Blue Water

Population growth, massive urbanization and climate change are placing increasing demands on our limited water supply. Forty one percent of the world’s population – that’s 2.3 billion people – live in water-stressed areas; this number is expected to grow to 3.5 billion by 2025.

And according to the United Nations, water use has been growing at more than twice the rate of population increase over the last century.

With advances in technology — deep computing and Big Data analytics linked to sophisticated sensor networks and smart meters — IBM is helping clients and partners make smarter decisions about water management.

By monitoring, measuring and analyzing water systems, from rivers and reservoirs to pumps and pipes, we can better understand the issues around water.  IBM is applying its expertise in smart systems and Big Data to help companies, governments and citizens understand and more effectively deal with these issues.

Waterfund LLC announced today that it has signed an agreement with IBM to develop a Water Cost Index (WCI).

Scientists from IBM Research will apply Big Data expertise, acting as a calculation agent, to analyze large and diverse unstructured data sets. This will be used to develop of a WCI framework that would estimate the cost of water in different regions around the world. With its market and financial product expertise, Waterfund will work to structure and commercialize the WCI.

Discerning The Real Cost Of Water

As governments are increasingly forced to turn to the private sector to fund the construction and maintenance of complex water networks, the Rickards Real Cost Water Index™ will serve as a benchmark for helping measure hundreds of critical projects on a like-for-like basis.

Index values will reflect estimated water production costs measured in US dollars per cubic metre for a variety of major global water infrastructure projects ranging from retail water utilities and wholesale water utilities to major transmission projects.

“The backlog of investment in water systems around the world by some estimates approaches $1 trillion – quite apart from the hundreds of millions of people who have never had access to a water or sanitation system at all,” said IBM Distinguished Engineer and Big Green Innovations CTO Peter Williams.

“By creating a benchmark cost for water we intend to harness the capital market to this supremely important cause. If we can make it easier to price investments in the water sector, we can improve the flow of capital into an area where it is desperately needed. We look forward to working with Waterfund to bring this about.”

Scott Rickards, President & CEO of Waterfund said, “The principal reason behind our decision to work with IBM was their unique combination of expertise in the water sector combined with the best data analytics available. Our initiative with IBM will finally bring real financial transparency to the water sector. By calculating the unsubsidized cost of freshwater production using IBM’s Big Data expertise, Waterfund can offer the first flexibly-tailored financial tools to investors in water infrastructure. The Rickards Real Cost Water Index™ highlights the energy costs, interest rate risk, and capital expenditures required to build and maintain large-scale water treatment and delivery networks.”

Smarter Water Management Examples

Typically, investors have turned to the public equity markets to gain exposure to the water sector, with mixed results. The WCI is intended to provide a market benchmark and to spur the development of third-generation financial products for both water producers and investors and to aid the growth of the water sector globally.

Here are two examples of how it would work:

Scenario 1: A Water Agency cannot obtain bank financing for Phase 2 of a seawater desalination plant project due to previous cost overruns on Phase

1. Yet the Agency lacks the water it needs to supply a contractually specified daily volume of water to its largest customer, with a consequent risk of large penalties for each day of insufficient volume. Using strike and trigger values based on the WCI, the Water Agency could purchase a $25 million, 2 year insurance product.

Payout to the Water Agency would be triggered on the total change in its Water Cost Index (as well as some other conditions, such as a specified increase in asset failure costs).  This approach would enable the Water Agency to enhance its overall credit profile with the insurance enabled by the WCI, finance Phase 2 of the desalination plant and meet its supply obligations.

Scenario 2: A large desalination and water transmission system project needs to secure private equity and institutional funding alongside that from development banks and sovereign funds, to the tune of one third of the total project cost. To achieve this, the project needs a way to reduce risk to its investors.

Based on movement in the WCI, the project could purchase $50 million in insurance. This would enable the insurance product to then be underwritten by a large reinsurer and allow the project to secure the private sector contribution it needs in order to proceed.

Go here to learn more about IBM Smarter Water Management initiatives.  You can also go here to register for a report IBM prepared on why we need smarter water management for our world’s most precious resource.

Impressions From SXSW Interactive 2012: Q&A With IBM Social Leaders George Faulkner & Susan Emerick

One of the best parts of attending SXSW Interactive 2012 these days is to meet other IBMers.

That wasn’t always the case — for many years, it was a lonely IBM vista in March at SXSW Interactive.

But this year, all that changed, and two of my good friends and colleagues in particular, George Faulkner and Susan Emerick, spent some time with Scott and I on the IBM “Future of Social” couch discussing how IBM approaches the social media.

