 From Las Vegas, expecting a signal from the noise. It's theCUBE, covering InterConnect 2016. Brought to you by IBM. Now your host, John Furrier and Dave Vellante. Okay, welcome back everyone. We are here live in Las Vegas for SiliconANGLE Media's theCUBE. It's our flagship program where we go out to the events and extract the signal from the noise. We are here at IBM InterConnect 2016. I'm John Furrier with my co-host Dave Vellante and I've got Scott Heppner as the Vice President of Marketing, IBM Global Technology Services. Welcome to theCUBE. Thank you. So your job is essentially lay out and understand and get immersed into digital transformation. You have to eat your own dog food, drink your own champagne, implement it internally at IBM, but also in real time work with customers. And this notion of digitizing everything is what is on the horizon. Yeah, no, actually that's an interesting point that you may not only helping customers digitize their enterprises, but as a marketing professional, we're digitizing how we engage with the marketplace too, right? So you're kind of a practitioner and a coach, right? But clearly, it's been happening for what over 15, 20 years, the slow steady digitization of a business. And I think we're in a whole new wave now where businesses are going full steam ahead to enable almost a complete digital experience for their clients, right? Not a website, right? Not just engaging at any time, you know, always on, but having the ability for the personalization of what that person may want to engage with you on, because it understands the person, right? It understands what they've done, what they're interested in, what they've done in the past, and therefore you're able to provide a service or an offering that is more custom to what they're looking to get from you. And it really transforms how a business needs to operate if you think about it, not just how they sell it. I mean, it could be mind blowing for our customers. Let's unpack this notion of digitizing a business, because it makes sense. If you can measure everything, that whole equation of 50% of your ad spend is wasted, you just don't know which half, but now applies to supply chain manufacturing, go to market, customer interactions, sales, all aspects of business, social business, whatever you want to call it, it's happening, it's data driven. What does a customer do? It's kind of daunting. So, doing a digital transformation, there's spectrums of where customers are in their orientation to that. They're tire kicking, they're taking first baby steps, they're walking, some are running. Can you give some examples of that spectrum? You know, tire kicking, baby steps, walking, running. And what are people doing? I mean, what are some of the things that we're seeing in that spectrum? Yeah, let's start on the more further out there, which is I think the tire kicking, right? If you think about the secret sauce here around digitization, it is about the data, right? The data, we all know about the explosion of data. Everyone, no one is able to program all that data. You can only program so much to take advantage of all the data. So you need these systems that are able to understand it, they're able to learn from it, they're able to reason around it and help the human beings that are running the organization make the right decisions. So there are many businesses now that let's take an example of how I engage with a customer around a service that I may provide to them, right? The ability to understand the history of what they've done, what they're engaged in with, understand things like emotion and behavioral trends, right? Maybe there's sentiment about your business and then be able to translate that on the fly. Because remember, digital means almost always on, right? You got to do it immediately. You don't have time to go work on things. So how do you take advantage of that data that is really the footsteps of what that customer is trying to do and turn it into value on the spot? So collecting the data. Collecting the data, understanding what the data means, right, and the data is not just, well, I bought from you before or I live in this state. It's what my sentiment is about your business, what your competition, what they think about the competition, who they've looked into before, what their experiences have been. It could be personality traits about people, right? And then from there, you take that data and you present to that customer, you know, a experience that is optimal to that personality and that desire that they have. In other words, the one size fits all is no longer there, right? And more and more of a journey towards personalization. A customer of one, if you think. So we've been working on a premise at our organization, our editorial and our research, which addresses that directly. And I wonder if we can run the premise by you that basically you said it's been happening for 10 or 15 years, this notion of digitization. And one of the things we noticed is that there was years ago real asymmetry and information, in other words, the brand knew a lot more than the consumer. About, you know, demand patterns, pricing, et cetera. Now with information freely flowing, that asymmetry is balanced. What we, the premise is that we see digitization as a way for brands to regain some of that market power to understand their consumers, which has a whole lot of implications. I mean, some brands know more about me than I know about me. When I run out of a certain product, they ping me in it. They're providing value there, but sometimes it's a little scary. So is that a reasonable premise that this is about dealing with problems of demand, changing demand