The week before last I had the pleasure to spend a few days visiting NICTA, the premier Information and Communications Technology research agency in Australia. It was my first time “down under” and I didn’t quite know what to expect. Up until this trip I’ve only met a handful of Australians, who seemed nice and just had a funny accent. : )

In fact, the people I met were extremely nice, welcoming and above all uncomplicated. Frankly, I’ve never meet a people as relaxed, calm, and unpretentious. They make you feel welcome. I guess that must be because Australia is so far away (I spent more than 22 hours on a plane getting there from Zurich) and they want to show their appreciation. : )

Anyway, working at a Nobel prize winning lab, I see amazing innovation on a regular basis, so the bar is high.  But I have to say,  NICTA certainly made an impression on me by showing off a number of very interesting projects, some of which fit very well into IBM’s vision of a smarter planet.

For example, in Sydney, I saw first hand the work they’re doing with the local roads and traffic authority to make traffic flow smoother and to get higher throughput on roads.  To do so they are observing moving traffic, which is different than current state-of-the-art sensing technology which studies cars stopped in front of a traffic light. They’re working with the Sydney Coordinated Adaptive Traffic System (SCATS) which – surprising to me – had been developed by the New South Wales (NSW) Road and Traffic Authority and is marketed world-wide to cities.

In Canberra, they showed me work they’re doing on optimizing vehicle routing, where multiple constraints are factored in, such as time to destinations, driver availability and time driven. They solve these optimization problems using the G12 Constraint Programming Platform.

In Melbourne, I saw an extremely interesting project where NICTA is collaborating with various Australian research partners in creating a bionic eye. The bionic eye will be made up of  three parts including an implant that stimulates the retina, thus enabling high resolution vision, a high-speed externally powered wireless transmission system and a video camera using video processing to place the relevant pixels onto the retinal implant.

Another project of particular interest to me is a wireless sensor network application the Melbourne team has developed for smart water management, called Water Information Networks (WIN).  The innovative approach taken here, is to use the canals as additional reservoirs allowing farmers on-demand-access to water for irrigation. By managing the whole system from the farmer, via the canals, back to the reservoirs, a lot of wastage can be avoided and the already scarce resource  is used optimally.

This last project is also a good example for my theory that technological innovations often need the right environment to happen. What do I mean by that? Well, agriculture makes up the largest part of Australia’s exports.  Fresh water on the other hand has become a scarce resource in Australia because it rains less and less frequently. So being able to reduce wastage by, say 50% means that the agricultural output of the economy can be sustained even under these adverse circumstances. Such a problem we would likely not tackle in Switzerland as we still have plenty of fresh water and rain.

All in all, Australia is a great place to visit, but even more importantly a great place for innovation.

Yesterday I attended EIRMA’s CTO roundtable, an annual, invitation only, meeting of European Industry Chief Technology Officers (CTOs) hosted by Shell Research. The topic was the role of the CTO/Head of Research in times of economic crisis. How should the CTO communicate with the other leadership in the firm about the importance of maintaining research budgets? What was the role of government in times like these to maintain innovation alive?

Times of crisis spur innovation

I will not write in detail about these questions, but I wanted to share the key messages in the opening speech by Jorma Ollila, the former CEO of Nokia and now Chariman of both Shell and Nokia.

He spoke about the three areas a CEO will focus on in times of recession, including:

1. Adjust fixed cost to revenues and increase productivity by reducing variable costs. What this means is quite simple: when orders stop coming in you need to reduce the workforce and work with your supply chain to reduce the cost of materials, services purchased.
2. Examine R&D costs as they represent a significant fixed block of costs. Re-prioritize those projects that will likely make you a winner when you come out of the crisis and eliminate those that don’t make the cut. Effectively also reduce or keep flat the spending on R&D.
3. Communicate more than ever with the employees and build trust in talking to them in times of great uncertainty.

