IBM: From Inventor to Innovator
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Case Code: BSTR136 Case Length: 11 Pages Period: 1970 - 2004 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.300 Organization: IBM Industry: Information Technology Countries: USA, Global Themes: Innovation |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Fall of a Giant
Despite having a world class research facility and talented research teams, IBM's track record for commercializing its inventions in the 1970s and 1980s was poor. The company failed to take advantage of the work done at its laboratories and consequently lost out on a number of opportunities. Many smaller companies that were set up around IBM's neglected inventions during that period, went on to become market leaders. Notable among these were Oracle Corp. (Oracle) and EMC Corporation (EMC). In later years, when IBM eventually realized the potential of the products it invented and began commercializing them, it found it difficult to catch up with its competitors. In the early-1970s, IBM engineer Edgar Codd (Codd) had developed an algorithm defining relational databases that involved tabulating large amounts of data and using operators to manipulate the data. However, IBM management felt that this innovation did not mesh well with the broader corporate strategy and did not sanction its development...
Cultural Transformation
Culture was the single biggest reason for IBM's decline. Therefore, changes in culture formed the core of IBM's transformation. Under Gerstner, IBM's new strategy was to use processes and culture to regain advantage. Before the transformation, IBM Research was organized more like a university laboratory than the R&D unit of one of the largest technology companies in the world. Researchers worked in an academic environment and were rewarded for the number of papers they published and awards they won, rather than for commercial innovation. Academic excellence was valued and IBM Research even had its own system of recognition. Researchers were given titles of Master Inventor, Distinguished Engineer or an IBM Fellow, which was the highest level of recognition. IBM Fellows had the freedom to conduct research in any topic of their choice and most of these people came out with outstanding innovations...
Better Late Than Never
In the 1990s and early-2000s, IBM Research was involved in a number of path breaking research initiatives. In the 1990s, it developed deep computing that used parallel processing to solve complex computing problems. In 1997, Deep Blue, a chess playing super computer developed by IBM Research, defeated Gary Kasparov, the then world champion. In the late-1990s, IBM Research announced the development of another supercomputer, called Blue Gene, which would use deep computing to help biologists explore how proteins folded themselves up into their distinctive shapes. Blue Gene was being touted as the fastest computer on earth, capable of performing one quadrillion calculations per second. IBM was also developing 'on-demand-computing', that was widely believed to be the future of computing. On-demand-computing would enable customers to purchase variable amounts of computing power according to their requirements at different times, as they did for public utilities like electricity and water. Using on-demand-computing, customers would be able to respond to changes in their technological requirements, faster...
Can IBM Resurrect?
Analysts were divided in their opinions about the future of IBM. While most of them agreed that IBM Research's strength lay in its ability to attract and retain excellent researchers (over the years, IBM Research employed five Nobel Laureates, two of whom were still working there in 2003), they said its success would depend on its ability to bring about a harmonious relationship between research and product development, and sustain it. In the early-2000s, IBM was actively managing the relationship between pure and applied research to ensure continuing relevance to its products. IBM Research was also proactive in creating and evaluating technology transfer programs and ensuring that innovations had commercial relevance. Considering the breadth and depth of the research at IBM, many analysts felt that it was capable of helping IBM regain its past glory, making it a dominant force in the future. It was also noteworthy that IBM managed to steady itself in time and did not lose its markets completely. Analysts compared IBM favorably with other companies like Xerox and Pacific Bell, whose research wings, PARC and Bell Laboratories, never managed to do much for the parent organizations, despite being the inventors of path breaking products...
Exhibits
Exhibit I: IBM's Patents Over the Years
Exhibit II: Top Patents Recipients
Exhibit III: IBM Timeline
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