patterns, fickle demand patterns, ever-changing consumer patterns? Do you buy that? I buy that 100%. And what's happening now is the engagement with a potential customer needs to be real time and it needs to be situational. And if you kind of think about this whole explosion of data, you can argue there's been three huge phases. Customers have always had empirical data, customer records, transaction records, all that. Then we moved to this phase where everything was being instrumented and connected to the internet, the internet of things, if you will, which is a huge transformation that's going on right now. And so you have this flood of data from location to how fast you're moving down the street. I just drove by you. So all that data is coming in from all these instrumented devices. Then you add the whole social element to this, Twitter, Facebook, go down the line here. And with that starting to record, every footstep that people take is the behavioral trends, the behavioral data about the customer, about what they're doing. So now the trick is how do I take all that information, unlock it from all my systems in my business and from what's happening in the marketplace and translate that situationally on the fly to here's some value for you. It knows you more, like you said, probably better than you know yourself. Because all the data is there, the question is how do you unlock it? Well, so I wonder if you can help us understand what customers are doing. So I'm going to simplify things. It's two broad knobs to turn. One is data. The amount of data, the types of data, the data sources that I can ingest. I can put my $100 budget there, or I can put it on making better algorithms, improve and continuous improvement and you hear a lot about machine learning. You know, making myself, my organization smarter. Where do you see your clients spending their, you know, if they had $100 to spend, spending that resource? I imagine the answer is both, but do you see any patterns emerging where one or the other is favored? Well, I think especially when you look at this idea of how do I integrate my enterprise for the customer, right, seamless experience, and how do I begin to provide this real time, you know, experience for them that's based on their personality. That takes the integration of your enterprise and all your technology assets, all your data, your business processes. And that has borne the whole notion of cloud, right? And especially hybrid cloud bringing this all together with the initial focus being on productivity and cost savings. And by being able to do that, you're able to save money that you can then invest in where the real value will be longer term which is the innovation around the experience and how I tap into all this data and provide value to the client. So I think it started off as a productivity, flexibility, cost savings thing. Now it's all about using hybrid cloud platforms to unleash the innovation, to do all these things that we're talking about like, you know, understanding emotion or understanding, you know, sentiment of a customer and putting those packages of value together in real time, right? So I think the focus now is in investing in that experience, the user experience, the digitization of that experience and a lot of that's made possible by the cost savings and the productivity that cloud has brought over the years. The cognitive or cognition theme has been, you know, on the cube all morning, Nancy Pearson was talking about it, also when the analysts were on as well. And then what came up was this whole return on asset and the new asset classes, analytics and UX, user experience, I mean, not asset class, literally, but that is a valuable component of the digital transformation. So, and also we had the weather company on, CTO and CIO on, so we love to kind of geek out, but we're kind of connecting the dots here, so I want to get your thoughts on this. This is in your wheelhouse. IBM buys, Ustream, digital transit company in the cloud. Couple agencies, kind of see this digital concept. Yep. Share with us, are we on the right dot connecting line here? IBM's bringing this in-house, not to have an agency, but is it to get the analytics and the user experience thing baked into the portfolio? Is that kind of the thinking? Yeah, I mean, I think it's a transformation of the value ultimately isn't how you exploit the data. You need a platform that gives you the cost savings, the flexibility and the ability to innovate very, very quickly, which is cloud, right? And then by having those two things in place, you then are able to create that innovation around the experience. And you're seeing us with acquisitions and organic new capabilities, from products to services in each one of those three areas, right? And that all comes together to deliver this notion of a digital enterprise. And you just think about this last step about the user experience and some of the things we've been talking about the behavioral data and really understanding so you can really treat your customers as a customer of one. The technology's out there now, a lot of the cognitive new APIs that IBM Watson provides, right? There's all kinds of new technologies, but you as a corporation, and you have your IT staff and your developers, how do you unleash those capabilities so you can quickly and efficiently experiment and build new capability, right? In the old days, you would have to stand up the whole environment and you would have to do all kinds of things to get going. Now with the delivery of cloud, these APIs are being delivered to the cloud which is so much easier as a service to get engaged at a low cost to experiment and try new