New Opportunities for Business and Societal Innovation
© 2006 IBM Corporation
Innovation—on every leader’s agenda
Innovation in the 21st century:
• Open
• Collaborative
• Multi-disciplinary
• Global
Key factors driving change:
• The dynamics of a flattening world
• The emergence of new capabilities
• The evolution of information technology
• The march of commoditization
• The massive shift in demographics
• The unpredictability and impact of change
2
© 2006 IBM Corporation
Commanding the Attention of Global Executives
“CEOs today have to drive growth while cutting costs.
The only answer: innovation.” - Sam Palmisano, Chairman and CEO, IBM
Ability to innovate
Ability to allocate the best talent
Ability to manage a global organization
Ability to allocate capital
Ability to manage increasing regulation costs
Source: March 2005 McKinsey Quarterly survey of 9,345 global executives
3
% of respondents
© 2006 IBM Corporation
Leaders feel pressure—but also see opportunity
CEOs say they must achieve...
and they want to innovate their...
revenue
growth
Business
Models
cost
reduction
28%
asset
utilization
42%
Operations
30%
risk
management
0%
20%
Products
Services
Markets
40%
60%
80%
100%
Products/Services/Markets
Operations
Business Models
IBM Institute for Business Values (IBV) CEO Study 2004, multiple answers permitted
IBV CEO Study 2006, top answer shown
4
© 2006 IBM Corporation
CEOs: Top sources of new ideas and innovation
Collaboration sparks innovation
Employees
Business partners
Customers directly
Consultants
Competitors
Associations
Internal Sales & Service Units
Internal R&D
Academia
Think-tanks
Labs and/or other institutions
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
IBM Institute for Business Value, CEO Study 2006
5
© 2006 IBM Corporation
The Global Innovation Outlook: Overview
IBM opens its business and technology forecasting processes
for the first time
• Series of dynamic, free-form brainstorm sessions around
key issues and opportunities related to innovation
• Draws together broad ecosystem of experts from business,
academia, government, citizens’ groups, partners, etc.
• Insights shared openly and opportunities pursued collaboratively
Launched in 2004 with three primary focus areas
• Healthcare, Government, Work/Life
• Resulting initiatives: integrated healthcare records; IP reform;
global skills forecasting; BCS innovation offerings
Greatly expanded in 2005-06
• Participation increases by 50% to almost 180 external partners
• Brazil and India added as Deep Dive locations
• Increased focus on developing new markets and capitalizing
on business opportunities
6
© 2006 IBM Corporation
GIO 2.0 by the numbers
•15 “deep dives”
•248 thought leaders
•178 organizations
•33 countries
•4 continents
Deep dive host cities.
7
© 2006 IBM Corporation
GIO 2.0 Focus Areas
The Future of the Enterprise
• Including designing the 21st century
corporation; managing global talent and
skills; alternate R&D/innovation models;
“global” small businesses
Transportation and Mobility
• Including mega-urban centers and smart
traffic management; “connected” vehicles;
customs, ports and border control
Environment and Energy
• Including eco-efficient technologies;
economic impact of access to clean
water supplies; predictive environmental
impact services
8
© 2006 IBM Corporation
Horizontal themes emerged
The power of networks
• Organizing principle for innovation is increasingly the
endeavor (and no longer built around hierarchies)
• “Trust” and “reputation capital” provide new standard
of accountability for virtual networks and partners
Line of sight
• Essential to harness wealth of data from distributed sources
• Clearer understanding of the consequences of actions
results in smarter decisions and outcomes
• Risk acceptance correlates to likelihood vs. consequences
Flipping the equation
•
•
•
•
9
Opportunities for innovation in unexpected places?
Decomposition, not composition
Divergence, not convergence
Disaggregation, not aggregation
© 2006 IBM Corporation
The Future of the Enterprise: Discussion Points
The very definition of the “enterprise” is being challenged
•
New organizational structures emerging:
- IBM has 329,000 full-time employees in more than 160 countries around the world
- By contrast, Wikipedia has global reach with 2 full-time employees
(and 360,000+ registered contributors)
- More than 725,000 Americans make a living selling through eBay
(none are employees)
• Are networks of specialized entities with complementary interests (as opposed
to a static organizations) the new definition of “enterprise”?
• Increasingly, activities driven by a common set of interests, goals or values are
providing the glue between individuals or entities
• As a result, management focus might shift to orchestration and facilitation
• Small and highly specialized businesses will increasingly compete globally and
disrupt existing business models
Innovation isn’t a department, it’s a culture
•
Leading organizations find ways to ingrain innovation into every aspect of their operations
- Employees must be motivated to reject the status quo—and to tempt failure
- Organizational silos must be rejected and the skill, talent and creativity of people
from different teams and different organizations around the world are tapped into
- Can R&D be managed as part of an innovation supply chain, rather than as a
discrete organization?
• Notions of “intellectual property” are shifting to ones of “intellectual capital”
10
© 2006 IBM Corporation
The Future of the Enterprise: Wild Card
Is your next CEO playing games?
 Next-generation leaders must thrive in environments that are
massively distributed and virtual in nature—just like those in
massive multiplayer online role-playing games (MMORPGs)
 MMORPGs have high levels of complexity and uncertainty and lack
formal hierarchies—yet powerful leaders emerge to set direction
and shape behaviors, sometimes for millions of people
 As a result, “players” adopt different roles and responsibilities, and
then get things done collaboratively
 The most active and productive areas of many MMORPGs are often
those created and embellished by the players themselves, not those
provided the original game designers
DISCUSSION POINT:
One popular game, Worlds of Warcraft, has more than 6 million paying
customers who average 2.4 hours a day collaborating on game activities. That
equals more than 102 million hours of activity per week. By comparison, if
every one of IBM’s 329,000 employees worked 10 hours per day, it would still
take them more than six weeks to approach the same level. Do these games
suggest entirely new models for corporations to quickly and effectively
source work?