George has been a stalwart in IBM social media — I worked with him way back in the Jurassic Age of the social Web, in 2006, on the IBM ShortCuts podcast series.

And Susan has been a digital leader in and of her own right, most recently helping IBMers who haven’t been as active in the social media to get up on their feet and establish their social media eminence.

This thought-provoking interview opens the kimono a bit on the challenges and opportunities a large organization like IBM faces in opening itself up to the social media, and explains how, in fact, IBM gets 400,000 IBMers on the same page so they can successfully change the corporate social media light bulb.

IBM Board Names Ginny Rometty New IBM President & CEO

The IBM board of directors has elected Virginia M. Rometty president and chief executive officer of the company, effective January 1, 2012.

She was also elected a member of the board of directors, effective at that time. Ms. Rometty is currently IBM senior vice president and group executive for sales, marketing and strategy. She succeeds Samuel J. Palmisano, who currently is IBM chairman, president and chief executive officer. Mr. Palmisano will remain chairman of the board.

“Ginni Rometty has successfully led several of IBM’s most important businesses over the past decade – from the formation of IBM Global Business Services to the build-out of our Growth Markets.”

“Ginni Rometty has successfully led several of IBM’s most important businesses over the past decade – from the formation of IBM Global Business Services to the build-out of our Growth Markets Unit,” Mr. Palmisano said.

“But she is more than a superb operational executive. With every leadership role, she has strengthened our ability to integrate IBM’s capabilities for our clients. She has spurred us to keep pace with the needs and aspirations of our clients by deepening our expertise and industry knowledge. Ginni’s long-term strategic thinking and client focus are seen in our growth initiatives, from cloud computing and analytics to the commercialization of Watson. She brings to the role of CEO a unique combination of vision, client focus, unrelenting drive, and passion for IBMers and the company’s future. I know the board agrees with me that Ginni is the ideal CEO to lead IBM into its second century.”

IBM Board of Directors Elects Virginia M. “Ginni” Rometty President and CEO of IBM: Samuel J. Palmisano and Virginia M. “Ginni” Rometty at IBM’s corporate headquarters in Armonk, N.Y.  Rometty, an IBM senior vice president, was elected by the IBM board of directors to become the company’s president and ninth CEO on January 1, 2012.  Palmisano, currently IBM chairman, president and CEO, has significantly transformed IBM.  During his tenure as CEO, the company has delivered record financial performance and breakthrough innovations, such as Watson. Mr. Palmisano will remain IBM’s chairman. [Photo: Jon Iwata/IBM]

Ms. Rometty said: “There is no greater privilege in business than to be asked to lead IBM, especially at this moment. Sam had the courage to transform the company based on his belief that computing technology, our industry, even world economies would shift in historic ways. All of that has come to pass. Today, IBM’s strategies and business model are correct. Our ability to execute and deliver consistent results for clients and shareholders is strong. This is due to Sam’s leadership, his discipline, and his unshakable belief in the ability of IBM and IBMers to lead into the future. Sam taught us, above all, that we must never stop reinventing IBM.”

Mr. Palmisano, 60, became IBM chief executive officer in 2002 and chairman of the board in 2003. During his tenure, IBM exited commoditizing businesses, including PCs, printers and hard disk drives, and greatly increased investments in high-value businesses and technologies. He has overseen the significant expansion of IBM in the emerging markets of China, India, Brazil, Russia and dozens of other developing countries, transforming IBM from a multinational into a globally integrated enterprise. In 2008, he launched IBM’s Smarter Planet strategy, which describes the company’s view of the next era of information technology and its impact on business and society.

Since Mr. Palmisano became CEO, IBM has set records in pre-tax earnings, earnings per share, and free cash flow. During Mr. Palmisano’s tenure, IBM increased EPS by almost five times, generated over $100 billion in free cash flow, and invested more than $50 billion in research and development – creating over $100 billion of shareholder value since 2002 through an increase in market capitalization and dividends paid.

As global sales leader for IBM, Ms. Rometty, 54, is accountable for revenue, profit, and client satisfaction in the 170 global markets in which IBM does business. She is responsible for IBM’s worldwide results, which exceeded $99 billion in 2010. She also is responsible for leading IBM’s global strategy, marketing and communications functions. Previously, Ms. Rometty was senior vice president of IBM Global Business Services. In that role, she led the successful integration of PricewaterhouseCoopers Consulting — the largest acquisition in professional services history, building a global team of more than 100,000 business consultants and services experts. She has also served as general manager of IBM Global Services, Americas, and of IBM’s Global Insurance and Financial Services Sector.