things. So talk about the digital agency rationale on those acquisitions because I want to kind of just tease this out because I think it's nuanced and I don't want to kind of unpack it. Most people think of digital agency, they think, oh, is an agency providing digital services? I think you guys have a different view on that. That's why I want to ask the question. Those acquisitions, are they to have in-house user experience agency like function? What specifically about those deals can telegraph to your customer base this new configuration of IBM to help them bring that? Is it more of mobile development? Is it more UI? Is it more walking and tackling? Share the insight. I think you framed it correctly a couple of minutes ago which is the whole user experience is a major area of focus by most of our customers because that means digitization, right? And again, this notion of always on personalized engagement with your customer. And so helping customers with how do you build the right experience, right? Is a major part of how they design the applications that run their businesses, their business processes, how they unleash their people, how they present the data in a way that's useful to the customer, right? So you're seeing those capabilities being integrated into that end-to-end capability for the customer as part of our commerce portfolio, as part of our cognitive- It's a different approach. I mean, if you think about weather data. Yep. Digital agencies. I mean, I was joking with Dave on the opening about LeBlanc's comments around Ustream and like, hey, you know, whoever can do 20 to 100 million concurrence basically bypasses a CDN. That's potentially the digital transit of the future. Right. You almost can just see it happening. That's not speeds and feeds. Go to market. Email marketing. I mean, that's kind of the older way. Still relevant today, some degree, but like... Well, you bring up the weather challenge. That's actually a really good example because weather is big business, right? And you go through all the different scenarios of storms and what the weather patterns are and how it affects business from inventory to how your customers are wanting to buy what promotions you should provide. There is an unbelievable amount of weather data that's available in real time like every second of the day, right? But for the average IT organization or someone that needs to deploy new applications, how do they get access to that data? It's not trivial. So what we've done is we've taken all that Internet of Things data. We're now making it available easily to customers to exploit through the cloud, right? Again, this is the notion of the hybrid cloud, you know, blue mix and the APIs that are being integrated into it. And that is what is allowing people to innovate with their user experience. Again, hand on the data. I've had a new digital value chain, if you will. Right, right. Concepts. Right, because the digitization of the enterprise and all the value that it brings is going to require the ability to move quickly, to be able to have the money to reinvest in these new capabilities and these new innovation points and the ease of access to all this. And that's what the cloud platform provides. So moving to cloud is really something that is going to be the catalyst for all this digital user experience and the overall digitization, right? So again, it really is three layers. You've got all the data. You've got the cloud platform that delivers that ability to easily innovate at a good cost model and then that's going to deliver ultimately the digitization in terms of the experience. So you have very clear thinking on this, Scott. And another observation we would make, and I'd love your comments on this, is that virtually every company is becoming a technology company. But they don't want to be a technology integrator doing a lot of heavy lifting. They want it, as you said, as services. So I believe you guys agree with that. That's clearly the prize you're going after. What gives you confidence that IBM will be the partner of choice to be that provider to enable companies, clients, to become technology companies? Well, I mean, it is absolutely true. You look at just going back to what 10 years ago, a lot of these hardware companies like appliances, like your refrigerator or your car, right? Those were thought as physical things. They weren't software companies. But think about it. If you're the provider of a refrigerator or a car now, you are a software company. Because what differentiates and what provides innovation in the car or the refrigerator these days is the software, right? And so you are becoming a software company. And if you look at what IBM is able to provide, we have a massive software business and a lot of enterprise experience in software. We've got the services that can help people build that strategy and implement that across their entire organization. And now we're infusing all that with a very intense focus by industry. So we understand retail. We understand petroleum. We understand financial industries. So I think you take the industry expertise plus the history of our offerings around software, hardware and services. And you add it to what you've been touching on here, which is the cloud platform, all this cognitive capability and the user experience digitization of the business. The three big pieces that need to come together for a client. And so I think we're uniquely positioned. Well, Neil Henderson was on the queue earlier, Apex coaching and consulting. He did the thought leadership sessions on stage. He's a cycling guy. He's a technology company. He's doing tech. Lumix basically enabled him. And then the guys from