Early this year, IBM formed the Watson Group, investing $1 billion to commercialize the Watson cognitive computing technology that captured the public\u2019s imagination in 2011 when it beat two former Jeopardy! champions at their own game. Watson is already solving some challenging problems in healthcare, finance and other professions, and the Watson Group is moving quickly to empower developers of every ilk with the tools needed to build Watson-fueled applications.\nSo, is Watson ready for your world? Could it help you make faster, smarter decisions about the most important aspects of your business today? How will Watson be melded into other parts of the vast IBM product line for enterprise IT? And how can you start experimenting with Watson today?\n[ Related: What Makes IBM Watson So Smart? ]\n \nMike Rhodin, senior vice president of the Watson Group\n\nMike Rhodin, senior vice president of the Watson Group, answered those questions in a conversation with IDG US Media Chief Content Officer John Gallant at the organization\u2019s new headquarters in New York City\u2019s Silicon Alley. Rhodin explained how his team has worked with early Watson customers and the steps he\u2019s taking to speed the technology\u2019s rollout.\n[ Tech Titans Talk: The IDG Enterprise Interview Series ]\nCIO.com: Let\u2019s start by talking about why IBM set up a separate Watson business unit earlier in 2014. What\u2019s the goal?\nMike Rhodin: I think it\u2019s important to step back a little bit farther than that. When we did the demonstration [of Watson] on Jeopardy and played the game show successfully, a buzz started in the market that hasn\u2019t actually died down, which is unusual in the tech industry. The tech industry tends to be built out of lots of products that have very short shelf life. But the concept of Watson and the branding of Watson really have staying power.\nWhen I go on campus and I\u2019m talking to students or doing lectures, I get mobbed with questions, starting from the Jeopardy context. It wasn\u2019t that Watson played Jeopardy. It was that people who watched that demonstration saw a glimpse of a future technology that they thought was going to be meaningful for a new generation. That\u2019s what powered the brand and why it still gets a lot of press. The Jeopardy match stood for the beginning of a new era \u2013 a new era of systems that were going to be knowledge-based vs. application-based.\nWe don\u2019t declare eras of computing very often. We think this is only the third in the hundred-plus year history of the IT industry. The first era was tabulating machines that counted stuff. The second era, which started in the late \u201940s, early \u201950s, was programmable systems, electronic computers that ran programs. We\u2019ve gotten really good at making those computers smaller, faster and better connected.\nThat\u2019s what we\u2019ve done for the last 50 or 60 years. But the basic model is the same. The apps that run on your iPhone are running on the same programming models that were around for many, many years. We invent new languages and the engineering has been spectacular over that time period. It\u2019s changed businesses and business models, it\u2019s transformed entire industries and that\u2019s great.\nBut there are areas of human life and business that that class of systems didn\u2019t touch. We think part of that is because these are areas of human life and professions that are judgment related. You need to have the ability to reason through problems, not just write a program to give you an answer off a piece of data.\n[ Related: IBM Watson Analytics Now Open for Business ]\nCIO.com:\u00a0As well as context.\nRhodin: Right. Context and clarification and dialog and ever-changing information sources and most of the information is not what programs are good at dealing with -- standard relational rows and columns. The information itself is completely unstructured. We didn\u2019t really have systems that knew how to do anything more than store and categorize unstructured data. We could search it, we could find lists of documents but we didn\u2019t have systems that understood the contents of documents.\nComing out of the Jeopardy match we had to do what any technology company does when they have a really amazing piece of research technology -- and at that point in time we had a great piece of technology that knew how to answer one question for one user in under 3 seconds. To be commercializable, you have to answer tens of thousands of questions for tens of thousands of users simultaneously, with all sorts of robustness and tools and you can\u2019t require people to buy a supercomputer. It needed to be a cloud-based system with APIs that enabled people to reach out and use the services.\nWe spent the better part of two years after the Jeopardy match doing what I would call classic market and technology validation. We evolved the technology, we made it more robust, but at the same time we were working with a half-dozen clients in healthcare and financial services -- brave companies that wanted to work with really raw, emerging technology. Their view was they could get a lot out of learning with the technology along the way. Our view was that we needed help figuring out what the use cases were going to be.