INNOVATION: THE VIEW FROM THE TOP
IBM's honcho on what CEOs can do to lay the groundwork for real breakthroughs

This great article appeared in the Business Week APRIL 3, 2006 edition covering an IBM survey of CEOs and government leaders to find out what's high on their agendas. The following is an excerpt of the interview held by Steve Hamm from Business Week and IBM's Chairman Samuel J. Palmisano. It highlights the important role of leadership in driving innovation, particularly when fundamental change is required.

Innovation is a hot button for chief executives. What's driving that?

CEOs and business leaders around the world see increased competitiveness, and they see challenges in their business models going forward. They see many things commoditizing. They see that all roads lead to innovation.

Your survey found that business-model innovation has become a focus for CEOs.

People realize that you need to do innovative products. You need to have your products differentiated. But with product innovation, it's a certainty that your competition is shortly going to copy what you've done…….. With business-model innovation, though, if you can come up with a unique way of doing things, it's much tougher to react to.

Why is business-model innovation so much harder to achieve than product innovation?

It's because organizations have inherent resistance to change……. There's a lot of inherent resistance to this shift and this change. With many companies, what makes it hard to do is not necessarily setting the strategy but executing it. That's where it requires strong leadership from the CEOs as well as collaboration with groups outside of your own organization. You need to collaborate because the collaboration is so important to learning.

Is collaboration with business partners a key part of business- model innovation?

Our point of view is simple: In today's environment, with all the global opportunities that exist and these new technologies, the best way to make them unique for your own enterprise is to foster collaboration. You can do that in multiple dimensions. You can collaborate within your own organization………. In addition, you need to collaborate between companies and governments and educational institutions…….. We also started collaborating with communities of experts. It started with Linux and the open-source community, where we all come together and share in some of these areas of technology and standards

Another thing that you found in your survey is that the CEOs feel they have to personally lead the innovation campaign.

With product innovation, if you stand up on your soapbox and you cheer a little bit, that will certainly help. But the reason I think that the CEOs have to lead this is because, fundamentally, the biggest breakthroughs are a result of changing the business model and the processes and the culture. When you say the new strategy is going to be to change the business model, every CEO understands that's their job. When you talk about driving culture or management systems to change your culture, my colleagues all understand that's their job. So CEOs realize that they have to get these new types of innovation done through their own leadership.