Editor's Note: After IBM recently released the findings of a survey that involved interviews with over 750 CEOs, the consulting giant quickly deployed some of its top brass to underscore certain survey revelations — such as the fact that 76 percent of all CEOs ranked business partnerships and collaboration as top sources for new ideas, but only half of the CEOs surveyed believed that their organizations were collaborating beyond a material level. What's more, only 14 percent of the CEOs ranked internal R&D as a source for new ideas. Later, Consulting Magazine caught up with Ginni Rometty, senior vice president, IBM Enterprise Business Services. Here's what she told us.

CM: The findings seem to indicate that CEOs no longer view R&D as a top source of innovation. What does this mean for internal R&D units?

Rometty: What it means for R&D is that its role is going to change going forward. And that while in 17 to 20 percent of the cases R&D is still an innovative source of product and service ideas, what this says is that R&D needs to be focused on process innovation and business model innovation. These are different, and if you look at how we reshaped our own R&D within IBM, you see how we had to move from a product orientation and become much more applied. There has been a redefinition of R&D.


CM: The survey also showed a new willingness to share R&D . . .

Rometty: Yes. When the CEOs did talk to us about business model innovation, what had changed was the number areas in which they were willing to talk about this type of innovation. These areas included R&D and engineering, and this was something different, because in the past they would not say R&D. This idea to do external collaboration in these areas was much stronger than anything we've seen in the past.


CM: What did the survey reveal as far as the priorities that CEOs have goes?

Rometty: The last time we did this survey, back in 2004, growth was put back on the agenda, and products and services and market reach were the areas CEOs talked about. Now, this is really a fundamentally different agenda that CEOs are putting forth. While they were from all different industries and with different growth rates, still they had some very common views as to where their time needed to be placed as far as the future goes. And when it comes to business model innovation, this is around how do I change not just a product or services, but how do I change how I actually operate and challenge paradigms that have been vertically integrated for decades. What we found was that those CEOs who are being driven to open, global collaboration in nonconventional areas are the ones who are now enjoying the highest returns. There was a definite correlation.
CM: Only about 24 percent of CEOs said that they viewed consultants as a source of innovation. This seems rather low in light of how consultants transfer knowledge from one industry to the next.

Rometty: I think it's related to the fact that what CEOs attribute to long-term sustainable innovation is not just around advice or counsel – it's around who can be a partner, who can actually be a partner and actually part of my value chain and do something with me. That's different. It's not that CEOs don't find advice interesting, but it's more situational versus being part of the solution. And that's what CEOs told us.


CM: So, what does this mean?

Rometty: Again, what most CEOs told us is that their business model would need to undergo a transformation. And, only 20 percent felt that they had a track record of having already done it before. One of the stats is that about two-thirds of CEOs think that it's the business model and operational innovation that matter, whereas only about 40 percent said product and services. Think of the airline industry. Is it really about the planes? Or is it really about how Jet Blue puts a video screen on the back of your seat? Or is it about which airlines have fixed costs and which ones have variable costs? Look at the music industry and the success of the MP3, a great invention, but is the issue really an invention or what has happened to the business model around content and distribution. Again, CEOs continued to underscore that the business model is the biggest concern.
CM: It seems that CEOs view themselves as driving business model innovation . . .

Rometty: Yes. In fact, when we asked CEOs who was responsible for innovation within their company, the number one answer was "Me." What they together reinforced for us was that innovation is not moments of brilliance. It needs to be sustainable, and there often needs to be a culture change. Growth is all about change. 
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