\nThen last summer we came to the conclusion that the technology had evolved enough and there was a second wave of technology starting to come out of IBM Research that was additive to it. That [told us] it\u2019s time to start the next phase, we really need to start a commercialization project around this. We put that plan in place over the fall and then we launched it in January with the formation of the Watson Group.\nWhen we were putting the plan in place, we came to the conclusion that this new business needed to have a freedom of action different than just another new business unit within the organization. It needed to really act and operate like an emerging startup that had the freedom to make quick decisions, to twist and turn in the market as things were evolving and really move forward at a quick pace. It\u2019s not the first time we\u2019ve done that. Probably the most well-known example was the PC company, when we segregated that and put it down in Boca back in 1981. That became the basis for an entire industry.\nMany people today still call them IBM-compatible PCs even though we got out of the business 10 years ago. But the architecture and the machines that we created then spawned an entire industry of machines and then clearly gave way to Microsoft and Intel becoming very dominant in the PC industry. We did a similar thing in \u201991. We created a wholly owned subsidiary called ISSC. ISSC was the seed for IBM Global Services. It grew to a $50+ billion business over the course of a decade.\nWe recognize that there are times in any large corporation\u2019s history that a new idea needs to be set aside in order for it to grow at the speed it needs to grow at. We felt this was one of those moments. We decided to set it up as a separate group. Group structure in IBM is a [specific] designation. IBM Global Services is a group. There are only a half dozen of them in the company. It is a separate P&L, separate structure, it\u2019s autonomous.\nWe moved 150 researchers, bringing over a whole next wave of products. That [represents] the single largest movement of IBM Research personnel in IBM\u2019s history. We brought the market validation team, the team that had been working the technology forward, obviously, and we also brought over some related big data technology from our software business to form into the new group.\nWe brought over consultants from our consulting business, delivery people from our cloud business so that we had the ability to create strategies, design, build and run Watson-based systems for clients without having to stitch together pieces of different organizations to make that happen -- a very clear line of sight on what we had to do. That\u2019s why we created it as a separate group. That\u2019s worked out pretty well. We\u2019ve been able to move very quickly.\nCIO.com: A lot of what we read about Watson involves big engagements with big brand-name customers, some really amazing things that you\u2019re doing. I think that leads to a couple questions from customers. Is Watson only for the big guys and does every project involve this deep consulting and engagement with IBM?\nRhodin: No. One of the things that we realized when we set up the commercialization project is that there were going to be three parallel tracks to market. There was what you just described, which I would call big transformative solutions, industries that are going to go through pretty robust transformations because of these information-based platforms.\nWe also recognized there was going to be a class of very repeatable applications that would evolve, much like the ones that we launched a couple of weeks ago at the IBM conference, Insight, like IBM Watson for Wealth Management, even our Chef Watson application. We\u2019re targeting widespread adoption, not requiring heavy consulting engagements up front, more off-the-shelf product sales.\nThe third level is that we recognize that at our core we\u2019re an enterprise B2B company. But cognitive computing is going to be a great technology for consumers and we needed a way to reach them. The way to do that is to open it up as an ecosystem platform that allows startups and entrepreneurs to build applications and businesses on top of the platform. Those applications and businesses can target other businesses, or target consumers free, and we set up the system in a very contemporary way, which is that you can use the platform for free. If you build a business on it we get a cut of the revenue.\nCIO.com: I want to drill into that. Since you mentioned it, is that both as a development sandbox but also a Platform-as-a-Service (PaaS) where people can buy and run these applications? \nRhodin: Exactly. The idea is you start in the sandbox, you promote it to production and we run the production system for you. The work we do for our revenue share is that we\u2019re actually providing the technology and running the system for the clients you\u2019re selling to.\n[ Related: 10 IBM Watson-Powered Apps That Are Changing Our World ]\nCIO: Is there a model like that in IBM today?