A presentation from Anders Quitzau about how innovation happens at IBM, why they innovate and their strategy and values when it comes to innovation.

1. How IBM innovates
- Anders Quitzau, innovationschef
1
© 2010 IBM Corporation

2. How IBM Innovates
What is innovation?
2 © 2010 IBM Corporation

3. How IBM Innovates
IBM’s definition of innovation
 Intersection of invention and insight
 Creates value
 Holistic view
– Business model
– Products & services
– Operations
© 2010 IBM Corporation

4. How IBM Innovates
IBM has in a relatively short period re-innovated ourselves
Business Model, Operating Model and Workforce Transformation
Remixed our portfolio toward services, Shift in geographic mix…
software, and integrated solutions…
 2008 revenue:
– 21% Asia Pacific
– 37% Europe, Middle East, Africa
 Exited commoditized businesses: – 42% Americas
– PCs
– Hard disk drives
– Printing Systems  71% of employees outside US
– 84K in India, 60K increase in 5 years
 Strengthened position in: – 16K in China, 10K increase in 5 years
– Business Consulting
– Service-Oriented Architecture
– Information on demand
– Virtualization
– Open, modular systems
 Record Performance in 2008…
– $103.6B revenue, up 5%
 Acquired over 60 companies in last 5 years – $16.7B pre-tax earnings, up 15%
– to complement and scale our portfolio of products and 20 $ 10 $
Pre Tax Income & Free Cash Flow ($B)
offerings
Revenue ($B)
15 $
Pre-tax income EPS
EPS
Free Cash Flow
6$
16% 21%
9$
2003 49% 2008
Segment 57%
Segment
Revenue Revenue Software
4$ 2$
Mix 21% Mix Services 2000 2001 2002 2003 2004 2005 2006 2007 2008
35% – $8.93 Earnings Per Share, up 24%
Hardware &
Financing – Strong performance in services, software and growth markets
© 2010 IBM Corporation

5. How IBM Innovates
IBM’s early days....
5 © 2010 IBM Corporation

6. Enabling culture
How IBM Innovates
change
Collaborative Innovation
Why? What we’ve done
 Become our clients’ “innovation partner”  Established an innovation agenda
– Address client priorities that spans multiple dimensions:
– Build deeper client relationships
– Product
 Respond to changing nature of innovation – Services
 Organizations need each other to be – Business process
successful – Business model
– Pace of innovation outstrips an
– Management and culture
organization’s ability to “go it alone”
– Policy and society
 Changing workforce dynamics
– Globalization  Enabled global collaboration
– “Millennials”
– Culture of collaboration
– Innovation ecosystem
Venture
Capitalists ISVs Business
IT Analysts
Partners “We opened up our labs, said to the world, ‘Here
Investors Alumni
are our crown jewels, have at them’. The Jam --
Regulatory Bodies Universities
Innovation Ecosystem  Technical
and programs like it – are greatly accelerating
Clients  Business our ability to innovate in meaningful ways for
Community business and society.” - Sam Palmisano,
Employees Leaders
Standards Competitors IBM CEO
Policy-
Bodies makers
© 2010 IBM Corporation

7. How IBM Innovates
Innovation is about people – Getting ideas on the table – and
implementing the best
Paint a picture for your people that
provides strategic context, both giving
direction and setting boundaries for
innovation.
Stamp out fear by creating a culture Value and leverage the ideas residing
that embraces risk and eliminates the within the diverse cadre of your
stigma associated with failure. employees.
“Connect the dots” within your Collaborate with external 0rganizations,
organization by understanding and including partners and suppliers, and
leveraging the informal networks that with customers to complement existing
can improve innovation effectiveness. competitive advantages, speed up time
to market, or spark new insights.
Make ideas visible using a variety of Provide incentives and recognize your
practices designed to elevate ideas people’s innovativeness through
from all corners of the organization. programs that carefully complement
both the passions that drive employees
and a well-crafted organizational vision.
© 2010 IBM Corporation

