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For the last five years, IBM has strived to reinvent itself as a cloud computing and cognitive platform company to support its large enterprise clients as they shift their operations online, including many in travel and transportation.
With most large companies today evolving into digital companies, cloud computing is a booming marketplace for the big four industry providers: IBM, Microsoft, Google, and Amazon. Google, for example, stated that cloud could overtake advertising revenue in five years.
Travel companies like Etihad and Lufthansa are helping drive IBM’s cloud sales. The UAE carrier signed a $700 million IT deal with IBM last October, while Germany’s national airline invested $1.25 billion in Big Blue in November 2014 to integrate cloud computing.
Cognitive, on the other hand, is IBM’s wild child savant compared to its older cloud sibling. IBM’s cognitive strategy is the company’s big push for 2016, based in large part on the IBM Watson artificial intelligence (AI) supercomputer platform that’s designed to grow smarter on its own as it analyzes more and more data, otherwise known as “machine learning.”
Famously, Watson beat the two top Jeopardy contestants in 2011, which showed that a computer can “understand” non-linear structure in human language. Similarly, in terms of inductive reasoning, Google DeepMind’s AlphaGo AI machine bested the world’s top Go player four out of five games earlier this month.
The potential for cognitive is enormous.
The staggering rise of big data that companies now collect year-over-year requires a monster data-crunching AI machine like Watson to cull through and disseminate that data in order to provide any value based on it.
IBM president and CEO Ginni Rometty, who has spearheaded the company’s drive in cloud and cognitive since assuming her role in 2012, suggests that cognitive alone represents an untapped $2 trillion global market.
She has her detractors, based on IBM’s uneven stock history over the last two years. Her supporters, including Warren Buffet, however, point out that restructuring IBM is a monumental undertaking. Furthermore, the ability to leverage cognitive technology to offer real world deliverables around big data is still an evolving science.
“Companies are realizing they need to start acting in a more agile fashion because they’re seeing data as a new natural resource,” said Dee Waddell, general manager, global travel & transportation industry at IBM. “That’s happening at every intersection of travel and transportation. Currently, it’s estimated there’s 2.5 quintillion bytes of data produced daily, and about 80% of that is unstructured, typically making it invisible to current technology.”
Explaining that “Watson is a cognitive system that can understand this data, learn from it, and reason through it,” Waddell told Skift that IBM is leveraging Watson’s ability to become the world’s greatest expert in any field it’s directed at. Presently, IBM is investing heavily in acquiring health and financial companies where it sees the greatest opportunity presently for Watson’s ability to sift through and organize massive quantities of data.
At the same time, IBM is developing a growing list of Watson APIs — application interface protocols that connect companies’ digital platforms with Watson’s big brain. Those APIs can be seen at IBM’s Bluemix online marketplace, which are basically just a few lines of code that directly access individual cloud-based Watson functionalities.
Those APIs include things like Visual Recognition, Retrieve & Rank Search, Tone Analyzer, Natural Language Dialogue, and Personality Insights, among a couple dozen more, which all analyze data through Watson’s cognitive backend. They are then licensed to third-party, industry-specific companies such as WayBlazer, which operates in the travel and tourism sector, to customize for a specific consumer audience.
WayBlazer then licenses its Watson-integrated digital products to companies like Trisept Solutions, which recently embedded the cognitive search API into its VAX VacationAccess travel agent platform. The goal is to help agents provide a more nuanced range of relevant travel information based on the individual traveler’s specific personality and travel behavior parameters supplied online.
To date, a lot of media attention has focused on Watson-supported initiatives in hospitality and tourism, including the new “Connie” AI robot at Hilton and new semantic search capabilities embedded in the Leading Hotels website.
Expect to see an explosion of those integrations coming online over the next year, but they represent only a part of IBM’s overall strategy in cognitive.
“Cognitive, which intertwines with Watson, is really about the opportunity to fundamentally transform our travel and transportation industry,” Waddell said. “Cognitive is really about a new era, with data and digital as a foundation. So the key message here is we’re really in a time of unmatched disruption with lots of stress and anxiety about how to deal with the pace of innovation. That’s what’s on the top of mind for C-suite executives today.”
Redefining Boundaries for the C-suite
In November last year, IBM published a 40-page paper called “Redefining Boundaries,” based on insights from a new Global C-suite Study that surveyed over 5,200 top senior executives, described as “CxOs,” based in 21 industries in 70 countries.
The results of that research is informing how IBM is designing cognitive and cloud-based products and services for its clients.
