IBM, Innovation in a Globally Networked World   what we need from you

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2. . . . How do we tap the Power of Globalization?. How do we deliver unique value in an open, collaborative ecosystem?. How do we forge a strategy for Specialization?. What we need from you Help with the questions we face as a Globally Integrated Enterprise. Leverage Global AssetsServe Dis

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IBM, Innovation in a Globally Networked World what we need from you

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1. IBM, Innovation in a Globally Networked World …& what we need from you Chris Cromack, Steve Street

2. 2 What we need from you… Help with the questions we face as a Globally Integrated Enterprise The new landscape has many direct and indirect implications for IBM. Using the framework that we presented for the Globally Integrated Enterprise, we identified one key aspect for each part of the Hexagon that will drive significant change for IBM. The global marketplace implies that we need to deal with not only new competitors (such as Wipro or Tata), but also that we need to set up new partnerships with companies we may have never heard of before to serve an entirely new set of customers. Economics is a key paradigm of a globally integrated enterprise and we therefore need to be very conscious and deliberate in our usage of global resources – not the cheapest, not the closest, not the most obvious, but the most set that provides the best economic benefit. Management of the open network requires us to closely investigate the actual value creation of an activity. We might sign a large deal where the value is created by our partners and subcontractors – in that case the revenue would be flowing directly to them and we could be easily replaced. Therefore it is vital that we always understand where, when and by whom value is actually being created. The other management areas in this open business environment which require us to find innovative approaches are risk management and Intellectual Property. Open innovation and closed IP are diametrically opposed, but can still sit on the same conceptual sphere. We have already found numerous ways to open up our patent pool, but it requires innovative thinking to make it happen. The same is true for risk management. Most of the time we are reluctant to take on any risk and our processes play at their best when they cross out any risk for IBM – this might be the best course of action for 80% of our deals, but to profit from the opportunities of the New Landscape we may have to focus on the other 20% where risk mitigation, not risk prevention will plant the roots for success. The New Landscape is all about NEW. New markets, new assets, new infrastructure, new possibilities – old business designs will often not match. Therefore, by applying these new found insights we can create new business designs that will help us close performance and opportunity gaps currently hindering our business. Collaboration is the name of the game – at times it can be paired with competition (then called co-opetition). When it comes to innovation, we are world leaders in traditional methods – that ofen do not include collaboration. We need to maintain our lead in the traditional model, but also find ways to lead in traditional collaboration, else the “traditional innovation” will soon be worth too little to differentiate ourselves.The new landscape has many direct and indirect implications for IBM. Using the framework that we presented for the Globally Integrated Enterprise, we identified one key aspect for each part of the Hexagon that will drive significant change for IBM. The global marketplace implies that we need to deal with not only new competitors (such as Wipro or Tata), but also that we need to set up new partnerships with companies we may have never heard of before to serve an entirely new set of customers. Economics is a key paradigm of a globally integrated enterprise and we therefore need to be very conscious and deliberate in our usage of global resources – not the cheapest, not the closest, not the most obvious, but the most set that provides the best economic benefit. Management of the open network requires us to closely investigate the actual value creation of an activity. We might sign a large deal where the value is created by our partners and subcontractors – in that case the revenue would be flowing directly to them and we could be easily replaced. Therefore it is vital that we always understand where, when and by whom value is actually being created. The other management areas in this open business environment which require us to find innovative approaches are risk management and Intellectual Property. Open innovation and closed IP are diametrically opposed, but can still sit on the same conceptual sphere. We have already found numerous ways to open up our patent pool, but it requires innovative thinking to make it happen. The same is true for risk management. Most of the time we are reluctant to take on any risk and our processes play at their best when they cross out any risk for IBM – this might be the best course of action for 80% of our deals, but to profit from the opportunities of the New Landscape we may have to focus on the other 20% where risk mitigation, not risk prevention will plant the roots for success. The New Landscape is all about NEW. New markets, new assets, new infrastructure, new possibilities – old business designs will often not match. Therefore, by applying these new found insights we can create new business designs that will help us close performance and opportunity gaps currently hindering our business. Collaboration is the name of the game – at times it can be paired with competition (then called co-opetition). When it comes to innovation, we are world leaders in traditional methods – that ofen do not include collaboration. We need to maintain our lead in the traditional model, but also find ways to lead in traditional collaboration, else the “traditional innovation” will soon be worth too little to differentiate ourselves.

3. 3 What we need from you… An architecture of the Service Enabled Business - New business strategies Component business model definition Service creation opportunities

4. 4 What we need from you… Methods that directly support our Services Business To clarify, what I mean by systematic innovation and learning to invest to make progress – consider an analogy with Moore’s law. Moore’s law is not a law of nature – it is an investment roadmap that says if you invest to shrink the transistor, you can increase the capabilities year over year of computational systems. Service systems -- or “value creating systems” as they are called by Richard Normann in his book Reframing Business – are value coproduction configurations of people, technology, value propositions connecting internal and external service systems, and shared information (language, laws, measures, contracts, etc.) Norman talks about unbundling and rebundling capabilities to create higher density coproduction configurations. For example, he describes IKEA the self-service furniture company. --------- Investing to shrink transistors has helped IBM, Intel, and the whole industry develop more powerful hardware and computational systems. Now, IBM needs to find the equivalent of Moore’s Law to guide investment in improving service systems (a business or a component of a business). Perhaps, Richard Normann points the way when he talks about higher density coproduction configurations in “value creating systems” aka “service sytems.” However, we know how to measure transistor density, how do we measure and begin investing in creating coproduction configuration density? ----------------------- Moore’s Law http://news.com.com/i/ne/p/photo/microprocessor_400x534.jpg Physical system that performs computations Service system ecologoy Normann’s Law? http://www.gbn.com/PersonBioDisplayServlet.srv?pi=24465 http://www.gbn.com/BookClubSelectionDisplayServlet.srv?si=207 To clarify, what I mean by systematic innovation and learning to invest to make progress – consider an analogy with Moore’s law. Moore’s law is not a law of nature – it is an investment roadmap that says if you invest to shrink the transistor, you can increase the capabilities year over year of computational systems. Service systems -- or “value creating systems” as they are called by Richard Normann in his book Reframing Business – are value coproduction configurations of people, technology, value propositions connecting internal and external service systems, and shared information (language, laws, measures, contracts, etc.) Norman talks about unbundling and rebundling capabilities to create higher density coproduction configurations. For example, he describes IKEA the self-service furniture company. --------- Investing to shrink transistors has helped IBM, Intel, and the whole industry develop more powerful hardware and computational systems. Now, IBM needs to find the equivalent of Moore’s Law to guide investment in improving service systems (a business or a component of a business). Perhaps, Richard Normann points the way when he talks about higher density coproduction configurations in “value creating systems” aka “service sytems.” However, we know how to measure transistor density, how do we measure and begin investing in creating coproduction configuration density? ----------------------- Moore’s Law http://news.com.com/i/ne/p/photo/microprocessor_400x534.jpg Physical system that performs computations Service system ecologoy Normann’s Law? http://www.gbn.com/PersonBioDisplayServlet.srv?pi=24465 http://www.gbn.com/BookClubSelectionDisplayServlet.srv?si=207

5. 5 What we need from you … Availability of key skills Need higher skilled workers to compete Need adaptive workers who change with the business who can lead market innovation, technology innovation, and /or business model innovation to compete who can cope with/exploit the accelerating pace of technological and societal change

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