An Open Conversation about Open Innovation
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Hello, hello. Malcolm Gladwell here. I want to tell you about a new series we're launching at Pushkin Industries on the 1936 Olympic Games. Adolf Hitler's Games. Fascism, anti-Semitism, racism, high Olympic ideals, craven self-interest, naked ambition, illusion, delusion, all collide in the long, contentious lead-up to the most controversial Olympics in history. The Germans put on a propaganda show, and America went along with all of it. Why?

This season on Revisionist History, the story of the games behind the games. Listen to this season of Revisionist History wherever you get your podcasts. If you want to hear episodes before they're released to the public, subscribe to Pushkin Plus on Apple Podcasts or at pushkin.fm slash plus.

Hello, hello. This is Smart Talks with IBM, a podcast from Pushkin Industries, HiHeartMedia, and IBM about what it means to look at today's most challenging problems in a new way. I'm Malcolm Gladwell.

In this episode, I'm speaking with Jim Whitehurst, Senior Advisor at IBM. In his time with IBM as both an advisor and former president, Jim was responsible for the IBM Cloud and Cognitive Software Organization and Corporate Strategy.

Jim is an expert in open innovation. During his time as president of IBM, Jim embedded his philosophy into the company, helping clients and partners on their own digital transformation journeys.

Today, we'll be talking about the ways open culture at companies can change the way we lead and work together. I realized, hey, this isn't insanity or chaos. It's actually a different way to run an organization that's trying to seek its way into the future. Before coming to IBM, Jim was the president and CEO of Red Hat.

Red Hat has been a leader in enterprise open source software. And while CEO, Jim helped it become the first one billion revenue open source software company in 2012. Let's dive in. Hi, Jim. Hey, how are you? I'm good. Thank you for joining me today. There's so many things I want to talk to you about. Whenever I read the resume of someone like you, I always wonder, how did he get there? Right?

Like what? Tell me, can you give me a short version of how did you end up thinking about things like innovation and creating these kinds of receptive cultures? It's such a kind of, there must be a million paths to that direction. I'm just curious about what your path was.

I graduated from college, thought I wanted to be in technology. I interviewed with the Boston Consulting Group. I loved client service. I never thought I would leave. The craft of working with clients and working in small teams, I loved. I didn't realize that was kind of the nub of how teams and innovation work. And then I was a partner there. I never thought I'd leave. Literally at noon on 9-11,

The CEO of Delta called me and said, I need you now to be my treasurer. And I said, you know, you're out of your mind. I know nothing about being a treasurer. And he said, well, that's okay. Nobody in their right mind would loan us money right now. I just need kind of a creative strategic person. So I joined Delta literally at noon on 9-11 and then kind of ran through the bankruptcy restructuring and then was approached by Red Hat. And I've been a geek playing with Linux in my spare time for a long time. And I joined Delta.

I think that's where my interest really started. Delta is considered a very well-run company. It's always on the list of the most admired companies. And I got to Red Hat and I thought, okay, I know what leadership looks like. And I'd say in the first month,

I thought this place is absolute chaos. I understand they brought me in here to clean it up. Right. The problem at Delta is how do you run a tightly integrated, has to be run with excellence operation. Red Hat's all about innovation. Yeah.

You know, there isn't a leadership style that solves every problem. There's a leadership style for, you know, driving efficiency and driving out variance in a static environment, which is what most leaders have been raised to do. And then there's a leadership style for trying to drive a faster pace of innovation. And those fundamentally look different. So wait, I'm curious about this. So you go from Delta to Red Hat. So Delta.

You couldn't. If we sat down, Jim, and tried to figure out, tried to name two companies that were more different. Yeah, you couldn't do it. So now, how long does it take you to come to the insight you just spoke? So you go from A to Z and you say, whoa, this place looks different because you could have gone the other way, right?

You could have said, I have to turn Red Hat into Delta, but you didn't. I'm guessing nine out of 10 people would have tried to turn Red Hat into Delta and would have flamed out, but you didn't. Why?

