The core of entrepreneurship is that someone organizes a business venture and assumes the risk of it. In Silicon Valley the presumption is that the business venture is undertaken with the intention to build a company, with the purpose of having a successful (i.e. highly profitable) exit (M&A or IPO) or to generate long term value and impact. As noted in my last posting, SRI’s corporate venture program has resulted in a number of companies (nurtured inside SRI and then spun out) that have produced significant equity return for SRI.
From my current understanding (which may be revised depending on what we hear at our July 10 session) of what IBM is doing on this front, the strategic goal of its corporate entrepreneurship (CE) efforts is not to incubate and spin out (independent) companies. Rather, IBM’s CE goal is primarily to enable strong IBM revenue growth and this can be achieved in various ways, including the following:
- Creating a strong internal environment at IBM for its innovators, including support for world-class R&D. The result has been the creation of a huge and valuable patent portfolio that in turn has enabled IBM to create innovative technologies (such as the Watson supercomputer that gained worldwide prominence by winning the Jeopardy tournament on TV).
- Building strong strategic partnerships with academic institutions to enable world class research which in turn will enable new IBM products and services. This has been one of the focus areas of Jim Spohrer who will be on our panel at our July 10 session.
- Creating programs that provide IBM resources and capabilities to external entrepreneurs for benefit to IBM and the entrepreneurs. More information on IBM’s Global Entrepreneur Program can be found here: https://www-304.ibm.com/partnerworld/wps/servlet/ContentHandler/isv_com_smp_startup
- Co-investing with established VC firms in startup firms that align well with IBM’s strategic goals (these include building world-class offerings in areas such as “Smart Planet”, analytics, cloud computing, security and resilience, smarter commerce and sustainability, among others)
IBM’s Venture Capital Group (VCG; see http://www-304.ibm.com/businesscenter/venturedevelopment/us/en/aboutus/) works by teaming up with established VCs and “focusing on growth markets and emerging technologies important to IBM, to establish a strong ecosystem that fosters innovation.” IBM’s VCG provides expertise, infrastructure, and “Go-To-Market” support that gives credibility and visibility to early stage ventures which improve IBM revenue growth through one or more of the following: Acquisitions, filling IBM’s portfolio gaps, yielding valuable strategic insights, and expanding IBM’s ecosystems (especially around its strategic areas of smart planets, analytics, etc).
Both internal or external CE activities can result in acquisitions when IBM leadership feels this will help build key strengths around key technologies, products, services or markets—or enabling/supporting business model innovations, for instance—but IBM has not been as aggressive or active on the acquisition front as has Cisco, for instance (and more on this in my next posting). Instead, IBM’s preference seems to be more focused on building a wide range of strategic alliances and partnerships, including with large number of world-class academic research institutions around the world. Part of this is driven by the assumption that world class cities will be built around world-class universities, and world-class research in these universities that will help support the economic development of the (smart) cities which will be important markets for a range of IBM products and services (and services account for around 50% or total revenues).
IBM is one of the most successful, large technology-driven companies in the world (with 433,000 employees worldwide and revenues of $107 Billion in 2011). The company celebrated its 100 year anniversary in 2011, building a very impressive business innovation enterprise in the years following serious challenges faced in 1993 (when Lou Gerstner led the turnaround and transformed IBM into the tech and service giant it is today). At our meeting on July 10 we will hear what Jim Spohrer and his colleagues are doing to continue to leverage innovation and CE within IBM and its external ecosystems to ensure continued future growth of this impressive organization.