[Heart of Innovation, Corporate Research Center①] How "Watson" Made the "Outdated Dinosaur" IBM Dance Again

A Report from the IBM Watson Research Center, Established in 1945
Outdated Innovation and Falling Behind Rivals Are Things of the Past
Leaving the "Lost Decade" Behind, IBM Surges to Record-High Stock Prices
The Driving Force Behind the Transform

Editor's NoteThere is a growing call for a new driving force-a new heart-for the Korean economy, which is losing its growth momentum. Corporate research centers, once the heart of our economy, have faded from public attention. Few now care about what these labs are focusing on. IBM, a leading force in the US IT industry, has made a comeback after overcoming its "lost decade." The key to this revival was the rebuilding of its research center. In the past, founders of Korea’s major conglomerates unanimously advocated for "technology for the nation." Today, industry voices argue that the entrepreneurial spirit of these founders must be revived and the Korean-style research and development (R&D) DNA must be re-embedded in corporate research centers. Asia Economy presents a four-part series exploring the research centers of global companies, offering insights into the role of technology and policy recommendations for this era.

IBM Watson Research Center viewed from the sky. Built in the 1960s, this building has hardly changed in appearance except for the addition of solar panels in the parking lot, but futuristic research such as AI and quantum computing has been continuously advancing here. IBM

The 2010s were a "lost decade" for IBM. Its revenue shrank to half its peak, and in future markets such as artificial intelligence (AI) and cloud computing, it fell behind competitors and was dismissed as an "outdated dinosaur." When a new CEO took office in 2020, IBM bore the ignominy of being the only major US tech company whose market value had declined over the previous eight years. The giant "Big Blue" seemed destined to sink forever, overtaken by latecomers like Google and Meta.

Yet, even in despair, there remained a spark of hope. That spark reignited and became a beacon for the company’s future. Recently, IBM even reached its highest-ever stock price. The epicenter of this revival is the IBM Thomas J. Watson Research Center (Watson Research Center) in Yorktown, New York. Founded in 1945 under IBM founder Thomas J. Watson’s belief in "contributing to the advancement of human knowledge," this research center has been the heart of innovation. Although there were periods when innovation slowed and moments of both challenge and painful failure, IBM was able to look ahead to the future because this research center remained steadfast.

If the "Innovation Studio" at IBM’s Manhattan headquarters offers only a taste of IBM, the Watson Research Center is where its true essence is hidden. I also visited this place in 2005, just as IBM began its decline. With curiosity about how it might have changed after 20 years, I returned once again.

Above the entrance information desk stood a giant sculpture in the shape of a silicon chip, as if to proclaim Watson Research Center’s status as a milestone in the semiconductor field. Guided by a staff member, I was led to the "Think Lab." Here, IBM showcased a variety of experimental results. There were neural processing units (NPUs) used for AI inference, and various 12-inch silicon wafers displayed like vinyl records. Each jacket described the reason for the wafer’s existence.

At the entrance of the IBM Watson Research Center, a large model of a semiconductor circuit board is displayed. Paek Jongmin, Tech Specialist

The pride of the Think Lab is the quantum computer. The massive "System Two" quantum computer greets visitors, exuding an overwhelming presence. It looks nothing like the mainframe computers installed nearby. While IBM’s computers are typically black, System Two resembles several stainless steel refrigerators joined together. System Two is currently the most advanced quantum computer in existence.

This superconducting quantum computer, which IBM has been steadily developing, appears to be an insurmountable "wall of lamentation" for competitors. I was able to see the quantum processing unit (QPU) used in this computer. Each QPU contains 156 qubits. South Korea has only recently demonstrated 20 qubits and is aiming to produce a 50-qubit QPU. The gap is significant. IBM has also set goals to surpass the performance of classical supercomputers next year and to solve the calculation error problem of quantum computers by 2029. Vice President Scott Crowder emphasized, "The roadmap is proceeding as planned."

IBM Watson Research Lab's 'ThinkLab'. IBM

This place attracts many corporate and government officials. Just before my visit, there was evidence that researchers from Nvidia had been there. Bae Kyunghun, Minister of Science and ICT, and Ha Jungwoo, Chief of AI Science at the Presidential Office, also visited the Watson Research Center on the 23rd (local time). Minister Bae signed a memorandum of understanding (MOU) with IBM for cooperation in quantum research. This underscores the importance of collaboration with this research center in the quantum field.

Ha Jungwoo, Chief of AI Future Planning at the Presidential Office (fourth from the left in the front row), and Bae Kyunghun, Minister of Science and ICT (fifth from the left in the front row), are visiting the IBM Watson Research Center and posing for a commemorative photo in front of the "System Two" quantum computer. Ministry of Science and ICT

◆The Power of "THINK"= The history of the Watson Research Center began in 1945, at the end of World War II, in a small laboratory on the Columbia University campus. Launched as the "Watson Scientific Computing Laboratory," this space embodied the firm convictions of then-IBM Chairman Thomas J. Watson Sr. His goal was not merely the pursuit of short-term profits but contributing to the advancement of human knowledge itself. As the first director said, "Problems will be chosen for their scientific interest and not for any other consideration," the research center was guaranteed the freedom to focus on pure scientific research, free from commercial purposes.