He then went on to talk about what is required to create a world-class research environment, namely:

1. Engineers like gadgets (his words), so make sure they have access to the tools of their trade.
2. Labs must look like labs of a winning company otherwise the talent you’re looking for will not come.
3. Hire stars, employees that new hires will respect and aspire to become like them.

His last observation was that innovation is at its best in times of crisis and scarce resources. He cited Intel, which spent a lot of money to get into the mobile world and kept failing – so far. The times when they produced real innovations was in their early years, when they were struggling as a company. He cited Amazon.com where the CEO stated that whenever they were strapped for cash, they had the best ideas. Whenever the investors poured more money into the company, nothing new happened.

While it seems like a paradox, I think he’s right with this observation. When IBM lived through its near death experience in 1992/93 many innovations happened in our business, for example, we started the IT outsourcing business that now has developed into a huge business not only for us but an entire industry. Or we revamped our mainframe computers to use CMOS chips which reduced the running costs significantly and provided a performance roadmap for the future.

The experience also kept us out of the dot com bubble, where abundant amounts of money were spent on innovation but not too much happened in our industry. The real innovations came when the bubble burst – Google, Web 2.0, ….

The challenge is: however little we like crises – they do have positive effects on our creativity and innovation spirit. How do we maintain this sense of urgency when we get out of the current crisis? And what will be the innovations that will come out of the biggest recession since the 1930s?

Please share your thoughts.

Recently the University St. Gallen completed a study where they looked at the perceived value that a research organization contributes to a company’s brand equity or reputation. The hypothesis was that if you are well known for your research efforts, it should have a positive effort on the overall brand value. The findings were released at an event on 22 September called “Brand it or Lose it.”  and the project was conducted by the Institute of Technology Management at the University of St.Gallen , its innovation and intellectual property spin-off BGW AG, and IBM Research.

Being part of IBM Research, I found this project of course very interesting, because if we could come with a concrete (preferably large) $ value that our research efforts contributed to our brand’s value then we would have another justification that investing in research was a good idea and it could perhaps encourage more organizations to invest in R&D.

Well, it turns out the question could not be answered as concretely as I had hoped by citing specific data, but some positive effect on the brands’ value could be shown.

What was more interesting to me, however, was that the study also compared the various research labs of our competitors and other industrial companies that operate in Europe.  St. Gallen asked all of the labs to rank themselves and others in various disciplines (e.g., material science, physics, computer science, information theory etc.).  They were also given the opportunity to name other labs that were not on the list.

It turns out that our small Zurich laboratory came out # 1 when compared with industrial labs and # 3 in another study where they had also compared government sponsored research entities – we came in a close 3rd after the multi-billion € funded and well-respected German Fraunhofer Gesellschaft (#1) and Max Planck (#2) government labs.

This result made me think, how does one maintain this level of peer recognition? What does it mean to be the best? How can we assure to remain in that coveted first place in another five or ten years when some other business school studies a similar question.

I would claim, we need to be famous for the innovations not only within our company, but also outside. This applies to how we do research, what we work on, and how we turn our research into innovations for the world. It all starts with hiring the most talented people, of course.

We also need to make a difference in the world where it would be felt if we were not around. We need to be so unique that we cannot easily be replaced by somebody else.  I recall an inspirational pitch by a senior executive in the early 90s when IBM was on the brink of total failure titled “Where would the world be without IBM?” and he listed numerous achievements, including landing on the moon and PCs,  that may not have been accomplished without  IBM.

CHALLENGE: You just became lab director of the #1 corporate research lab in Europe, what would you do to keep it that way?  Let me know your thoughts.

Credit: St. Gallen, Wolf-Christian Rumsch, ITEM-HSG, CTI Dissemination Conference, IBM Research GmbH, Rüschlikon, September/22/2009

One of the dilemmas I’ve observed  in many companies is the decision to standardize and harmonize internal processes so one implementation fits all, sometimes pushing flexibility and innovation into the back seat. Obviously this is quite a challenge when you need to support different business models (e.g., services vs. products, B2B vs. B2C, …), so you create appropriate processes for each business model your company supports. You roll these out globally in some form of IT solution (ERP, CRM, and all the other three letter acronyms that have been used in our industry) and have your employees work according to these processes.

