IBM Global Business Services is one of the largest business and technology consulting firms in the world; their reach touches organizations across many industries undergoing digital transformation. In this episode, CXOTalk host and industry analyst, Michael Krigsman, speaks with Mark Foster, the head of IBM Global Business Services.

Mark is Senior Vice President, IBM Global Business Services, responsible for the strategy, client value and business performance of IBM’s consulting, systems integration, digital agency, business process outsourcing and application management services businesses across all industries. GBS brings clients the expertise of more than 100,000 consultants and practitioners creating value at the intersection of business insight and information technology.

This interview covers AI, the future of digital transformation, cognitive computing, platforms, IoT, blockchain, cloud computing, enterprise architecture, and related topics. The conversation also addresses industries such as shipping, insurance, and financial services.

Transcript

Michael Krigsman: Digital transformation is the topic of our show today. What's going on inside the largest organizations in the world? Right now, on Episode 293 of CxOTalk, we are speaking with somebody who is in a position to know. I'm Michael Krigsman. I'm an industry analyst and the host of CxOTalk.

Before we go any further, it is time to call your friends, call your family, and tell them to watch right now and to subscribe on YouTube. There is also a tweet chat happening with the hashtag #CxOTalk, and so feel free to share your thoughts and also to tweet in questions for our guest today.

Our guest today is Mark Foster, who is the head of IBM Global Business Services. Everybody knows about IBM, but you may not know that IBM Business Services is an enormous, enormous entity in its own right. Mark Foster, welcome to CxOTalk. Thank you for being here.

Mark Foster: Michael, thank you very much. It's a real pleasure to be with you - a real pleasure.

Michael Krigsman: Mark, please tell us about IBM Global Business Services.

Mark Foster: Yes. As you say, IBM Global Business Services, some might say, is a bit of a well kept secret in the organization after recognizing that IBM Global Services is actually around about 20% of the whole of IBM, which meant that last year, in 2017, that was around about $16 billion in revenues last year. I have about 125,000 people somewhere around the world all working for our clients on behalf of Global Business Services.

Michael Krigsman: Your revenue was $16 billion. What type of clients are you working with?

Mark Foster: Well, of course, we're working with clients across every industry. We're working with governments around the world. We're largely working with the larger organizations, the more global organizations, the leading organizations in each industry around the world.

Clearly, the main reason people come to us is because we're able to solve some of the most complex problems that these kinds of organizations face, and so that really defines our client base. We also, of course, work extremely closely with the other parts of IBM, so particularly my sister organization, Global Technology Services, which is another 40% of the organization, which provides all of the infrastructure services which underpin many of the things that we do for our clients around consulting, around business process outsourcing, and around application management and systems integration.

Michael Krigsman: Mark, I know that digital transformation is very important to your organization, and you've also done research on this as well. So, would you share with us some of the views or some of the learnings or the things that you're observing among your clients in relation to their ongoing business transformation and digital transformation in particular?

Mark Foster: Yes, well, interestingly enough, I actually joined IBM just some 20 months ago. The reason that I came and joined the organization at the time was that I could see there was another entire wave of change taking place, a real inflection point taking place, in terms of the impact of technology on business. There have been many, many times over various eras where technology has actually really changed the way businesses are organizing themselves, and this is one of those.

It's really the next wave of change beyond the Internet wave of change. Clearly, for the last decade or so, we've seen something we would call a digital journey going on for many of our clients because they've responded to the fact that the Internet has become pervasive. That clearly has changed the way they're interacting with their customers, and it's changed the way they deal with ecosystem partners and transform their supply chains and other processes.

We're seeing, now, another whole wave of change, which we're saying is something we're calling the cognitive enterprise. This is one where the pervasivity of data — the new technologies such as IoT, blockchain

Michael Krigsman: Digital transformation is the topic of our show today. What's going on inside the largest organizations in the world? Right now, on Episode 293 of CxOTalk, we are speaking with somebody who is in a position to know. I'm Michael Krigsman. I'm an industry analyst and the host of CxOTalk.