Well, I do think a big part of it was I was also learning a new business. And so I literally spent the first six months on the road traveling, seeing customers. And if that hadn't happened, I think you're exactly right. I would have said, no, my job is to bring in, quote unquote, professional management. But I was traveling enough.

that I didn't kind of focus on change. I was saying, let me learn the business, understand our clients, et cetera, et cetera. And in that period of time, I saw a couple of amazing things happen. My second week on the job, I was being briefed on this area called virtualization. And I'm getting briefed on the strategy and why we picked the technology we picked. And in the room was kind of the head of engineering,

a couple of people who worked for him, but all the way down to some engineers working on virtualization. They're telling me the strategy and why we picked the technology we did. And one of the engineers, the most junior people in the room,

And the briefing said, yeah, this is what we're doing. You know, it's wrong. Fundamentally, we picked the wrong technology. There's this new technology that's emerged, which is kind of upstream in Linux. And this is one we should pick. And a huge argument erupts. No, no, no, we did this. And so I'm listening to this back and forth. And I remember going home and telling my wife that night, I said, I am living in chaos.

There's a briefing in front of the CEO where these people are just like literally food fight arguing this stuff out. Four months later, that same set team came in and said, you know what? We were wrong. We need to acquire the company behind the other technology because that's the way to go. And what I realized is, you know what?

If they had just come in and given me a briefing on here's the technology and why we did it, and four months later come in and said, "No, no, no, we want to buy this other," I would have said, "No way. You gave me all the reasons why this is right. We've invested in it. Why would I do that?"

But because I heard the arguments that it was a 55-45 decision and understood it wasn't clear cut and that 55-45 changed over time because of changing circumstances, it was much easier for me to go to the board and say, you know, let's spend hundreds of millions of dollars buying this other company because, you know, I'm convinced it's right because I've heard both sides of the argument. I've seen how it's evolved over time. So that was a time when I realized like, wow,

This system that seemed like chaos was a way that we socialize, you know, the problems that we need to solve in innovation and recognizing that circumstances change and therefore our output can change. All of a sudden I realized, like, no, that argument wasn't chaos. That was a great way to make sure that we were all on the same page on both the facts and where we felt we should act coming out of those facts.

And then I realized, hey, this isn't insanity or chaos. It's actually a different way to run an organization is trying to seek its way into the future. Now, can you let's talk a little bit about that transit. You have these two modes and you're not saying.

Mode A, the Delta mode, isn't useful. You're saying it works if you're in an industry that is well-established, where the technology is moving incrementally, where it's about, Delta has to execute perfectly.

You do not want anyone experimenting with the safety procedures before you buy. I mean, that's a strong example. Now the issue is most companies have some of both. You do want people tinkering with trying experimenting on Delta's website or the mobile app. And so all companies have a degree of difference in the types of operations that they're running.

Red Hat has financial accounting and I go to jail if those numbers are wrong. So you want to make sure that those are locked down. The key is for executives to recognize there are different approaches to your organization, your leadership, your management processes, depending on which organization

objective function you're trying? Are you trying to drive variants out to drive standardization? Are you trying to inject variants in to drive innovation? And you have to do a little bit of both and recognizing that there's a continuum around that. But importantly, more and more of the world is moving to, you know, innovation is important. So walk me through, let's break down all of the components of this open innovation model.

What does it, what does it look like? What does it feel like? What is it, you know, give me a kind of prepare me. So Malcolm's going to move, Malcolm's going to join to do this transition and join. Prepare me for what it looks and feels like.

Sure. So first off, it is absolutely clear what the strategy of the company is, but your work steps are typically left somewhat ambiguous. So you can work to improve, try new things, observe what's happening. So I think most large companies will say frontline really needs to understand the work tasks to get their job done and let's make those efficient. They don't really need to know the corporate strategy.

We would flip that around and say, everybody needs to know the corporate strategy and exactly what we're doing and why. We're going to leave the work steps blurry so you can work to figure it out. And the other thing I think people see out of it, at least certainly at Red Hat, is the

Everybody thinks they're going to come in and everybody's going to be nice and holding hands and singing Kumbaya. And one of the first things they find out is like, wow, it's kind of harsh. I throw up an idea and immediately people shoot it down. And one of the things that we've learned over time, and I do think this is beyond Red Hat, this is kind of a broad, important point, is that

Great ideas are fused together from many good ideas and people arguing and fighting it out and building on top of each other. Let me ask you a very random, odd question. Suppose I came to you, Jim, and said, I would like you, I'd like to bring you into my really good school. Your job is to redesign the curriculum and pedagogy of this school to prepare our students for the world you just described.

Yep. So look, the broad way I would say this is true for any organization, the traditional approach to thinking about solving a problem or leading is very simple. It's three big steps.

You plan, right? You come up with a plan. You then prescribe the activities to whoever has to go execute it. And then you execute and execute is about driving compliance to that plan. You know, in university, what do you teach? You need to...