Source: bioteams.com

These roll outs are expensive, often require sophisticated change management, and when they are completed they may or may not yield the desired results in quality improvement, increased revenues, reduced expenses, higher client satisfaction and more motivated employees. What they often do is stifle innovation. In many instances doing things differently (e.g., new business processes, new business models) or creating new things (e.g.,  offerings that don’t fit into a given framework) become very difficult. One of the interesting things about start-ups is that a significant part of their first years is spent on figuring out the value proposition and the right business model to be successful. Large enterprises don’t have this luxury as they cannot experiment easily. In particular, when – at great expense – they roll out global processes that they make mandatory for everyone to follow.

I wonder what you think about this vexing issue? Care to share an example?

No one ever said innovation was going to be easy. As if coming up with an idea and bringing it to market isn’t hard enough, you also need to deal with the public’s reaction.  Case in point, Google recently made its Street View technology available for several cities in Switzerland.  If you aren’t familiar with Street View, it basically allows a 360 degree detailed view of streets, including homes and businesses.  You can see the IBM Research – Zurich lab here in Street View for example.

In my opinion, it’s fantastic.  If you need to check out a hotel before booking a room or if you want to look at an apartment or house before contacting the agent, presto.  It’s  better than tapping your heels three times (as in The Wizard of Oz).  But the challenge lies in the photos, because as they are taken, they also capture people and data, like license plates and this raises privacy concerns.  And with all of the press about the United States requesting private banking data this is just adding fuel to the fire in our small country. Google has responded saying that their algorithms blur photos of people and license plates. They already work quite well, they even blur the expressionless faces of mannequins in store windows . Achieving 100% accuracy – as apparently is expected – will be hard, if not impossible.  Asking for 100% anonymity creates a real dilemma: on one hand the value of the service is apparent, on the other hand I can understand that individuals may perceive this as an intrusion into their privacy. Personally, I have no problem with it – after all what they photograph is public space – for as long as they react to users reporting non-blurred faces and license plates to quickly make them anonymous again.

Here at IBM Research we have done a fair amount of research into privacy on the Internet. One such project  is called Identity Mixer.  It allows users to share personal information but ONLY what is needed for a specific transaction. You can read several good examples here of Identity Mixer in practice.

But getting back to my main point, should we stifle innovation to avoid rocking the boat?  I would certainly hope not. To me it is clear that we always should spend in parallel a similar amount of attention to consider and deal with the drawbacks of a new technology as we spend on developing it in the first place.

The first two weeks of August my family and I spent our vacation in a great Finca in Mallorca, Spain. We had wanted a vacation without hassle. Sleep late (one day my daughter managed to get up only at 13:30), enjoy the nice weather, food and just plainly relax and get away from my otherwise busy schedule.

Finca near Arta

Pool

As you can see in these pictures, it was a great place that held what it promised.

While everybody told me, I should for once not respond to e-mails and not do conference calls, this is something that seems to be almost unavoidable. We come to expect to be connected all the time and no longer talk about work life balance but work life integration.

So I decided to take the middle ground:  read my e-mails once in a while, respond to the important ones and skip all but one conference call in the two weeks we were there. Reading the e-mails had another advantage,  I did not need to spend the first few days after  my return just working off the backlog.

The Finca is located in the middle of nowhere: electricity yes, but no phone line and no broadband. So before going, I researched the Internet for what other people did in this situation in Spain. During my vacation last year in Germany, I had used my regular Swiss cell phone SIM and ran up an astronomic bill and wanted to avoid that this year. Data roaming in Europe is a bonanza for the cell phone companies. I found that various operators in Spain offer flat rate mobile (GPRS, 3G) Internet access via pre-paid SIM cards.