\nRhodin: Our Bluemix platform is that model. Amazon Web Services is another PaaS model. Azure is another PaaS model. There are a number of those PaaS models. Watson is only available right now on the Bluemix platform.\n\n\t\n\nCIO.com: Do you ultimately see it going on to other platforms?\nRhodin: I\u2019m busy enough right now that I\u2019m not worrying about it.\nCIO.com: I want to go back to the big transformative ones. Talk about that brainstorming process. How do the ideas take shape? \nRhodin: One of the things we discovered over the course of the last year is that this isn\u2019t about industries as much as it is professions. So we started to think about what professions exist where the amount of information being produced is overwhelming the ability of the professional to consume it? So that\u2019s target No. 1.\nThe other thing that seems to be common about the really big, transformative solutions are professions that are taught through the time-old tradition of apprenticeship, the passing down of best practices from one generation to the next. That applies to Watson because it\u2019s a voracious reader. It can just keep reading and connecting the dots across what it reads. Then it learns as it goes through a training cycle with experts. Those experts are actually teaching it best practices. Those best practices become how it learns and becomes expert in a particular domain and that\u2019s when you build the app.\nWhat\u2019s interesting about this new model, this knowledge-based system model, is that most of the work goes into the creation of the knowledge base, not the application. In the prior domain it was the other way around. That takes people a while to get their heads around. You\u2019re going to spend six months working on your information and you\u2019re going to spend two weeks writing your app. It\u2019s really that dramatic.\nThe reason it takes a while to figure out the information is that curating the information is often difficult. You have to curate information from many, many sources, synthesize it down to something you can create a concrete article out of. Watson has to go through that same process. We have a process and a product called Watson Curator that crawls and searches all of your enterprise data and helps you build curated datasets for ingestion into systems like Watson.\nThe best practice piece is done the same way our children learn. If our children read a book, the way that we know they understood the book is we ask them questions. So after Watson reads a lot of books, we ask it questions and we see how good it is at getting the answers.\nIf it\u2019s not good, then we try to figure out why is there conflicting information in the underlying knowledge base. Usually it has something to do with the way we\u2019ve constructed the knowledge base underneath. But you have to be careful not to train the system to answer the questions you know because then you\u2019re just writing a rules engine.\nYou always have a blind set of questions that no one has seen and those run against the knowledge base and they let you know how accurate you are against the blind set. Then you know whether the knowledge base is trained correctly. So you go through these training cycles to build up your knowledge base. Once the knowledge base is built, the APIs are clear, it\u2019s very easy to build the applications at that point.\nCIO.com: Our readers, for the most part, are IT executives. If they have ideas about Watson, how Watson might help their businesses, talk about the process. Who do they reach out to? Is it their traditional IBM contacts? Is it specifically this group?\nRhodin: Either works. If they reach out to their normal IBM contacts, they\u2019re going to contact my group. Because it\u2019s new and it\u2019s new technology, I have a team of experts that engage with the clients to help them work through possible use cases.\nA typical engagement might look like this: A customer goes to a session at a conference, hears about this, gets interested, they reach out. We have people that sit down and talk with them about things and they get an idea of what they might want to do. If there\u2019s something really interesting there we\u2019ll bring them here to Astor [Place]. We have what we call a Watson Experience Center where you actually see how Watson works in different professions and industries.\nWe picked examples that everybody can relate to. It will trigger the imagination to make them think about how it could be used in their industry. We use context like a doctor\u2019s office because everybody\u2019s been to a doctor\u2019s office. If you could see how the technology might be used in a doctor\u2019s office, you can then draw analogies on how it might be used in your environment. It takes about an hour to go through this set of experiences and then we have brainstorming rooms where we sit down with experts from your company and ours and start to narrow in on a use case and how that use case might operate.\nTypically, we would work with the customer jointly on business cases, business models, return on investment (ROI) type scenarios around the technology, because we recognize it is new. It\u2019s not a standard \u2018send an RFP off to procurement and go get the best price on something,\u2019 because there isn\u2019t anything like it.