8. IBM Strategy
How IBM Innovates
IBM Strategy and Values
… Building a Smarter Planet
Our world is becoming
Focus on open technologies INSTRUMENTED. Smart food
and high- value solutions Smart traffic systems
systems
Deliver integration and Our world is becoming
innovation to clients INTERCONNECTED. Smart energy
grids
Smart supply
chains
Become the premier Globally
Integrated Enterprise All things are becoming
INTELLIGENT. Smart
Smart healthcare
retail
© 2010 IBM Corporation

9. Smart energy Smart traffic Smart oil fields
How IBM Innovates
Smarter water Smart food supply
management We Innovate
because
We must
Smart disease Smart architecture Smart healthcare
prevention
9 © 2010 IBM Corporation
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10. How IBM Innovates
We work with venture companies to build our innovation eco-system
- and to sense what is going on ‘
10 © 2010 IBM Corporation

11. How IBM Innovates
IBM’s innovation portfolio reflects the tremendous creativity and
contributions of many organizations – both within and outside
IBM
Generally
Available
 IBM Industry
Solutions
 IBM Business
Partner Solutions
 Product & Service Offerings
 VC Backed Firms
(Late Stage)
Maturity of Tech-
nology/Solution
 Emerging Business Opportunies
 IBM Research Services  IBM Institute for Business Value – studies and PoVs
 Joint Innovation Teams VC Backed Firms
(Early Stage)
 First Of
A Kind
 IBM Research Projects
 Academy of Technology
 Early Stage Incubation Projects  University Programs
 Seed-stage
“Bleeding  Extreme Blue Startups
Edge”  Ideas
IBM-led Involvement of External-led
Innovation External Partners Innovation
Innovation Management
11 © 2010 IBM Corporation

12. How IBM Innovates
At IBM, ideas are generated from multiple sources within and
outside …
Ideation Sources
Market Institute for
Intelligence Business Value
Business Unit
ThinkPlace Strategies
Global Technology Emerging Business
Idea
Outlook Opportunity Program
First-of-a-Kind New Technologies
Program Venture program
On Demand
University Transformation Strategy
Programs
Global Innovation
Outlook
© 2010 IBM Corporation

13. How IBM Innovates
Overview of main innovation programs at IBM
Challenge /
Idea Generation Incubation Validation Value realized
Opportunity
IBM’s key innovation programs
Research, Technology
Innovation Jam BizTech IBM Internal
Corporate Adoption Program
IBM Lines of Extreme Blue
ThinkPlace Alpha Works IBM Offerings
Business
GTO / GIO / Communities Emerging Partners
of Practice Business First of a Kind
IBV
Opportunities
Client (and IBM)
Clients
Challenges
Client
Joint Innovation Partnerships Clients
Challenges
13 © 2010 IBM Corporation

14. How IBM Innovates
IBM’s research and development
IBM is 17. year in a row leading the way in IT-
reasearch by having:
– a yearly R&D-budget of six billion dollars
– over 3.000 researchers, scientists and
engineers
– five Nobel prize winners
– eight research laboratories in six countries
– 24 development laboratories worldwide
IBM has the most IT-patents in the world:
– In 2009 IBM beat its own record with 4914
patents and can call itself world champion in
”most granted patents.”
– Over 40.000 active patents globally
IBM’s number of non-IT-related patents is
growing:
– Patents regarding organisational- development,
solutions and business processes
14 © 2010 IBM Corporation

15. IBM Research
IBM Research
~3,000 employees
China
Zurich Tokyo
Almaden Watson Haifa
Austin India
IBM Research Lab
15

16. IBM Research
IBM Research: Collaborative Innovation
China Pangoo
Zurich Tokyo
Almaden Watson Haifa
Austin India
IBM Research Lab
Global, Smarter Planet Collaborations
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17. How IBM Innovates
IBM establishes collaborative ‘Centers of Excellence’ with
governments, universities, cities and companies all over the World....
17 © 2010 IBM Corporation