Ms. Rometty joined IBM in 1981 as a systems engineer. She holds a Bachelor of Science degree with high honors in computer science and electrical engineering from Northwestern University.

Celebrating Social Media Week: Our Big Blue Social Business

Remember the logo, that curvy red “e” that mimicked the “@” symbol, which came to represent what IBM meant by the idea of “e-business” back in the late 1990s?

Starting in 1997, the IBM e-business logo signaled IBM's focus on helping organizations transform themselves using Internet technologies. It's now helping them pursue similar transformations with "social business" adoption.

Well, imagine replacing it with a curvy “s” instead and calling it “social business” instead, and you’d have a pretty good symbol for describing IBM’s social transformation inside the company, as well as the market it’s helping to make for other companies and organizations around the globe to follow suit.

IBM: The Social Case Study

As we celebrate “Social Media Week,” I wanted to write a post to let people know some details and facts behind IBM’s social transformation. As the largest consumer of social technologies, IBM is a case study for this transformation into a social business.

This goes beyond IBM’s business in social software and services (IBM’s collaboration software, consulting services, analytics/social media research, conducting Jams for clients).  IBM is leading social business on all fronts – technology, policy and practice.

IBM takes social networking seriously —  to develop products and services, to enable sellers to find and stay connected with clients, to train the next generation of leaders, and to build awareness of Smarter Planet among clients, influencers and other communities.

What’s Past Is Social Prologue

IBM’s social media activity dates back to the 1970’s when its mainframe programmers started online discussion forums on the System 370 consoles. For 15 years, IBM employees have used social software to foster collaboration among our dispersed 400,000 person team — long before Generation Y became fixated with social networking sites like Facebook and MySpace.

I remember, because when I joined the company in 1991, I used to collaborate with fellow employees in other locations via IBM’s internal mainframe.

Then, in 1997, IBM recommended that its employees get out onto the Internet, at a time when many companies were seeking to restrict their employees’ Internet access (I’d gotten on the commercial Internet starting in 1993 myself).

In 2005, the company made a strategic decision to embrace the blogosphere and to encourage IBMers to participate (I started this blog in June 2005).

In 2007, IBM launched its own social networking software for the enterprise: IBM  Connections. My team now uses Connections to collaborate and coordinate work literally around the globe. I’m not quite sure how we got along without it (but we used to say the same thing about email!)

This is a screenshot from an IBM Connections Community that I use to manage a workgroup of people who attend a weekly call I've been holding for nearly six years now. The Connections community streamlines the time I have to take to manage basic details for the call, ranging from communicating where files are located to highlighting the call-in number. In short, I'd be lost without it, and be much less productive in my day-to-day work!

In early 2008, IBM introduced social computing guidelines to encompass virtual worlds and sharing of rich media. (Remember Second Life?? Yeah, me neither…well, kind of.)

And later that year, IBM opened its IBM Center for Social Software to help IBM’s global network of researchers collaborate with corporate residents, university students and faculty, creating the industry’s premier incubator for the research, development and testing of social software that is “fit for business”.

Social Business Means Business Change

Here’s a profound stat: According to Gartner, in 2010, only five percent of organizations took advantage of social/collaborative customer action to improve service processes.

IBM sees social media morphing into what we view as a key requirement for “social business” — as tools for organizational productivity and culture change, for engaging with diverse constituencies of clients and experts, and for spurring revenue growth and innovation for our global workforce.

Today, IBM views itself as one of the most prolific users of social networking in the industry with one of the largest corporate-wide communities on social media sites.

Some examples of IBM’s internal social media footprint today include the following:

• 17,000 individual blogs
• 1 million daily page views of internal wikis, internal information storing websites
• 400,000 employee profiles on IBM Connections, IBM’s initial social networking initiative that allows employees to share status updates, collaborate on wikis, blogs and activity, share files
• 15,000,000 downloads of employee-generated videos/podcasts
• 20 million minutes of LotusLive meetings every month with people both inside and outside the organization
• More than 400k Sametime instant messaging users, resulting in 40-50 million instant messages per day

The screen above has become one quite familiar to IBMers around the world. "LotusLive" emeetings have become commonplace, helping employees across multiple geographical locations come together in real-time and virtual space to meet and get work done!