11
© 2006 IBM Corporation
Transportation and Mobility: Discussion Points
Mass urbanization, mass congestion
• Mass urbanization is creating a new breed of “mega-city”: by 2010, 59 cities will have
populations of five million or more, up nearly 50% since 2001
• Inadequate planning and transportation infrastructure is increasing congestion and creating
horrific logistical challenges for these emerging mega-cities, especially in booming regions
of Asia and Latin America
• There’s a direct correlation between mobility and market growth—it expands access to goods,
fosters business investment and attracts higher-caliber workforces
• Cities and regions that pursue systemic, integrated solutions across all transportation modes
will be best positioned for long-term economic advancement
It’s time to shape up shipping
• The backbone of the world’s global supply chain—the shipping industry—still relies heavily
on antiquated processes and techniques
- There are no common, global (or even regional) standards, customs policies or
even naming conventions for the world’s major ports
- The average container ship generates 40,000 paper documents per trip
- On an average day, 30 container ships are at sea waiting to dock at the Port of
Los Angeles; the average cost of sitting at anchor per day: $50,000; average number
of days to dock, unload cargo and return to sea: 7
• Delays and inefficiency at the world’s ports could reignite regional manufacturing and trade hubs
• Virtual borders—located well in-land and aided by advanced technology—could emerge to
alleviate port congestion
12
© 2006 IBM Corporation
Transportation and Mobility: Wild Card
Will your car simply become one big server on wheels?
• Rather than remaining relatively simple mechanical machines, vehicles
of all types are increasingly complex mobile information technology
devices
• The new Airbus 380 contains more than one billion lines of code
• GM predicts the average car will have 100 million lines of code by
2010;
• Windows XP, by comparison, has about 40 million lines of code.
• Advanced technology will fundamentally change the relationships
between drivers, passengers, manufacturers and third-party service
providers
• Advances in in-vehicle services and applications will be accelerated by
the adoption of common development platforms will accelerate
• Reliability and security of these new “mobile IT devices” is an area of
huge concern—and opportunity
DISCUSSION POINT:
It doesn’t take much imagination to consider possibilities for in-vehicle content delivery: e-mail, driving directions or web
surfing. But the real opportunity for innovation might be tapping into these connected vehicles to deliver and entirely new
breed of services built around information and technology. What new applications, services and industries can you
envision emerging around “the connected vehicle?”
13
© 2006 IBM Corporation
Environment and Energy: Discussion Points
Product lifecycle management—burden or opportunity?
• Rapid performance improvements, “planned obsolescence” and the constant flow of
new models and features has created what some call a “disposable society”
• Upwards to 50 million tons of electronic and electrical waste is generated globally
every year
• In the U.S., 50 million computers are disposed of every year
• Japan will have discarded 610 million cell phones by the year 2010
• As a result, environmental concerns will place ever-increasing pressure on manufacturers,
governments and consumers alike to address the back-end of a product’s lifecycle
• Responding to these pressures might create opportunities for new and more consistent
revenue streams—in particular, by shifting product-driven business models to services-driven ones
Seeing is behaving?
• Companies can create competitive advantage through voluntary “eco-friendly”initiatives that get ahead
of government regulations and restrictions
• Common, verifiable approaches to disclosing product contents might encourage smarter, more informed
purchase decisions—and drive manufacturing innovations that minimize environmental damage
• Substantial savings—financial and ecological alike—can be realized when companies have access to
immediate data about what’s being consumed across their plants and facilities
14
© 2006 IBM Corporation
Environment and Energy: Wild Card
From trash to treasure?
• Some natural resources are now more plentiful (and easier to retrieve)
in landfills vs. the earth
- Every six million tons of electrical and electronic equipment waste
includes an estimated 2.4 million tons of ferrous metal, 1.2 million
tons of plastic, 652,000 tons of copper, 36,000 tons of aluminum
and 336,000 tons of glass
- Up to 100 tons of earth dirt and rock must be moved to retrieve one
ounce of gold from the ground; one metric ton of electronic scrap
contains more gold than 17 tons of gold ore
- The amount of aluminum in North America’s landfills alone outweighs
the amount of ore remaining in the earth.
• Advanced data mining and frequency modeling could identify the “richest”
landfills—and then they could mined for reusable precious metals
• Some emerging nations have little electronic waste as networks of
enterprising scavengers breakdown products and recycle parts before
disposal
DISCUSSION POINT:
“Reverse supply chains” are a concept gaining traction as companies find unexpected ways to reduce costs by reusing old parts.
But what about reverse supply networks? Could your company find new efficiencies—and revenue streams—by creating
networks with other companies, and sending used components and manufacturing by products back and forth?
15
© 2006 IBM Corporation
Observations from the GIO Process
Tremendous value in bringing together diverse perspectives and expertise
around common issues
• Understanding regional differences and global commonalities essential
for lasting innovation
• “The GIO has shown me how profitable it is to bring minds from different
cultures together and think holistically about mega-challenges that we face.”
Uma Chowdry, VP, Research and Development, DuPont
Near-term pressures cloud long-term thinking
• Even in the most free-form setting, participants found it difficult to
think beyond the next 12-18 months
• General consensus: “quarter-to-quarter” mentalities are the single
greatest inhibitor of innovation
Solving the toughest problems will require greater collaboration across
business, government and academia
• Right now, there’s the will but entrenched barriers to the way
16
© 2006 IBM Corporation
17
© 2006 IBM Corporation