Saturday, June 24, 2017


HBR: You’ve been running IBM for more than five years now, overseeing big changes. Do you view
this process as a turnaround?

ROMETTY: I wouldn’t use that term. This is a transformation. We’re a 106-year-old technology company, and we’re the only tech company that has moved from one era to the next. When you’re in tech, you have to transform. How much transformation can your employees and investors handle? When will you be able to declare that you’ve made it to the other side? That’s a good question. Let me answer in a couple of ways. First, you need to be clear about what you are transforming to. For us, it’s all about data, and we have a very clear view of what our enterprise clients will need. When people talk about data, they often mean things that are searchable via public search engines. But that’s only 20% of the data in the world. What we’re trying to unlock is the 80% that’s behind
everyone’s firewalls, because that’s where the value is. Everybody has tons of data; they just can’t make use of it. Our belief is that you’ll make better decisions if you can unlock that data and that there’s a $2 trillion market around better decision making. That’s the market we are going after.
How do you know you’re on the right strategic path? And are you making changes as you go? Oh, goodness, have I made changes! It’s important to have deeply held beliefs about the vision. But then
you have to look at the results. I’m confident about where we are at this point. Our new businesses around cloud, data, and security add up to almost $34 billion in revenue. They’re growing at 13% to 14% a year and makeup 42% of the company. Watson, our artificial intelligence platform, will touch one billion people by the end of this year. I consider these numbers prove  that we’re on the right track. Yet you’ve had 20 consecutive quarters of revenue decline.
Yes, but that includes divestitures and the strong U.S. dollar. Currency is responsible for $14 billion of that decline. And I divested $8 billion to $9 billion worth of revenue sources. So that is the bulk of it. However you account for it, is this extended revenue slide part of the plan? Or is it a
disappointment? What’s positive is that the plan is proceeding as we believe it should, with the growth of large new businesses that are adjacent to our core franchises. IBM will grow again. But we need to grow in the right ways. We’re moving into areas that have value and shedding ones that don’t. We could have higher growth rates, but we made a bold decision to divest commoditizing businesses before they commoditize further. The new areas are higher margin, but we have to invest in them
and then scale them up. Warren Buffett just sold a big chunk of his IBM holdings. Does he not get it?
I never talk about our shareholders; they can speak for themselves. But our clients vote through their use of our oferings, and they are showing that we’re on the right track. H&R Block, for example, took Watson for the tax season to assist its professionals in handling millions of customers. The company gained market share and had an unbelievable Net Promoter Score.

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