Before we go any further, it is time to call your friends, call your family, and tell them to watch right now and to subscribe on YouTube. There is also a tweet chat happening with the hashtag #CxOTalk, and so feel free to share your thoughts and also to tweet in questions for our guest today.

Our guest today is Mark Foster, who is the head of IBM Global Business Services. Everybody knows about IBM, but you may not know that IBM Business Services is an enormous, enormous entity in its own right. Mark Foster, welcome to CxOTalk. Thank you for being here.

Mark Foster: Michael, thank you very much. It's a real pleasure to be with you - a real pleasure.

Michael Krigsman: Mark, please tell us about IBM Global Business Services.

Mark Foster: Yes. As you say, IBM Global Business Services, some might say, is a bit of a well kept secret in the organization after recognizing that IBM Global Services is actually around about 20% of the whole of IBM, which meant that last year, in 2017, that was around about $16 billion in revenues last year. I have about 125,000 people somewhere around the world all working for our clients on behalf of Global Business Services.

Michael Krigsman: Your revenue was $16 billion. What type of clients are you working with?

Mark Foster: Well, of course, we're working with clients across every industry. We're working with governments around the world. We're largely working with the larger organizations, the more global organizations, the leading organizations in each industry around the world.

Clearly, the main reason people come to us is because we're able to solve some of the most complex problems that these kinds of organizations face, and so that really defines our client base. We also, of course, work extremely closely with the other parts of IBM, so particularly my sister organization, Global Technology Services, which is another 40% of the organization, which provides all of the infrastructure services which underpin many of the things that we do for our clients around consulting, around business process outsourcing, and around application management and systems integration.

Michael Krigsman: Mark, I know that digital transformation is very important to your organization, and you've also done research on this as well. So, would you share with us some of the views or some of the learnings or the things that you're observing among your clients in relation to their ongoing business transformation and digital transformation in particular?

Mark Foster: Yes, well, interestingly enough, I actually joined IBM just some 20 months ago. The reason that I came and joined the organization at the time was that I could see there was another entire wave of change taking place, a real inflection point taking place, in terms of the impact of technology on business. There have been many, many times over various eras where technology has actually really changed the way businesses are organizing themselves, and this is one of those.

It's really the next wave of change beyond the Internet wave of change. Clearly, for the last decade or so, we've seen something we would call a digital journey going on for many of our clients because they've responded to the fact that the Internet has become pervasive. That clearly has changed the way they're interacting with their customers, and it's changed the way they deal with ecosystem partners and transform their supply chains and other processes.

We're seeing, now, another whole wave of change, which we're saying is something we're calling the cognitive enterprise. This is one where the pervasivity of data — the new technologies such as IoT, blockchain, Internet of Things, and all other technologies are starting to come together with AI and machine learning to again transform the enterprise in a very, very fundamental way. What we have done in terms of GBS is try and organize ourselves to help our clients go on this next journey, to complete their journey as a digital enterprise, and then go on to become a cognitive enterprise.

Michael Krigsman: What are the underlying drivers of the changes that you're seeing, both from a digital transformation perspective, but also the shift to cognitive because they're both happening simultaneously, right? It's not like we're leaving one and now going to the other. It's all happening at the same time.

Mark Foster: Exactly, Michael. In fact, if anything, they're happening simultaneously. One, if you like, that I like to think of as coming outside in, as we think of the impact of digital on organizations; and one is coming inside out, as I think about the impact to the leverage of data with the power of AI to transform businesses. In fact, we see this. It's kind of coming together in something we would call business platforms.

Just the backend of last year, IBM held a 100 CEO forum here in New York. We asked those CEOs what their biggest bet was they were placing for their organization. It was really interesting that some two-thirds of them described that bet as being the fact they were wanting to become a platform. As they thought about their business, they were trying to find a way that they could actually define themselves in a manner that would allow them, yes, to be digital and fully connected with the world, but to take advantage of the data that they have to differentiate themselves and create moats around their business.

This idea about creating business platforms, platforms that leverage their data, that then have workflows that are distinctive, that are actually differentiated because I'm working my data to make my supply chain stronger, my sales and marketing more effective, whatever my core process is going to be. Then, of course, the fact that the people, the expertise in my business now sit on top of these workflows and also get smarter and smarter and smarter as the kind of man-machine interface moves up in the business.

