IBM (IBM, Financial) CEO Ginni Rometty discussed Watson, IBM’s artificial intelligence platform, at this year’s Consumer Electronics Show in January. In the video below, she asserts that the future of the internet is cognitive. The goal of Watson is to help customers make better decisions by collecting massive amounts of data for predictive analytics. Three business leaders from Under Armour (UA, Financial), Medtronic (MDT, Financial) and Softbank (SFTBY, Financial) discuss how they are incorporating Watson’s functionality into their products and services. The video does a good job of describing IBM’s vision and business strategy. The company has had four straight years of revenue declines, and investors are wondering when new revenue streams will offset the declines in their existing businesses.
Under Armour (20-minute mark)
Under Armour is a high growth athletic apparel company. CEO Kevin Plank talks about the company’s Connected Fitness business unit and the introduction of its product, the HealthBox. HealthBox retails for $400 and comes with connected wrist band, weight scale and heart rate monitor devices. The devices record users’ sleep, activity, fitness, nutrition, weight and general well being. Watson is used to compare the user’s data against other members with similar characteristics and make recommendations to exercise, diet or sleep patterns. Down the road, the company envisions using Watson to develop fitness coaching where the Under Armour app can take on the role of a personal trainer and help people meet goals like losing a specific amount of weight.
Medtronic (33-minute mark)
Medtronic is a manufacturer of medical devices including pacemakers, defibrillators, insulin pumps and glucose monitoring systems. CEO Omar Ishrak discusses how Medtronic has an app that will use Watson to help diabetes patients better manage their blood sugar levels and potentially avoid medical complications like seizures. Similar to Under Armour’s HealthBox, Medtronic captures more and more data over time so Watson can help customers make better decisions.
Softbank (48-minute mark)
Softbank is a Japanese company that operates in many industries including mobile communications, e-commerce and IT. Kenichi Yoshida, an executive from Softbank Robotics, explains that Softbank believes the next three biggest business opportunities will be the Internet of Things, artificial intelligence and robotics. He then demos Pepper, their latest robot powered by Watson. Pepper can understand natural spoken language. Its applications may include helping customer find an appropriate loan at a bank. It could also act as a hotel concierge who helps guests with various requests like finding the nearest restaurant. Softbank claims that Watson helps Pepper continually learn and interpret human emotions. An example of a current Softbank client is Nestle, which is using Pepper to sell expresso machines at physical stores.
Some thoughts after watching the video
As a Berkshire investor and Warren Buffett (Trades, Portfolio) admirer, I check in on IBM news from time to time and ask, “what does Buffett see in this company?” After seeing this video, I am a bit more encouraged about IBM’s prospects but remain skeptical. My main questions about Watson relate to competition. My concern starts with access to data. The artificial intelligence platform with the most access to data will have a tremendous advantage as more data helps improve predictive capabilities. IBM supplies point-of-sale machines to many companies, but from a consumer market perspective, it’s reasonable to assume that companies like Google (GOOG, Financial), Facebook (FB, Financial) and Amazon (AMZN, Financial) have an advantage. From an enterprise perspective, IBM has a strong presence in health care and finance, but it’s reasonable to assume that Microsoft (MSFT) has an overall advantage in access to enterprise data. In the end, the cognitive computing market will not be a one winner take all scenario but some companies will profit more than others. It will be fascinating to keep track of how it evolves.