This spirit continued with his son, Thomas Watson Jr., IBM’s second CEO. That is why both the father’s and son’s names are inscribed on the research center. Watson Jr. is also the author of "Father, Son & Co.," a book recommended by Lee Jae-yong, Chairman of Samsung Electronics.

Under the founder’s slogan of "THINK," the Watson Research Center became more than just a corporate research lab; it served as a national think tank leading the advancement of American science and technology. Especially during the Cold War, it undertook key projects directly tied to national security, such as nuclear weapons simulations, establishing itself as the US government’s most trusted technology partner. During the Apollo program, which led to humanity’s first moon landing, it was the Watson Research Center’s computers that assisted in precisely calculating the spacecraft’s trajectory. This dramatic story was later introduced to the world through the film "Hidden Figures."

Inside the Watson Institute, phrases encouraging creativity to lead the future computing market are written everywhere. Paek Jongmin Tech Specialist

The true source of IBM’s competitiveness can be found at the Watson Research Center. An IBM researcher I met there said, "In my 19 years here, I have never skipped dinner or come to work on weekends." What he emphasized was the virtuous cycle where "having time" leads to creativity. Another researcher in his seventies, with gray hair, was the leader of a development team. This demonstrates that top experts continuously explore technology and provide direction.

"Leaders only provide a clear direction; they do not dictate specific methods. There is no pressure to deliver results within a set timeframe. This makes researchers think for themselves-'Should I try it this way? Or that way?' Of course, appropriate compensation for researchers is essential."

This culture is possible because of the company’s firm philosophy that "R&D is not a cost, but an investment in the future." The Watson Research Center generates substantial revenue solely from accumulated patent license sales, enabling it to continue long-term research without being swayed by external factors. Adequate compensation further increases researchers’ immersion in their work. The Watson Research Center demonstrates that when talented individuals are freed from repetitive, routine work and allowed to "play" to their heart’s content, unprecedented creative results emerge.

A researcher at the IBM Watson Research Center is gradually developing the chandelier, a key component of quantum computers. IBM

◆Watson’s LLM Grows into an 8 Trillion Won Business= Behind IBM’s dramatic revival is Arvind Krishna, the company’s first CEO with an engineering background, who spent 35 years at IBM. A year before ChatGPT appeared, he immediately recognized the potential of large language models (LLMs) during a technology briefing at the Watson Research Center and decided to invest billions of dollars in R&D. Without his insight as an engineer and bold decision-making, today’s IBM might not exist.

The first thing he did was to declare a break from "The IBM Way," a tradition that had lasted over 100 years. He boldly abandoned the discipline, stability, and conservative top-down culture symbolized by black or dark navy suits and neckties. At the Watson Research Center and the recently opened Manhattan IBM office, it is now hard to find employees in stuffy suits and ties. Not only dress codes but also the way of working has fundamentally changed.

Instead, he instilled a "Geek Way" culture that values autonomy, rapid execution, and constant feedback. In a media interview, CEO Krishna said, "If you punish failure, no one will take risks," and emphasized, "If you say, 'You won’t be punished for failing, and ask for help when you need it,' you can do more with fewer people." These changes are reflected in performance, results, and stock price. IBM’s recent stock price could not be better.

Arvind Krishna, IBM's first CEO with an engineering background, is from the Watson Research Center. IBM

Of course, the journey was not always smooth. The "Watson Health" project, ambitiously pursued in the 2010s, ended in a disastrous failure despite its grand slogan of "conquering cancer." CEO Krishna admitted, "The gap between where we were and the problem was too great," and shifted strategy to focus on practical AI (Watsonx) that corporate clients could immediately benefit from. The ability to turn failure into a stepping stone for a comeback was possible because the research center accumulated the experience of failure as an asset and explored new directions.

The research achievements translated into tangible results. Since June 2023, IBM has secured $6 billion (about 8 trillion won) in generative AI business orders alone, accounting for a significant portion of IBM’s annual revenue of $63 billion. Strong performance in the AI sector continued in the first quarter, with an additional $1 billion (about 1.4 trillion won) in orders. It was confirmed that technologies developed at the research center are being linked to the AI consulting field.

There was also a notable case of a researcher moving into government administration. Dario Gil, Senior Vice President of the Watson Research Center, was recently promoted to Under Secretary for Science at the US Department of Energy. He is expected to play a key role in science policy under the upcoming Trump administration.

◆Beyond AI, to Quantum= The Watson Research Center is boldly taking on the challenge of quantum computing, a field that, along with AI, does not promise immediate large profits. Quantum is IBM’s future. Jay Gambetta, Vice President overseeing IBM’s quantum division, said in a media interview, "In the early days, the quantum computer team needed space and protection to do crazy things," recalling, "It was always Arvind who said, 'Let them do whatever they want.'"

IBM’s revival offers important lessons for Korean corporate research centers. Are we extinguishing the spark of hope for the future under the pressure of short-term results and a rigid culture that does not tolerate failure? IBM exists today because it had a research center that quietly prepared for the next era, both in moments of glory and in times of decline. The "Big Blue" elephant has begun to dance more nimbly than ever in decades.