I think it's really, really powerful to think about your business and the cognitive enterprise as being platform centric. That's a really big idea that is, as we go around and talk to clients around the world, which platform are they going to choose to really differentiate themselves on? Then, how do they go about building those platforms? Then, those things they don't choose to be their main platform, where do I access that if I start to build a composable organization made up of multiple platforms to allow me to compete into the future?

Michael Krigsman: Mark, you're raising a host of issues here. Maybe we can dissect them one-by-one. To begin with, is it fair to say that platforms are the evolution or extension of digital transformation?

Mark Foster: Yes, I think that's a way to describe it. I think, if you think about the way that digital transformation has tended to happen so far, it really starts on the outside of the organizations, and people gradually work their way back to their customer interactions, their online and mobile interfaces, whatever it may be, but gradually start that digital journey, as I say, from the front of the organization. What we've seen is that process continuing with the digitization of more and more of the activities inside the organization. That is going to carry on happening.

When I think about this platform idea, it's the fact that people now need to be really clear, though, about what is the digitization all for. What is the purpose of my organization going to be going forward? If I start to be clearer about that, I can start to be more focused about how I am leveraging digital but, also, very importantly, much more focused about how I'm leveraging my data to differentiate my processes and my expertise in a very, very different way.

By being able to make those choices more crisply, we believe that also helps to give more purpose to the digital journey and, of course, sets off, in parallel, this other journey because what we've discovered, and this was something that came out from our research, is that 80% of the world's data is still proprietary. It's inside the walls of the major organizations that we're serving. In fact, this came through from some of the research you referenced, which was our C-suite study we recently completed with some 12,500 C-level executives around the world.

The biggest idea of that study was incumbents are striking back. They're striking back through this platform idea, platforms that they know are now leveraging the data they have in their organization and, of course, putting that data alongside other external sources, but using it in a very, very powerful way to win.

Michael Krigsman: Established businesses, then, are using internal data, combining it with external data, changing processes to build these platforms. Can you give us some concrete examples to make this more specific?

Mark Foster: Yes. You might take an example like Maersk, for example, who are a major global shipping organization. They're looking to try and create a new platform as part of a global trade network to facilitate the movement of goods around the world. Obviously, they have a huge amount of data themselves. They're looking to use new technologies like the blockchain particularly to create a completely different platform, which again is going to be super-efficient. It'll take out much of the paperwork that currently bogs down that process. Then it will allow them to compete a different way but, also, in this case, start to put in place a new ecosystem of players across the global trade network.

Another example might be the work we're doing with Volkswagen and, indeed, with some other major automotive companies around the world who want to start to use, of course, the data they have about their vehicles but, also increasingly, the data they're collecting about their customers to connect them in a completely different way around a mobility platform that could be the core of the experience. Again, so many of the world's automotive companies are trying to redefine themselves, not as automotive manufacturers, but as owners of and runners of mobility platforms where all of the merchant services, all the experience you want to have will be so much more about what it's about than simply the fact that I have a vehicle to drive around in.

Michael Krigsman: I want to dive into that, what these companies are doing and what's involved. What are the implications when they decide to make this type of transformation? But, before that, can you touch again on why? Why do perfectly rational, very smart people decide to make this kind of dramatic change in their business? Then we can talk about what's involved in making that change.

Mark Foster: Well, I think the first thing, the first meaningful "why" right now is that you can. The fact that you can is one of the reasons why this has actually not been so possible in the past was that, actually, frankly, we didn't have the tools. Also, frankly, we didn't have the ability to leverage all the data in the organization in the way that we can now to transform processes. We didn't have the ability to use these capabilities around machine learning, AI, and IoT to automate our processes, to transform that and re-engineer them in a completely different way. To some extent, the reason for why is that now I can.

The second is, now I must. Why is the must? The must comes with the fact that, yes, there are many disruptive forces out there. But, it's also interesting that there is a battle of the platforms going on.

It was interesting that there were several competitive organizations in this CEO forum that we had, and that many of them had the same platform objective or ambition. Several of them wanted to be the insurance claims platform for the region they operate in, or the banking payments platform for the place they work in.

