IBM Industry Summit: IBM’s Jon Iwata On Making Markets For Smarter Industries

Jon Iwata, IBM senior vice president of marketing and communications, visited the Barcelona IBM Industry Summit stage this morning with a little bit of Alice in Wonderland in tow: In order to understand how we were moving forward, Jon invited the audience to first take a glance back.

Jon Iwata, IBM Senior Vice President, Marketing and Communications, uses an image of the IBM System/360 as an object lesson as he explains how IBM is "making new markets" with its Smarter Planet agenda.

In a very matter of fact way, Iwata observed that it’s not very often one’s industry moves to an entirely different realm, but that when it does, it presents a unique opportunity for an organization to make new markets.

By way of example, Iwata explained that IBM will be turning 100 next year, celebrating its centennial as an ongoing business concern, and that it has made markets numerous times in its past.  It’s also missed opportunities to make them.

But by reminding ourselves of these moments, Iwata suggested, we start to see a pattern, one in which emergent technology plays a role often so powerful that new clients don’t quite know what to do with it.

In those circumstances, it’s important that we not only introduce new products and services, but also that we identify a new kind of client or buyer, possibly even a new vocabulary.

At these moments of inflection, however, it has not always been in IBM’s interest to embrace the new.

Arguably, Iwata explained, the first market IBM ever made, made IBM: The Hollerith tabulation machine.

But further innovation didn’t come when we tried to outsmart the competition, in this case Remington Rand, to try and counter their 90 hole punch card.

No, it was embracing vacuum tubes (which could compute faster than punch cards) and, later, the recording tape (which, in 1947, delivered the first recorded radio broadcast).

As Iwata explained, a whole room full of engineers in Poughkeepsie wondered whether that recorded audiotape could also serve as a new way of storing information — soon, an entire new inflection point was created.

Good thing, too: IBM customer New York Central Railway was punching 75,000 punch cards a day, and devoting entire floors of their Manhattan offices to storing those cards.

An IBM executive dropped by the Poughkeepsie office, saw the hullabaloo regarding the recording tape, and said “Interesting technology…but don’t forget the IBM company was built on punchcards.” (At the time, IBM derived one-third of its revenues from punchcards).

Yes, a good business…but still an inflection point.

Even with the new magnetic storage technology, IBM had to make the market.  That meant change, and not always change that was welcomed by customers (“We could see the data with the punchcards, but not with tape!”).

New technology, new applications, change the market.

Flash forward a few more years: A press conference presided over by then IBM CEO Thomas Watson, Jr.: The announcement of the System/360.

This was a bet-the-company move: $2B in R&D ($34B in today’s dollars), the first 8-bit byte, six processors in a family, 54 different peripheral devices.

IBM took 1,000 orders in the first month, and sold several thousand more the following months: But it took five years to ramp up to meet customer demand in volume.

Make the market. But in so doing, cannibalize virtually all of IBM’s existing product lines.

Later that decade, clients embraced radical new concepts like “online transaction processing,” and IBM technology even helped send men to the moon to allow both computing, and mankind, to go places neither could have gone before.

But at the time, it wasn’t obvious.  It was a market in the making.

Iwata explained, now flashing forward to the fall of 2008, another inflection point.

In the Smarter Planet agenda, we saw a similar pattern.

Despite the market fallout two years ago, we’ve witnessed a continued explosion in technology, much of it even now disposable, and with that an explosion of data in form, type, and speed.

New workloads, new applications — we had to develop a different vocabulary to be able to explain it both to ourselves, and to our customers.

Two years ago, we set out to make a new market, one that would open opportunities for IBM, our partners, and our customers.

We set out to modernize the understanding of IBM’s differentiation, to demonstrate IBM’s relevance to what people cared about, to take a leadership stance at a time the world was calling out for it.

But it almost didn’t happen.

When that global financial crisis hit, we hit pause, briefly, waiting for the next Great Depression…Panic…Uncertainty…All heading into a presidential election.

