In Pursuit of the Hardest, Riskiest and Most Valuable Innovation

Last week IBM once again announced that they received more U.S. patents in the previous year than any other company in the world. This marks the 26th year in a row that Big Blue has set the standard.

Nearly half of the patents IBM received in 2018 relate to cutting edge technologies such as artificial intelligence (AI), cloud computing, security, blockchain and quantum computing. IBM chairman, president and CEO Ginni Rometty said these inventions are indicative of the company’s commitment to “solving problems many people have not even thought of yet.”

As IBM was preparing to announce yet another milestone achievement, this year receiving 9,100 U.S. patents in 2018, I had the opportunity to sit down for an on the record conversation with Mark Ringes, Vice President and Assistant General Counsel for IBM, and Manny Schecter, Chief Patent Counsel for IBM. Our conversation took place at IBM offices on Madison Avenue in New York City, and was wide-ranging. What appears below specifically relates to IBM’s innovation leadership and quest to patent as much of its technology and innovation as possible. Stay tuned in the coming days for the rest of our conversation.

In the discussion that follows, we discuss IBM’s commitment to innovation and how the company is not afraid to pursue hard, risky innovations because those will be the most valuable innovations in the future. But even IBM is constrained by a budget. So, the philosophy is to obtain patents in a variety of areas and allow the technology and market realities dictate where future resources, and company efforts, are placed.

Without further ado, here is my conversation with Mark Ringes and Manny Schecter.

QUINN: So, IBM is now ready to announce 26 years in a row of having achieved the most U.S. patent grants.  Why has this continued to be so important to IBM?

RINGES: Innovation has always been fundamental with IBM from the very beginning of the company, and for the last 107 years  And we believe that patents are a very strong proxy of the innovation that goes on within a business, and so that’s why leadership has been important and continues to be important to us, because it really is a sign of the amount of innovation that goes on in our company.

SCHECTER: I certainly agree with Mark, but if you think about it, most of the businesses, most of the competition we have in our industry is, are companies that have only existed for some portion of our lifetime.  We’re a company that goes back over 100 years.  We started out in clocks and scales and, you know –

RINGES: Meat slicers.

SCHECTER: Meat slicers and things.  And we’ve re-invented ourselves several times, so innovation has become part of the fabric of the company.  And, you know, there is nothing better to highlight that, to make that evident to the world than the patent system.

RINGES: And also, to add to that, it’s important to the people in our company that are responsible for innovation, that they are recognized and patents are a way to encourage them to continue to innovate on a daily basis.

QUINN: You know, when you said, Manny, other companies have only been around for a portion of your lifetime, what I thought you were going to say is some companies, including companies that are also on the list, have only been around for less than the number of years that you’ve been number one.

RINGES: That’s true.

SCHECTER: That may be true, although, I can’t say that I’ve researched that.

QUINN: And there’s a couple that come to mind, you know, you think of, some of the ones that, you know, our kids might think have been around forever, simply because they have been in their consciousness ever since they’ve had a consciousness that they can go back to, but that’s the power of innovation – it can keep you at the top.

SCHECTER: That’s right.  And that is a core fundamental principle of our business.

QUINN: Yeah, so where do you see IBM going in the future?  And I know that’s a very broad, open-ended question, and it’s probably terribly unfair, but I’m going to try and get you to give me something anyway, because Watson is something that has caught the public consciousness, and obviously, you knew about Watson and its potential long before the public knew about it, and I don’t want you to give away any trade secrets, not that you would or anything, but is there anything that you think that is the future of innovation that the public should be paying attention to that they’re not, or that IBM is working on? I know every year there seems to be a new application that you’re talking about with respect to Watson.