If you were to glance outside IBM on the social media external to the company, you’d find a continued and expansive footprint of IBM participants:

• Over 25,000 IBMers actively tweeting on Twitter and counting
• Approximately 300,00 IBMers on Linkedin. This number is growing at 24%/year, which gives IBM the largest employee presence of any firm on the platform.
• Approximately 198,000 IBMers on Facebook

Putting Social Into Action

Our social business initiatives have had a profound impact on IBM’s business processes and transformation. By way of example, well before the phrases “Web 2.0” or “social media” came into being, IBM was using online jams to drive business initiatives and values development across the company.

As our own CEO Sam Palmisano explained, “Jams have helped change our culture and the fundamental way we collaborate across our business.”  We’ve conducted jams both for IBM and our clients, including the Innovation Jam in 2006 which led directly to the development of the business opportunities that preceded our Smarter Planet agenda.

So, from that perspective, it becomes evident a massive internal social exercise that allowed the employees of IBM identify a major strategic shift for the company!

When’s the last time you let your employee base determine a massive strategic direction that your company was about to take??

Human Resources Are Inherently Social

IBM’s HR hasn’t been untouched by the social business evolution. Our HR professionals use social media for tech-enabled recruiting (think LinkedIn), employee education, sales training and leadership development.

By way of example, IBM relies on social media for leadership development from the first day on the job.  IBM’s Succeeding@IBM makes new hires become part of a social group for the first 6-12 months, so that they can get better acculturated into IBM with other new hires.

In 2006, hundreds of thousands of IBMers came together in a 72-hour virtual jam to help identify the emerging business opportunities that came to represent IBM's "Smarter Planet" initiative. This was "crowdsourcing" of a massive scale, and led to over $100M in internal investments in these important new business opportunities.

In point of fact, IBM’s recent study of 700 Global Chief Human Resource Officers found that  financial outperformers (as measured by EBIDTA) are 57 percent more likely than underperformers to use collaborative and social networking tools to enable global teams to work more effectively together and 21 percent of companies have recently increased the amount they invest in the collaboration tools and analytics despite the economic downturn.

Most recently, we’ve launched an internal initiative entitled “Social Business @ IBM” on our intranet which serves as a resource for IBMers to better educate themselves about social media and various social initiatives taking place internally, while also helping enable them to participate in the broader social media.

We also host modules that provide the IBMer with an introduction to the social web, where they learn how to use social computing tools to foster collaboration, develop networks, and forge closer relationships…with people who are often halfway around the globe!

Social = Transformational

When people tell me they still have to go into an office my response is, “How primitive.”  Don’t get me wrong, I love to press the flesh, but I’ve found that in this flatter earth, increasingly globalized realm, where my colleagues and I have to work all different hours, the question that always comes to me is “Who has time to waste sitting in a car?!!!”

But more importantly, the social business evolution I’ve witnessed at IBM is truly transformational.  When I started work at IBM in the summer of 1991 as a greenhorn intern, we DID go to an office every day and we DID have meetings face to face all the time and I DID wear a white shirt and blue tie.

These days, I can’t remember the last time I went into the IBM office, and yet I feel more connected and more productive than ever.  Why?  Well, I won’t lie, even if I sound like a commercial — the IBM technologies, from our IBM Lotus Sametime Instant Messaging to Lotus Notes and IBM Connections largely remove time and geography from the productivity equation.

But I would suggest there’s an even more transformational thought at work: IBM now trusts its employees in ways it never did before, and the democratization that social tools brought forth has also brought us a democratization in decision-making.

I now make front line decisions that, 20 years ago, would have been driven through a host of hierarchies and managers at a pace that likely would have been acceptable in terms of those times.

Today, such delays would be completely unacceptable and even uncompetitive, as decisions often need to be made instantly. But based on both the technological and cultural transformation within IBM, that’s okay, I’m expected and trusted to make those decisions.

And finally, social business, like social media, is also just plain more fun.

It’s as if these tools enable you to have the whole world at your fingertips.  And that makes for a smarter planet and  a smarter, more competitive IBM.

Planets Aligned

Is it a coincidence that Apple releases Mac OS X Lion and the new MacBook Air models on the anniversary of the Eagle landing on the moon 42 years ago?

Perhaps…but if the timing were really well thought through, STS-135 Atlantis might have landed back on earth today as opposed to its scheduled landing tomorrow.

Pretty soon, we space nuts will have to look beyond the Space Shuttle for our orbital kicks.

In fact, I’m already looking beyond the Shuttle and into the Heavens, and to the increased focus on commercial space ventures.

Orbital Sciences Corporation announced today that the Dawn spacecraft, which the company built for NASA’s Jet Propulsion Laboratory, successfully achieved orbit around the solar system’s move massive asteroid, Vesta, which resides in the main asteroid belt between Mars and Jupiter and which is 1.7 billion-miles away.

