Cognitive Things

The New Era of Cognitive Things

During the next five years we believe that a fundamentally new technology cycle will emerge that will accelerate human and business intelligence over the next thirty-five years. We refer to this new 35-year era as the Cognitive Things Era. We refer to the macro-level long-duration tech cycle that powers the initial phase of this new era as the cognitive things innovation cycle.

The best way to clearly understand and visualize the emergence of the cognitive things cycle is to simply extend our previous story about the 30-year evolution to the wearable multiscreen post-PC cloud era into the future by five years and answer the following fundamentally speculative, yet critically important, questions:

1. What will the top platform suite be in 2020?
2. What will the game-changing control paradigm be in 2020?
3. What will the game-changing Internet service be in 2020?

The top platform suite in 2020 will be the Xiaomi family of wearable and non-wearable smart devices, referred to conceptually as the Xiaomi Mi Family suite. With the introduction of a comprehensive family of smart devices spanning smart wearables such as glasses, bands, and watches through smart non-wearables such as phones, tablets, home appliances, media players, and ultra-high definition televisions, Xiaomi, with strong backing from Android-owner Google, will be the first company to offer health-conscious consumers and insight-driven businesses a fully integrated suite of intelligent devices optimized to promote a true balance between productivity at work, social time with friends, and healthy living at home.

The game-changing control paradigm in 2020 will be the cognitive agent, as represented in nascent form today by IBM Watson. In 2020, cognitive agents will work hand-in-hand with human counterparts to solve some of the most challenging problems faced by business and society across many different domains, including healthcare, finance, energy, commerce, insurance, defense, agriculture, and transportation. Human subject-matter experts within each of these domains will teach, guide, and provide feedback to cognitive agents as they absorb data, information, and knowledge at an unprecedented rate and at an unfathomable scale. In return, cognitive agents will teach, guide, and provide suggestions to human experts and domain practitioners, with the ultimate goal of combing human and cognitive intelligence to make fundamentally better and more consistent decisions.

The game-changing Internet cloud service in 2020 will be the IBM Cognitive Cloud, a set of public and private cloud infrastructure, platform, and intelligence services enabling small companies or large enterprises across a wide variety of industries to quickly provision and dynamically scale industry-specific cognitive computing resources utilizing a pay-as-you-go pricing model. The new model will free business from having to gather, develop, assemble, integrate, and support the domain-specific cognitive data sets, cognitive engines, cognitive services, cognitive apps required build a modern intelligent digital enterprise.

By 2020, mass-market consumers in developed countries (as well as many developing countries) will focus their disposable resources on assembling a complete and comprehensive suite of wearable and non-wearable smart devices, and we believe that more often than not the preferred suite will be the Xiaomi Mi Family suite of cloud-connected smart devices, as shown in the prospective 2020 chalkboard diagram below.

The diagram is called the 2020 Cognitive Things Innovation Cycle within the 35-Year Cognitive Things Era. It is organized into three columns and four rows. The first column contains the following core dimensions: user-to-device ratio, top platform suite, game-changing input control paradigms, and game-changing Internet cloud services. The second and third columns display the specific values of the corresponding core dimension in the first column in graphical format and text format, respectively.

Reading the visual chalkboard from left to right and top to bottom, the core dimensions and corresponding values for the 2020 cognitive things innovation cycle are the following:

1. User-to-Device Ratio: One User to Lots of Devices
2. Top Platform Suite: Xiaomi Mi Family Smart Device Suite
3. Game-Changing Input Control Paradigms: IBM Watson Cognitive Agent and Voice Agents
4. Game-Changing Internet Cloud Services: IBM Cognitive Cloud, Baidu, Google, Facebook, Microsoft

In addition to IBM Cognitive Cloud, the four other leading Internet cloud services in 2020 will prospectively be the Baidu emerging markets cloud service, the Google information cloud service, the Facebook social cloud service, and the Microsoft productivity cloud service. During this period, Baidu, Google, Facebook, and Microsoft are expected to be able to maintain their respective positions of dominance in emerging market services, information search services, social networking services, and business productivity services, respectively.

Defining the Global Value Chain for the Cognitive Things Era

The grand macro definition of the global value chain ecosystem for the cognitive things era of personal and enterprise computing comprises the following three core components:

1. Cognitive computing solutions
2. Cognitive computing infrastructure producers
3. Cognitive computing cloud service producers

Cognitive computing solutions include mobile analytics solutions, social intelligence solutions, deep cognition solutions, and digital enterprise solutions, as represented by the four circles in the center of the framework below.

