Posted by Ted Schadler on November 20, 2008
[dateline] Stamford, CT
IBM CEO Sam Palmisano gave a speech to the Council on Foreign Affairs in New York City on November 6, 2008. In the speech, he added his voice that that of Al Gore, Jeff Immelt, and Barack Obama to declare that the US can lead the world to prosperity (and out of this financial quagmire). He called his vision building a "smarter planet."
Here's how I see the smarter planet:
- Intelligence and network connections are embedded in physical systems. Chips and bandwidth have helped optimize business processes and make information workers more productive. But information technology hasn't yet really helped optimize our physical systems. A company on a smarter planet will put computers and connections into every physical system so that machines can phone home, operating problems can telegraph themselves, and power grids and distribution systems can be monitored, controlled, and optimized. (Forrester first identified this trend of an extended "Internet of things" in 2001 with a report entitled "The X Internet.")
- End-to-end processes are identified, instrumented, and optimized. Internal business processes that involve people are still manual, clunky, and inefficient. But processes that span companies are particularly manual. A solid company on a smarter planet will know where its processes bog down and instrument them so they can be tuned. An excellent company on a smarter planet will work closely with partners to instrument and automate the processes that span their industry. This will help companies embrace the inevitable change that Google-brilliant buyers, global customers, and scarce resources will drive.
- Systems are designed for sustainability and lifetime cost. Green is all the rage today, and there is money to be made in building and operating green. But green is just one dimension of sustainability: building systems and processes that preserve scarce resources, get the most out for the least in, and take the upfront cost hit to gain long-term operational payback. A company on a smarter planet will think about the lifetime cost and do a smart tradeoff betweeen capital expenditure and operating expense.
The Payoff Is Lower Costs, Less Waste, Faster Turnaround, And More Agility
What IBM has correctly identified is that information technology can make entire systems and industries, not just single firms or business processes, more efficient. To achieve those efficiencies will require embedding IT -- data, computing, and networks -- into every part of that system. And IBM is probably the company with the necessary IT assets -- hardware, software, networks, partnerships, services, and processes -- to drive this effort. HP is the next closest alternative.
Challenges To Building A Smarter Planet
There are of course big challenges to becoming a company on a smarter planet:
- Challenge #1: Business metrics reward short-term investments, not big infrastructure overhauls. And if there's one thing required to build a smarter planet, it's big investments in intelligent infrastructure and systems. These will be tough to finance and justify. This is where governments can help with investment incentives.
- Challenge #2: IT expertise is focused on the data center and desktop, not physical systems. And IT expertise is required to make physical systems and end-to-end processes intelligent. IT professionals can build this expertise, but only if they free their time by shedding responsibility for basic systems like email.
- Challenge #3: Information today flows inside a company, not between business partners. And the culture of compliance, security, and (my view) paranoia that permeates our post-9/11 world makes it almost impossible to imagine how we'll open up the information flows between companies. Here again, the government can help by revisiting the most rigid strictures of regulations like Sarbanes Oxley.
What Must Change To Thrive On A Smarter Planet
Of course, none of this will happen unless companies, their suppliers, and their governments make fundamental changes in their expectations and operations.
- IT suppliers will have to master industry issues. IBM Software Group organized its analyst event around what it calls "industry frameworks." These are essentially integration frameworks that include the industry standards and connectors. On a smarter planet, the devil's in the details: IT to make the power grid more efficient has little in common with IT that optimizes transportation systems. IBM's industry frameworks are a start (and are far ahead of other IT suppliers), but IBM's mastery of specific industry infrastructures, processes, relationships, and issues must go much deeper.
- IT professionals will have to partner with their operations colleagues. Physical systems can't be made intelligent until the digital folks and the physical folks are sitting in the same room, wrestling with the same issues, solving the collective problem. You may remember the disaster that was the automated baggage handler at the Denver Airport when it opened. Avoid that by building bridges between IT and operations.
- Investment vehicles will have to be created to fuel an infrastructure overhaul. In the US, we suffer from aging infrastructure and no will to replace it. But replace it we must if we are to embed intelligence in it. Here's a consumer example and a sample solution: Putting photovoltaic panels on your roof can cost $50,000 and have a 15-year payback. Most consumers won't bother. To help, Massachusetts and California have created laws allows a utility or third party to buy and install the panels, take a cut of the monthly energy revenue generated, and lease the panels to a home owner.
- Business boundaries will have to become checkpoints not barriers to information flow. We must protect corporate information, but to eliminate wasteful processes and chokepoints, we must also let the right information flow more easily between firms. The integration and security technology exists, but the business will doesn't. These linkages will only happen if both parties share benefit and risk.
- Firms will have to insist on deep partnerships between their IT and industry suppliers. IBM can't do this alone. Nor can industry suppliers like ABB, Johson Controls, Siemens, GE, UPS, or Lockheed Martin. Instead, these suppliers must combine their expertise to get the job done.
Disagree? Have thoughts to share? Please comment and let me know.
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