But as the fallout of the crisis settled in, IBM CEO Sam Palmisano hit “play” and introduced the ideas behind what drives a smarter planet at a speech before the Council on Foreign Relations.

That was two years ago this week.

It wasn’t introducing a new marketing campaign, explained Iwata.

IBM was initiating a conversation with the world to forge a shared belief.

What do you need to believe something, Iwata asked the audience in Barcelona? Facts. Data. Evidence.

In Palmisano’s speech, the word “IBM” never appeared once.  In the advertisements and editorials that began to emerge as part of the campaign, the focus was on the evidence, the data, the proof of the gathering storm that indicated the new market was emerging, but it was one represented not by IBM-speak, but rather by business-changing facts emblematic of what IBM customers were doing to improve their businesses and, in turn, the world.

The results: Two years later, 85% of IBM clients would consider IBM as a key partner having had prior knowledge of the smarter planet agenda.

Yes, it creates a more favorable selling environment, conceded Iwata.

But as IBM enters the third year of making this new market, even our friends at Gartner suggest that the smarter planet agenda is doing something more, is enabling IBM to stake a claim to a significant role in business and societal transformation.

Now, we’re providing client and partner references with hard facts, and lessons learned.  We’re helping clients understand the “how to’s” of building smarter systems.

We’re developing clearer paths to value, and we’re focused on quantifying outcomes, often via industry-specific measures.

We’re building progressive paths to provide clear roadmaps and to help partners chart outcomes and quantified value for their clients.

And we’re showcasing some of our most progressive clients, as well as using the social, digital eminence of IBM experts (by industry, technology, and so on) to reach out and demonstrate that value and make those experts accessible to the marketplace.

We’re making a new market, admittedly…but we’re trying to build a better world in the process.

IBM Industry Summit: Smart Planet, Smarter Business Opportunity For Partners

At this morning’s kickoff keynote session at the IBM Industry Summit here in Barcelona, IBM general manager, Rich Hume, IBM Global Business Partners, set the tone for the day and the event by highlighting what he hoped IBM’s partners and customers would gain from the next few days. In the process, he also outlined the large business opportunity looming on the horizon.

Referring to the IBM growth roadmap, which IBM CEO Sam Palmisano shared with the analyst community earlier this year, Hume explained that IBM would grow in four notable areas through 2015, including through its Smarter Planet effort, business analytics, cloud computing, and in growth markets.

At the IBM Industry Summit in Barcelona, Spain, IBM Software vice president Mike Rhodin paints a compelling portrait of the immense opportunity that industry-specific context will increasingly provide for IBM and its business partners around the world.

Each would contribute its own sizable share of market opportunity, and IBM, as well as its partners, are poised to share in the bounty — but only if they cultivate a renewed sense of focus around core industry expertise, and by providing industry-specific solutions for IBM clients.

Hume then passed the baton to Mike Rhodin, IBM vice president, IBM Software Solutions Group, who spent the next 45 minutes articulating the details and challenges of that business opportunity, and who explained the key role IBM Business Partners would be playing in this renewed industry focus.

Joking that “We even brought the Pope in over the weekend to bless the event,” Rhodin then got down to business by asking a simple question: “Why are we all here, in Barcelona, in the middle of the fourth quarter?”, a courtesy nod to the investment in time and money of so many key IBM partners to gather for several days here.

The answer was multifold: The world today looks very different than it did a decade ago.  The Internet of commerce has radically evolved to the Internet of “people and of things.” Rhodin cited the enormous amount of transistors (over 1B) in the world, of the enormous number of people connected to the Internet, and to the Internet RFID tags and those transistors, all of which was producing an enormous amount of new data (some 15 petabytes per day!).

The Internet of things was expected to soon reach 1 trillion, but what of it if companies and institutions aren’t in a position to take full advantage of that data and turn it into actionable insight, new products and services, and the like.

With a nod to social media, Rhodin then explain that “the Internet’s really about people and how they connect on a global scale,” joking (but still serious) that we’ve even invented new words that were unheard of a decade ago (“friending”), and that social networking has become the basis of how a globally connected world interconnects and communicates.