The second day there, I went to buy one where the plan appeared to be attractive. A large phone company that does business around Europe, offered a SIM card where for 29 Euros you get flat rate Internet access for 15 days. You buy the card, which you can use for phone service as well, send an SMS to a service number and subscribe to the plan. At least that’s how it was described.

I subscribed and connected,  all worked well. However after some time, I noticed that the balance on the card kept shrinking. They were still charging me per MB of traffic. So I called their help desk who eventually credited my card with what had been used up until then and told me they had fixed the problem. Unfortunately, it turned out that wasn’t the case. They kept charging me per MB. So I called again and they opened another trouble ticket. When I called the next day to inquire whether it now had been resolved, I was told that they wouldn’t start working on it until three days later. And in deed, three days later, I received an SMS that they had started to work on my problem and that I would hear when it was resolved. A few days later, I received a call (in Spanish, so much for customer relationship managment) where a computer asked me about my customer experience with their help desk – however until our last day in Mallorca, the problem had not been resolved. I must say, I was a little disappointed in this kind of service, I thought I was dealing with a large international company that – while being somewhat more expensive – would live up to its brand promise.

Realizing after my third help desk call that my problem would likely not be solved in any reasonable time, I went and bought a prepaid SIM card from a smaller provider that offered flat rate access for three Euros per day. That worked flawlessly and, where I was, I even had HSDPA access.

About a month ago I attended the EIRMA Annual Conference titled A Larger Europe – a Smaller World. While most of the conference dealt with branching out R&D into the growth markets in Europe (Hungary, Russia, Poland) and Asia (China, India), one presentation by Lars Kolind, Chairman of the Board of the Poul Due Jensen Foundation (Grundfos), serial entrepreneur and author of “The Second Cycle – Winning the War against Bureaucracy“, Wharton School Publishing 2006, stood out.

In his talk he promoted the idea that enterprises need to constantly reexamine why they’re organized as they are – do the assumptions that lead to an organizational structure and a way to work still hold up or have they changed.

He illustrated this with the example of the unions who played a very important role in the 1800s and through the first half of the last century.  Now however the relationship between employers and employees has shifted to more of a partnership where any union official knows that if a company would accept the union’s demands it would go out of business. Nevertheless the relationship remains antagonistic as both sides have not adapted to the changed circumstances.

The second example he gave is the hierarchically led enterprise which made sense prior to the information age when companies mostly manufactured products on assembly lines. For the modern enterprise he claimed that hierarchy made no sense anymore. What a modern enterprise, particularly those engaged in knowledge work need is:

1. A good way to structure, track and execute projects
2. A good hiring process to find the best
3. Ways and means so the employees can succeed and have impact; professionally and in the company

I found that deviation from the traditional management system quite intriguing, in particular when I think of how we work in Research at IBM. We work in an open market place. Good researchers can choose to work here or elsewhere. So it is all the more important that we become a horizontally oriented organization where people can move in and out of projects based on their opinion of whether a project will be a success or not.

The other point Lars Kolind raised was that profit as the sole goal for a company fell way too short to excite its employees to give their best. He claimed that fulfilling values are much better goals for companies to aspire to. Employees who embrace a company’s values will work with a purpose that goes way beyond earning a living. They will work harder and better.  He also claimed that value-based companies – who were recognized in the market as such – fetched much higher EPS multiples than the rest.

From my experience, though it is challenging – particularly in tough economic times – it is important to find the right balance between measurements and values.  Values that are not lived consistently will never become the fabric of a companies culture.

Last week I had the pleasure to travel to Berlin to attend the SmarterCities conference, but let me start with something local.  On Tuesday June 23,  we announced at the Zurich Lab a new kind of water-cooled supercomputer called Aquasar with ETH Zurich, a prized science and engineering university.  While you can read all about it online, I found this Technology Review article particularly well written. The one item that didn’t make it into the press release is that all of this wouldn’t have happened if we didn’t have such a strong relationship with ETH.