\nInstead, it\u2019s how do I build a business case so I can justify this when I go home? We work with them on those models. We\u2019re working now with hundreds of clients and partners, so we\u2019re at the point where we\u2019ve got sets of models that we can start from that help us tailor to [different] environments. These engagements are getting easier as we go forward.\nCIO.com: I was going to ask you about the practical nature of that, given that probably everyone thinks, after hearing about Watson, that there\u2019s some application to their industry. How do you avoid being overwhelmed by either not particularly applicable use cases or people who really aren\u2019t ready to do this and are just kicking the intellectual tires here?\nRhodin: Typically, that\u2019s a good problem to have, and it is a problem we have. Since we\u2019ve opened this building we\u2019ve had two to three clients in for half-day plus experiences every day in the center downstairs. We do go through iterative process with some of them.\nCIO.com: You have centers around the world as well? \nRhodin: We do. But there\u2019s only one of what you\u2019re going to see downstairs. We will open satellites of it next year in Asia and Europe but there\u2019s only one of these [Experience Centers] in its current form. It\u2019s not a slide show. It\u2019s very different.\nThe idea here is that we\u2019re going to identify the use case that\u2019s going to have a good business case and then we\u2019ll actually work with the client on developing that into an application and then go on to production.\nThe business model is actually pretty straightforward. There\u2019s some upfront consulting on coming up with the ROI in the business, a very low cost kind of thing, but it\u2019s just working together on something and then when we select it we go through an implementation phase, which is like a services implementation phase, and then when you go into production. It\u2019s a cloud-based, Software-as-a-Service business model.\nThere\u2019s not one price for Watson. It really has to do with what the application is and the complexity of the application. We decide what the pricing model for the end state is going to be in the upfront state, in that consulting piece upfront that we call a cognitive value assessment. In that cognitive value assessment we actually decide what the business case is going to be and what pricing model makes sense. Is it per transaction, per user, per case kind of a business model? What makes sense for that particular use case?\n\n\t\n\nCIO.com: When is Watson not applicable? What are you learning about where this is not the right answer? \nRhodin: Right now the important thing is figuring out if you know what information you want to put in the system, the curation process. If you say: Well, I want the Internet in it, we\u2019re pretty sure that\u2019s not the right use case. It\u2019s just too big right now. There are ideas about how to get there someday, but that\u2019s not the state of the technology today.\nIt\u2019s really about coming up with the domain that you\u2019re interested in and where you might want to go with that domain. That\u2019s one of the key first indicators. The second is making sure about sponsorship of the project. Because it\u2019s emerging technology, you need pretty high-level sponsorship for the project, someone who\u2019s got enough clout to keep it going. You want to avoid the kick-the-tires scenario. We\u2019re typically working with line-of-business sponsors who are focused on something that\u2019s pretty transformative to the business process or business they\u2019re running.\nCIO.com: There\u2019s a lot of emphasis on your team working with other parts of IBM. Help me to understand for our readers: How does that bear fruit? What would customers expect to see in the way of new products, hardware, software, from other parts of IBM?\nRhodin: A couple things. One of the ways we\u2019re expanding our APIs out to the masses is through IBM\u2019s Bluemix platform, which is our PaaS. In the first two weeks that the APIs were available they were called 1.2 million times, so we have a number of developers starting to build applications in the wild off of those. We have 100 ISVs that have signed into our developer program that are actually in development sandboxes building commercial applications on the platform right now.\nA great example of that is Terry Jones. He was the founder of Travelocity, Kayak. He\u2019s built a new company called WayBlazer on the platform in the travel industry space. He\u2019s a good example of someone who came up with a very different idea that required this kind of technology to do something he couldn\u2019t do when he built Kayak and Travelocity.\nHe\u2019s building the travel planning concierge that helps you think through what you want to do, where you want to go and what you want to do when you get there, as opposed to having to spend your time searching through many Internet sites and curating the information yourself. It curates it for you and makes recommendations and gives you the underlying supporting evidence to back up the advice it\u2019s given you. It\u2019s a really neat application. I think it\u2019s a good exemplar of what a consumer-oriented approach might be and how people will be able to see this kind of technology in the future.