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But Can Big Blue Boogie?

Shortly after taking over as research director in 1996, Paul Horn changed the division’s motto. Out went the phrase, “famous for its science and technology and vital to IBM.” The new legend simply declared: “vital to IBM’s future success.” Talk about shock. “He took science and technology out of the wording,” recalls Randall Isaac, research vice president for Systems, Technology, and Science. “People were wondering, What does it mean, what does it mean?’”

While the motto change hardly raised eyebrows outside IBM, what it spoke to has dogged the company since the McGroddy days: science doesn’t hold the place it once did. Cherry Murray, director of physical sciences at Lucent Technologies’ Bell Labs, pulled no punches during a talk last December in Washington, D.C. “IBM lost 50 percent of its physics researchers. When you do that, what you had is gone.”

Horn’s people counter that axed basic science projects involved long shots like neutrino detection, which even if successful were unlikely to impact the company commercially. Meanwhile, Research continues to support fundamental studies in key areas of physics and materials science, as witnessed by its storm of semiconductors and storage advances and its explorations into quantum computing and other scientifically risky areas where gambling makes more sense. What’s different from the past-the point of the new motto-is that science is no longer considered an end unto itself, says Isaac. “We still want to be famous in science and technology-but its goal is to be vital to IBM’s success.”

In this view, IBM has an ally in former research director John A. Armstrong. Before his 1993 retirement as vice president for science and technology, Armstrong was McGroddy’s boss. What IBM has done, says Armstrong, is dare to ask, “How much is enough?” The finding that less science will do, he adds, “is deeply disturbing to the national scene.” And though people chastise IBM for scaling back basic studies, he scoffs, “they don’t scorn Intel for never having serious research. Same is true for Microsoft, same is true for Motorola.”

In the end, far more serious than how much science to support are the straightforward challenges of staying nimble and creative inside a worldwide organization. Horn admits Research isn’t as competitive as he’d like in networking and certain Internet technologies, though he won’t specify which ones. But in attempting to beef up these areas IBM must battle the perception that it is stodgy, and, well, uncool.

Since taking over, Horn has moved aggressively to address these concerns. To better compete with startups, an unprecedented number of researchers now receive stock options. A Watson out-building was turned into a gym. The Hawthorne lab got a new entertainment room-the Hawlodeck-rigged for video games, go and chess. In what would have been a sacrilegious act at previously teetotaling IBM, Research now hosts “Summer Fun Days” with live music, beer and wine. Horn’s even hired an activities director to ensure summer interns have fun.

Horn says that these efforts are beginning to pay off in improved recruitment. But at least some potential hires have a bigger question on their minds: Can radical ideas thrive in the new environment? Former IBM Fellow Jerry Woodall, now an electrical engineering professor at Yale University, thinks this is Research’s Achilles’ heel. In their zeal to bolster the bottom line, he says, managers have virtually eliminated curiosity-driven investigations in areas that don’t relate directly to current business needs. Such projects, Woodall believes, could be vital in the future, “the high-tech corporation’s equivalent to seed corn.’”

Gerstner himself had the chance to confront this issue last July, when Research treated 700 summer students to a day of music and brainstorming sessions held simultaneously at its labs around the world. At the Watson festivities, a young would-be recruit said he’d never come to IBM for fear that if he did do something truly different and important it would never see the light of day.

The chairman didn’t miss a beat. Pointing out a curly-headed mustachioed figure in the crowd, he replied: “Ask Meyerson about that.”

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