Samuel J. Palmisano
IBM Chairman and Chief Executive Officer
Final Remarks, as prepared
IBM CIO Leadership Forum
Grimaldi Forum
Monte Carlo
October 4, 2006
"The New CIO: Setting the Innovation Agenda"
Welcome to Monte Carlo and the first IBM CIO Leadership Forum. We appreciate your taking the time to spend a few days with us, and we promise to make this a worthwhile investment for you. So before I get into my remarks, let me just say thank you from all of us at the IBM company.
Now let's get down to business. For starters, why are we here? We're here because we're at an inflection point in the IT industry, and this has significant implications to a group of people we care deeply about - and that's you.
A little history is called for here. Forty years ago - just before I started my career at IBM - no CEO had a CIO. The title and the role didn't exist, because information technology as we know it today - as a vital business tool- didn't exist. As computing became more and more important and beneficial to business, IT - and the professionals who managed it - elevated their role and influence in the corporation.
You went from being DP managers to MIS directors to Chief Information Officers. These are not mere changes in title - they reflect the growing importance of IT in business and society. There are literally thousands of CIOs today. You are as numerous as the enterprises, institutions and governments you collectively serve.
You know, IBM can take some credit for having invented the role of the CIO. The systems we built, starting back in the 1950s, revolutionized the application of technology in how business gets done. We have more relationships with more CIOs than probably any other IT company today. And that gives us a good sense of where the CIO profession is, where it's going, and where it needs to go. And right now, the role of the CIO is at a historic turning point.
It's no secret that revolutionary shifts are transforming the global economy. Globalization...massive economic and demographic shifts...open industry standards...new modes of collaboration and integration...emerging economic powerhouses in Asia, Latin America and Eastern Europe...and above all, the emergence of the Internet as a global platform. In an interconnected world, work moves to where it can be done most efficiently and effectively - the work that people do, and the work that computers do. Taken together, these developments mark the beginning of a new economic era.
In this environment, the role of the CIO has come to a crossroads. What will you do - will you step up to the challenge? CIOs have an opportunity, once again, to reinvent themselves. This is your moment - one of those moments that doesn't comes along very often - when you have an opportunity to enhance your standing, influence and contribution to the enterprise. Or, the role could be marginalized. CIOs could stick to being the setters of technology standards, managers of the infrastructure...or, worse, overseers of a kind of technically-savvy procurement shop.
Like any good CIO, you will probably take a cue from your boss. How are CEOs responding to all of these unprecedented challenges? Will they hunker down and ride it out? Wait and see how others respond? Can they possibly get by doing things the way they've always done them - maybe just better and faster?
The most successful leaders are choosing a new path forward - the path of innovation. This summer in Rome, we hosted a global forum of several hundred CEOs, government officials and other industry leaders to explore the demand for innovation in today's economic climate. Before the event, we surveyed more than 750 CEOs and government leaders to get their views on the challenges they face in the current economic environment, and how they intend to respond. Here's what they told us.
First: Innovation is the surest path to growth. Two-thirds of CEOs expect their organizations will be inundated with change over the next two years. The only way they see to keep ahead of new competitors...who are emerging out of nowhere, everyday...and to avoid the persistent threat of commoditization...is through innovation. This is a significant shift in perspective, by the way. For years, businesses of every size reacted to globalization the same way - they cut costs. Now, there is equal pressure to grow the top line as well.
Second: CEOs recognize that the primary focus of innovation needs to be on your business model. Innovation today means much more than new products and services. That's still important, but in a world of fast-commoditization, you can't count on your product line to give you a lasting competitive edge.
Fortunately, the opportunities for innovation are everywhere in the enterprise - in your IT infrastructure, certainly. They also reside in your business processes, operations, management systems and culture. CEOs told us they are focusing nearly 30 percent of their innovative efforts on business model innovation. Why? Because they consider the way they do business to be an important differentiator. Business model innovations are not so easily replicated or imitated. So they do not invite commoditization the way that product and service innovations do. Simply put, the competitive advantage that business model innovation offers is more durable over the long term.
Third: Innovation is collaborative. When we asked CEOs about the best sources of innovative ideas, their top answer was their own employees. What's fascinating were the next five: business partners, customers, consultants, competitors and industry associations. All of them external sources. Internal R&D came in a distant seventh place.
