Earlier in April I participated in IBM's 2006 Business Leadership Forum (BLF). The forum included several hundred leaders of industry, government and academia from over 50 countries who gathered in Rome for two days of discussions about the challenges and opportunities facing business in the 21st century. This is the fourth such forum we have held and the first global one. In 2003, our first BLF in San Francisco began a dialogue on the proper business strategies to pursue in the wake of the dot-com implosion. In 2004 and 2005, we held regional forums in Paris and Shanghai respectively. Having learned from these earlier forums that business issues in each region are not dramatically different, we decided that for 2006 the BLF would include participants from around the world.
I found the presentations and panels over the two days of the Rome BLF fascinating. It was not just the content; it was also the different leadership styles and approaches to innovation represented by the speakers. Let me talk about a few of them.
IBM Chairman and CEO Sam Palmisano opened the forum by observing that innovation is an imperative for anyone wanting to differentiate their companies and avoid competing solely on costs in a crowded, commoditized marketplace. He talked about some of the powerful forces driving innovation in business. First, he told the audience that one unavoidable fact of which all should be aware is that globalization is inevitable and that the world as a result is becoming more integrated. He then linked globalization to economic expansion and, in particular, to the growing percentage of worldwide GDP coming from emerging markets -- especially China and India where a young, vibrant, talented set of professionals is eagerly entering the global economy.
Sam then talked about the unpredictable environment we have been living in for the past few years, and the difficulty in planning due to the rate and pace of change inspired by geopolitical and security issues, economic fluctuations, market bubbles and what have you. As a result, business models are being furiously challenged by world events beyond their control and occurring anywhere, which in today's integrated environment will have a rippling effect across the globe.
In such an environment, Sam went on to say, a business has only a couple of choices. It can hunker down and try to ride out the changes, hoping things will return to the more stable world of the past; or it can create a strategy and a set of business models that allow the business to thrive and be successful in the face of the realities of this emerging world -- in other words, embrace innovation across the business.
BP Group Chief Executive John Browne spoke next. (By the way, for the last few years I have been a member of BP's Technology Advisory Council.) Lord Browne said that innovation was all about organizing the business in ways that allow people to explore possibilities and take risks confidently. Innovation, in his opinion, is part of the process of anticipating and responding to changing needs and, since human needs are constantly evolving, innovation is the key to the long-term competitive success of any business. He went on to talk about innovation in the energy business, summarizing its key challenges as enhancing energy security by finding reliable supplies of energy, and addressing climate change concerns by reducing the environmental impact of energy production and use.
Lord Browne then talked about some of BP's efforts in these areas. For example, the amount of oil typically recovered from a field is a bit over 50 percent, up from around 25 - 30 percent when he first joined the industry forty years ago. He believes oil recovery can be driven beyond sixty percent through advanced simulations that convey a better idea of where the oil is, and advanced technologies like horizontal drilling to get at it. He talked about some very exciting pilot projects BP has under way in Scotland and California to produce clean, carbon-free electricity through a technology called carbon sequestration which extracts carbon from hydrocarbons and buries it in an existing oil or gas field. Finally, he briefly mentioned some of the newer, riskier projects in search of greener and renewable energy sources, such as crops that produce plentiful, clean energy.
Lord Browne made several comments about the issues surrounding climate change that I found particularly compelling. He acknowledged that there are multiple points of view in this area: “The science of climate change is still provisional. But then, all science is provisional,” and then added “What seems clear is that we can't ignore the mounting evidence. And no business whose purpose is to supply energy sustainably can turn away from the challenge or pretend it's someone else's problem.” Later on in his talk he said “. . . innovation can help provide answers and help us to escape from the sense of fatalism which starts from a belief that climate change is such a huge global problem that there's nothing that can be done about it. That is wrong. There are lots of things that can be done.”
BP and IBM are very good examples of well established, multi-national companies looking to transform themselves through innovation. A very different innovation story is that of Bharti Enterprises, India's leading telecom conglomerate. Sunil Mittal, Bharti's Chairman and Group Managing Director talked about the major challenges Bharti has faced over the last few years as India navigates some turbulent waters. He explained that, with India's annual per capita income only a bit over $600, cellular phone service has to be provided for the Indian market at a very low price, around 2 cents a minute or less. The only way to provide telecom services so inexpensively and run a profitable business is to take advantage of India’s large population and economic growth, scaling up the business rapidly by adding many new customers every month.
To do this, Sunil Mittal had to develop a radically innovative business model: focus only on the customers and outsource just about everything else. In other words, put all the energy of the business into attracting, supporting and retaining customers and accept the fact that pretty much everything else has been commoditized and should be outsourced, including managing all the IT equipment and the network. He said there was a lot of resistance to this strategy. People were calling him from around the world saying that IT and the network were the heart of a telecom company. “You cannot give your heart away and then run a business”, they said to him.
Mittal begged to differ, saying the customer, not the technology, was at the heart of his business and then proceeded to implement the strategy. He further confounded everyone by not picking Indian companies as his outsourcing partners, choosing instead IBM to run IT and Nokia and Ericsson to run the network, because he wanted highly experienced, international companies that could keep up with the torrid pace of Bharti’s growth. Today, Bharti is one of the top five companies in India, and Mittal’s vision for it is to be India’s most admired brand by 2010.
Linus Torvalds represents a totally different innovation leadership style. At the BLF I introduced him by reminding the audience that a community of the best and brightest programmers around the world is developing Linux, and that in my opinion the Linux community works so well and has been so productive because of Linus' creativity certainly, but also his leadership qualities.
Linus told the audience that he was primarily an engineer, not at all a visionary leader, and that he spent all his energies focusing on the problems right in front of him. He talked about how Linux is organized and explained that it has no central authority at all - a phenomenon he attributed to his inability to be a great leader. Instead, Linux has a distributed decision-making process in which different people decide which ideas they will accept from contributors all around the world. He answered a question as to how the different people who make decisions in the Linux community are picked, and replied that it was all based on trust and connections. There is a built-in mechanism that allows good people automatically to strengthen their own connections to everyone else through a combination of good technical and communication skills.
Linus also explained why people would spend so much of their time on a volunteer project like Linux with no immediate financial gain. As an engineer, he said, there is no better feeling than solving a problem that has bedeviled you for days. Suddenly a light goes on, and you get the rush of having finally solved it. In the end, he said, a lot of technical people find solving such technical problems very satisfying, and that is why they do it.
I stand by the words I used to introduce Linus Torvalds – he is indeed a very good and innovative leader, with his own unique style that has proved tremendously effective in leading one of the most powerful forces in IT today.
Let me close with an observation made by Tom Friedman, best-selling author of “The World is Flat”. He addressed the Rome Business Leadership Forum on tape and succinctly captured the necessity of everyone’s paying close attention to innovation.
"When the world is flat, whatever can be done will be done. Pay attention to that. Whatever the technology empowers and enables, whatever can be done will be done.
There's only one question left: will it be done by you or to you? And that is really the challenge for every company. You've got to understand and identify what the tools out there will enable you or your competitors to do, and you've got to do it before your competitors.
And that takes an innovative flare."
So, what did I learn from the various talks and panels at the Business Leadership Forum. One lesson is that no one approach to innovation and innovation leadership is best; rather, different approaches will work best in different situations and for different individuals.
Another is that the era of competing to be the best is no longer enough; we are entering an era where we are competing to be unique. And while in principle being the best is a zero sum game, different people and companies can each be unique in their own innovation style.