A Smarter Planet: The Next Leadership Agenda

Prepared Remarks by Sam Palmisano, IBM chairman and CEO to the Council on Foreign Relations New York City Nov. 6.

It is a pleasure and an honor to be here today in this distinguished assembly, and at this extraordinary moment: a major political transition in the United States, the global economy in flux, our financial markets restructuring themselves -- and an acutely felt need for leadership.

Our political leaders aren't the only ones who've been handed a mandate for change. Leaders of businesses and institutions everywhere confront a unique opportunity to transform the way the world works.

We have this chance for reasons no one wished. The crisis in our financial markets has jolted us awake to the realities and dangers of highly complex global systems. But in truth, the first decade of the 21st century has been a series of wake-up calls with a single subject: the reality of global integration.

Two years ago, I published an essay in Foreign Affairs that described the changing structure of the corporation, which I felt had been largely left out of the discussion on globalization. I described the emergence of a new kind of corporation -- the globally integrated enterprise, which was replacing the multinational.

Today there is growing consensus that global integration is changing the corporate model and the nature of work itself. But we now see that the movement of information, work and capital across developed and developing nations -- as profound as those are -- constitute just one aspect of global integration.

In the last few years, our eyes have been opened to global climate change, and to the environmental and geopolitical issues surrounding energy. We have been made aware of global supply chains for food and medicine. And, of course, we entered the new century with the shock to our sense of security delivered by the attacks on 9/11.

These collective realizations have reminded us that we are all now connected -- economically, technically and socially. But we're also learning that being connected is not sufficient. Yes, the world continues to get "flatter." And yes, it continues to get smaller and more interconnected. But something is happening that holds even greater potential. In a word, our planet is becoming smarter.

This isn't just a metaphor. I mean infusing intelligence into the way the world literally works -- the systems and processes that enable physical goods to be developed, manufactured, bought and sold... services to be delivered... everything from people and money to oil, water and electrons to move... and billions of people to work and live.

What's making this possible?

• First, our world is becoming instrumented: The transistor, invented 60 years ago, is the basic building block of the digital age. Now, consider a world in which there are a billion transistors per human, each one costing one ten-millionth of a cent. We'll have that by 2010. There will likely be 4 billion mobile phone subscribers by the end of this year... and 30 billion Radio Frequency Identification tags produced globally within two years. Sensors are being embedded across entire ecosystems -- supply-chains, healthcare networks, cities... even natural systems like rivers.
• Second, our world is becoming interconnected: Very soon there will be 2 billion people on the Internet. But in an instrumented world, systems and objects can now "speak" to one another, too. Think about the prospect of a trillion connected and intelligent things-cars, appliances, cameras, roadways, pipelines... even pharmaceuticals and livestock. The amount of information produced by the interaction of all those things will be unprecedented.
• Third, all things are becoming intelligent: New computing models can handle the proliferation of end-user devices, sensors and actuators and connect them with back-end systems. Combined with advanced analytics, those supercomputers can turn mountains of data into intelligence