Cognitive computing infrastructure producers, represented by the leftmost chevron in the framework below, include semiconductor producers, system software producers, supercomputer producers, and middleware producers. Cognitive computing cloud service producers, represented by the rightmost chevron in the framework below, include industry-specific cloud solution producers, cloud intelligence producers, cloud platform producers, and cloud infrastructure producers.

Cognitive computing infrastructure producers and cloud service producers are structured, organized, and aggregated into cognitive infrastructure and cognitive cloud service value chain systems, respectively, as represented by the leftmost pink chevron and rightmost blue chevron in the framework below.

The framework above, called the Grand Macro Value Chain Ecosystem for the Cognitive Things Era, visually summarizes our formal definition of the global cognitive computing ecosystem, firmly establishes its macro-level structure, and provides a solid starting point to explore and define the substructure of its constituent components, namely the cognitive infrastructure value chain system and the cognitive cloud service value chain system.

In the next two sections, we define and explore the cognitive infrastructure and cloud service value chain systems for IBM, a firm, as of this writing in December of 2015, believed by many industry and financial analysts, institutional investors, and hedge-fund managers to have lost its way after a string of quarterly earnings reports marred by substantial financial underperformance. We strongly disagree with these assessments, and firmly believe that IBM is on the cusp of a revolutionary new approach poised to transform the fundamental nature of how humans and machines work together to provide value to society and sustainable competitive advantages to businesses, governments, and nations.

Defining the Cognitive Infrastructure Value Chain for IBM

The global value chain system that provides cognitive infrastructure hardware and software components to be utilized in the development and delivery of cognitive solutions around the world is defined by and referred to as the infrastructure value chain system for the cognitive things era, and it comprises the following value chain groups:

1. Cognitive Computing Semiconductor Value Chain Group
2. Cognitive Computing System Software Value Chain Group
3. Cognitive Computing Supercomputer Value Chain Group
4. Cognitive Computing Middleware Value Chain Group

These four core infrastructure value chain groups are each controlled by a handful of leading, and in some cases dominant, business units or firms. Using this definition, we have constructed the cognitive infrastructure value chain system for IBM and its partners, as shown for the first time in the diagram below.

The diagram above, entitled the Infrastructure Value Chain System for IBM in the Cognitive Things Era, clearly depicts the leading business units and partners within each of the value chain groups of the cognitive infrastructure value chain system, which itself is a core component of the grand macro cognitive value chain ecosystem presented and defined previously.

Strategic partners in the cognitive computing semiconductor value chain group include Nvidia, OpenPower, and Xilinx. Strategic business units and partners in the cognitive computing system software value chain group include IBM z/OS and various forms of enterprise-class Linux. Strategic business units in the cognitive computing supercomputer value chain group include IBM zEnterprise and IBM Power Systems. Strategic business units in the cognitive computing middleware value chain group include IBM Cognos, IBM WebSphere, and IBM Tivoli.

IBM business units and strategic partners in the cognitive infrastructure value chain system have operating profit profiles that range from high margins to low margins, depicted in the diagram above by green and red chevrons, respectively.

Defining the Cognitive Cloud Service Value Chain for IBM

The global value chain system that provides cognitive cloud services to be utilized in the development and delivery of cognitive solutions around the world is defined by and referred to as the cloud service value chain system for the cognitive things era, and it comprises the following value chain groups:

1. Cognitive Computing Cloud Infrastructure Value Chain Group
2. Cognitive Computing Cloud Platform Value Chain Group
3. Cognitive Computing Cloud Intelligence Value Chain Group
4. Cognitive Computing Cloud Solutions Value Chain Group

These four core cloud service value chain groups are each controlled by a handful of leading, and in some cases dominant, business units or firms. Using this definition, we have constructed the cognitive cloud service value chain system for IBM and its partners, as shown for the first time in the diagram below.

The diagram above, entitled the Cloud Service Value Chain System for IBM in the Cognitive Things Era, clearly depicts the leading business units and partners within each of the value chain groups of the cognitive cloud service value chain system, which itself is a core component of the grand macro cognitive value chain ecosystem presented and defined previously.

Strategic business units and partners in the cognitive computing cloud infrastructure value chain group include Microsoft Azure, IBM Softlayer, and Amazon Web Services. Strategic business units in the cognitive computing cloud platform value chain group include IBM Bluemix. Strategic business units in the cognitive computing cloud intelligence value chain group include IBM Watson. Strategic business units and partners in the cognitive computing cloud solutions value chain group include IBM Health Solutions, IBM Finance Solutions, IBM Government Solutions, IBM Commerce Solutions, and a wide variety of both complementary and competing third-party solutions.

IBM business units and strategic partners in the cognitive cloud service value chain have operating profit profiles that range from high margins to low margins, depicted in the diagram above by green and red chevrons, respectively.