Irving Wladawsky-Berger

A Personal Year of Transition

In January of this year I posted an entry in my blog announcing that I was Moving On.  I wrote that "After thirty-seven years at IBM, I will be retiring this coming June.  I will continue to be involved with the company on a part-time, emeritus basis, contributing as appropriate where I can."  I later added, "Beyond my continuing relationship with IBM, I am still working out my post-retirement plans."

Even though it has been only a short seven months since my formal retirement from IBM, it is interesting - at least for me - to reflect on this new phase of my life, not just on the obvious personal implications, but on what it might tell me about the changing nature of work in our knowledge economy.

In my case - and everyone’s case is clearly different - I did not go from a full time job at IBM to another full time job in another institution.  I did not retire in the sense of not working either.  I have pretty much remained involved full time in matters concerning the IT industry, including education, technology, market strategy, and policy matters.  But, instead of doing so working full time at one company, - as I did for the past 37 years - I am doing so now by working closely with a few different institutions.

Innovation Communities and Network Effects

I just returned from a week in London, about half of it spent at Imperial College.  I gave a couple of seminars to MBA students, and spent time with faculty and research members of the Innovation and Entrepreneurship Group, arguably one of the foremost such academic groups in the world.  A main focus of my conversations was the Design-London initiative, which was launched earlier this year as a multidisciplinary effort between the engineering and business schools at Imperial College and the Royal College of Art.

Design-London aims to "create an innovation triangle between design (represented by the Royal College of Art), engineering and technology (represented by the Imperial College Faculty of Engineering), and business and management (represented by Imperial's Tanaka Business School)."  It brings together these multiple disciplines to address jointly the challenges of innovation in an increasingly global, competitive economy.  Its main objective is to make London an innovation leader that would enable it to thrive in such a world by building on the historical strengths of the city - its history, culture, infrastructure, diversity and talent base. 

I am intrigued by the efforts around the world to make cities, regions and nations centers of innovation.  They all see major opportunities, as well as fear being left behind as the world transitions from the industrial economies of the past two hundred years to wherever it is we are heading in the knowledge or information age.  Such fears are quite rational, if not downright primal.  Becoming the equivalent of a ghost town, as the global economy passes you by, is something none of us wants for our families and communities.

Hybrid Models of Capitalism

An article in the November 29 issue of The Economist caught my attention.  Titled “Going Hybrid”, it is the lead article in a special report on business in Japan.  It examines the changes taking place in Japanese companies in the past decade as they are developing a new industrial model that combines elements of the old Japanese way of doing things with some carefully chosen bits of American capitalism.  The result is a new hybrid model of capitalism that aims to achieve the best of both worlds.

The old model was founded on three main elements:  lifetime employment, seniority-based pay and close cooperation between unions and management.  This model was well suited to the times, and formed the basis for the Japanese miracle in the second half of the 20th century, which helped Japan become the world's second biggest economy.  But as we know, the old model ran into trouble in the early 1990s, and the Japanese economy has stagnated ever since, during a period when the American economy took off, practicing a more dynamic form of Anglo-Saxon capitalism, including performance-based pay, stock options and pursuit of shareholder value.

In the late 1990s the American model seemed to have all the answers that the Japanese model was missing, but then came the dotcom crash and the series of corporate scandals and unethical behaviors that continue to this day.  Anglo-Saxon capitalism, or at least its most extreme forms, has lost some of its luster in Japan and other countries around the world.

I am fascinated by these discussions because they go to the heart of a very important question: What objectives should ultimately drive a company or business organization?  At one end are the owners or shareholders, whose main objective is typically to grow their personal wealth.  At the other are the stakeholders, including the employees of the company and the communities in which it has facilities and conducts business.  It would be quite rare - perhaps even dysfunctionally so - to meet employees who would put an abstract concept like shareholder value ahead of their personal well being, as well as that of their families, colleagues and friends.

Talent, Unpredictability, and The Strategy Paradox

I recently attended a meeting with Michael Raynor, to hear him discuss his new book, The Strategy Paradox.  Michael is a Distinguished Fellow at Deloitte Consulting, where he works on corporate strategy with senior executives across a wide range of industries.  He is co-author along with Clay Christensen of the 2003 bestseller The Innovator's Solution: Creating and Sustaining Successful Growth.  The Innovator's Solution is one of the books I used in the graduate seminar I just finished teaching at MIT this semester.  It is an excellent book, both well organized and well written - a combination not often found in business and management books.

The Strategy Paradox was published this past February, and was just named one of the best business strategy books of the year by strategy+business magazine.  Its tag line is “Why committing to success leads to failure (and what to do about it).”  "Most strategies are built on specific beliefs about the future," writes Michael in the opening of the book.  "Unfortunately, the future is deeply unpredictable.  Worse, the requirements of breakthrough success demand implementing strategy in ways that make it impossible to adapt should the future not turn out as expected.  The result is the Strategy Paradox: strategies with the greatest possibility of success also have the greatest possibility of failure.  Resolving this paradox requires a new way of thinking about strategy and uncertainty." 

He lucidly makes the point that the most successful companies often have more in common with companies that failed and are no longer in business, than they do with companies that have managed merely to survive.  The successful companies, as well as many of the failed ones, aimed to be leaders in their industries and market segments.  The former made it.  The latter did not.  Often, the only discernible difference between the two is the element of luck.  When you aim for the stars, you take risks, and those risks will often do you in.  The best way to improve your chances of survival is to take fewer risks, a strategy that usually leads to mediocre firms.

A Grand Challenge Crying Out for Leadership

The November 25 Sunday New York Times included yet another editorial bemoaning "The High Cost of Health Care."  It is a good editorial, and I generally agree with both its list of Causes as well as its recommended Solutions.  But I wonder if anything will come of it.

The editorial points out that "health care costs are far higher in the United States than in any other advanced nation, whether measured in total dollars spent, as a percentage of the economy, or on a per capita basis."  This would be fine, or at least tolerable, if the U.S. enjoyed a quality of health care commensurate with its higher costs.  But as we well know, this is not the case. 

The Commonwealth Fund, a private foundation, reported in a recent article, "Despite health expenditures that are twice those of the median industrialized country, a new national scorecard of U.S. health care system performance finds the nation falls short on key indicators of health outcomes, quality, access, efficiency, and equity."  It goes on to say that "Among 19 industrialized countries, the U.S. ranked 15th on mortality from conditions amenable to health care, or deaths before age 75 that are potentially preventable with timely, effective care. The U.S. rate was more than 30 percent worse than the benchmark—the top three countries. The U.S. also ranks at the bottom for healthy life expectancy and last on infant mortality."

There is nothing new here.  We have all been reading editorials and reports like these for a while now.  Calls for action abound.  Among the top recommendations of the 2004 U.S. National Innovation Initiative was a call to build a health care test bed, including electronic health reporting, standards for an integrated health data system, pilot programs for international exchanges on health care research and delivery, and the use of performance-based purchasing agreements.

Finally, the 2005 report, A Healthy System issued by the Technology CEO Council, concluded, "If there's one thing that everyone agrees on about the U.S. health care system, it's that it isn't, in fact, a system," and that "the sad truth is that in health care today the whole is much less than the sum of its parts."  The report went on to say, "We will never fix this problem simply by tinkering with its parts. As a practical matter, and as a moral imperative, we have to address the systemic problems of health care.  And the most glaring - and promising - is health care's shocking lack of modern, networked information technology (IT), and the lost quality and efficiency that result."