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.