IBM CEO on use of artificial intelligence to improve business

I think everyone is looking for new areas for growth, and we're in a period of time when almost every company is trying to reinvent itself, including ourselves. We've been in our own transformation here. As we've evolved our core franchise businesses, we've built what is now the enterprise cloud at $14.7 billion, and we've built out, as you know, we were just talking about Watson. We are now the artificial intelligence platform for business. We'll touch a billion individual consumers by the end of the year in some way. So I see this rooted underneath our own transformation, and it's going to get to what I see around the world. It's really this belief that all of this data that we've talked about forever is actually going to make a difference and be the basis of competitive advantage. I see no matter what industry you're in, everyone's trying to reinvent themselves in some way to take that and make it their competitive advantage. In fact, that's the root of our whole foundation of our transformation ourselves, and what we do for companies is to help them be competitive in that era. If you're not looking behind you and saying who's going to disrupt my business, you're probably not doing a good job, because there's been a lot of disruption. Every industry, remember years ago people would say to me, boy, IBM is having to change, and I'd say be careful, this is coming to a theater near you. This is happening every single industry. But I do really believe this point that the future is going to be about what we call cognitive: this idea that you are going to be able to take things and have systems that you don't program, they understand, they reason, they learn, and they are going to help change every part of what you do in your business—your operations, your processes, your products, your services. Artificial intelligence is not a feature; this is a fundamental tenet of how this world is going to operate. It will be better for it.

Yes, so when I say the AI platform for business to touch a billion consumers in some way, there are three big things we do differently. One is that if you think about going to a public search engine, that only searches 20% of the data in the world. 80% is with companies; it's behind their own firewalls. It's their data, very rich in usage. So what we do with artificial intelligence is focused on that 80%, but it's vertical. It's a domain. You have to know what it means to be a doctor, to be an underwriter, to be a financial person. Therefore, it is a very different thing. It's not speech-to-text, it's not asking where the weather is. That is not what we're doing here. We do that, but this is about systems that actually understand what it is to be a doctor and therefore can assist a doctor. So we are looking at systems that are vertical, domain-oriented. The second point is a really key point when it comes to making another company successful: a very deep belief, and we've architected this so that when clients bring that precious 80% of the world's data that no one else has access to, we can assure them their insights belong to them. They don't go into some big area that makes one company rich and not anybody else. I think we've seen how that has played out. So vertical in nature, assuring a client their insights are their own. And then what it is that you do all around that has got to do with the breadth of information that you see. So it isn't just text and images; it's sound, it's sight, it's motion, sensors that go into this. And therefore, when you change, just yesterday ABB announced through their manufacturing using Watson. Watson is actually assisting with manufacturing, looking at what defects are. You talked about General Motors earlier. General Motors with OnStar, Watson helping with patterns and what you should be doing when you're in the car through OnStar. Or if you look at healthcare, we have now gone through from oncology to genomics to clinical trial matching, assisting a doctor with what they do in their process. And H&R Block taxes were just done with the assistance of Watson. This can happen within seconds. What Watson is doing in terms of digesting and spitting out information happens really quickly. It's better.

It's not 29. I think that is not even a sufficient way to describe us, because that doesn't count $9 billion of divestitures, almost $9 billion divestitures, and $14 billion of currency at this point in time. So what it is, in our transformation, you see two dynamics playing out. We do the core mission-critical systems of the world. Those may not be in growing markets, but they're really important, and those are high-value businesses. To us, our business model has always been about value, not just size. If it was size, we would never have made all these divestitures. They were in high-growing areas, by the way. So it's about always reinventing yourself. You move commoditizing businesses out, invest in the new. So you've got big core franchises that run in non-declining markets but are important, and then we built on top of that the businesses of the cloud, of Watson, data analytics, which are now $33 or $34 billion in size. 42% of IBM last quarter grew 13%. So those are built on top of those core franchises. So that's the dynamic: a steady, important, high-value market that is important to clients and high value but not growing, and on top of that we built already in this short period of time that $34 billion of businesses around cloud, data analytics, Watson, cognitive, mobility, security. One of the great companies in the world continuing to reinvent itself.