RINGES: Well, there are a number of technologies that we continue to invest in, that we think are important to our long-term future.  There’s no doubt about that.  And in the mid-term, cloud, hybrid cloud, machine learning, those technologies are extremely important to us, and you look at our portfolio and the patents that we have received in 2017, 2018, hopefully we will receive in 2019, many of those will be directed to those technologies.  Of the longer-term technologies we continue to invest in, one that is getting a little bit of attention and probably will get more and more attention as it becomes more of a reality is quantum computing.  We see that as a huge difference maker for, not only our company, but for the world.  Now, that technology is still nascent, it’s got a long way to go before it’s something that can be put in production and people actually derive significant value from, but we’ll put a lot of effort and investment into the longer-term technologies and we’ll get patents in them as well.

QUINN: I notice that you said machine learning and not artificial intelligence.  I know the difference between machine learning and artificial intelligence, but a lot of people really don’t know the difference.

RINGES: I was trying to be a little more specific there because artificial intelligence can go across the map, and I think the real innovation in that space is around machine learning, and that’s why I was specific with that.

SCHECTER: The hardest innovation, the riskiest innovation.

RINGES: And probably the most valuable innovation will come out of that.

QUINN: Right, and that’s where you guys are focusing on?

RINGES: Well, that’s one area, obviously, that we are focusing on, absolutely.

QUINN: Okay.  And in terms of applications of many of these things, Manny, do you see anything that stands out to you that, you know, when you talk to your guys or you see what’s in the pipeline, your inner geek goes, wow?  That you can share with us, obviously.

SCHECTER: Not really that I can share.  The thing that is different for us is that in the beginning we were of course focused on applications of Watson that had the greatest public wow factor or the largest relevant markets, and now we are actually starting to get the freedom to build Watson applications for all sorts of things that maybe we couldn’t early on when we had to actually prove the technology worked, and so now we even see our own people in the law department in IBM dabbling with Watson, applying it to various legal applications. So, you know, I don’t know if that is the wow factor you’re talking about, but it is evidence to me of the coming of age of the technology.

QUINN: You know, that works, that works.  So, I’m looking at the clock and I know that I don’t want to keep you too late, but is there, hmm, how do I phrase this?  One of the things that always, maybe I should just throw this out there because, you know, I think about this a lot, and it is something you told me, I think it might have been during our very first interview, and I asked you why do you think others haven’t figured out this, this model, you know, and you said to me, I just don’t have time to sit around thinking about why others haven’t done it this way or what others are doing.  I know what we’re doing.  And I’ve taken that into my own life to mean, just put your foot on the accelerator and don’t look back, and I suppose you have to have a sense of where the industry is going and you know, it’s not totally right that you can’t keep an eye on the periphery, but when you know you’re onto something, you just have to trust the process, I guess, is the way to do it. So, is it still like that around here?  Is IBM just still always foot on the accelerator, you just continue to just plow forward in that same sort of way?

SCHECTER: Well, to some extent the answer is yes.

RINGES: In some ways, we’re constrained by limited funds and that sort of thing that always is an element of things we have to consider because we have shareholders that we have to answer to.  But in the technologies that we deal with, the market is moving so quickly that it is hard to predict, at any point in time, where we will be five years from now, not that we don’t try, we do try.  We put a lot of effort into that.  But that just means that we need to have our investment dollars in a number of different places, and that’s one reason our portfolio is extremely broad.  And that’s because we know that we can’t identify 1, 2 or 3 spaces that we should throw all our investment dollars in, and focus our patenting efforts there.  We focus more broadly because any one of those areas might take off and be very successful for us and so we’re fortunate that we have a sizeable research and development budget that we can take advantage of and throw money in a number of different spaces. Through our research organization we invest in a huge variety of technologies and spaces, and ultimately, some of those will hit, and for others we will decide that it wasn’t necessarily good money invested there, but we don’t know today what’s going to be successful four or five years from now.

QUINN: Yeah, and that wasn’t how I took it, what I kind of took it as is that, you know you have a process that works, and you’re just going to continue to do it.  I guess the way, that this may have come up was, during tough times, and this may have been when we had this conversation back in ’08 and ’09, what a lot of these companies will do is the first thing that gets cut is the research and development budget, you know?  As if you are going to find more when you’re looking for less, you know, and that doesn’t seem to be something, you know, going along with the whole IBM leadership that, you seem committed to continuing on this trajectory and that level of commitment of purpose, is something that I think is a unique.