The report outlines three strategy frameworks, which forward-thinking companies that IBM calls “Torchbearers” are focusing on in the cloud and cognitive landscape. IBM classifies about 5% of the survey group as Torchbearers and 38% as Market Followers, or what Waddell calls “laggards” lacking a comprehensive digital strategy.
Those three frameworks are: 1) Prepare for digital invaders; 2) Create a panoramic perspective; and 3) Be first, be best, or be nowhere.
The top-line results in the 2015 report show a 26% increase in CxOs who say they see more competition coming from outside their own industries in 2015 versus 2013. This is based on blurring boundaries between business sectors resulting in industry convergence and digital disintermediation.
Further data from the IBM Global C-suite Study:
- 22% of respondents reported a need for more focus on customers as individuals, versus segments.
- 19% anticipate more digital/virtual interaction than face-to-face with customers over the next few years.
- The three technologies growing fastest in importance for CxOs are cloud (63%), mobile (61%), and Internet of Things (57%). Cognitive computing was ranked fourth at 37%.
- Respondents ranked conventional techniques to identify trends — such as brainstorming (80%) and predictive analytics (63%) — higher than new methodologies like crowdsourcing (23%) and cognitive computing (13%).
That last statistic shows a lot of growth potential for cognitive.
“The C-suite Study is really about adding new value, new business models, new ways with better products and services, and building strong customer relationships by leveraging the data out there,” said Waddell.
“It’s also all about reimagining, reinventing and reshaping,” he added. “For IBM, we are reinventing ourselves and you’re seeing a new IBM emerge. Ginni has been very clear that we’re a cognitive solutions and cloud platform company with industries leading the way and informing everything we do.”
The Rise of Design Thinking
That “industries leading the way” phrase references a shift internally at IBM from a product-centric culture to a user-first focus that’s driving IBM’s new Design Thinking platform. It underpins every aspect of the company’s operations moving forward, aligned with the C-suite Study research.
Originally, the design thinking concept, also known as empathy design, evolved around product development at companies like IDEO in Palo Alto, which invented the Apple mouse. Design thinking proposed that product makers needed to study end user habits to identify pain points in the user experience to develop better products.
IBM and other companies have expanded that idea to strategize new business models for their enterprise clients.
To date, IBM has opened 10 IBM Design Studios around the world to engage with enterprise clients around the precepts of design thinking as they apply to cognitive and cloud-based solutions. Six are located in North America, three are in Europe, and one is in Shanghai.
Promoting that vision at the South by Southwest (SXSW) Interactive conference in Austin this month, the IBM Cognitive Studio held design thinking sessions for SXSW attendees.
First, the group was broken up into two teams to imagine the psychographics of people who want driverless cars and those who wouldn’t. Once that information was collected, the two teams then used the most interesting ideas to design amenities that a driverless car should have to satisfy both groups. It was a very rudimentary exercise, but it illustrated the process behind consumer empathy research to drive new product strategy.
The 1-hour session was based on the same process behind IBM’s Reinventing the Wheel initiative, using Watson data analytics, to develop the automotive operating system of the future.
“I’m not certain a lot of our clients know that we have the pre-eminent, client-accessible design centers in the world,” said Waddell. “It’s not really about the methodology or technology. It’s about the business outcomes and driving new business value, and aggressively jumping on that in an agile fashion. It’s really about getting into the minds of our customers and understanding the stress and anxiety they have around the future of data and digital throughout the travel and transportation continuum.”
Another primary goal of design thinking empathizes with the internal client as well, because there’s so much confusion and lack of understanding around cloud and cognitive.
Based on his experience as a chief digital officer before joining IBM, Waddell said, “Design thinking for us expands the discussion of digital and data beyond the CIO. Next generation CIOs have always desired to drive digital strategy, but talking about technology from the domain of IT has struggled to relate with other C-suite executives.”
Therefore, he said the IBM design thinking methodology prioritizes the studio discussions around new digital technologies in business terms and business goals. The idea is to establish a common language that everyone can understand.
“The transformative aspect is to get various stakeholders in the C-suite aligned around business strategy, using proof-of-concept case studies of disruptors in their space for evolving in the new digital world,” Waddell told us. “That’s the exciting piece of this, when you’re getting everyone excited about Watson APIs and cloud-based solutions, and really giving them a platform to see the future.”
At the IBM Travel & Transportation landing page, there’s a wide range of case studies of various cloud and cognitive platform projects with airlines, airports, hotels, railways, and freight companies. Waddell also writes about cloud and cognitive on IBM’s Insights on Business blog.