Teach the capacity to be curious, to experiment, to try. You need to teach the comfort with ambiguity. And that's a tough thing to do. And so that's why I do think engineers in particular need to take more humanities. Right. You know, more open ended, whether it's, you know, philosophy or political science or sociology, where some of these questions don't have focus.

firm answers, I think it's really important for people to learn because comfort with ambiguity and recognizing that there are things that there is no firm, hard answer to, combined with

engineering skills are what enables great engineers to say, I'm going to learn from others. I'm going to try. I'm going to experiment. I'm going to come up to an answer. There is no right answer to solving XYZ innovation. There are multiple approaches and getting people comfortable with that. I think those are key important points that I would advise anyone going to university or universities to think about curriculum. It's, um,

There are no right answers in innovation. There are different approaches and we do spend a lot of time on right and wrong, you know, versus kind of experiment and building. And then the final thing is working together, you know,

There's a lot of evidence that shows that teams come up with better answers than individuals. I always talk about, you know, Red Hat's known for open source, which is, you know, thousands of people working together to build like Linux or other software. And I always make sure people understand open source is not the same thing as crowdsource. Crowdsourcing is you get a million people to throw an idea and one of them's probably going to be good.

Open source, or what I'm talking about with an open organization, is how you get multiple people to work together to give you better solutions than any one of those individuals could on their own. And so the social skills about how you get people to work together to get better solutions is important. But Jim, if I look at, just take high school and university education in this country, so little of learning is taking place in groups.

We are sending kids off by themselves to tackle problems that have been handed to them, prescribed, planned and prescribed, and asking them to execute the problem that we've given them on their own in large part. And to the extent that they are part of a team, it's a very, very informal team. But then we break them up again when we evaluate them, right? I mean, there's a complete disconnect between the world you are describing and

which is responding to the technological challenges of the 21st century and the world we're preparing kids for.

Well, this is the lag. So it's not only the leaders who don't realize their management system is built for the prototypical factory work, road tasks, static environment, et cetera. Education, lining people up in rows, individual, you make a mistake, that's wrong, that's bad, where we know experimentation is so important for innovation. Yeah, we have an education system that is

optimized for the industrial world that no longer exists. And there is a lag there that we have to fix. And we really have, if anything, we're sliding backwards with social media and other things that gets kids even more isolated from each other. And that,

core insight that we know there's tons of academic evidence in research that says groups do better at solving problems than individuals, yet somehow we then want to split people up. It's just, I think it's a lag problem. It's a recognition problem.

Yeah, this is not all the way back. You know, yeah, Ronald Coase won a Nobel Prize for explaining why a company exists. You know, the whole idea was transaction costs. You know, so in other words, the question is, why are companies exist versus everybody's an individual actor and kind of coordinating? And his point was, well, when transaction costs are lower by coordinating inside a company than what a market cost would be, all people will get together and kind of create a company.

That all assumes interactions between people are cost, which is true when you're trying to coordinate and, you know, kind of drive building something at scale. But when you're trying to innovate, we know interactions between people are a benefit because teams are more innovative than individuals. So all of a sudden we built the corporate entities and how we put them together, how we educate people. It's all about minimizing transaction costs and optimizing, you know, the,

individual output and assuming that there's some greater way of, you know, some scientist somewhere, he's going to plug all that together. Yet it is the interactions where, you know, the magic happens when you're trying to innovate. Yeah. This reminds me, I, in my podcast, your vision's history, the one of the last episodes this season is all about war games. It basically asks the question,

why does the military play war games? They play a lot of war games. And one of the reasons is exactly the one you articulated, which is that you can do all the plans, formal planning and prediction. You can send your experts off to come back with reports and you will learn, get a certain kind of insight from that. But there's another way more valuable insight that will only come if you bring a group of people together and have them interact over a problem.

Everyone in the war game world quotes this line from Thomas Schelling, which is something to the effect of even the smartest man in the world cannot make a list of the things that haven't occurred to him. Right. Which is so lovely. I love that. I love that. And that's the point, right? That you only learn about the things that haven't occurred to you when you are in this kind of free flowing, interactive social environment. That's the point. That's why we throw people together.

and create the kind of chaos you're talking about because it's only going to force you off the narrow path that you put yourself on. Yeah, but speaking of the military, one of my favorite kind of pieces to read on leadership, it's commander's intent. And the whole point is intent is so important for others in the field to understand because you can get separated. Frankly, a commander can get killed. And understanding the intent and the objective is so much more important

than understanding the specifics that go around that because as soon as you're on a battlefield, things change by definition. And so if you need to really understand intent and how do you convey that as a leader, I do think those are critical in an ambiguous environment. Yeah, yeah. Is there a way to adopt the wargaming model in the kind of more conventional corporate setting? In other words, running simulations, real-world wargaming,

social simulations of anticipated problems. Is that something that we're doing or at least doing enough?

