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Earlier this year, IBM Corporation launched a program called Big Green Innovations. The goal was to mine the company's vast wealth of expertise and technology to create products and services to help address its customers' -- and society's -- environmental challenges.

Big Green, a play on the company's longtime nickname, Big Blue, takes aim at everything from creating carbon dashboards, which help lower companies' carbon emissions, to designing energy efficient data centers and more powerful solar cells.

Recently, GreenBiz's executive editor, Joel Makower, had the opportunity to speak with Sharon Nunes, who heads the Big Green Innovations program, and Wayne Balta, IBM's Vice President of Corporate Environmental Affairs, about Big Green.

Joel Makower: First of all, I'd like to just start with a little back-story on Big Green. I sort of know what it is, but I'm not quite sure how it came about. What really drove this and who?

Sharon Nunes: Well, I think -- I think there's a couple pieces that we could start off clarifying to begin with. So we have sort of the Big Green Innovations work, which is what I lead now, actually came out of IBM's innovation jam just about a year ago. And I just want to clarify we also have a program called Project Big Green, which you're probably aware of because there was a lot of press on it about two months ago. That's very much focused on IBM's data center business and creating efficient data centers.

So the Big Green Innovations is a little bit further-looking -- a little bit more outward looking. And last year in IBM's Innovation Jam we had 150,000 or more people blogging over two to three-day period, and the chairman had basically identified about ten areas or -- actually it was more than that. I think there were maybe ten or 20 topics that he felt were important to have people think about, IBMers, clients, university partners, some of our business partners talk about from the aspect of how are these important, how do we use these technologies to help solve important problems.

And out of that Jam came -- I don't know -- it was -- it was probably 30-40,000 ideas, and those were distilled down into what ended up being ten new innovation topics that the chairman sponsored for new programs for IBM last December.

So Big Green Innovations is focused on advanced water management, alternative energy, specifically photovoltaics and technology that could use some of IBM's nanotechnology expertise to help create new, more efficient filters for desalination. But it all came out of this innovation program from last summer where we had a number of IBMers and partners blogging about what were some of the word's most important problems and how could IBM bring IT expertise including some of our materials and engineering processing expertise to help solve those problems.

JM: So help me understand, for example, solar. Why, among all energy technologies, did solar rise to the top as something that IBM was uniquely positioned perhaps to address?

SN: Well, if you look at the current solar technologies IBM has actually a lot of expertise in the technology, which is very silicon-based for solar cells right now. If we look at our silicon processing materials, engineering, nanotechnology, we have a very similar skill set to what is being used today to create solar cells, silicon-based solar cells.

In addition to that, in our research lab we have a lot of work going on that's really aimed at maybe five to ten years out into the market, and we've had people in our IBM research lab looking at these solar materials and processes and the challenges associated with it, which have to do with cost and efficiency, for two or three years now and looking at alternative ways to process the materials or new materials for processing. And they've been really working in the research lab very quietly, under the radar screen, and this came up as probably an alternative technology to pursue, an alternative path for us to pursue using the expertise that we have on hand during last year's Innovation Jam.

JM: So it sounds like there's a fusion taking place, a convergence perhaps, between IT and clean tech. Is that a part of what Big Green Innovations is about?

SN: Absolutely. Yes. So we are looking at how we can use information technology or materials and engineering processes, skills that we have on hand, how we can use that IT technology to help solve some of these important problems around IT -- around clean tech issues. So whether it's around alternative energy, whether it's around integrating those alternative energies into the grid, because that's another big IT challenge as your probably know, or whether it's about how you can bring information technology to making smart water systems so you can more efficiently use the water that's at hand.

Wayne Balta: Joel, Sharon mentioned the Innovation Jam.

JM: Right.

WB: As something that directly led to the creation of Big Green in IBM which is the business unit that Sharon runs. There's some interesting background with those even in front of the Innovation Jam, which might help you in better understanding IBM's involvement with the overall subject.

IBM has for the last -- we're now in our third year of running a process called the Global Innovation Outlook. We call it the Global Innovation Outlook, the GIO. It is a process under which we invite thought leaders from around the world to meet with leaders at IBM, both executive and technical leaders, to discuss typically three of the world's most pressing issues and needs in terms of innovation and collaboration. So we're now in our third cycle of doing this. It doesn't necessarily happen annually, but we've gotten three of these done in about a three- to four-year period of time.