18. How IBM Innovates
We engage in public/private partnership:
EDISON - Electric vehicles in a distributed and
integrated market using sustainable energy and open network
18 © 2010 IBM Corporation
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19. How IBM Innovates
Collaborative Innovation - connecting the dots in IBM
How we did it Impact
 Provide platforms to foster open dialog  IBM Research
– Single Portal: On Demand Workplace – #1 on the US patent list for 17 years
– Innovation incubator: Technology – Collaboration with clients on real-world
Adoption Process challenges and solutions
– Information sharing: Lotus Connections  On Demand Workplace
– Brainstorming, idea creation: Jams – One of the world’s top 10 intranets
– Content creation: BluePedia  JAMs
– Dynamic interaction: Sametime
– $100M investment to bring 10 ideas to
reality
 Collaborate with everyone – 35 Innovative solutions in 4 areas
– Collaboration with client  Global Innovation Outlook
– Societal Innovation – Entire ecosystem to create new and
– Social network participation unforeseen opportunities
© 2010 IBM Corporation

20. How IBM Innovates
The IBM Institute for Business Value creates fact based industry and business
level thought leadership and tools that help IBM and
clients realize business value
Our Objectives Our Focus Our Research Types Our Deliverables
 Content: Create  Distribution  Future Agendas  Executive Briefs
extraordinary, fact based
business insights  Financial Services  3 to 10 year industry  Quick Read (Executive
 Market Impact: Differentiate  Industrial and/or functional area Summary)
IBM in the marketplace
 Public outlook with action  Event and Conference
 Value Creation: Value-based oriented next steps Presentations
approach to identify and  Strategy & Change
deliver client results  Innovation  Value Realization Studies  Blue Paper (What and
 People Growth: Attract,
 CRM  In-depth assessment of How to Sell)
retain and motivate top GBS today’s critical issues,
talent  Human Capital  Knowledge e-cards
opportunities, and value  Pod/Webcasts
 Supply Chain potential
 Financial Management  Books
 CXO Surveys  By-lines and articles
 Application Innovation  Chief officer studies
 Emerging Markets
20 © 2010 IBM Corporation

21. How IBM Innovates
Our philosophy of innovation is: Fail many, but fail cheap
- A new paradigme in innovation enabled by Web 2.0:
Yesterday – as was 1 Today – As is
 Ideation and Product
Inception from the
Ideas source: expanding source for Ideas source:
Internal innovation Internal, partners and customers
idea idea idea idea
idea  Use Collaborative idea
ideaidea ideaidea idea idea
tools to solicit idea idea idea idea
interactive feedback.
Weeks to months
idea
18 months to 2 years
 Limited
community to
foster new
innovation
Service Service Service
 Little user
interaction and
market feedback  “Build it and
Service
 Service silos
 Limited reuse
they will 3 2  Use of exposed
come”  Larger variety of
approach compelling offerings common capabilities
to offer customers to enable rapid
service assembly
Breadth
© 2010 IBM Corporation

22. How IBM Innovates
What are How do How IBM How customers
Jams? Jams work? has used Jams are using Jams
An introduction
• A massive online discussion using the
Internet.
• A time-limited event that can elicit
participation from thousands of
individuals anywhere in the world.
• Subject-matter experts and moderators
guide participants to build on each
other’s ideas.
© 2010 IBM Corporation

23. How IBM Innovates
Examples
“Ideas” Jam
IBM WorldJam 2004: Develop pragmatic ideas
 Actionable ideas about a particular topic / and solutions to drive company’s growth and
challenge the business (enterprise) faces innovation strategy
 Quantifiable inputs from jammers Global Customer Electronics Manufacturer:
collaborating to bring the ideas to life Develop ideas to realise the company’s new
strategy with it’s new values as the framework
 Establishing company (enterprise)-specific Nato Security Jam: AFGHANISTAN , CRISIS MANAGEMENT ,
best practices and an action plan CLIMATE CHANGE, DEVELOPMENT , HUMAN RIGHTS, COMPREHENSIVE
APPROACH CAPABILITIES & TRAINING, RELATIONS WITH RUSSIA & CHINA,
PIRACY
Possible questions Example of topics/questions
Getting closer to our customers: How can we
get better at delivering what our customers
expect — and more?
Understanding ourselves: What do our
strategies and values imply for each one of us?
Driving growth: How can we see and seize new
growth opportunities?
Creating a better company: What will it take to
make our company the envy of our industry?
© 2010 IBM Corporation