There's a battle going on out there for people to seize the platform landscape, if you like. If you're not seizing it, before you know it you're going to be sitting on somebody else's platform. Therefore, clearly, you're not going to be able to differentiate yourself, or you may not be able to influence your future in the way that many large organizations wish to.

Of course, also, there are other disruptors out there. Although our point of view from our report did identify that the organizations we spoke to saw so much more of their disruption coming from incumbents in their own industry, there was still a lot of activity coming from disruptors who are coming from outside the industry, just as, for example, my automotive example. They're actually being disrupted by telcos who want to be the mobility platform. There are city construction companies that want to be the mobility platform. So, you not only have a need to do it because others in your industry are going to be trying to seize that space, but to recognizes the space is being consumed by others as they start to try and create the platform landscape we're all going to be operating in, in the future.

Michael Krigsman: To what extent? I know your research touched on this. To what extent are established organizations aware that they have to change and actually taking proactive steps to start to initiate those kinds of changes?

Mark Foster: I think we're seeing, actually, a huge amount of focus on this. It was very interesting that some, over 50% of the CEOs that were with the leading organizations we spoke to, were putting a very large amount of their capital towards the building and operating of these platforms. I think the journey that so many companies have gone through around understanding they're now playing in a digital world, they've all seen the impact of things like an Uber or an Airbnb or these new business models that are out there. In many cases, actually, of course, they're now either copying, accessing, or engaging with these business model players in different ways as well.

I think that the awareness in the business community, the leaders we deal with, is in fact very high. Therefore, their recognition of the need to change and some of the opportunity to change is very clear.

I would say, and this is where our services become so important, is that there are many choices in that journey about the sequencing, about where to start, about what really matters. I think that's really where our ability to help clients go on the journey becomes really important. We have established our mission, if you like, in GBS to be the digital reinvention partners for the leading clients in the world.

As a partner, we see ourselves trying to help our clients go on this journey, now, and make sure they're sequencing themselves, but also recognizing these journeys are not linear. It's much more evolutionary and much more agile. Strategies are going to need to be adaptive, as these platforms are created. That's something else that we see our role to do is to make sure that we help our clients keep their options open while being very clear about seizing the moment that's in front of them.

Michael Krigsman: I want to remind everybody that we are speaking right now with Mark Foster, who is the head of IBM Global Business Services, which is actually a $16 billion business in its own right, a very large company. There's a tweet chat taking place. It's a rare opportunity for you to ask questions using the hashtag #CxOTalk.

Mark, we've spoken about some of the drivers that are underlying these disruptions and the changes. What is involved? A company says, "Okay, we need to do something. We need to get ahead of this." What do they do?

Mark Foster: Yeah, exactly, that is the $64 million question for most of these organizations, and in some cases even more. Actually, the first thing is to be really clear about your intent. It actually means the whole idea of being strategically certain about your choice of the platform you're going to choose to try and win on becomes really important. Of course, once you've chosen that perspective, it's then really important to understand, how is that fitting into how I'm going to operate the rest of my business as well?

I think that what we try and do with our clients around that is help them, yes, with that process of understanding the nature of platforms, how their data could be a real clue to where differentiation could come from, how your workflow or a process has the potential to be distinctive. But, in many cases, I think our clients have a very strong sense of that. Their real question is, what's the blueprint? What's the roadmap going to be as I then move down the path to start to create this capability?

The second thing that they're grappling with, I think, very much is around the issue of, how do I continue to focus on innovation in my organization while the fact that I've got to start to put in place robust platforms? A lot of the innovation that we see can lead to a proliferation of ideas and things across these big companies. We see lots of things we call proofs of concept going on. But, actually, you need to make sure they don't just distract you from seeing the bigger picture. There's a need, therefore, to continually balance between innovation, co-creation, and the building of these platforms.

Again, what we have focused on is we've created something we called cognitive barrages, which in many cases are actually in our client's premises. In some cases, they're in our premises where we, together, first of all, try to create that co-creation environment to sort of help people think about, how will I apply these techniques to transform my critical workflows and my business, particularly making them ever more customer-centric and aligned with the customer journeys that our clients want to go on?

