IBM, R&D And 60 Years

Licensing of IBM-developed technology brings in nice profits.

When analysts noted in October that IBM's third quarter exceeded expectations, most merely referred to the strength of the business model across hardware, software and services. What they missed was the strength of the R&D strategy as exemplified at October's 60th anniversary of R&D at the T.J. Watson Research Center.

For example, licensing of IBM-developed technology in 2004 resulted in $1.2 billion in profit, reports Paul Horn, senior vice president/research at the Yorktown Heights, N.Y. facility

What analysts also missed is IBM's preeminence as the world's most inventive company -- based on its generation of U.S. patents. For 12 consecutive years IBM has led the world according to the U.S. Patent and Trademark office, Horn says. He anticipates the 13-year record to be forthcoming.

What also has made R&D more significant to IBM's progress is the expanded roles of the company's researchers as more of the company's revenues come from services (53% now), Horn says. Henry Chesbrough labeled the transition as "turning them [research staff] into knowledge brokers as well as knowledge generators" in Open Innovation (2003, Harvard BusinessSchool Press).

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