spent. Booz Allen uses the list to analyze how some companies are able to use their R&D investments more effectively than others.
IBM ranked ninth worldwide for R&D spending in 2005, the most recent figures available. It spent $5.8 billion on R&D that year, or 6% of total sales.
But patents and R&D spending don't tell the entire story, Jaruzelski says. All business innovation comes down to "the processes, tools and culture around developing and delivering a new value proposition," he said. "Patents are but one dimension of innovation. R&D is just one facet of the larger enterprise."
Jaruzelski cites the iPod music player from Apple as a strong innovation. The device is simple and stylish. But Apple's real breakthrough is its iTunes music store, he says. The online service makes it easy for listeners to download their favorite songs, rather than buying whole albums.
"The iPod is a phenomenally great implementation of the hardware and user interface," he said. "But the biggest innovation is in its business model."
Patents alone aren't the ideal gauge for innovation, but they're still useful for economists, says Josh Lerner, a Harvard Business School professor who studies innovation. He says that other "innovation outputs," such as the number of patents cited by prestigious journals, also are a good guide. "True innovation is not easy to assess," Lerner said.
IBM is well-known for regularly cranking out new technologies. That alone is a clear sign of innovation, says Carl Shapiro, a professor of business and economics at the University of California, Berkeley. "IBM clearly innovates a great deal and has done so for many years," he said by e-mail.
"Meaningful' Innovation
An invention can lead to innovation only by addressing real business needs for customers, says Steve Mills, an IBM senior vice president and head of the firm's $18 billion software group.
"IBM is at the forefront of articulating trends away from gadgetry and toward applied value," Mills said. "Innovative ideas are about how to bring all of that together in a meaningful way."
In recent years, IBM has convened a think tank called the Global Innovation Outlook. Leaders from business, government and academia meet to discuss such big-picture items as urban transportation or social policies in the developing world.
"We look for areas that are ripe for societal innovation," Poole said.
IBM also is working with a group of colleges to launch academic programs that focus on business services. Several schools are developing new classes and degree programs for the emerging field of services science. Such programs mimic the dawn of computer science courses half a century ago, Poole says.
"Services are a very different field than manufacturing," she said. "They require different skills than mass-producing and marketing a product."
The service economy of the 21 st century, it seems, will require a new type of innovation factory -- one that nurtures original ideas rather than just cranking out commodity products on an assembly line. Maybe IBM is on to something.