But then, also, how do I start to then eat the elephant? How do I create the first building blocks? Then how do I govern the process going forward of having to invest in this over time because, in the end, there are major investments required here? There are major architectural choices to be made. Being able to help guide that and to spot the moment when that's going to happen becomes really, really key.

Michael Krigsman: What about the dimension? When you talk about data, that means sharing of data, and that means data going across silos, organizations, systems, departments, people that previously were siloed. Then, that leads into the culture of an organization, and so the tentacles of this start to spread far and wide very quickly. Can you address that cultural dimension and breaking down of silos and all of that as well?

Mark Foster: Yes, Michael. It's a very, very important point. It's very interesting that, again, coming out of that CEO forum that took place in New York, the single biggest topic that those CEOs want to talk about, apart from the fact that they were thinking about all these platforms, was the cultural challenge of getting there and the cultural challenge of the change in their business that this kind of change of thinking and approach really led to. It's quite clear that there are a number of aspects to this.

One of the key parts of this is how you create a true learning organization because part of the model that we're seeing here is one that is fast-changing. As the power of your data is making your processes more evolved, and as they get smarter and smarter and smarter, the need for the people working with those processes to keep up and then, frankly, to keep ahead of that process becomes also very important. The reskilling agenda that's so important for organizations, both therefore around how workforces are going to shift in this world, where new skills need to be built, how existing workforces need to be trained for the future becomes a really big idea, quite apart from the issue you touched on of cross-organizational collaboration, the true agility you need to build into your company to make it work in this way.

We see lots of organizations, and we work with many organizations that talk about being agile. We ourselves at IBM have done a lot of work around trying to make ourselves more of an agile organization. This agenda sets a whole new bar for what that really means in terms of the fluidity of using skills, the fluidity of teams, how you, as I say, bring people together to help build those building blocks while, at the same time, of course, keeping the plane in the air around the fact that these are all large organizations delivering really, really important things as business as usual, right now.

Again, the challenge of an evolving culture, the challenge of balancing the new with the legacy, becomes just a really important leadership challenge. I think, again, we have a strong view that this does mean the leader of the future will need to have a set of different skills than the way we've managed organizations even now. Another step on from the matrixed organization, another step on in terms of how you actually balance these agendas side-by-side becomes really key.

Michael Krigsman: Mark, can you describe differences between the innovators who are embracing the practices that you've just described and companies that are having more difficulty with that?

Mark Foster: Yeah. Again, the research that we undertook with our C-suite study around the world, we tried to, again, parse out those organizations we saw as winning and innovating, and those organizations that perhaps were less successful. When you looked at the ones that were more successful, they were the ones that had put in place a deeper cocreational environment, were incenting their employees to engage in this innovation agenda in a different way, were creating this kind of, again, more open and collaborative culture between the various parts of the business. These were all characteristics that we could hear and see people talking about in those leading organizations. Again, I think that it's a clue.

I like to use the analogy of Formula 1 racing team to describe a little bit what I think this world is like. For those of you who follow Formula 1, you know that you have the team races. They race somewhere in the world. They gather an enormous amount of data about the track, about the car, about the driver, about the engine - every single facet.

They then go back to base for two weeks while they learn from all of that. They gather that information. They use that data. They redesign the car. They retrain the driver. They think about all their processes. They turn up, and they race again two weeks later.

Thinking what that means in terms of, how do I make my company more like a Formula 1 team in terms of the pace of change, the adaptability of every aspect of it, I think is something that sets a bar for us all to think about, about this balance between the cultural shift and the more underlying process shifts and, of course, technology shifts. One of the things we've not touched on here so far is, of course, underpinning all of this, there are some very important ideas about my data, how I manage my data, how I access the data, and how I make my data fit for purpose for the world that I'm talking about. There are, of course, big questions about my AI architecture and how I'm going to use machine learning in a powerful way in the business.