The second cycle of the Global Innovation Outlook took place in 2005, and for the GIO 2.0, as we called it, environment energy was one of those three topics that we said we were going to examine in great detail. Not just with IBM's own strategic thinking, executives and technical leaders, but also with thought leaders, opinion leaders and experts from outside of IBM. And the way in which we do this is by organizing a series of what we call deep dives: meetings that take place over a couple of days in major capitals of the world in North America, South America, Europe, Asia and this year we're doing it in Africa as well.

And so we have these deep dive conversations in the major capitals of these major continents of the world with IBM leaders and people outside, and for IBM it's a means of better understanding on a given topic what concerns and issues and needs for collaboration are apparent from the outside, and we marry that up with our own views of the world's greatest challenges. We're not trying to invent the latest technical gizmo through this process, but, instead, we're trying to understand what fundamental, global issues are compelling a greater need for business collaboration in the introduction of technology.

Environment and energy was one of the three we examined in detail in 2005, and as we wrapped up the Global Innovation Outlook in which environment and energy was examined one thing that became clear to us was an ever increasing passion among our own people at IBM for innovation around the environment and a recognition that we possess the kind of skills that can really make significant differences in the operations of our clients and government.

So that was a precursor to the company deciding in the Innovation Jam that Sharon mentioned which occurred after this GIO -- okay, that was a precursor to the decision in the Innovation Jam to feature energy and environment as one of the topics around which we wanted IBMers around the world to jam, as Sharon described. Meaning 24/7 blogging for a week's time. So there's some deep background to this, that strategically all ties together. And, as Sharon mentioned, the unit she's running grew directly out of the Innovation Jam, the need for which was made even more apparent by this Global Innovation Outlook that had occurred a year to a year and a half ahead of that.

Now, having said all of that, accompanying IBM's work in the unit Sharon's running, Big Green Innovation, is, as you may know, a good deal of other work. For example, in IBM's utilities business we have launched something called the intelligent utility network, under which we are working with some of the world's largest electrical generating companies to introduce technology into their networks and their operations aimed at improving both business efficiency and energy efficiency. Another example that Sharon mentioned was the unit that we announced, coincidentally using Big Green again, and I guess the marketers got a hold of that. But that's the whole business on data centers, under which we said, "Look, we can help our clients drastically -- not incrementally -- drastically increase the energy efficiency of their data centers." And to put our money where our mouth is we're redirecting a billion dollars worth of assets to that effort and we're going to double IBM's own computing capacity in three years without using another electron to do it. There's another aspect.

Okay, and then you may have read Tom Friedman's column in the New York Times over the weekend, in which he revealed the work IBM's done in the city of Stockholm on traffic congestion and traffic management which is a way in which our travel and transport business is getting integrated.

So the message I want to leave you with through this long monologue is that energy and environment are extremely horizontal subjects. They cut across many different industry sectors. There are many opportunities for business innovation, collaboration to be married with technology. And a company like IBM comes to the table with a suite of expertise in different industry sector and technology and, therefore, the ability to help bring it to the table. It's very diverse and very wise.

JM: So help me understand a little bit what Big Green Innovation is in terms of what it is in the company. Is it a program? Is it a business unit? Is it an overlay? Have you made actual commitments much in the way that GE did with Ecomagination? How do you talk about it?

SN: So right now if you're familiar with the -- actually, first, before I get into that I just want to reemphasize something that Wayne said because one of the quotes out of Tom Friedman's article really struck me as very relevant to IBM's whole focus on the green areas where he said, "The fundamental truth about green technology, you can't make a product greener whether it's a car, a refrigerator or a traffic system without making it smarter: smarter materials, smarter software, smarter design." And I think that's really the underlying premise of a lot of what we're focused on here.

WB: Quite right. Quite right.

SN: So the Big Green Innovations is -- right now it's being called -- we call these emerging business opportunities. If you're familiar with the Alchemy of Growth books several years ago by some McKenzie consultant. They talk bout multiple phases of the businesses where an H1 business is your typical business, kind of business as usually, it's your P&L business. Horizon two is a growth business, a business that you're starting to look at the P&L but it really has terrific growth opportunities from a revenue and profit perspective. And horizon three is much more of your new start-up phase organizations where there's a lot of uncertainty in the market, it's not clear what the overall organization is as far as the P&L opportunity and you're really trying to put it together and define what your revenue opportunity is, what you place in the market is.