It took Dawn four years to make it out to Vesta, and successfully entered its orbit last Friday. As its mission progresses over the next year, Dawn will descend to additional science orbits at 425 miles and then 125 miles above the asteroid’s surface, which is said to be the size of Arizona.

Godspeed to the Asteroid Mapper…it’s going to have to be the next best thing to a man (or woman) being there.

Back here on Earth, IBM shared some good news earlier today, awarding nearly $1 million in Smarter Planet grants to 11 organizations around the world.

Known as the IBM Centennial Grants, these are both monetary and in-kind awards up to U.S. $100,000 each which fund innovative projects in areas such as healthcare, energy, and food safety.

These grants fall under the auspices of IBM’s continued “Celebration of Service” as the company enters its second century of social engagement and of IBMers helping their communities work better.

By way of example, one award recipient, the Drishtee Foundation, i funding a Smart Rural Aggregation Platform which will help evolve Drishtee’s model villages into sustainable Smarter Villages in rural India.

The solution will help to aggregate critical services and products related with livelihood, agriculture and information services and making services accessible to farmers and village communities.

You can read more about IBM’s Celebration of Service here.

Live At Impact 2011: Jon Iwata On 100 Years Of Innovation At IBM

At this morning’s opening general session of Impact 2011 here at The Venetian Hotel in Las Vegas, Jon Iwata, IBM Senior Vice President, Marketing and Communications, put IBM’s 100 years of transformation and innovation into context.

Mr. Iwata started his talk with a video demonstrating IBM’s 100 years of transformation in 100 seconds, a video MTV would have trouble matching in terms of the jump cuts.  But just watching the video segue from black and white to full color, one could sense the rich history of IBM’s contributions to innovation in industry over the span of a full century.

He used a few examples to demonstrate IBM’s commitment to making new markets, sometimes at the risk of cannibalizing existing ones: Changing from the 40 to 80 column punchcard. Being inspired by a recorded Bing Crosby radio show to investigate magnetic storage media for computing storage. Building a new computer system, the System/360, which was a bet-the-company business that took years to grow in volume, but which was truly transformative, both for IBM and for its customers.

These changes weren’t always easy.  Iwata quoted one customer frustrated by the punchard to tape change: “Not only can I see my data in a punchcard…I can feel my data.” (Big laugh from the audience.)  At first, customers didn’t quite know what to do with the System/360, but partnering with IBM, they figured it out over time, and another market was made.

To celebrate some of these milestones, Iwata explained, IBM has created 100 iconic programs of progress (including a new one introduced today for WebSphere) that mark 100 IBM Centennial milestones.  A few examples: RISC, PCs, Fractals, the Bar Code…you get the idea.

Flash forward to 2008: Despite the sudden changes in the economic climate, people at IBM were coming to a realization: Technology was moving out of the data center, the PC, through the mobile devices, and out into the physical systems of the world: Cities, pipelines, roads…we were putting computing into things never recognized before as a computer.

These new capabilities brought about “bigger” and more complex data, requiring more analytical capabilities and technologies to understand the larger trends occurring in these vast new data.

Thus was born the “smarter planet” initiative.

But there was more to the story that just saying it was so.  To help IBM customers take the most advantage of these new approaches to computing, we had to help them learn how to do so in the construct of their industries, we had to learn how to build up “agency,” to show our customers the way — learning by doing, the same way we humans learn most effectively.

Iwata then demonstrated what’s past was prologue, flashing pictures (straight from the IBM archives) of IBM offices opened around the globe the past 100 years, with IBMers sitting in classrooms: attentive, learning, preparing to share their knowledge with customers, just as we’re working to do with our customers’ smarter planet initiatives.

Three years on, Iwata explained, we’re proving we can change how the world works, and we’re doing it industry by industry.

New examples: Netherland Railway captured $57M in new fares with a smarter transportation solution. Madrid’s Emergency Response system is 25% faster, as its smart communications system better synchronizes fire, traffic, and police with a business process management system. Even a case study on how Italian fishermen are making markets for their fish via mobile devices while their boats are still out to sea.

That’s why you’re here, Iwata concluded.

Here among your peers and role models and other leaders to learn from one another, at Impact 2011.

Live @ Lotusphere 2011: IBM Senior VP Jon Iwata On Making A Social Business Market

Greetings, Lotuspherians…and those beyond who wish they were here.