the trading company there, what's an amazing example. I bought it three years ago or so. I remember I bought a new treadmill. The differentiator on why I bought that certain treadmill was all the software. I don't even care about the mechanics of the treadmill. It was the software. So think about that. 10, 15 years ago, they wouldn't be thinking about mechanics. Now they're thinking about the digital experience. And now these things are hooked to the internet. Now it's got the ability to wearables. Now I got your fitness, you can say, hey, good run of the treadmill at home. Now you're out walking around. They take a flight of stairs instead of the elevator. I mean, this is the new integration. This is the new value chain, not siloed. And digitization is things from the watch, from the phone to your dashboard in your car. Your car is becoming a platform in itself. It's a data platform. And again, it's going to keep coming back to the same things that without a true hybrid cloud platform to quickly innovate, to have the cost savings, to have the flexibility, and the integration of all this. That then unlocks all that data. You're not going to have that digital experience, whether you're in the car or whether you're looking at it. You're a watch or whether it goes on and on and on. There's an here with that. How are you doing? Keep alumni walking by. I always say hi. I got to ask you on the premise. Another thing we're thinking about, I want to get your thoughts on this. And this is interesting because you've been on demand, Jen, you've been marketing. You know the digital side. I'll call Web 1.2.0 kind of phase. Certainly it's search engine marketing. You've got microsites. You've got websites. Kind of boring, not very dynamic. Now you've got social, a lot unstructured data. So as we move to this new era, the premise is this. Your customers want to buy from a brand that has assets that are truly digital. And everywhere, pervasive. Meaning not just the website, not just an email blast. So the premise is people want to buy from brands that have digital assets. That means all their stuff needs to be out there. Yes. You buy that? Absolutely. How do they do that? So what happens? Is it like just tweet? I mean, we're doing our share with the queue. But I mean, outside of that, as a marker of IBM, your customers want to buy from you in this new format. Yes. One of the most important changes over the last 15 years has been the value of the expertise of your company. And it even goes out to a store that you go into by fishing and equipment. More and more people are going there to tap into the expertise of the people that work there, about where do I go fishing, what's biting, all that stuff, versus just to buy stuff. You kind of take that to a larger corporation is with this whole transformation of digital comes access to experts. And so one of the most important things a business can do is leverage all this new social, technical, editorial capability, the social web, to unleash your expertise and all the people you have in your ecosystem. So customers can engage with them quickly and get their questions answered. And it's the intellectual value around the products that's becoming more important in the products themselves. You mentioned experts. That brings up the next question, which is in good segue into the community. I mean, you guys have always been a great leader in open source. IBM has had great history. And we talked about this earlier in the queue of this next generation of open source. But now you have a connected consumer, if you will. That's con-social. They're being instrumented. They're now plugged into your nervous system, if you will. If you want to call it that, IBM's fabric. How does crowdsourcing, how does the crowd aspect change the relationship in terms of how you produce digital assets, how you measure them, how you engage with them? I mean, there's a new way to engage, there's new ways to connect. How do you guys view that? And what are some things that you see as the best practices? Well, a great example is, you know, used to be you would build a piece of content, a brochure or whatever, make it available as a PDF, you put it on your website, you'd get traffic and how many people downloaded and all that. But you don't really learn anything about what they think about it, right? Now with social, you can actually measure the value of that content. Because if it's valuable, there will be actions taken on it. They'll click through, they'll retweet it, they'll like it, they'll comment on it. And you can start to have real-time feedback, like real-time, like, you know, minute by minute of what people think and are saying about the content. And then you learn from it and you adapt the content and you refresh it. It becomes a living piece of content, right? You extend that- And you have interaction data on it, so you have that community engagement. You know who's talking about it, you know the sentiment of the people that are talking about it, and then you can create triggers that say, well, if they are living in the state of Texas and they have a positive sentiment on this offering and they've mentioned it more than twice in the last month, I think they have a propensity to be interested in buying something from us. Then you go back to them directly and retarget them versus just wasting and shooting things out there. You wouldn't know that if you didn't- This is a cookie today. It's a cookie. I visited the website. You have no intent knowledge other than they went to the website. Right. And you take that one step further, take that same exact concept and you apply it to the notion of a focus group, right? The crowdsourcing