UCB Japan Alumni Association Event

December 7, 2007 at IBM Japan, Tokyo

Successful Innovation in the Corporation

Kakutaro Kitashiro
Chairman, IBM Japan

Mr. Kakutaro Kitashiro, Chairman, IBM Japan (MS EECS, UC Berkeley '72) gave a lecture for UC Berkeley Alumni members in Tokyo on December 7, 2007. Mr. Kitashiro summarized key success factors for innovation showing that at IBM everyone talks, breathes and sleeps with innovation in mind, being highly proficient in executing the innovation process.

For successful innovation in a corporation:

1. Top management must build a climate and culture necessary for innovation. Therefore, they
must incessantly mention the importance of innovation using his own initiative.

2. Create an environment for collaboration among different departments. Wai-Gaya of Honda
is a good example (i.e. enthusiastic exchange of ideas). Make space for having tea together, reading magazines and informal exchange of ideas.

3. Establish management system for innovation:

    a. Set a goal such as 30% of revenues generated from products developed in the past 3 years.
    Define a method for measuring the results in accordance with the degree of business maturity.

    b. Devise the method for evaluating innovation activities from one for evaluating conventional
    business activities (評価の仕組みを分ける）:

       (1) Mainstream business business may be measured by revenues, profits, ROE, etc.

       (2) Outcome from innovation effort is uncertain and may take time. Evaluation based on the
            mile stone of innovation is necessary. Only negative evaluation based on financial prospect
            will terminate the project.

    c. Verify that enough investment is being invested in the areas with guaranteed growth.

    d. Innovation projects need be evaluated, supported and managed by SVP-class executives.

    Otherwise, the projects should be terminated.

4. Quick decision-making is essential, otherwise competitors will break into the market. Large companies tend to take time for decision-making so as to fail in innovation.

5. Keep on having employees being filled up with entrepreneurial spirits and lead the project. An original proposer could be an innovator who is free from conventional approaches, (過去に捕らわれず、独創的な考えを持ち）and he can avoid an inventor's dilemma.

6. Information and Communication Technologies (ICT) are rapidly advancing. Use ICT so as to accelerate innovation. ICT can be used as a tool for corporate management processes, making a core business model (経営に取り入れろ）.

Just 10 years ago, IBM was a 70% hardware sales company, and it has drastically changed its business structure. Currently, hardware sales portion is about 20%.

Clear vision and leadership of the top management has made this transformation possible, that is, from a hardware-centered company to a service-oriented one (業体の変革）.