Of course, the Internet of Things is its own interconnection, one between the digital and physical world. High percentages of the world’s population are now online and creating unheard of amounts of data.

But what do you do with it all? It’s great we’re collecting it all, said Rhodin, and it’s coming in real-time, but how does one make real-time decisions based on this, how does one use fact-based analytics to make better decisions, and to steer away from our legacy of making decisions centered on batched, historical, and increasingly out-dated information???

Rhodin then captured the essence of the discussion in one small sound byte (which also nicely set up IBM senior VP Jon Iwata’s following talk on market-making…more on that in a future post):

“Smarter planet is not a marketing campaign…it’s a description of what’s happening in the world.”

Rhodin then probed on what it would take for IBM and its partners to fully capitalize on how they could respectively capitalize on the opportunity and help one another.

For example, by taking proven solutions, patterns, and capabilities, and then applying those techniques to new domains.

The explosion of new information — when integrated, analyzed, and acted upon using new types of intelligence — enables solutions that help build a smarter planet, and increasingly, through industry-specific approaches.

We can now actually predict traffic jams 45 minutes into the future, Rhodin explained, and then make that analysis a closed loop process that allows traffic monitors to adjust the timing of their traffic lights on the fly in order to prevent those jams from ever happening. (And hearkening back to my posts from the Information on Demand conference from two weeks ago, that’s why the Big Data chicken has to cross the road!)

Rhodin explained that CEOs don’t wake up thinking to themselves, “I need to buy a server today.” (Well, most of them.) No, they’re looking for a way to stay competitive in an increasingly complex world (see yesteday’s set-up post for more from the IBM Global CEO Study).

That means IBM and its partners have to change what and how we sell moving forward.

Our clients, Rhodin explained, need repeatable solutions and industry expertise (and yet only one-third of partners believe they are well-prepared to address customer industry solution needs).

There is currently too much first generation delivery, when customers (and partners, for that matter) don’t want to start over on a new version every single instance of change. They want to build on what they have.

Rhodin then explained a recent customer scenario, whereby IBM, in a retail context, offered up new value by helping the customer achieve a specific desired outcome (in this case, dynamic inventory optimization that would lead to 80-90% of inventory replinishment).

The key driver, Rhodin pointed out, was a strategic business driver, not an IT buying outcome.

Whether they be socioeconomic pressures, changing consumer behaviors, or competitive and/or technological considerations, the retail industry, again as the example here, is facing some substantive pressures. But by identifying and working to resolve specific industry-relevant outcomes, IBM and its partners will be able to both seize the momentum and start to create industry opportunity.

Continuing the example into the new world, smarter IBM retail industry solutions would create several layers of value: a smarter shopping experience, one that’s more personalized; smarter merchandising and supply chain, which delivers localized, relevant, and tailored offerings and optimized inventories; and smarter operations, which drive operational excellence through cost efficient management of people, processes and technology.

Rhodin also explained how IBM’s hungry acquisition spree filled in key aspects of IBM’s solution marketplace needs, from the predictive analytics capabilities of SPSS to the risk management profile of OpenPages.

This, along with the industry context, will allow partners to bring together the best of IBM hardware, software, and services the way customers increasingly want to buy.

In the meantime, Rhodin indicated that IBM was expanding its industry focus through the announcement of its 13th industry framework here at the event, the Product and Service framework for the manufacturing sector.

Pointing to the Industry Solutions expo next door, Rhodin explained “With the solutions center next door, what we hope to do is show you how far we’ve come already, and where we’re going, with the capabilities we think you need to win in the marketplace.”

He indicated that the biggest fear IBM’s competitors had in the market was if IBM ever got its act together across the entirety of its business, integrated by a common fabric (such as the industry-contexts).

“Well,” he said, “it’s happening.  Integrated Industry Solutions bring smarter planet to life. But we can’t do it alone. We need you to invest, to build skills. We’re going to provide thought leadership, assets, training, and the like, and the air cover in the marketplace on a global scale.

He concluded: “We’ll provide the market – but we need you to engage.”