Should Watson Co-Run IBM?

Friday Mar 17th 2017 by Rob Enderle

Yes, Watson should co-run IBM. Not only would this put a Watson again at the head of the firm, it would create the first AI company to be co-run by an AI.

One of the things I found really annoying when I worked under Louis Gerstner at IBM was his response to the question of why the company didn’t use its most advanced technology. IBM, for the most part, does this today, but back then, his response was “would you rather I used this for our needs or our customers’?” It’s a false choice, though. An enterprise firm at scale can do both. Inside IBM at the time, I knew that the real reason was that we couldn’t justify the cost. This was troubling because we bought at cost and if the TCO didn’t work for us, then how did it work for our customers?

With IBM Watson, Ginni Rometty, IBM CEO, has argued that its best use is not to replace humans but to augment them. This is not only a bold difference from most automation efforts; it more effectively deals with the unintended problems of mass unemployment that otherwise might occur. If you put everyone out of work, you lose the very customers you need to buy your goods.

But if you are going to argue augmentation as a path, why wouldn’t you begin by augmenting the office of CEO? Now, I can anticipate the answer as being too few users, but given that the CEO is the most highly leveraged position in the company, this is wrong headed. Put differently: If by implementing Watson you could turn an average CEO into a Steve Jobs, Bill Gates or Thomas Watson Jr., the cost would be insignificant to the benefits.

Let’s explore this on a couple of vectors, focusing on leverage rather than volume and then specifically on why we should be augmenting CEOs.

Leverage vs. Volume

We generally justify a project by the number of potential customers and users, particularly with a software offering, because the more you have, the lower the relative cost per user, and the more attractively you can price the product and still maintain a decent margin. This also spreads your risk because you can lose hundreds of customers and stay in business if your customer base is in the 10s of thousands, but if you just have one customer and lose them, you are done.

This goes to the core of the total cost of ownership (TCO), model that Gartner placed on us and showcases the problem with it. TCO exclusively focuses on cost and implies that the lowest cost solution is the best solution. But there are two parts to a measure of success. At Forrester, Chip Gliedman, since retired, championed a concept called Total Economic Impact (TEI), which traded off the benefit from a technology against its cost. So let’s take two offerings. Offering one costs $1 and provides $1 of benefit (cost reduction or revenue increase), and offering two costs $5 but provides $10 of economic benefit. Intuitively, you should conclude that offering two is better, and TEI would agree, but TCO would focus you back on offering one. TCO as one of many factors for consideration is an important element, but as the only one, it leads to stupid decisions.

In much the same way, we tend to focus on tools used by lots of people. SFA, CRM and similar classes of tools are designed to make the rank and file more effective collectively because they, in aggregate, control the tactical revenue and cost of the company. However, the higher you go in the firm, the more leverage you get. The CEO can make a billion-dollar decision, yet CEO tools are nearly non-existent because we don’t really consider that class of employee needs help. Butt we’ve certainly seen how the difference in CEOs, particularly when transitioning from a very good one, can have a huge adverse impact on the firm. Steve Ballmer certainly wasn’t Bill Gates and is credited with Microsoft’s lost decade. Tim Cook hasn’t had a successful product at scale since Steve Jobs’ death. Michael Dell had to come back and save his company, and IBM after Thomas Watson Jr. eventually almost went out of business.

Wrapping Up: CEO Augmentation

Technology companies should be showcases for the technology they share. If they can’t justify the cost of their leading technology, then it is hard to argue that their customers, who pay a premium over cost, can do so. This is why I believe in always asking a vendor how they use their product (if they can use it). We almost exclusively focus our tools on rank-and-file employees to make them more efficient, but with the advent of artificial intelligence, we have the opportunity of focusing on executives to make them more successful.

If you take into account leverage, assuring that executives don’t make avoidable mistakes could save a company billions of dollars, easily justifying the cost of an AI implementation. It would seem, much like TCO vs. TEI, that we aren’t taking into account leverage when we design and focus tools. But Watson, which is being positioned as an employee augmentation tool, could be the ideal way to turn a new CEO into a superstar.

Watson could become the sustaining intelligence inside IBM, assuring that no new CEO starts from scratch, and become a repository for not only every smart CEO IBM has ever had but for observed behavior from iconic CEOs like Jobs and Gates. Watson, in this form, could be the tool that assures IBM survives and flourishes over the next 100 years and, if successful, could assure that most companies were tied to IBM at the very top. But it would all have to start with Rometty.

So, to answer my question, yes, Watson should co-run IBM. Not only would this put a Watson again at the head of the firm, it would create the first AI company to be co-run by an AI. Now, that would be showcase of a level of confidence in a tool that would likely make Thomas Watson Sr. proud.

Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+

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