After a night of Tweetups and parties and bar talk and heaven only knows what other tidings going on in here in Orlando, it was time to awaken early and get your social business vitamin shot.

IBMs’ Mike Rhodin and Jon Iwata delivered early and often in their opening remarks on Day 2.

IBM's Mike Rhodin explains the challenges and opportunities of social business for the Lotusphere 2011 audience in Orlando, Florida.

Rhodin is Vice President, IBM Industry Solutions, and picked up on a theme he started to deliver in the marketplace at last fall’s IBM Industry Summit in Barcelona.

With a nod to Alister Rennie’s comments from Day 1, he acknowledged that the market is shifting to a new era of social business, and that we heard yesterday from a wide variety of clients about the obstacles and opportunities.

And, more importantly, noted Rhodin, we heard from one another, our fellows in business and industry about the steps we’re taking to build smarter, more social businesses.

Rhodin then encapsulated the challenges and opportunities.  The challenges: Information overload (15 petabytes per day and growing), shared complexity (both infrastructure and organizational), and the need to create more shared connections.

The Social Business Opportunity

The opportunity? Social businesses embrace networks of people to create business value, and there are a few key entry points: The need to deepen client relationships, to drive operational efficiencies, and to optimize the workforce.

We’ve all had to focus on getting leaner and meaner these past few years, to the first point.  But we can also get new products to market faster, and use the market as a listening and sounding board more effectively.

Most key to social business, we can optimize our workforce by finding ways to extract new value from an increasingly distributed workforce (think globalization), and to do so without impacting productivity (in fact, quite the opposite) and to help our people become more focused on innovation.

Rhodin then posed some provocative questions: What are consumers saying about your business?  Are you listening?  What about your employee’s digital reputations, which have never been more important?

Did you know 20% of the top search engine queries in the world were now going back to consumer generated content?

Is your organization applying social analytics practices to conduct sophisticated sentiment analysis that can help you understand not only your brand reputation but also help you improve your products?

Then, Rhodin put up a slide that I thought told the entire story in one sweeping motion: The transition from traditional, hierarchical enterprises transitioning to social synergistic ones consisting of vast numbers of communities and a culture of sharing and innovation, which will soon start to separate the leaders from the masses.

It was then that Rhodin introduced IBM senior vice president, Jon Iwata, whom I also had the pleasure to hear speak about IBM’s 100-year legacy last fall in Barcelona.

What’s Past Is Prologue: From “e-business” to “S-business”

Iwata provided another quick flashback, but this time to explain we’ve all been here before.  It was 1995, and IBM bought Lotus as the commercialization of the Internet was underway and everyone in the market was talking about browsers and content.

IBM, and then CEO Lou Gerstner, were talking about the potential impact on business, even though to many it appeared IBM had no real involvement with the Internet.

Quite the contrary, and as IBM introduced the idea of “e-business,” it soon became clear Gerstner and others were correct, and the impact on business and organizations around the globe since then has been profound.

We made a market.

And today, Iwata explained, we’ve got another opportunity to lead and to make a new market, and in the process to provide our companies with game-changing capabilities.

Two years ago, IBM started a global conversation about the next era of computing and its impact on society, the “smarter planet.”

We identified three broad trends there: 1) Instrument the world’s systems 2) Interconnect them 3) Make them intelligent

With this strategy, we could start to see for the first time what was happening in key infrastucture: Our energy grids, our supply chains, etc., and we could make them more sustainable and, in a word, smarter.

But, Iwata went on to explain we also saw all the ways people interact would also become smarter, from the interconnectedness using social software to the mobility new devices would bring.

Now, we could connect billions of people, use social analytics to analyze all this new data (including our connections to one another!), and tap into the core human reality that people are inherently social.

Sometimes we work socially in a public way (retail), sometimes in a private, secure way (banking), but we’re all social.

People Working Together Better

Hence, social business, like e-business, is an opportunity to transform the enterprise, the way we work, extract, and create value, and yes, the ways we interact with one another.

IBM’s proof point, Iwata pointed out, was “Generation Open,” our own internal software development community that allows IBMers to develop software of their own choosing, and the reputation monitoring and feedback included to motivate and reward those developers.

The results? Generation Open delivered 160,000 new projects last year, drove down development costs by one-third, and increased asset reuse by 4X.

Social business.

And that’s what IBM continues to deliver in its market communications: strong, tangible proof points of how social business can deliver real business outcomes.

Take social engagement, for example: There is lots of focus on internal collaboration and expertise sharing, but what about when you go outside the firewall.  You may want to designate certain teams to monitor the social media, or provide CRM.

