I recently came across an article by Peter Cohan on Forbes.com, written in August of this year, that suggested that IBM is slipping in its ability to innovate, and could learn something from Novartis and P&G. While he makes some interesting points, I couldn’t help but wonder, when he suggested the concept of explore/exploit, why Ciba-Geigy was his prime example. In fact, IBM was one of the first and most well-known companies to embrace this concept.
In the early 2000s, IBM launched 17 distinct ‘greenfield’ business initiatives under the Emerging Business Opportunities (EBO) banner. A former senior executive recently told me that these generate approximately 40% of corporate profits. I worked with Professor Charles O’Reilly from Stanford GSB, and Andy Binns, Managing Principal of Change Logic, to support formation of these EBOs. They were led by my colleague at HBS, J Bruce Harreld, then SVP of Marketing and Strategy at IBM.
If IBM is facing a genuine downslope as the Cloud challenges its Services-Software-Hardware business model, it will do well to look at what worked in the past. They may not repeat the great reinvention led by Sam Palmisano, which placed them so squarely ahead of peers like HP. However, they could re-examine and re-imagine their innovation processes, and perhaps be inspired by other companies’ examples of leading disruptive change. Certainly, I see IBM as a poster-child for reinvention across multiple generations from counting machines to business services. I see no reason to count them out.
What IBM has taught the world is how to incubate new businesses from within and test-and-learn your way to new growth. My Change Logic colleague, Andy Binns, wrote a helpful blog entitled “5 Practices for Corporate Experimentation and Innovation” that describes some of these approaches.
There is every reason to believe that by relearning the capacity to both defend its core and explore new value creation possibilities, IBM will be able to beat digital natives like Amazon and Google, and define yet new areas for growth.