24. How IBM Innovates
Executive Report – 2008 Innovation 16
Jam
Participation with Breadth and Depth
– During the 90-hour period of the Jam, Jammers:
• Represented people in 80 countries from over
1,000 companies across 20 industries
• Generated nearly 90K logins
• Created over 32,000 posts
• Read roughly 1.5 million pages, averaging 76
pages per Jammer.
© 2010 IBM Corporation

25. How IBM Innovates
IBM and Ålborg University develops revolutionizing and
intelligent EPJ interface sparkled by Innovation Jam in 2006
25 © 2010 IBM Corporation

26. Collaborative
Innovation with
Thinkplace
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© 2010 IBM Corporation

27. How IBM Innovates
Objectives of Thinkplace
 Demonstrate that every employee
can be an innovator
 Provide a single, consistent global
management system for innovation
 Create a culture in which collaboration and
interaction across silos is possible
 Educate employees on approach to
innovation
 Reward innovators and innovative ideas in
tangible, visible ways
© 2010 IBM Corporation

28. How IBM Innovates
ThinkPlace
 The main employee
innovation program
 Focus on
collaboration
 No review board for
ideas
 Innovation Catalysts
 Stimulating the
community
 Executive
innovation
challenges
 Rewarding
28 © 2010 IBM Corporation

29. How IBM Innovates
Local Innovation Task Forces / Innovation hubs
29 © 2010 IBM Corporation

30. How IBM Innovates
ThinkPlace: BizTech prototypes deliver proof points
 Top talent from across the company gain
opportunity to work on innovative projects one “[ThinkPlace Prototyping]
day per week for 6-8 months
provides a stage for people
who have an innovative idea
 Senior business and technical leaders serve
and want that idea to be
as project mentors
transformed into valuable
 Projects sponsored by business unit managers business for IBM.”
- Participant
and executives
 Staffing and project support provided by
ThinkPlace corporate innovation team
 Measurable results presented at Showcase
event twice annually
© 2010 IBM Corporation

31. How IBM Innovates
Technology Adoption Program (TAP)
31 © 2010 IBM Corporation

32. How IBM Innovates
The rise of the enterprise mashups
 “Good enough”
 Free enterprise data
and build data feeds
(consumables)
 Mashup editors
 IT supporting the
business for them to
solve their business
problems
 Agility, cost savings
and an ecosystem for
new innovations
32 © 2010 IBM Corporation

33. How IBM Innovates
Collaboration in 1000’s of communities ~ Innovation
33 © 2010 IBM Corporation

34. How IBM Innovates
Innovation culture – Top down and bottom up
34 © 2010 IBM Corporation

35. Innovation collaboration
partnership with our industry-
leading customers
35
© 2010 IBM Corporation

36. How IBM Innovates
First of a Kind Program (FOAK):
IBM jointly invests with clients on cutting edge innovations
 A Collaboration among Research, Sales & BPI for Core Insurance
Distribution, Clients and Partners • 50%-60% reduction in work
effort
 Experimental technology-based solutions • 55%-65% reduction in
engagements project duration
 Testing tomorrow’s innovations on real business
problems and new growth opportunities
 Yielding prototype solutions across a range of
industries
Smart Surveillance for
 Clarifies client requirements and tests market Intelligent Oil Fields
readiness • Breakthrough in discovery of
anomalous patterns
 Established in 1995 • Accurately demonstrated sand
 20 – 25 projects funded each year production prediction 23 days in
 70% successfully transfer assets for reuse advance during trial
 75% drive or influence additional business
 Some Danish / Nordic FOAK projects:
 Intelligent Oil Fields for Statoil, Aker a.o Customer Lifetime Equity
• Reduced marketing costs by
 ASME – medical information hub – with
Aarhus University 20%
• Improved response rates by
 Intelligent Trade Lane – Maersk 10%
• Improved customer sat by
10%
© 2010 IBM Corporation

