Yesterday, several of our members had the incredible opportunity to join the Chief Executive’s Club of Boston to listen to IBM’s CEO and Chair Ginni Rometty share her thoughts on the current state of Industry transformation. These events are normally limited to the top executives in the Boston area so naturally we jumped at the chance when given the invite. What we didn’t know was that IBM would announce it’s tenth straight quarter of revenue decline and the divestment of its semiconductor manufacturing division just a couple days earlier, adding some serious energy to the event. While Mrs. Rometty would touch on these in the Q&A, she chose to keep the talk itself focused on overall trends relevant to the executives in the audience, the majority of whom worked in finance.
The theme of Mrs. Rometty’s speech was simple, there is nothing new about disruption but what makes today different is that there is not one trend transforming business but three concurrently. Furthermore, while they sound like they are Tech Industry trends, they are infiltrating every industry with the potential to reorder them from top to bottom. It will be the companies that understand and embrace these that will be the winners. So what are the three trends? No surprise to Tech Club members here: Big Data, Cloud, and Engagement.
Big Data: Mrs. Rometty pointed out that neither data nor analytics are new to business but rather it is the type of data and analytics that is changing. Traditionally businesses have used descriptive or perhaps even predictive analytics. Mrs. Rometty compared these to navigation. Descriptive analytics can tell you what route is best to take based on past data. Predictive can give the best of several options based on data available at the time of the decision and what is expected to happen, but prescriptive is like a GPS that constantly adapts the route in real time according to a variety of constantly changing factors. Applying prescriptive analytics to business is not easy but Mrs. Rometty asserted that companies who succeed have 8% better retention, 10% higher share of wallet, and are 2.5 times faster to market than their competition. Mrs. Rometty urged the audience to use data as a weapon and suggested naming a Chief Data Officer as a good first step.
Cloud: Mrs. Rometty began by informing the audience that while “Cloud” can be an ambiguous term the exact technology behind it is unimportant but what is crucial is understanding that the idea of “Anything as a Service” is transforming all industries. Business models are changing and the keys to winning are going to be speed and agility. Finding the right balance of on and off premise computing, software, and services will be the key to unlocking the competitive advantages innate in the next generation of business models. Mrs. Rometty reminded the crowd that its $7B of acquisitions make IBM the largest digital agency in the world and reaffirmed her commitment to helping IBM customers “reimagine the world”.
Engagement: The final trend that Mrs. Rometty spoke about was Engagement. Generally when people think engagement they think social and they think consumer. However, she was adamant in reminding the crowd that IBM is a B2B company. Social engagement, especially via mobile devices are the production engines of how work gets done. It is crucial to embrace this while underscoring it all with security. In answering a question, she added to her thoughts on security, saying “Whatever you do, you don’t do enough!” She prescribed 5 key actions to take:
- Raise the security IQ of the internal team. 60% of all errors are internal, and 99% of those are accidental. It is crucial to train, test, and trick employees to accomplish this.
- Establish a permanent fast response team. Cyber attacks are a question of when, not if.
- BYOD is here. You need technology and policies to manage it. (IBM and Apple’s partnership provides this)
- Protect your crown jewels. Know what the true sources of value to your organization are and protect them from all angles.
- Make security a corporate priority governed by value not budget. “It’s not in the budget,” can never be a justification for leaving key assets vulnerable. Businesses should make the necessary trade-offs to ensure they are protected.
While the overall tone was positive, one audience member did challenge Mrs. Rometty about the poor financial performance, particularly in the area of declining revenues. While she did not seem particularly happy about the question, she certainly was not unprepared. Mrs. Rometty emphasized her focus on rebuilding what’s underneath and offloading declining divisions. She pointed out that she had just offloaded not just $7B of revenue but also a half billion dollar loss. “We don’t need more revenue with empty calories,” she told the crowd, “what I do to add margin is much more important than revenue growth.” Instead, Mrs. Rometty highlighted IBM’s focus on shuffling IBM’s business mix to be much more focused on high growth areas.
Jettisoning the disastrous Roadmap 2015 is certainly a step in the right direction but with the huge lead Amazon and Google have in the Cloud, and the speed and agility of start-ups in the Big Data space the road ahead for Big Blue will be difficult. Commercializing Watson and offloading the hardware divisions are good moves but it may be too little too late. Whatever happens, however, the opportunity to hear such an incredibly experienced and influential executive as Ginni Rometty is one for which we are truly grateful. Her observations on the changing business landscape are insightful and promising for our members who continue to strengthen skills in Big Data, the Cloud, and Social Engagement via our in class experiences and the hands-on opportunities the Grad Tech Club provides. A huge thank you to the Chief Executive Club of Boston and our old friend (and former assistant Dean) Warren Zola!
-David LoVerme is a 2nd Year MBA at Boston College and the President of the Grad Tech Club