The one thing that Sam Palmisano has learned as CEO of IBM these past eight years is that companies need to differentiate themselves to survive. As a rule, Palmisano says that means making some difficult choices to give companies the capital and flexibility they need to invest in innovation.
Speaking at a gathering of IBM business partners in Orlando today, Palmisano said that in order to make those choices companies are going to have to invest in analytics in order to discover opportunities where they can truly differentiate themselves. That data is getting richer by the minute, he added, thanks to the advent of smart tags, sensors and mobile computing devices that have digital footprints that generate information that can be collectively analyzed.
To enable that process, while at the same time serving to differentiate IBM, Palmisano cited IBM's investment in its Watson supercomputer, which is specifically designed to combine natural language queries and analytics to make information generally more accessible. Currently starring on "Jeopardy!," Palmisano said the real business purpose behind Watson is to advance the state of analytics in a way that creates new opportunities for using IT that ultimately differentiate IBM.
Palmisano noted that of the top 50 companies that were in existence when IBM CEO Thomas Watson, Jr. observed the 50th anniversary of IBM in 1961, only four of them still exist today. Unless companies can truly differentiate themselves through innovation, that casualty rate shows that business is simply too tough to compete on pricing alone. The simple fact of the matter is that in a global economy there is always going to be somebody that can produce goods and services less expensive than your company can. The only way to survive is to constantly innovate by investing in new products and services that allow your company to constantly move up the value chain, he said.
That approach to business, says Palmisano, drives IBM's Smarter Planet strategy, which is focused on solving real-world problems that IBM can help uniquely address. That doesn't mean that IBM wants to do everything, he said. But it does mean that IBM wants to place strategic bets on analytics and new models for delivering IT services such as cloud computing. The implications of cloud computing, he added, are currently being trivialized and are not fully appreciating what it really means to be able to optimize systems for specific application workloads around the goal.
When all is said and done, Palmisano says that as IBM marks its 100th anniversary this year, it occurs to him that there are too many companies that are not focused on acquiring the skills they need to innovate. And without those skills, it's unlikely that any of them will be around for the long term.