I was involved seven years ago in IBM's life sciences organization, if you're familiar with that. We went through the same sort of start-up phase. I was part of the early team there that led this into what was a billion-dollar opportunity for IBM in life sciences. Many -- doesn't seem possible -- almost a decade ago.

And basically with the Big Green Innovations we're in start-up mode looking at what out offerings will be. We're working through our typical IBM business channels, right. So they will be the ones actually driving the revenue. We've had some preliminary discussions about what happens when we grow up, but that's usually decided about two or three years after an organization is put together in this EBO mode. So we focus on these emerging business opportunities. They're nurtured, usually under the arm of a senior executive, for two to three years, and then a decision is made about where the right place to put them in the organization, in the bigger IBM.

Right now we have a number of partnership discussions. So I've been actively working on this for about six to seven months now. I was brought in the beginning of December, put the team together in late January. And we have a number of discussions underway. We've defined some key offerings, mostly around the era of the advanced water management. So think about how you can bring information technology to bear of solutions that would have to do with water conservation.

So we're looking at water from very high-level perspective. Think about water availability, and it could be underground water, above ground water, water distribution along the pipes and the channels, aquifers and water consumption. And, from a consumption perspective we're looking at things like the cleanliness of water, the availability of water through some of the -- what we think would be smart filtering technology we could bring out of our research lab. A lot of these areas we will partner.

Wayne mentioned that collaboration and innovation is part of the GIO, the Global Innovation Outlook, and we really have identified four or five key areas where we would partner with others who have expertise in water systems because we don't have expertise in water systems, but we have expertise in information technology that could help people who are managing water systems make better decisions about the use and the distribution of the water.

So, for example, we've been talking to a number of people in the dry part of the U.S., mostly the southwest area of the U.S., about how they could implement smart irrigation systems. And that means that you need to put sensors into the soil and have a very real time monitoring system that would allow you to look at what is he weather going to be. We actually have an offering that helps you to look at the weather forecast in a very local area, one-kilometer grid area, over the next 24 hours. So integrating is a very precise weather prediction capability with information on the current soil content and how do you devise a smart irrigation system that takes into account the current moisture content as well as the expected moisture content for the next 24 hours. And there's expectations that you could save 30 to 50 percent of water in an irrigation process through the smart metering and smart irrigation technology.

Now, if you look at water availability, water distribution most of the water usage in the U.S. in areas where there's very high agricultural content about 75 percent of the available water is used for irrigation. So this could save a huge amount of water, especially in arid regions of the country where there is significant issues around shortages, especially during dry season in the summertime. So that's one very specific area that we're looking at.

Another area is how we integrate our advanced weather system, this 24-hour weather projection on a one-kilometer grid into companies' business operations. So we actually have some work underway right now with an electrical company who's looking at how they could better improve their response system based on what the weather -- especially during sever weather periods. So they're looking at if there's a storm coming, whether it's in the summer or the winter, could they better deploy their response people or equipment because they have a better idea of what the weather will be based on their local prediction that we can provide them.

And we're in discussions with some other people about how we could provide smart censoring in a framework. So we're providing the information technology and the framework to incorporate real time sensors and monitor water quality, water flow, a lot of I guess the information that you would be collecting on fresh water systems or delta water systems. And we're talking to three or four different locations actually around the world about building this smart network and these water systems. So hopefully in the next few weeks you may see an announcement on one of these initiatives.

JM: How much of this is driven by customers, and how much of this is driven at your own R&D sort of creating solutions that you believe have a market that aren't necessarily customer driven?

SN: Well, when I first started in this area I thought this is great technology and it can solve a lot of problems, and we started talking to a lot of people. I will say right now most of the pull is coming from Europe. They are way more advanced in their thinking about these issues than we are in the U.S., especially in the Netherlands. We have a number of discussions underway with Europeans but a fair amount in the Netherlands and other locations in northern Europe because they're very sensitive to the issues of climate change. And especially in the Netherlands where about 30 percent of the country is under water if they don't carefully manage their dams and dykes.

So they have -- as soon as they realized that IBM ws thinking about this they actually engaged in a number of discussions with us, and as we've had discussions in the U.S. with areas that are very sensitive to water availability because of their location like in the southwest or southeast U.S. we've had very, very positive response, very interesting. "Gee, this is an interesting aspect, and we'd love to hear more about what you're thinking."

