IBM: From Progression to Regression
By Noam Copel, CEO, DAV Foundation
Corporate giant IBM was at the forefront of technology for most of the 20th century. Their patent portfolio includes over 70,000 inventions, which include the likes of magnetic tape drives, random access memory, and the floppy disk. The history of the company is awe-inspiring, but their magic seems to have fizzled in their recent past. In this era of crypto, IBM’s profile is strangely hollow. Its greatest claim to “fame” in the blockchain space is its race to patent as much of blockchain tech as it can, and it has recently been doing a bang-up job.
IBM’s Foray into Blockchain
In a space as wide-open and transformative as blockchain, an industry giant like IBM could accomplish things that would bring about profound changes. But we can’t even give IBM credit for its entry into the blockchain arena. IBM is considered a founding member of the Hyperledger Project, with the mission to create an open, standardized and enterprise-grade distributed ledger framework and code base. What many tend to overlook is the fact that this cross-blockchain umbrella effort is actually the brainchild of The Linux Foundation. Once IBM came into the picture, most of the rest of Hyperledger’s stakeholders quickly became overshadowed.
Their collective brain-power could have been used towards mass adoption, or creativity in the blockchain space, but IBM barely scratched the surface. Simply throwing money around isn’t enough, which IBM has learned the hard way by spending $160M a year towards blockchain adoption, with less-than-stellar results. They did do one thing right: diverse leadership.
From a business standpoint, it’s almost as though they are afraid to take risks beyond standard cookie-cutter approaches, which is a sharp contrast to the values of IBMs founding fathers. In 1929, Frederick W. Nichol, the Vice President of IBM, was quoted saying,
“In 1914, no money was spent on Engineering, Development or Patent work. Last year we spent over $500,000 on this important phase of our operations. … In other words, we spent more money in 1928 in Engineering, Development and Patent work than our entire earnings amounted to in 1914. … Mr. Watson has always been an ardent advocate and a firm believer in ‘ploughing’ money back into the business to protect and insure its future.”
What is IBM doing now to protect and insure its future? From here, it looks like struggling to stay afloat, while capitalizing on the inventions of others. They seem to have focused on rapidly filing blockchain patents as an effort to control the uncontrollable. “Patent work” without vision is business-by-litigation. This massive company, despite its resources, networks, and golden legacy, seems to be blind to the possibilities on the horizon.
Unbecoming of A (Former) Powerhouse
IBM’s reign of technological breakthroughs seems to have become a thing of the past. Things did look somewhat promising for IBM towards the end of 2011, as Warren Buffett started to buy shares. It was around that period that IBM announced a turnaround strategy which entailed selling off or downsizing traditional businesses with low margins and develop or acquire new cognitive and cloud businesses with high margins. This move was considered a strategic imperative, however it sparked a chain of declines — 20 quarters in a row to be exact.
So what’s a company to do when it isn’t growing revenue or profits? It cuts costs. Out with the well-paid skilled employees and contractors, and in with their less-skilled outsourced replacements. No one would notice, right? Wrong. Especially when mediocre employees end up playing a role in embarrassing events such as IBM’s public contract disasters in Canada and Australia. This is why it’s hard to be optimistic about the future of what was once a powerhouse of innovation.
Don’t Create, Just Litigate
Not since the Web has it been so obvious that we are on the cusp of another technological revolution. Historically we have looked to industry heavyweights for leadership and innovation. Perhaps it is the nature of many large, wealthy organizations to rest on their pools of capital and adamantly avoid risk, but there is no one better equipped to handle global change than the giants like IBM.
It’s clear that the venerable giant has elected to hibernate in its mountain of patents. But there will be no avoiding or controlling the coming wave of decentralization. Refusing to adopt a true leadership role in this space will only mean that IBM, and other organizations like it, will be left behind.
