Case Study: Sample Homework Paper on Innovation at IBM


Innovation at IBM


International Business Machines Corp (IBM) is renowned worldwide for inventing, developing and manufacturing some of the most revolutionary information technologies such as personal computers, software, microelectronics and storage systems. The company has been in the technology industry for almost one hundred years. Its success has been built upon its firm emphasis on innovation (O’regan 2012, p. 82). This paper will analyze its approach towards innovation and process changes.

Innovation Framework

            IBM’s innovation framework is founded on three interrelated dimensions: market and offering focus, business/enterprise models and operations (IBM 2006). In its market and offering focus, the company desires to find new ways of reaching out to meeting the needs of customers. Consequently, it continually scans the environment, collects new information on present trends, predicts future realities, and works back to explore all that is needed to attain that desired future. The business/enterprise models dimension aims at finding new approaches organizing and expanding its operations. IBM believes in agility, responsiveness and flexibility to the ever-dynamic technology industry. It follows this approach as a way of differentiating itself from rivals and cutting on business expenses.

The last dimension, operations, enables the company to view innovation at an elevated level. It is driven by the need to change outcomes in terms of efficiency, costs, satisfaction levels and sales as well as the need to support new services, products, channels and markets. The intersection of these dimensions has been one of the key reasons why the company has been able to come up with revolutionary gadgets and software in the past. This has also enabled it to adjust its operations to correspond with the contemporary business climate.

Innovation Culture

            IBM’s innovation culture is based on idea generation, an atmosphere of creativity, structure and incubation, incentives and metrics, and technological tools (IBM 2006, p. 93). IBM recognizes that it needs to have a continuous supply of creativity and a free flow of new ideas so that to increase its innovation capacities. Therefore, it encourages its employees to reflect and generate ideas that can be turned into action. The company also fosters a climate where inspiration abounds on a daily basis. Its leaders foster a psychological and physical working environment that facilitates employee stimulation. To ensure that ideas and inspiration comes to fruition, IBM has created structures, mechanisms and process to incubate them. These shepherd ideas maturation by making sure that they are well considered and pursued. Another element of IBM’s culture is employee incentives and recognition. The company has developed metrics to measure talent and endeavor, thus ensuring that it evaluates its entire creative process. Finally, IBM has invested in the appropriate technologies and tools and aligned them in such a way that they promote an environment that is in itself innovative and supports creativity.

Organizational Structure and design

            At IBM, the ownership of innovation is the responsibility of each employee, not just those employed in the research and department or in the labs. This implies that all employees of IBM, from top to bottom, are expected to demonstrate their innovation capabilities in everything they do. The company’s deep sense for innovation is manifested in the fact that the second highest-ranking leader of the company has the specific role of creating and sustaining all innovation programs in the company. Innovation is considered part of the strategic focus for every business unit. As a result, as opposed to establishing a special unit to be in charge of innovation, it is ingrained into all operations of the company (Lojeski & Reilly 2008, p. 152).

Since innovation accountability is bore by each employee, it is considered a personal commitment for every member of staff. In the past few years, IBM has been shifting resources and judgments closer to the customer and the employees that come into contact with them. Thus, clients have played a crucial role in driving innovation. To support innovation across the board, IBM has fostered a collaborative environment by opening up multiple channels through which all stakeholders can communicate and inspire each other. For example, employees, executives, business partners, keystone customers, venture capitalists and universities associated with IBM have a created a network so that to share new information and ideas.

Funding Model

            Innovation at IBM is funded internally or in partnerships with other organizations. Business units, research and corporate departments manage internal funding. In some cases, a cross enterprise transformation organization may provide the funds. Every year, each business unit projects the amount that it would invest in the next financial year. Thus, the business unit leaders have the responsibility of controlling the funds to be used for innovation practices (Chesbrough 2003, p. 89). The corporate management will control budgets that cut across many departments. Apart from business units, IBM has established an Emerging Business Opportunity program that allocates resources and funding to innovative entrepreneurial opportunities that cut across units. However, the relevant units will all contribute. This program is managed by its leaders and members of staff, corporate strategy and the finance department. Another unit that plays a central role in developing innovative products is the Research and Design department. This department has its own budget even though it is partly funded by the business units.

Business transformation and integration

IBM has sustained its success for close to century because of its ability to continually transform its business operations and products so that to meet emerging customer demands. For much of its history, it had focused on manufacturing technological gadgets and hardware. However, the company began to create software in the 1990s on a large-scale basis. In the past decade, the company has taken to business consulting services. These transformations have meant that the company now generates most of its revenues from consulting and services (Hsu 2007, p. 53). This is also a manifestation of the company’s deep culture of innovation.

Most of IBM’s IT innovation strategy is managed by its Global Technology Outlook (GTO) unit, which was formed in 1980. GTO is a collaborative effort designed to predict important trends and developments in IT. This ensures that the company focuses on major business opportunities for sustained growth. GTO guides what the research department works on from a technical direction. In essence, it guides the company’s strategy since it highlights emerging trends in hardware, software and services technology that are likely to influence the IT industry in the coming years.

Each year, the GTO releases a report of its findings. Even though its predictions are mostly made by the company’s vast research community, any IBM employee can forward a topic or idea during the kickoff phase. The company has assigned 12 teams to review and discuss the suggestions amongst themselves and with other units within the company. Their findings are then categorized into themes before a group of technical leaders reviews them. Recommendations from this team are then integrated into the company’s overall strategy.



To succeed in the information technology industry, IBM has had to adopt a forward thinking mentality. Rather than copying what other companies are doing, it has resorted to predicting what is needed and providing it, thereby giving it a competitive advantage over its rivals. However, this strategy could not have worked had the company lacked a robust innovation strategy.




Chesbrough, H. 2003. Open innovation: the new imperative for creating and profiting from technology. Boston, Mass, Harvard Business School Press.

Hsu, C. 2007. Service enterprise integration an enterprise engineering perspective. New York, Springer.

‘IBM’ 2006, Innovation: Putting Ideas Into Action IBM Case Study, pp. 91-119, Business Source Complete, EBSCOhost.

Lojeski, S. K., & Reilly, R. R. 2008. Uniting the virtual workforce: transforming leadership and innovation in the globally integrated enterprise. Hoboken, N.J., John Wiley & Sons.

O’regan, G. 2012. A brief history of computing. London, Springer.