So, again, back to Wayne's earlier comment on this collaborative innovation we've got some early thoughts. We're not really pushing a technology. We're trying to figure out does this technology help to solve what we think are some of the world's most important problems? So we're really trying to approach this in a collaborative manner and asking the people that we're talking with, "Are we solving important problems, and can information technology really help? If not, are there some other areas that information technology could target that might be solving a more relevant problem?"

JM: I would imagine that just having this program would facilitate the beginnings of -- at least the beginnings of conversations with customers that you weren't able to have before about how to create solutions and think about new products and markets.

SN: Sure. Well, especially if you think about the water systems. IBM is not the first name that comes to mind. We are talking to a number of the engineering consulting firms, engineering delivery firms who have a lot of work going on in this area, but their focus isn't necessarily the IT.

WB: See, Joel, but herein lies the sweet spot of IBM I would submit to you. What makes IBM different? What makes us special compared to others? The sweet spot for IBM is our ability to integrate the different types of expertise no matter where they reside, inside IBM or outside IBM, and to help clients solve fundamental business problems, typically with the application of technology.

It just so happens that the fundamental problems they're solving these days are increasing what we refer to as green problems. As much as we like to sell server hardware and software packages as one-off events, that's a good thing for us in terms of revenue, but what makes IBM different here is our ability to get in and fundamentally understand the underlying problem whether it is societal or particular to a given industry and then bring to bear all the skills.

And that's really what Sharon's about here in the water works she's talking about. She has the ability to integrate all the players that she needs to present to clients a complete end-to-end integrated solution, and as she develops this business I suspect it's likely that you'll see more and more firms saying, "Hey, water is really important to us. It's a key resource. In fact, it's a key part of our ability to operate, and to be more efficient here? Wow. That would be big for us in terms of expense and- expense savings and environmental efficiency."

JM: For a large number of companies and particular municipalities moving water is a huge part of their carbon footprint just in terms of the energy used.

SN: Yeah. A huge amount -- and I think you probably said it too, Joel. A blurring of boundaries, for example, what happens when cars start possibly -- the speculation that cars might generate energy back into the grid? Does it mean the auto industry now becomes a generator of electricity? That's an interesting concept when you think about it at a macro scale like that.

It's similar here. You see this blurring between the electrical industry and the water because there's such an intricate balance the amount of electricity to move water and the amount of water it takes to actually generate electricity of some sort, whether it's in cooling or whether it's in the generation.

WB: By the way, when you think of the kind of things Sharon just said, IBM too has the ability to model, simulate and visualize what the world could look like under different scenarios like this. I mean, a lot of that involves numerically intensive computing, visualization the like. Those are core strengths of IBM.

JM: So how deep into IBM do you see Big Green Innovations going? Do you think -- do you see the potential to really drive this into the company, or do you see it being just concentrated in a few parts of the organization?

SN: Well, I think, Wayne, you and I have probably already seen this is -- this is way bigger than Wayne and me, which is really good. We've seen -- we actually held a workshop. Wayne's team was one of the key contributors to a workshop that was held last week where we had people from all over the world and all over IBM participating in looking at defining some of the IT needs that we still have around carbon footprints. So, for example, that was included people from research, people from my organization, people from Wayne's organization, people from our retail organization, people from the transportation industry --

WB: Corporate strategy.

SN: -- people from corporate strategy, people from software, people from services, like three of our different services organizations. So I think anytime that -- Wayne, I'm sure you see this -- that you mention something along the green initiatives that people come out from every corner of IBM to say, "How can I participate?" I had so many emails when this program was first announced, "What can I do to help? I want to participate." As Wayne said, we had so many people during the GIO and during the Innovation Jam saying, "This is really important. I want to be part of this. How can I help to make it real? I want to help to contribute to IBM. I want to help contribute personally."

So I think that as we define some of the actual offerings and get into the market through the end of '07 and into '08 that we'll see this really becoming more and more part of the everyday thinking across a lot of the organizations at IBM.

JM: I would imagine one place that could really use a lot of analytics and computational power because it's so complex is the world of carbon trading.

SN: Oh yes. Very complex.

JM: Is that an area that Big Green Innovations will be jumping into?

