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Ginni Rometty: Towards The Smarter Enterprise And The End Of Average

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IBM chairman and CEO Ginni Rometty speaks to the IBM InterConnect conference audience gathered at the Marina Bay Sands in Singapore about the strategic shift companies need to make to become a “smarter enterprise,” and in turn realize “the end of average.”

IBM president, CEO, and chairman Ginni Rometty took the stage at the IBM InterConnect conference here in Singapore early this afternoon, and began her discussion by thanking the IBM clients in the audience: For both their time, the most valuable thing they can give us, and their business.

She then immediately set to laying out her vision for the “smarter enterprise,” and how the raison d’etre of the firm was going to move away from simply minimizing the cost of the transaction, and instead maximizing the value of those transactions, for both the firm and the customer.

Ms. Rometty began her overview with a setup of some astonishing data points: 2.7 billion people interconnected via mobile devices, one trillion devices connected to the “Internet of things,” and biggest of all, that 90 percent of all the world’s information was generated in just the past two years.

And within all of these lay the world’s newest and increasingly valuable natural resource, one both infinite and ever-growing: Information.

But to take advantage of all this information and maximize the value of the firm, Ms. Rometty suggested, technology would have to evolve into a new era, one she called “cognitive computing.”

Juxtaposed against the backdrop of the first epochs of computing — first, systems of tabulation, next, systems of programming — the era of cognitive computing seems exponential in terms of capability, because in the systems of cognition, computers would have to learn.

Why? Because, with that much data being generated, we’ll never be able to program all those systems.

This new approach to computing and analytics “will change both industries and cities,” IBM’s CEO explained.

Ms. Rometty then cited some specific examples by examining a few industry engagements IBM had assisted with just in these past few years through its Smarter Planet initiatives.

Banks, for example, that IBM partnered with had increased customer acquisition by 125%, and revenue by 80%.

Retail companies, in which 70% had increased revenue and 75% had decreased costs.

And the list goes on and on, one industry after another, one smarter city to another.

Ms. Rometty then explained this new transition would require an adaptation to the Darwinian feast to which businesses had been exposed because of globalization.

She called this adaptation the move towards a “smarter enterprise,” one that would move beyond the transaction cost and instead focus on the optimization of the firm’s value.

The adaptations that would be required were threefold, Ms. Rometty explained.

One, in this new world, the smarter enterprise would be driven by information and analytics. All of us will be required to make more decisions more quickly in a more complex enviornment, and those who choose to be a smarter enterprise will have a competitive advantage, but if only we choose to put analytics at the center of our efforts.

Two, Everything the smarter enterprise creates will bring new value by infusing intelligence into its operations.

Rometty explained, “we can see the signals already. Smart meters for cars and electric grids, embedded software in cars, pay-as-you-go insurance.”

Manufacturers are moving towards a “production line of one,” but intrinsic to that is the ability to create value both in what they make, and how they make it.

And third, Rometty explained, I’m going to deliver my value not to customer segments, but to individuals. That means I’ll need to know more about my clients and more often, but also be able to put that knowledge to productive and beneficial use to my clients.

This signaled what Rometty described as “the end of average.”

For those of us who run companies, 1-1 will apply to how all of us engage our companies, Rometty explained, and said that “it’s going to revolutionize the science of management. The engaged employee will drive the client’s experience, and that will drive your business results.”

Rometty suggested a couple of examples, including IBM’s own use of social technologies to optimize its business, as well as President Obama’s 2012 election campaign, where he used analytics to “focus on folks who could be persuaded to change their votes for him,” and only on those people.

So in summary, she explained, the smarter enterprise would be pervasive in making decisions with analytics, and though the creation of value for the new firm would be infused with intelligence, the delivery of that value would be to the individuals.

However, in order to bring this new reality to light, Rometty suggested, we would have to do three things differently.

First, technology foundations would have to change, including the need to establish a firm big data and analytics foundation. We would also have to optimize for the mobile world and often atop a cloud computing foundation.

Second, we have to change the firm’s social fabric. “The social network,” said Rometty, “would be the new production line.”

“Inside your company you will change how and where decisions are made, and by whom,” because ultimately she said, “every company wants to improve its speed and effectiveness.”

And finally, ending average would mean a new kind of leadership, one ironic in its orientation. On the one hand, she explained, you have to recognize there is a new form of engagement, and yet on the other, you have to open up to influence of and by the customer.

Rometty summarized her talk before the packed audience at the Marina Bay Sands by explaining she was hopeful and optimistic.

“Information will be the new natural resource for the 21st century. It will mean what steam meant to the 19th, and carbon mean to the 20th. It will force economic growth and societal progress.”

She went on to explain that “this world is within our grasp. And in this smarter planet world, firms will be distinctive centers of expertise, they will exist to create higher value, and they will create trust across varying constituencies.”

“The enterprise’s role in our lifetime will be less about doing work efficienctly,” she explained, “but about creating value authentically and transparently.”

“Building the smarter enterprise,” she concluded, “will be the leadership challenge of the next generation.”

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