IBM, a computing and business services powerhouse with a lifespan of over 100 years, has almost 400,000 employees in 175 countries. IBM currently has six business units including IBM Cloud, IBM Watson, IBM Services, IBM Systems, IBM Security, and IBM Research . One of IBM’s guiding values is “Innovation that matters, for our company and for our world” . Though IBM indeed has a history of fueling and funding innovation through research and development, they have also been on the opposite end of industry-wide innovation that they produced – losing a valuable first-mover advantage.
IBM misses its boat
In 1970, IBM published research that would soon change the computing and software industry for years to come. The paper introduced a new concept of “relational database”, a new type of database for storing and querying data using relational algebra and relational calculus . Despite the overwhelmingly positive reception of this theory in the academic computer-science community, it took years for IBM to bring a product reflecting this innovation, System R/SQL, to market. In between that time, Larry Ellison read the aforementioned IBM paper and subsequently founded a company that developed and licensed their own relational database technology . That company, Oracle, beat IBM to market and eventually grew to become not only one of IBM’s biggest competitors (in its software business lines), but also one of the largest tech companies in the world.
Fast forward to 2018, and IBM continues to push the envelope in revolutionizing the way we think of business. IBM Watson is making strides in AI/machine learning and IBM Blockchain is mainstreaming the adoption of enterprise blockchain solutions. However, as history repeats itself, IBM Research continues to publish pieces on disruptive technologies and practices, without putting its findings into practice. One example of this is IBM’s praise of open innovation but reluctance to apply it to its own technology.
Open Innovation and IBM
Open Innovation is essentially the practice of organizations utilizing contributions of entities outside of their organizations to improve upon and/or build products, services, and technology. Open innovation is important to IBM’s management of process improvement and product development because industry scale open innovation threatens the livelihood and existence of IBM and every other technology company. Technology that is developed by interested participants free of corporate dichotomy is arguably comparable, if not superior, to technology developed in closed systems and private enterprises. By restricting contributors to employees tied to incentives of traditional employee-manager relationships, a firm is unable to compete with technologies produced by developers who willingly participate without direct compensation, purely via satisfaction, enthusiasm, and indirect incentives for the technology being built . “No matter who you are, most of the smartest people work for someone else” . Examples of open innovation in open source networks include the Linux operating system and Bitcoin.
IBM and several other technology firms have typically utilized open innovation in encouraging employees to work on products/services outside of their day-to-day responsibilities, successively patenting and incorporating these innovations in incumbent products or new services . As such, IBM’s management is slowly incorporating open innovation to its business models and employing open innovation on small segmented products, but not core business products – presumably due to fear of losing competitive advantages due to intellectual property sharing. However, if IBM does not incorporate open source contributions on its core/patented technologies and processes, it is at risk of being disrupted by truly open source systems.
Two examples of IBM business units that are at risk of being rendered obsolete are:
- IBM Watson
- Though IBM Watson pulls information from open sources, it is primarily of closed-source technology and infrastructure. If open sourced, it can be argued that the efficiency and progress of Watson would be multiplied. Because outside developers can not contribute to the development of Watson, Watson will likely be outpaced by an organic open sourced machine learning technology collectively built by passionate, project-motivated individuals.
- IBM Blockchain
- IBM blockchains are private and tailored to enterprise clients. However, IBM competes with public blockchains that cost nothing for a business to use and implement.
I recommend that IBM aggressively pursue opportunities without enforcing patents, intellectual property, and for-profit infrastructure. Instead, they can indirectly recruit the world’s best developers to work on internally incubated projects and use the resulting technologies as base layers to products and services for existing clientele. Just as the internet is built on open source protocols (TCP/IP, email etc), so too will truly transformative technologies.
Two questions for my classmates:
- Are the benefits and risks of open innovation mentioned above enough to warrant immediate action by IBM?
- How can IBM fully embrace open innovation while not innovating themselves out of business? What ancillary services and business models can IBM take advantage of if they can no longer monetize proprietary technology?
 IBM. “IBM Annual Report 2017” 2017. [Online] https://www.ibm.com/annualreport/2017/assets/downloads/IBM_Annual_Report_2017.pdf [Accessed: 13-Nov-2018]
 IBM. “2015 Corporate Responsibility Report” 2015. [Online] https://www.ibm.com/ibm/responsibility/2015/at_a_glance/our_approach.html [Accessed: 13-Nov-2018]
 Springer. “Encyclopedia of Database Systems” 2009. [Online] https://researcher.watson.ibm.com/researcher/files/us-dchamber/SQL-encyclopedia-entry.pdf [Accessed: 13-Nov-2018]
 Julie Bort. “Ellison Grew Rich From IBM’s Idea” 2014. [Online] https://www.businessinsider.com/ellison-grew-rich-from-ibms-idea-2014-9 [Accessed: 13-Nov-2018]
 Chris Dannen. “Iterative Capital Thesis” 2018. [Online] https://iterative.capital/thesis [Accessed: 13-Nov-2018]
 Karim Lakhani, Jill Panetta. “The Principles of Distributed Innovation” 2007 [Online] https://www.mitpressjournals.org/doi/pdf/10.1162/itgg.2007.2.3.97 [Accessed: 13-Nov-2018]