Aquasar

You’ve seen my posts about the new nanoscience lab we are opening with them as well and while this is an entirely different project, it stems from a partnership that is quite unique in the world of business and academia.  Without this partnership innovations like Aquasar likely would not be realized.  Imagine if there were thousands of these types of relationships  what could be accomplished — it could lead to some amazing innovations.

Back to my trip to Berlin. My main take-aways from the conference, which was attended by about 500 decision makers from city administrators to politicians to utility managers are:

• Implementing smarter projects, such as the congestion charging system in Stockholm, requires significant political will that is focused on the long term rather short term trying to win the next election. Some even claimed that autocratic systems like Singapore were better suited to implement smarter solutions that those based on real democracy. This thought sparked a lively debate
• Data becomes a control point. Ireland, for example, has established an open access policy to data collected by public agencies. Open access will generate more value for society than if the data were offered up for sale by the government.
• The world is interconnected already in social, economical, and technical dimensions to a system of systems. Understanding this “Uebersystem” though is a challenge that as of yet is not understood at all and will a very relevant topic of further research. Sam Palmisano, in fact, announced on the second day that he had discussed the topic of systemic risk with the German chancellor Angela Merkel that morning and had offered her that, if she were to provide the data from the German Bundesbank, we were ready to analyse it to make progress in understanding systemic risk – in the hopes of avoiding disasters in the future as the current financial crisis. Sounds like an ideal research project cut out for our Mathematics and Computational Science department

Attended by more than 350 guests, including local government officials, academia, IBMers both past and present, partners,  and members of the press we hosted the celebration of the laying of our foundation stone today for the new Nanotechnology Lab here in Rüschlikon.  If you were following the live photos online, great.  If not, one is below and you can see more here.

As you would expect the event featured several guest speakers and if I had to choose several words that really summarized the theme for what everyone said they would be “bold”, “forward-thinking” and “collaboration”.  I will post videos shortly with the speeches and you can hear for yourself.  The one by Dr. Georg Bednorz, IBM Researcher and Nobel Prize Laureate was particularly inspiring. (I will post his video and others shortly)

Throughout the planning for today’s event we organized a time capsule that collected more than 50 artifacts from IBM Zurich Lab employees and ETH professors.  You can see the donations here.

Overall, it was a proud moment for the lab and its employees.  Thomas Watson Jr., the son of the founder of IBM and former chairman, had great forsight, when opening the Zurich Research Lab in 1956, he commented:  “Advances in the various fields of human endeavor are due, to a large extent, to the cooperation of the best brains and best talents available everywhere.“  I couldn’t agree with him any more.

Sky view of Foundation Stone Event

The one embarrassing moment during our event was when I was asked to pour concrete over the time capsule, the concrete delivered in a huge bucket had almost turned solid and just did not come out at the bottom. The workers then had to turn the bucket up-side down to empty it. We had talked too long .

When one of my colleagues came to me last week, she told me about a seminar she had attended where Barbara Kellermann talked about  Followership. This was the first time I had heard this term (at least in English) and it made me think.

When I look what makes a company or country, it is ultimately its people. It is not only the leaders who define strategy and prescribe execution – it is all of us who actually execute and work towards the strategic goals. When things don’t go as planned (i.e., wrong) it is an easy excuse to point to the leaders – but in reality it is each and everyone of us – we’re all responsible. If we follow bad orders, act against common sense and good morals, we’re just as guilty as the people who issued these orders.

It comes down to civil courage, taking personal responsibility and accepting the risk of doing so. If my employees live up to these ideals, I know my organization will work better and be more effective, than if they were just to follow orders without reflection. I am glad to be working in a research environment, where most things get decided rather by debate than authority – and this is not only true for questions of science but also for everything else.