I remember talking to the CEO of one of the major global banks, and they were saying basically, "Hey, we got this issue with fintechs attacking us. I've asked my team, what are our two big initiatives? We're going to go and attack this." I basically told him, "I think

Don't go out and say you have two initiatives to do this because A, an initiative fails, the person's probably going to get fired. So how much is anybody really, really, really going to go out and try something radical? So what you need to do is say, hey, I want to see our 25 best ideas.

You got six months. Each one can have no more than $250,000 to experiment with. Let's come back in six months and say, let's see where those are. And we're going to maybe kill all of them and talk about the lessons learned. Or we're going to take two and then we're going to take the lessons learned and launch another 25. And we're going to keep doing that until we feel the right things emerge. And those are the ones that we're going to go do.

That's a management approach that says, let's experiment and try and learn and kind of quickly modify around that. As soon as you launch these big, big, big initiatives,

By definition, you're not doing much experimentation in it because you've already put dollars behind it with an outcome predefined. And that's the problem in general with so many of the existing management processes. I call it drive a future state. The words I'll use with leaders is seek a future state. How do you build an organization that can seek a future optimal state? We went backwards and talked about

high school and college education. Let's now go forward. Let's go beyond the corporation. I understand now that a lot of your focus is on philanthropic stuff, climate change, larger kind of society-wide issues. Let's apply that model to some of those. How would you guide us in the way that we think and attack a problem like, for example, climate change?

Well, I'll come back to that model of instead of plan, prescribe, execute, configure, enable, engage. So much of what we're talking about is like, what are the big ways we're going to go electrify the country and put stations around for autonomous driving, et cetera, et cetera, et cetera. And how do we pre-plan all that out? My sense is we need to configure for success. And what I mean by that is

If all of a sudden battery technology takes a leap forward and we get triple the density in a car battery that we have today, well, guess what? The number of stations, recharging stations, probably drops by half. I don't know the asymptotic, but that may be by 4x with a 3x battery. I'm not sure how that math works, but somebody I'm sure would figure that out, which means the number of stations you need, which means the number of electrical lines you need.

are all going to change. And what I know is that no one knows what the innovation curve of batteries look like. We can model things, but nobody knows. And innovation is discontinuous often.

So we need to set context for that to happen. So what does that mean? I would argue, and I know IBM does advocate for a price on carbon, because if you know what carbon costs and you have a carbon tax associated with it, now innovators, entrepreneurs, well, everybody, large companies know here's the cost. And therefore, what am I willing to invest in the

literally millions of decisions to get made in the economy, whether that's for an innovator to invest in a technology to try to make a better battery or whether that's companies and how they think about fleets and what they're doing. That's what I mean by configuring. Now, I do think government can play a role in substantial investments in fundamental research at the right sets of universities or in partnerships with companies. That, again, is configuring. So it's not saying here's the specific steps and pathway to get there because, again,

in the context of innovation, you know you're gonna be wrong and that's how you build a bridge to nowhere. The dollars were there but you didn't realize, well, that no longer makes sense. So setting up the context is critical. And I will say,

I'm very encouraged by what we're seeing happening around the world in terms of interest on climate change. But I do think there's a knee jerk reaction from governments in particular to say, OK, what are the multi hundred billion dollar massive 20 year initiatives when almost for sure those are going to be wrong because you need to take a more progressive,

nimble, agile approach that as we learn, you know, how do you kind of move? I'm not saying we don't want to spend hundreds of billions of dollars on it. We do, but the approach for how we do it can't be these multi-year plan things in a world there. We don't know what the world's going to look like or the pace of innovation. Yeah. I had somebody, I had a conversation with someone recently that was so fascinating. He was talking entirely about light and

LED lights have driven down the cost of light by levels that would have been unimaginable when we didn't realize it was going to be so radical. Light's essentially moving towards, it's not going to be free, but it's getting really, really cheap. And with all these things, it has all these impacts that no one, not a single person would have imagined, for example, that lighting is getting so cheap. It means that you can grow vegetables in greenhouses cheaper than you can grow them in fields. Right.

which never occurred to anybody, right? If you had started with, I'd like to make greenhouse vegetables cheaper than farmers. If you started with that as your goal, you never would have gotten there. It's an impossible physics problem. But I don't know how you build a kind of social and political infrastructure

Because it takes the very things that you were talking about to be comfortable with uncertainty. You have to kind of give up on the notion you can push the world in a given direction. You just have to set something, like you say, put the stick in the sea and let the life form around it, right? That takes an incredible amount of time.