Realistically, Iwata suggested, all of our employees will soon adopt social technologies if they haven’t already.

So, how can we help enable them?

At IBM, we recently launched an enablement program, named aptly enough, “Social Business @ IBM,” which helps increase the social acumen of 400,000+ IBMers, educating them on policies and guidelines, and also enabling them with tools that allows them to monitor their personal networks, participate in key social media vehicles, and the like.

We expect to educate 50,000 IBMers by the end of this year alone, explained Iwata.

This new type of change requires new systems of management and leadership.  Traditional vertical functions (sales and marketing, HR, etc.) will require more integration, driven by transparency and the need to have a single view of the customer.

Iwata began his close with a call to action: Those of you who are champions of social media will soon find yourselves becoming an integrating force in your organizations.

Be prepared to help the organization make this disruptive transition, and concurrently, think about how you can leverage secure, scalable technology (including that from IBM) combined with tangible business outcomes and responsible management practices to successfully navigate your way to the new world.

The time to act is now, concluded Iwata, and the way to act is together.

IBM Industry Summit: Smarter City Operations Center With Mike Kehoe

I did some more roaming around the IBM Industry Summit Expo this past Thursday afternoon just as the action there started to wind down, and I seguewayed from trying to better understand smarter video analytics to that of smarter city operations.

If you’ve seen the IBM TV commercials, you’ve seen our experts talk about the opportunities to make cities smarter around the world.

Well, IBM Smarter City expert, Mike Kehoe, provides a 5-minute video helicopter ride in the video below over what a typical smarter cities operation might look like.

…Oh yeah, and for the five minutes I interviewed Mike, he made me the honorary mayor of Barcelona!

Check out Mike’s excellent flyover below:

IBM Industry Summit: Ginny Rometty On The Business Evolution Towards A Smarter Planet Agenda

At the kickoff sesion of this morning’s IBM Industry Summit, IBM senior vice president of sales, marketing and strategy, Ginny Rometty, articulated a vision for organizations around the globe on how they could practically execute against the smarter planet agenda.

IBM Senior Vice President Ginny Rometty guides the IBM Industry Summit audience as to how companies can navigate their way to smarter business in the "new normal."

But first, she helped to rearticulate the problem statement through an example many may have already forgotten, the rice shortage crisis from early 2008.

Rometty explained she was traveling in Asia, and befuddled that in this day and age there would be a run on rice.

Once back at her office, she polled several colleagues from IBM Asia, and asked them what they thought was the cause of the shortage: Market speculation, climate change, growing demographics, what? In truth, it was all these things, but the “system of systems” had been overrun by its own complexity.

And ironically, a report released over a year later from the U.S. Dept. of Agriculture stated that 2007-08 had been a record crop for rice!

Too much complexity, indeed.

There were huge inefficiencies in the vast distribution and supply chain system for rice, and not unlike the global financial crisis, it was those inefficiencies and interconnectedness that led to the rice riots to occur in the midst of the greatest rice crop in years.

With that as the backdrop, and the problem statement established, Rometty then began to explain what organizations around the globe must do if they wish to embrace the complexity of such “systems of systems,” and start to capitalize on the new opportunities they present.

Because this one example was emblematic of broader, but common challenges facing the world: All the systems that govern our businesses are really interconnected.

Also, companies everywhere have started to realize the increasing costs of their longstanding inefficiencies.

Which leads to the third understanding: We have to change. This is clearly not sustainable.

Rometty mentioned a study which revealed that since the global crisis hit, one-third of all CEOs have been replaced (Monster.com, anybody?)

To respond (and keep their jobs), CEOs must start to focus their energy on productivity and structural change, continued Rometty.

“You’re going to either take a market, or make a market.”

Therein lies the promise and the aspiration of a smarter planet. It really is a new way of thinking about your business and its opportunity in the world.

So how as a business do I get started on this concept of a smarter industry, Rometty asked?

Rometty answered the question by outlining the fact that IBM has done over 600 engagements around the globe, and half were done with partners like those in the room here in Barcelona.

Rometty then fully hit her stride and outlined for the CEOs and partners gathered in the room the three general phases people go through as they move towards a smarter business:

1. Instrument to Manage
2. Integrate to Innovate
3. Optimize to Transform

The first step is simple: Understand the performance of your business by instrumentation.

You can’t know how fast you’re driving if your car doesn’t have a speedometer.

That’s why IBM has related this idea of embedded technology (RFID, sensor data, etc.)  To bridge the digital and analog world, we have to instrument, measure, and then manage it.