37. How IBM Innovates
Extreme Blue
 Summer intern project for IBM. The brightest and best students globally
 Extreme Blue teams in client projects
 Mix of business and technolgy students per team
 Mentored by IBMers - business and technology
37 © 2010 IBM Corporation

38. How IBM Innovates
Innovation Discovery Client movement through the program
Extreme Blue for Clients
Clients who need an Innovation
introduction to Discovery
FOAK
Innovation at IBM Explore
Curriculum New IBM
Offerings
Strategic Value Creation &
Major
Clients that are ready to Innovation transformation
focus on specific
Innovation
problems and look for Discovery Discovery 360/Collaborative Innov partnerships
innovative opportunities Focus Define
Customize Incubate
Software Business Dev
• Academy Studies
for Clients
• Virtual
Collaboratories Channels for Development
• Project Definition of Cross-Brand Solutions
Workshops
• + others
Existing IBM Offerings
© 2010 IBM Corporation

39. How IBM Innovates
Ongoing Innovation collaboration with major, strategic customers:
Strategic Value Creation Center Approach
Ideas Discussions Themes Initiatives Delivery
© 2010 IBM Corporation

40. How IBM Innovates
IBM develops the future of shopping with one of the
world’s largest retailers
Comfort Smart
Shopping Check-out
Infrastructure
WLAN Server
Content Bus
RFID
Inventory In-store
Information
Management
40 © 2010 IBM Corporation

41. How IBM Innovates
AlphaWorks
- Speeding IBM Emerging Technologies to the outside early-adopter
community
 Promising software programs
in research not yet
commercialized.
 Outside companies and
developers contribute valuable
ideas about bringing them to
market.
 First-cut versions of research
technology available for free
trial attracting thousands of
early adopters, innovators, and
entrepreneurs to site.
 40% of technologies on the
site graduate into IBM
products or industry
standards.
© 2010 IBM Corporation

42. How IBM Innovates
alphaworks is connected Internal to IBM
External to IBM
Open source
licence Open Not all nodes are
IBM Research Sources represented, e.g.
Lab Tours User Developers are not in
feedback the diagram
Technology
Legal&Naming Prototype IBM Open/source
Software
alphaworks
End-user
AWS infos evaluation
Technology
Prototype
AWS Software
IBM Dev Labs End-user Market/
Alphaworks
Alphaworks Software Community
Internal alphaBrief feedback?
to IBM DevelopersWorks
support
IBM Promotion
External IBM Software Product
to IBM Brand
developerWorks SWG
Information
Academic Initiative
GR Efforts
PR Efforts Coordination
Conferences Tangible transfer
Intangible transfer
© 2010 IBM Corporation

43. How IBM Innovates
alphaworks and the enterprise…
Did you know?
92%
of the Fortune 100
downloaded
technologies from
alphaworks in ’06.
15,000
Companies
downloaded techs
250,000+
Total number of
technologies
downloaded
© 2010 IBM Corporation

44. How IBM Innovates
Links:
IBM Innovation: http://www.ibm.com/innovation
IBM Research: http://www.research.ibm.com/
Institute for Business Value: http://www-935.ibm.com/services/us/gbs/
bus/html/bcs_whatwethink.html
IBM Global Innovation Outlook: http://domino.research.ibm.com/comm/
www_innovate.nsf/pages/world.gio.html#
IBM Jams: https://www.collaborationjam.com/
Alphaworks: http://www.alphaworks.ibm.com/
© 2010 IBM Corporation

45. How IBM Innovates
Spørgsmål?
45 © 2010 IBM Corporation