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How IBM makes radical collaboration work?

How IBM makes radical collaboration work is a special report that BusinessWeek has up at its website. Since I work at the site that forms the ground zero of this radical collaborative venture at and through IBM, I am at the vantage of seeing this happen not so much in evaluating how each of these partners are actually collaborating and creating value but in ensuring that the chip designs and processes of the collaborators actually get executed in the best way possible.

First, Steve Hamm lays out the financial picture of IBM prior to embarking on this radical venture.

By late 2003, IBM’s decision three years earlier to pump $5 billion into its chip business wasn’t looking so smart. The division had lost more than $1 billion in 2002 and was on its way to losing $252 million more in 2003. Investors urged Big Blue to quit, but that wasn’t going to happen. IBM saw leading-edge chip technology as vital to keeping its lead in the highly profitable business of making powerful server computers. Still, clearly, something had to be done.

I must note two different actors in this drama, their respective actions and their reasons which are important to evaluate not so much because they can be pigeonholed as primary reactions but as a sort of chicken-egg dilemma. As reported, the financial fact is that IBM is bleeding money in its semiconductor division. In IBM’s view chip-making is a source of competitive advantage in its high-margin server business and so it views its chip-making (and perhaps chip design) as an important upstream activity. Investors on the other hand, privy as they are to a set of financial facts and numbers, will view a bleed as something that has to be fixed. There are scores of examples that one can find where unprofitable businesses are spun-off or shut down by parent companies that go on to find, fund, nurture and defend other sources of competitive advantage. So why not in this case? What bridges these two camps is the need for a new story, a new strategy, a set of steps that must not only staunch the bleeding but also refresh the bleeding patient. And that’s what IBM has done,

IBM has built what it calls an "open ecosystem" of chip R&D with nine partners, including Advanced Micro Devices, Sony, Toshiba, Freescale Semiconductor, and Albany Nanontech, a university research center. All told, in five separate alliances, IBM partners have contributed more than $1 billion to help expand the company’s facilities and buy the latest chipmaking equipment. But just as important, they’re providing brainpower, including more than 250 scientists and engineers who now work in East Fishkill. As a result, IBM’s chip operation boomed, and, even now, during a cyclical downturn in the chip industry, it’s still making a profit.

How far this sort of collaborative innovation will go is anyone’s guess but it is a stab at the future. What you will note is that there isn’t a magical software that is enabling this sort of a collaboration. If you read more of the article, you will note that this sort of collaboration involves actual engineering teams sitting down together and circumscribing the terms of the collaboration while being open to the road ahead. So mark this down as an important milestone in the collaboration journey:

1. Collaboration requires partners to get down to brass tacks and structure it or at the very least draw a few boundaries and open up a few channels – it also involves the commitment of resources.

Read the rest of this entry »

About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

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