Is it self-confidence? What's the quality it requires of us? Yeah, I think one of the... I see this in companies as well. And you can argue it's self-confidence. You can argue it's needing to check your ego because so much of, I think, senior executives' sense of worth is, I'm the smartest person in the room, or I came up with the answer because I'm here, I've driven this. Where...

Building these types of things, you are the facilitator. You're trying to say, if I'm the smartest person in the room, I've done a lousy job of building the right team around me. There's something you said that I think is a lovely way to tie up the conversation. And I have to say, even after talking to you, what you said took me by surprise when you said,

If I'm silent during a meeting, the meeting is going well or things are. I just think that's so beautiful. So you say to people, if I say nothing, I'm the leader here. If I say nothing, then we've succeeded.

So moving from Red Hat to IBM, I mean, obviously 12 years at Red Hat, everybody knew me in style and it kind of organically grew over time. I was very explicit at IBM on the point of, hey, if I'm silent in a meeting, don't be uncomfortable. That is positive. It means I am listening to and observing the dynamics among everyone and

I'm feeling really, really good about how the conversation's going. If I have an opinion, I might decide to voice it, but I'm always a little bit, especially in new groups of people, I'm a little hesitant to voice them because I'm worried that that starts to jade others' points of view. If I'm silent, that's great. If I jump in, it could be because I have an idea that I just want to throw out there as a participant. It could be that I'm throwing out the exact opposite of what I believe because I think that's going to help the dialogue happen.

Yeah.

threw it out on purpose to try to take the conversation away in areas we want to poke. I think that's really, really critical because most leaders go into a room and think their job is the content. And my view is no, if you believe teams do better than individuals, your job is to make sure the tenor and tone of the conversation is happening because then the best idea will emerge. Yeah. But it makes me want to work for you.

Sounds so much fun. Well, I'm sure we can find a job. Yes, let's have a discussion. So what's next for you?

Well, using the same approach of not overly planning, I'm configuring myself for going forward. I've created a foundation around climate change. I want to spend some time trying to see how I can participate using some of these open principles and solving that problem. I'll continue to work with some technology companies as an advisor, and we'll see what happens in the future. Yeah. Well, good luck.

Jim has a big challenge ahead as he focuses his efforts on climate change. It will be interesting to see what kind of solutions he'll find with using an open culture strategy. Thanks again to Jim for taking the time to chat with me. I can only hope we'll all learn something from taking a more collaborative approach towards problem solving. Smart Talks with IBM is produced by Emily Rostak with Carly Migliore and Catherine Girideau.

Edited by Karen Shikurji. Engineering by Martin Gonzalez. Mixed and mastered by Jason Gambrell and Ben Tolliday. Music by Gramascope. Special thanks to Molly Socha, Andy Kelly, Mia LaBelle, Jacob Weisberg-Hedderfein, Eric Sandler, and Maggie Taylor and the teams at 8 Bar and IBM.

Smart Talks with IBM is a production of Pushkin Industries and iHeartMedia. You can find more Pushkin podcasts on the iHeartRadio app, Apple Podcasts, or wherever you like to listen. I'm Malcolm Gladwell. See you next time.

Hello, hello. Malcolm Gladwell here. I want to tell you about a new series we're launching at Pushkin Industries on the 1936 Olympic Games. Adolf Hitler's Games. Fascism, anti-Semitism, racism, high Olympic ideals, craven self-interest, naked ambition, illusion, delusion, all collide in the long, contentious lead-up to the most controversial Olympics in history. The Germans put on a propaganda show, and America went along with all of it. Why?

This season on Revisionist History, the story of the games behind the games. Listen to this season of Revisionist History wherever you get your podcasts. If you want to hear episodes before they're released to the public, subscribe to Pushkin Plus on Apple Podcasts or at pushkin.fm slash plus.