\nCIO.com: But when you look across other product lines at IBM, how does it become embodied in other hardware or software? \nRhodin: In the case of WayBlazer it\u2019s a powered-by-IBM Watson app, so we\u2019re doing ingredient branding on the partners that are working on the platform. We\u2019re going to do the same thing with IBM applications. We\u2019ve announced integration of our Watson Discovery Advisor capability into i2\u2019s intelligent law enforcement applications. Think of it as help for detectives to connect the dots between lots of information.\nCIO.com: It\u2019s like \u2018Watson Inside\u2019 on the product? \nRhodin: Yes. And we\u2019re doing the same thing with Kenexa, which is our HR solutions application. You start to see this coming out in multiple applications across IBM.\nCIO.com: If customers want to try this in the cloud, if they want to take advantage of that sandbox capability, what do they have to do? \nRhodin: If you\u2019re an ISV building an app, you have to sign a development agreement with us and you get access to your own sandbox. There is a filter on that because I\u2019m actually dedicating resources and compute time to those partners along with training, etc. But if you\u2019re just a developer that wants to get started on it, jump on Bluemix right now.\nCIO.com: I want to talk about the group itself. Why is it so important that you do things differently than what\u2019s been called Big IBM, whether it\u2019s the job titles or the way HR works or the location? Why is all that important from a customer perspective?\nRhodin: Culture, right. I\u2019m coming at it from a speed and culture viewpoint. I\u2019m very focused on an organization that is looking to the future, thinking differently, that doesn\u2019t feel tied to the way things have always been done.\nI\u2019m intentionally cutting strings so that [people] have the freedom of action to try new ideas, to do things differently. A simple little example, the business card in front of you looks different than every other IBM business card. Even the eight-bar logo on the back is slightly off-kilter. We did that intentionally right before we launched the group in January.\nPartly, I did it just to prove to my team that we could. The one thing you could never change was the IBM business card, except we did. I used it in a symbolic nature to say that it\u2019s okay to test the boundaries. It\u2019s okay to be bold. It\u2019s okay to do things differently. You have permission. That was the logic on what we\u2019ve been doing.\nGinni [IBM CEO Ginni Rometty] felt that it was important that this new enterprise had its own representative headquarters, something new and different and iconic and very intentionally in the middle of Silicon Alley. Not in midtown, not down on Wall Street, but in a part of town where all the startups are, because those are the people I need to work with.\nCIO.com: What is the one big thing you\u2019ve got to focus on to make this work?\nRhodin: It\u2019s actually very simple. There\u2019s a formula that I was taught a long time ago by Steve Mills [IBM SVP, Software and Systems]: Customers, revenue, volume, profit -- CRVP. I\u2019m at the stage where it\u2019s customers. Are we doing things with enough customers in enough different ways to test and mature the technology and advance it at the accelerated pace we need to run the business?\nWe\u2019re in customer acquisition mode. We started the year with a handful, that brave handful of customers that came out of the market validation phase and we\u2019ve been doubling our install base every quarter. It\u2019s very rapid growth.\nThen the thing that keeps me awake is: How well are we executing on what we agreed to do for those clients, because that will build the references that lead to the next several hundred.\nCIO.com: Finally, what\u2019s the one thing you really want the traditional IBM customer base to know about Watson?\nRhodin: That we\u2019re open and ready for business. Watson is mature enough for real-world solutions. Our biggest Discovery Advisor system right now has over 60 million documents in it. We\u2019re open and can scale. It\u2019s ready to go. Give us a call.\nCIO.com: Speaking of open, would you ever open-source any of the Watson technology?\nRhodin: I don\u2019t know if we\u2019ll get into open-sourcing core technology. The algorithms are moving way too fast and they are the secret sauce of how it works. We have been fairly open with the techniques that were used in the Jeopardy match. There have been research papers written and studied in universities, etc.\nWe haven\u2019t been hiding things but there is some magic in the way it was put together and that is the basis for competitive advantage. The key thing on that last point is we are opening up the APIs and making them freely available for people within those open-source environments to leverage and use.