SN: I expect it will be. We've had some early discussions both with clients who've asked us what our thoughts are. I was part of the Governor Crist panel last week in Florida. He invited about 15 business representatives to help him put together some plans and thinking around how Florida can put a strong focus on the state around climate change, their response to climate change which has a lot to do with their carbon footprint and how he's going to mandate change in Florida. And, certainly, Wayne, you know more than I do in this are because his organization -- Wayne's organization was part of the Chicago Climate Exchange back in the beginning I think right?

WB: Well, that's a really good point, Sharon, because true. I mean, IBM is a member of the Chicago Climate Exchange. We were a charter member, meaning we were one of the first to join. We just renewed our commitment for phase two of the Chicago Climate Exchange.

Now, why is this interesting vis a vis what Sharon does? Well, it's simple. It's because by participating in the Chicago Climate Exchange, which really governs IBM's own business operations and our company's own carbon footprint, we are better able to understand the entire arena of creating an inventory of carbon emissions, accounting for them in an audit-ready manner, presenting them to an exchange so they can be verified and considered to be tradable and how one does and doesn't make money on an exchange like there. Therein again like what I said earlier, our ability to integrate all the kinds of skills that are needed to bring to bear the best solution.

So in the arena of carbon trading we know a little bit about it because we're actually doing it ourselves, and, at the same time, we have deep capability in the whole financial services arena as well as all the computation that goes behind it. It's the -- it's, again, the integration of all these skills which is key to the solution.

SN: So we have had a number of clients ask us our opinions on this, Joel, and ask us what our thoughts are. We usually reference the fact that we've been involved in the Chicago Climate Exchange and we can bring some of -- right now we don't have a lot of experts in IBM, but we do have a core few who are in Wayne's organization who are -- we're offering to have further discussions with some of our clients who are really concerned with how they need to respond to this. They don't really understand the issues.

We commissioned some research -- market research a few months ago, and about 35 percent of the respondents were actually doing something to respond to issues that they felt were important around climate change and regulatory issues. About 90 percent wanted to do something, but they -- a lot of them just were overwhelmed by what they had to do and didn't understand where to begin.

JM: So as you look out even a year or two what do you -- and evaluate how this has been going what does success look like? How do you measure success? Is it strictly and economic calculus or how do you look at it?

SN: Well, I think it's two -- I think there are two initiatives, and, Wayne, surely jump in here. Because part of it is how we get this more embedded in IBM's business from a way of thinking, and, Wayne, you can talk more about that. Wayne, as you probably know, Joel, runs IBM's environmental sustainability programs. And you probably drill this into everyone, every unit, everyday that you get a chance to talk both at IBM and at other companies, Wayne. So I think that is one measure.

And certainly the other is is this a real opportunity for IBM to bring IT to bear on solving some of these key problems? Does that actually make financial sense for IBM as a business opportunity? I think everybody who's been involved and who has touched this from the intelligent utility network team that Wayne mentioned to the smart transportation network to my Big Green Innovations team, every one of them if you ask them today will tell you absolutely, yes, that we've had more interest than we can respond to. And the next steps, of course, are turning this into a real business opportunity. But, Wayne, you probably have a lot more to say than that.

WB: Well, I agree with all you say, Sharon. And one other thing that popped to my mind while you were discussion that was how well this subject matter resonates with IBM's values. You know, Joel, IBM is a values-driven company. We have three core values: dedication to every client's success, first one. Second is innovation that matters for our company and the world. Not innovation for the sake of the latest gizmo, but innovation that matters for our company and the world. And third is trust and personal accountability in all relationships personal responsibility.

So if you think about dedication to every client's success for cli -- if you're on the Fortune 100 in the year 2007 and you want to be on the Fortune 500 in the year 2057 you're going to have to get environment right or there's a rally good chance you're not going to be on the list in 50 years. So dedication to client success, yeah. Clients are going to need this across industries.

Second value, innovation that maters. Can you think of innovation that matters much more than this arena? Think about it. There's a lot of subjects around the world that we need innovation to better societies and the human condition for people. This is one of them.

Then trust and personal responsibility in all relationships, yeah. I mean, that's a key part of the environmental message, has been for 25, 30 years, and it's going to stay that way. So I think it really resonates the values that drive our company, and that's yet one more reason why I'm very optimistic that Sharon's leadership is going to sustain this for some time to come.

JM: Well, this has been great. I think this has been very useful and plenty of information for my needs, and so thank you both very much for taking the time to talk.

Joel Makower is the executive editor of GreenBiz, and maintains a blog, Two Steps Forward, at http://makower.typepad.com.