notion, whether it's for how you design new products to even the content in your message, there's the ability to get real-time feedback. It's the notion of A.B. testing. We have orange buttons on our website because guess what? I don't know why, but if you put the same thing out there and you had green, blue, and orange- Well, that was A.B. testing. Orange always wins. A.B. testing is obsolete now because now you have unlimited letters in the alphabet. You can do A through Z testing multiple times. You don't have to do two groups. You can do multiple subsets. That was my point about real-time, situational- I like that. Always on engagement that not only meets the customer need and you start to become a customer of one and how you personalize, but it gives you that real-time feedback on what works, what doesn't work, so you can adapt. Now we're back to Cogniz. So two years ago, when Bob Picciano came on, he was just kind of picking out this whole systems of record, which we all kind of get pretty easily in the business. So the engagement was, oh, that was awesome. We totally got that. That's like Twitter, that's engaging. Now you got those two layers. And now with Cognitive, now you have actionable value on top of the engagement. What is some examples that you can share that your customer should know about around this cognitive value proposition? Yeah, let me give you a very specific example. There's a company called Mutual Mind, they're actually over here, and they do this notion of adaptive listening and lead detection. And what it allows you to do is set up triggers, right? Use an example, if Texas and they're interested and their sentiment is positive, they then tap into the Watson API through Bluemix that would then be able to give you a propensity to share the information or the propensity to actually buy. And it uses Watson cognitive capabilities in the backend. So you're like, wow, I can actually mine all the Twitter conversations around a very specific what if then alt statement, a trigger, right? And then use the power of Watson to get a propensity to buy. Again, how do you build that on your own? Well, if it wasn't enabled through a cloud platform called Bluemix with Watson in the backend delivered through a beautiful offering from Mutual Mind. So now pretty much any customer can go out and start to not just tweet things, but now look at the data, group people into categories and apply cognitive capabilities to do they really have a propensity to buy? So they do, you're going to engage with them differently than if you're negative sentiment and you don't like IBM, you would want to engage with them in a different way. But you don't know who those people are if you're just tweeting randomly. You want to, right? And we call that lead detection or adaptive listening. And you get some predictive analysis, get some prescription in there as well. Yeah. And that brings you full circle to the digitization of your business. And when you start to do that, you start to engage with your customers in a highly personalized way because you're starting to understand what they really want, what their concerns are. And the data shows very clearly when you're able, the closer you can get to a customer of one, the propensity to buy from you goes like this. And the trick is getting to the ultimate, you know, nirvana here of a customer of one, and it was everything about you. Is the customer one paradigm kill the notion of communities or just highlights the value of what communities bring to the table? I think it hides the value of what communities bring because it's the communities that are having the conversations and really what that means is they're sharing their expertise and their experiences. Very communal. Yeah. And we know like in the buying process, the first 70% of the buying journey occurs in those conversations and doing your own research before they would ever come to us. Aided awareness, basically the conversation space is aided awareness. Whereas Jeff Jonas would say the observation space. So you can let those conversations go on in those big groups or you can really tap into them and understand. And it's crowdsourcing with a science behind it with the analytics behind it. And then if you go to the examples used before, then you start to tap into a cognitive engine to help you really understand, you know, are they really, are they going to share it? Are they going to buy it? It's pretty powerful stuff. Scott, thanks for taking the time out of your busy schedule to come on here where the Cube Madness starts on March 15th, getting ready for a March Madness to Cube Madness. We'll have all of our guests nominated and then they take their brackets and you vote for them, go to Cube Madness, check it out on SiliconANGLE.tv. Final word, Scott, share with the audience what the vibe of the show is this year. The folks who aren't here on site, what's the vibe in terms of content, feel, what's going on in the hallway? This has turned into a great show, what is it, 24, 23, 25,000, I'm not sure exactly how many people, but this is a huge, huge event, a lot of new innovation being delivered here through the cloud, you know, what we're doing around cognitive technologies, mobile. The vibe has been great and I've had nothing but good experiences with everyone I've talked to so far. You know, we're just getting started too, right? We've got three more full days. Got three more full days. This is day one. All the most powerful people here on theCUBE, sharing their knowledge, entrepreneurs, IBM executives, you name it, we're going to get whatever data we can, share that with you. This is theCUBE. We'll be right back after this short break.