5 big questions on innovation

We started the bar code initiative because the CEO of IBM at the time, Frank Cary, wanted to expand the company beyond mainframe computers. At first, Frank wanted to find the best companies in Silicon Valley and buy them. But it was decided that no, if you buy small startup companies, the most important people would quit because they don’t want IBM culture. They don't want blue suits and white shirts and red ties and black wing tips, and all that garbage. Frank’s response was to try to find somebody within IBM and to get them to act like and treat them like they’re a startup. Luckily, they knocked on my door. We were able to decide what business we would go after. We wanted something that was going to generate data and decided to go after point of sale. We saw that at the point of sale, particularly for supermarkets but also major retailers, there was a big need for item identification, automatic inventory control and automatic checkout.

The barcode had a tremendous impact on operational efficiency and business intelligence. For big retailers like Macy’s, it had a major influence on their purchase orders and their ability to see what sold quickly and what was effective. It really helped them with reordering and stocking their stores much more effectively and efficiently. For supermarkets it was a little different. Item prices were constantly changing, and there was a tremendous expense at price marking and remarking. But with the bar code, it could go back into the controller in the back room and look up the price. In addition, the scanner could read omnidirectionally so it wasn’t necessary to orient the item to read it. Clerks could pull items across the scanner very quickly, which sped up checkout dramatically. You could also run tests on where to position products to improve sales.

I would say the impediments we faced were in two major categories: technical and sociopolitical. The success of the barcode was not entirely due to the quality of the code, but its incorporation into an entire system. To build the scanner we had to use a new, bright light source, and that was the laser which had just been made available. Then there was a communication system. We had to send a lot of data from the check stand to the back room. Some stores in Europe had as many as 40 scanners at the front of the store. Each one was sending a signal back. They had to be high speed signals all going into a box at the back of the store, which had a disc file that recorded everything. We had to change not only the communication technology into what later became a local area network, but we had to change the magnetic recording. We were the first ones to use the Winchester file technology that IBM had perfected. We had to make this system fail proof because if it failed, a store would have to shut down. Because of this, we had to duplex the controller, adding another layer of technology. So we had leverage duplex controllers, new magnetics, new communications, new scanners, in addition to the code, in order to build the system.

The second impediment was the sociopolitical part. We were set to open one of the first stores in Tyson's Corner, Virginia. The engineer I sent to supervise called to tell me the store couldn’t open. It wasn’t because of a system failure. There were union picket lines blocking the entry to the store. They were afraid they were going to lose checkout clerk positions. But what turned out to be a more serious problem was the concern of legislators and government administrators who were concerned that the price coming off the item would be bad for the consumer. Eighteen states passed laws against the scanner or passed laws that made it more difficult. I traveled around the country to meet with state legislators and explained the advantages of scanning and the fact that the price would be marked on the shelf. Supermarkets were usually paying about $10 to anybody who got a mis-scan. But our code was very effective and had very few errors.

It was quite different than it is today. Today, pick up a newspaper or go on the Internet, and innovation and entrepreneurship is discussed widely. That wasn't so much the case in the late fifties and early sixties, and even the seventies. Innovation came primarily from the engineering organizations. IBM was divided up between sales, marketing, services, and so on. Development was managed by engineers. In the early part of that period we had something like 15 laboratories increasing to 20 or so worldwide later down the road. The laboratory average size may have been a thousand engineers and other support people. The bigger laboratories were many times larger than that and they were managed by engineers, and engineers were thinking about new products. We hired the best people we could. So they were pretty forward thinking people, and they were very innovative.

Frank Kerry, the CEO, decided we needed to get into some new business. And after he decided to build from within, he realized you couldn't be innovative and have a whole bunch of rules. Some of those rules said things like you have build everything within IBM. But we realized that wasn’t possible. A decade later, when IBM did the PC, the only PC part that was made in IBM was the keyboard. I wouldn’t say there was a top-down commitment to innovation so much a commitment to excellence. IBM wanted to do the right thing. The right thing for society. The right thing for shareholders. The right thing for employees. Leadership hired top quality people, and those people did the innovation. Of course, it's a little different today.

I think that the most interesting technology right now is AI. I was involved with it a little bit back at IBM. We built some machines that kind of used that technique. I think of it in a simplistic fashion as guessing. With a computer nowadays, you can guess a million answers possible to something, and then test them in a fraction of a second. Then you put that together in a more complex way, and you're writing essays, and it looks like you're John Steinbeck.

There are things in the bar code that are going forward that I think are going to change even more. We have QR code, which is a 2 dimensional code, whereas our barcode is one dimensional. And that's an opportunity for more complex applications. I think it's growth will be bigger than the barcodes. But I don't think the barcode will go away. The companies that use it, make themselves more efficient. I think the bar code is going be around for decades. But things like the QR code, RFID and other applications are going to develop markets that require larger data in each transaction or each item.

It's always hard to predict what's going to happen. But certainly the Internet has given us a new way of learning, and you can get answers to lots of questions that were hard to find 50 years ago. We just need to develop our minds in such a way that we can stay open and keep looking to the future.

There are a lot of high level people thinking about that question today. And they're coming up with better answers, and schools and universities are working on that, too.  And then we have the Internet to support these efforts. You can go on the Internet and get answers so fast, whereas before, the answer was stuck deep in a library. I think that all of the conversations taking place about how to go about this are very good. They help lead people in the right direction. I don't know which of those directions is exactly right, but I think it’s very encouraging that we have so many successful people thinking about it and young people just coming along who are using their minds in open ways.

If you want to get into innovation and be successful, look at the world from the point of view of what people need. Then have a level of expertise in a certain set of fields. I’m looking at a flashlight on my desk. If you're in a company that's building lights, you need to think about everything from what are the materials that go into the product that you need to make? What do people need? How do they use lights? And then start thinking about different things and make proposals.

Be sure that as you develop your capability to sell your ideas and to go meet with people and discuss these things and get them out into the open. I went to engineering school, but one of the things I did that was very important was being on the debate team at my university. Later, when I had to go to IBM managers to get money for my ideas, not unlike going to venture capitalists today, the skill to sell my ideas was really important.