SCHECTER: Well, we’re certainly committed to innovation, that’s for sure.  An innovation company could make the decision that it is not going to be an innovator anymore, and instead compete on price or through some other means.  That’s not what we have done –  we continue to want to be an innovation leader.  Other companies who might be cutting in that space might see it differently.

RINGES: Our general corporate strategy is not just to maximize results for the next two or three years.  We’ve been around 107 years, we’d like to be around 170 years, and so we need to continue to invest over the long-term, and we understand that we, our business will not look 10 years from now anything like it looks today.  It will have to look significantly different because the market we play in is transforming so quickly, we have to transform our business.  And the only way for us to get from where we are today to where we want to be in 10 or 15 years from now, is to continue to make those investments.

QUINN: Right, and to continue to evolve.

SCHECTER: You stop and think what it was like 10 years ago and what we never fully anticipated, you know? Divesting most of what we do in micro-electronics.  The emergence of quantum computing and artificial intelligence…

RINGES: And a hardware manufacturer 10 or 15 years ago, now hardware is less than 2% of our business.

QUINN: So now, this may be a loaded question that you want to just back away from, how do you define innovation?  And the reason why, and I’ll just lay it on the table, the reason why it may be a loaded question is simply because the way I think some folks define innovation is as a new product that they are selling for the first time, so it is innovative, it is new for them and I don’t sense that that’s really what the meaning of the word is intended to mean and when I talk about an innovator, I, I talk about somebody who creates something that heretofore has not existed.

SCHECTER: So that sounds closer to the way you think of the definition of an invention?

QUINN: Right.

SCHECTER: And, I, I’ve heard many people tie the definition of innovation to a product coming to market and I think we’ve heard that at times within IBM.  I know when I go to the dictionary and look it up, I don’t see it quite defined that way, but sometimes I think people, it’s like anything else, people define terms or think of terms in a way that suits their purpose at a particular moment.

QUINN: And the reason that I think it sometimes becomes a little bit loaded is when you get to talking about the 101 issue, are you a technology adopter or are you a technology creator?  You know, and if you’re a technology adopter that is putting something into your products to then sell to the consumer, that’s one level of innovation.  But it’s a wholly other level of innovation if you’re the one who came up with the technology that then allows somebody to adopt it and put it into their products and sell it to the end person and what I see is in the 101 debate is between the adopter who puts it into the device versus the person who created it to be adopted.

RINGES: A lot of the things that we do in our research space will never end up in IBM products.  We’ll help other companies improve their products or create products for them or find new solutions to problems they are trying to solve, and that works out just as well for us.  As long as we can find a way to monetize it and make it successful.  So innovation does not have to mean something that necessarily improves or creates a new IBM product, it creates something new for business and we’re trying to create things that help our customers do what they do better.

SCHECTER: Think of the famous quotes from Edison about learning from your failures.

QUINN: Yes, and we recently were talking about the models for monetization, you had mentioned that, Mark, it didn’t matter whether you manufacture or don’t manufacture, you were a patent owner.  And on some level, this sort of, as long as, whether your innovation is the last part of the mile or it’s the first part of the mile, innovation is innovation and we maybe ought not to be trying to parse it between which is the most relevant and which is not the most relevant, which is I think what is going on sometimes with the 101 debate, and it kind of plays two ends of that off of one another unfortunately.

SCHECTER: I agree, I always thought we should have a simple test for patentability, that goes back to, you know, the rigor of Graham v. John Deere.  The 101 malleability is just causing a nightmare.

QUINN: Right, because it’s got to be at least as difficult to do the first mile, and in my mind, a lot more difficult to do the first mile, than it is to do the last mile, but I don’t want to make it such that the last mile isn’t significant.

SCHECTER: Yeah, both are important.

RINGES: Right, they are important, we need a test that can deal with them all.

QUINN: Alright gentlemen, well I really appreciate your time, thank you very much.

SCHECTER: Thanks.

RINGES: Thank you.

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