The IBM Global CEO Study 2006
Irving Wladawsky-Berger [IBM] | POSTED: 04.17.06 @07:06
Over the last ten years I have been the "leader" in IBM of a number of important initiatives like the Internet, Linux and On Demand – initiatives that spanned the whole company and proved to be transformative in nature. I put quotes around "leader" not out of false modesty -- frankly I am very proud of what we have accomplished and of my own contributions to these efforts. I use quotation marks because in all honesty I could not possibly have done these jobs at all, let alone have achieved any kind of positive results, if these initiatives had not been personally driven by our CEOs during that period, first Lou Gerstner then Sam Palmisano.
While innovative ideas almost always emerge "bottoms up," from people within the business or from external communities in the wider marketplace, it has been my experience that their successful implementation requires top-down support, and the more disruptive and transformative the ideas, as was the case with the Internet, Linux and On Demand, the higher up in the organization must the support originate – up to and including the CEO.
I was thus happy to see that a key finding of the IBM Global CEO Study 2006, released last month by our Business Consulting Services organization, was that CEOs increasingly recognize that innovation cannot be treated as a marketing initiative and delegated down in the organization. To be successful, innovation requires orchestration from the top.
The CEO study is based on in-person interviews with more than 750 CEOs, business executives and public sector leaders from 20 different industries and 11 geographic regions, including both mature and developing markets. An online summary of the findings as well as a copy of the final report can be obtained here. They are free, but registration is required.
One of the major findings of the study is that 65% of the CEOs interviewed see that their organizations must make fundamental changes to respond to significant external forces over the next two years and are thus under intense pressure to innovate. But less than half feel they have been successful in driving such change in the past. While the innovation focus is highest for new products, services and markets, as well as for operational efficiency, competitive pressures are pushing business-model innovation – e.g., structural organization changes and the building of strategic partnerships - higher on their priority list.
CEOs are beginning to recognize how difficult it is to drive change in an organization, and that therefore they have the primary responsibility for driving the innovation agenda in their business. The study found that more than one third of the CEOs are now personally leading the innovation charge. We fully expect that figure to increase in the future as innovation agendas become bolder and wider to cope with the increasing pace of change, as well as with a more global and competitive marketplace environment.
Another key finding is the link between external collaboration and innovation. An increasing number of CEOs stressed the importance of collaborating beyond company walls, with business partners and clients as top sources of innovative ideas. This is very different from previous organizational models that assumed innovation was too critical to involve outsiders. In today's fast-moving, highly competitive and complex environment, more and more CEOs recognize that there exist a lot more capabilities for innovation in the marketplace than they could try to create on their own, no matter how big and powerful the company.
Surprisingly, only one sixth of the CEOs mentioned their own R&D as a top source of innovative ideas, perhaps because most companies view R&D as confined to labs and focusing primarily on technology and product innovation.
One of the main lessons we have learned in IBM over the last few years is that innovation increasingly is occurring in the marketplace not just in the labs. As the problems we are now tackling are much broader and more complex, R&D people can play a huge role if they get out of the labs and work with clients, business partners and others to learn about and help them solve those problems -- and then bring back their knowledge to the labs to develop tools, processes and analytical capabilities that will significantly improve how we solve similar problems in the future.
Innovation is clearly an increasingly crucial issue everywhere, because, as two thirds of the CEOs interviewed in the study told us, driving fundamental change in their organizations has become a top priority for business leaders. This is really hard work, and for it to bear fruit CEOs and other top executives will have to exert leadership of a profound and compelling nature.
1 comment(s) so far...
By Brian K Seitz on
Re: Innovation must start with the CEO: IBM study
One of the interesting points Irving and his inner circle discovered over the past years has been that many if not most of the innovation in a large corporation has been "started" or recognised as originating from the outside. If we are honest about this, isn't that true in most cases.
According to "classic" texts on business and strategy; marketing is all about finding a need or want and using company resources to fill it (i.e., innovation). However, can we say that just filling a market need is being innovative? Is having thirty different color versions of the same cellphone innovative?
If we stretch the concept of external source as true innovator (e.g., Eric Von Hipple's Democratizing Innovation) what does that mean for the engineering profession?
If S/W continues its automation of intellectual content capture and business rule execution, will it be not very soon before most simple to moderate engineering tasks are computer driven instead of computer aided?
Proof Point: In the 80s during the USAF Mantech program, many Aerospace Corporations were paid co-developers of CAD/CAM concepts and technologies. A few of us spent our early careers building various industrial automation systems. During my time at Rockwell & Lockheed I built a few applications that automatically routed and drafted pipes from a simple set of hardpoint coordinates in 3D and pressure requirements. These "specs" drove the system to model and draft the tube, its end fittings and then drove a vector bender and robotic welder to manufacture the tube. When Ed Schecter and I were tasked to improve the tube design and manufacture process orginally it was thought we could automate the manufacture sub-process by applying simple N.C. concepts. However, through the interlocking of the various other research projects that we were assigned also a systems approach was used to automate the entire process. We broke the problem down into three basic components: Design Capture, Scheduling, and Machine Control. Various research concepts enabled us to solve the individual component problems in such a way each supported downstream component needs: Pressure and Hardpoint specification directly supported tube routing, material selection and design; this drove group rules for manufacture planning using group technology, which drove scheduling which used the vector points and materials to drive actual machine control. The entire system ended up to be a series of tables that captured design and manufacturing rules that drove the system.
How much longer will it be before man of the design rules aka hueristics that engineering uses are encoded such that Computer Aided Design becomes Customer Design Automation?
One might say this is not possible now. However, look at the various progress in S/W research: a computer that's rated as a chess master, another program that creates art --yes art that critics cannot tell the difference from human created, not just copying line by line; a computer program that assembles music from standard segments (e.g., generative music) , one that creates music from thematic rules...
This is a rant far from the orignial topic, but it points out the scenario that an innovation while incorporated into a corporation's product is not always a CEO driven activity. S/He may call for innovation, but, is that driving innovation? S/He may sponsor initatives for innovation, but, does that really sponsor or set the environment up for people to be innovative...