Obviously, this level of collaboration is more than "teamwork." It means ongoing, systemic and very new forms of sharing. It spans disciplines, industries, the public and private sectors. And it works on a shared infrastructure and loosens traditional restrictions on intellectual capital, so that ideas can build on one another. As one of the CEOs in our survey put it, "Having a few beers together is not collaboration. Collaboration is a discipline." And as you know, it's also a system.
Finally, most CEOs told us they are not doing enough to be innovation leaders in their industry. They perceive a shortfall in how well they are harnessing IT to drive business strategy and generate growth. Overall, CEOs believe that technology has a larger role to play in their business strategies, helping them capitalize on strategic opportunities. We did a financial analysis that bears this out. It showed that organizations that are effective at integrating business and technology insight deliver significantly better revenue growth and operating margins.
So it's no surprise that eight out of 10 CEOs rated "business and technology integration" as a high priority. But less than half felt their organizations were integrated to a large extent. What's the holdup? CEOs identified inflexible physical and IT infrastructures and insufficient access to information as two of the biggest obstacles to integration and innovation.
So that's what your bosses had to say. We're providing copies of the study that will tell you more. The good news is that, when it comes to the tools and technology of innovation, we are surrounded by possibilities and inspiration.
In fact, when it comes to innovation, our generation of leaders has more tools and capabilities than any generation in history. The same forces that have turned our world upside down - globalization, universal connectivity, advanced technologies, emerging economies - contain the seeds of a promising future.
It's not an accident, I believe, that the new imperative of global integration is arising at the same time as the new possibilities of innovation. The two are intimately related. In an world where everything is connected, where massive computing power is available to everyone, where you can reach out to any marketplace on earth and get skills and ideas in return...in that kind of world, you have the makings of an unprecedented explosion in creativity.
If I sound overly optimistic for a CEO, it's because, when I look around, I see a very different landscape for business than we were looking at just a few years ago. It's filled not with theories, but with tools; not with blue-sky projections, but with new generations of people with reservoirs of skills and imagination; not with visions, but with available and affordable capabilities. Think about what's available to you today:
|
And those are just a few of the innovation capabilities that have come of age...that are powerful enough to transform companies, industries and societies...that are affordable and accessible enough to give everyone a chance to do so. This is why I believe that, as CIOs, you are at the tip of an enormous opportunity: To shape the destiny of your enterprises, move beyond your historic role as IT experts and emerge as the innovation leaders of your businesses, and demonstrate how technology can revitalize your business model and create new value and long-term growth for your companies.
One thing is clear: Your CEOs are going to advance these agendas. The question is: Will they look to you to lead this? Or to someone else in your organization? We designed this Forum to help you capitalize on this opportunity.
The role of the CIO is more critical than at any time in history. We feel strongly about this - but we didn't just want to talk to ourselves. So we reached out, first to our board of advisors - thank you all for your invaluable help - and then to a larger circle of CIOs - to listen, to learn, to validate. We also commissioned a benchmark study, and I thank all of you who participated in that as well. Our CIO, Brian Truskowski, will share the full results of the survey with you later. But I want to call out some topline findings, to give you an idea of what's on your collective minds as this Forum gets under way:
|
I'll let Brian tell you the rest...about the relationship you would like to have with your board of directors, where you see the future of the CIO profession, and what keeps you up at night. Let me just say how much I appreciate your remarkable candor and sharp insights about the role of the CIO. You have helped lay the foundation for a productive exchange of ideas over this next day and a half.
Based on your input, we have put together an agenda here that will allow you to hear from CIOs who are at the forefront of innovation and strategic leadership in their organizations, and get the perspective of other key business leaders - COOs, CFOs, CEOs, all the way to members of the board - about the benefits of a close collaboration with their CIOs.
This conference is unlike any CIO conference we've ever hosted. It's not about IBM and our products and services and how we can be better partners to you. Trust me, we will get plenty of important insights during the next couple of days...and you will be getting ample quality time with our sales leaders. But the agenda is all about you and your profession.
We reached out to you because you're leaders among CIOs. Together, I believe we will come away with new insights, and renewed enthusiasm, for your potential to grow beyond the role of Chief Information Officer, to a new understanding of CIO...what I call the Chief Innovation Officer.
Thank you again for sharing your time with us here. I look forward to a lively and stimulating discussion.