As an example, Rometty mentioned a Vietnamese seafood company which uses RFID sensors to monitor, from trawler to market, its fish catches to ensure quality control, manage inventory, and prove the premium value of its catch.

Second, companies must integrate to innovate. Organizations must be willing to evolve and adapt horizontally, across all their systems and structures, so that they can then be prepared to apply business analytics more effectively.

Rometty mentioned Toyota, which built an industrial waste efficiency project that the company spun off as a separate business unit, Ecomanage Network Corporation, to help other manufacturers facing the same waste management challenges.

Rometty also mentioned how supercomputing capability has evolved during the past decade. We’ve gone from Deep Blue, a supercomputer playing a chess game (but one with ultimately finite moves) to “Watson” (named after IBM’s founder, Thomas Watson), the new supercomputer learning how to play against humans with infinite possibliities in the “Jeaopardy” TV game show.

The host provides the answers, Watson has to come up with the questions.  Watson’s currently in training against other humans, but Rometty indicated that “She’s learning quite fast.”

Much laughter in the audience before Rometty moved on to the third step: Optimize to transform.

Now that you’ve built a foundation using instrumentation and new analytics, you can now move on to the art of the possible: Optimizing your system towards a specific business goal.

Predictive analytics is very different from the “looking backwards” model businesses have historically depended on.

The next decade, argued Rometty, will be one of predicting the future before it happens.

Unless you think she was now on to soothsaying, Rometty mentioned the Singapore Land Transit Authority, where technology is helping Singapore predict bus arrival times at a 98% accuracy rate, and helping commuters understand bus seat inventory via their mobile devices.

So what’s required to pull off this transformation, Rometty asked?

Three things. Leadership featuring an analytics based-culture. Systems thinking. And new forms of collaboration.

With regards to analytics, it’s actually simple to say (harder to do): Get your company and its people to move from guessing about your business via HIPPO (Highest Paid Person in the Room) and gut judgment, to one based on facts and trusted data that yields action.

Two, don’t get caught in the rice shortage paddy! Develop a culture of systems thinking so your organization is more adept and able to respond to unexpected crises, no matter their orientation.

And three, build a culture of collaboration. Your partners, your suppliers, your customers, all are key constituents in a supply chain of new ideas and possibilities for your business, but only if you facilitate and tap into their expertise and insights.

Pioneering companies which rethink their business systems and models, reinvent their outdated processes, and leverage analytics effectively moving will be poised to move beyond the “new normal” and instead realize new growth and outcomes for their companies.

IBM 3Q 2010 Earnings

IBM announced its 3Q 2010 earnings a few moments ago.

The net: 3Q 2010 diluted earnings of $2.82 per share, compared with diluted earnings of $2.40 per share in the third quarter of 2009, an increase of 18 percent.

Third quarter net income was $3.6 billion compared with $3.2 billion in the third quarter of 2009, an increase of 12 percent. Total revenues for the third quarter 2010 of $24.3 billion increased 3 percent (4 percent, adjust for currency) from the third quarter of 2009.

In the press release, IBM CEO Sam Palmisano highlighted growth in the hardware, software and services businesses, as well as expanded margins and, once again, increased earnings per share at double digits.

On a forward looking basis, Palmisano noted IBM is uniquely positioned in the enterprise, investing in high value segments like business analytics, advanced systems and smarter planet solutions.

Other details:

• Diluted earnings per share of $2.82, up 18 percent;
• 31 consecutive quarters of EPS growth, 13 of last 15 at double digits;
• Full-year 2010 EPS expectations raised to at least $11.40;
• Net income of $3.6 billion, up 12 percent;
• Net margin of 14.8 percent, up 1.1 points;
• Revenue of $24.3 billion, up 3 percent as reported, 4 percent adjusting for currency;
• Growth markets revenue up 16 percent, 13 percent adjusting for currency;
• BRIC countries revenue up 29 percent, 26 percent adjusting for currency;
• Business analytics revenue up 14 percent;
• Systems and Technology revenue up 10 percent, 11 percent adjusting for currency;
• System z mainframe revenue up 15 percent; MIPS up 54 percent;
• Software revenue excluding divested PLM operations, up 4 percent, 6 percent adjusting for currency; up 1 percent including divested PLM operations;
• Services revenue up 2 percent, as reported and adjusting for currency;
• Services backlog of $134 billion, up $5 billion quarter to quarter, down $2 billion adjusting for currency, and flat year over year.

You can read more about IBM’s 3Q 2010 earnings here.