Of course, all of this, or much of it, many of these platforms are going to exist on the cloud. The cloud is going to be the vehicle through which the agility and the adaptiveness of these models is maintained in our clients. The other piece of this journey for us is what's happening to my underlying application architecture to support these platforms, as that architecture, yes, will move slowly to the cloud. But again, I think that what we would say is this platform idea is at the heart of why go to the cloud as opposed to just go to the cloud because the cloud is there or go to the cloud because there's a TCO opportunity, you know, technology around leveraging the cloud. For me, the business case is going to be very much more leveraging around the fact that I can now accelerate the creation, the operation, the change of the platforms I need to create for the future in a cloud environment.

Michael Krigsman: Yes, this whole issue you mentioned. Application architecture and then the underlying enterprise architecture seems a very fundamental part of accomplishing the things that you've just been talking about.

Mark Foster: Yes, and, I think, to be honest with you, I'm probably just only beginning to think through some of the really bigger picture ideas here. I don't think we yet fully see platform-centric operating models entirely in place yet. It is interesting, though, how many people are working their way towards it, how many people are starting to think about their business in terms of platforms. When you start to look below the covers, you start to see that organizations are not all organized by sales and marketing, supply chain, or by functions and not all are organized purely by geographies, but actually starts to be organized by this kind of platform and process model as a way of actually thinking about your operating model, end-to-end.

Michael Krigsman: Where are we now? Is it the proof of concept phase? Is it the early building phase, the design phase? Where are we now for many organizations in terms of the movement to these more advanced business models that rely on platforms data and technology, as you've been describing?

Mark Foster: We're in early days. Let's be clear. I think we're staring at the journey of the next decade or so. We're in the early stage. Of course, it's also, as you said before, going on at the same time as we're completing our digital journey, and the two of them are merging themselves together, if you like, at the moment. I think we are in an early stage.

I think we are also, in some cases, moving beyond the proof of concept stage. We can certainly see new businesses, like, for example, the work we've done with Orange Bank in France, for example, where we've brought together. They have created a completely new digital bank, which is very much a fresh platform that straddles the world of a telco and a bank to create a completely new enterprise. That's up and running. It's serving customers. It's out there at scale, and it's very much living off this power of data and using AI in very creative ways to connect with customers, to identify needs, and think about it in a different way.

It was interesting, for example, from our study that over 80% of the leading organizations in that study said they were using their data around customers to identify and meet previously unmet customer needs. The confidence that talks to about the fact that people are actually starting to really use this information and having the tools to use the information and how we use those tools to transform processes, I think starts to give us a real sense of confidence of where people are in embarking on these journeys. Having said that, I'd say that most people are still in the planning and early scale implementation thinking of those journeys.

Michael Krigsman: We're not talking here about implementing a chatbot to help with customer service. We're talking about redesigning and rethinking core aspects of both business model and relationship to customers.

Mark Foster: Exactly. Exactly, Michael. This is about workflows being reimagined. To me, this is another entire step on from what we would have called "process re-engineering" in the past, Lean, Six Sigma, whatever the techniques are. This is now completely reimagining the workflow because you can, because the power of automation, the leverage of sensing in IoT, the power of AI to use my data to transform and cut across previously long chains of activity in a process, to take a lot of the grunt work out that many, many large organizations find themselves having to do to support processes. This really does put up a huge opportunity. Again, to your point, I think what we would say is you should make sure all of those process workflow changes continue to be laser-focused on supporting enhancing your customer interaction, supporting your innovation processes, making sure that they are things that are going to help you stay ahead of the game, stay connected, hold onto your market in a very powerful way.

Michael Krigsman: Many companies find it easier to use technology to create efficiency or to undertake minor innovation at the edges rather than to embrace platform technology data, all these new things, to really innovate at the core. And so, how do you help them or what do companies need to do in order to think beyond efficiency, but to think really about core innovation, as you're describing?

Mark Foster: Yes. I think I touched on it before. I do believe that things like the creation of a sort of cognitive garage idea, but also, I think, it's making sure that, from the top of the organization right down, the signals about how important change is, how important this evolution is going to be for competitive advantage and for staying in the game, has to come from the very top of the organization. There also obviously are techniques you can use that are around how we create centers of excellence around many of these things.

Many of our clients are creating their AI center of excellence in their business. Many of them are creating centers of excellence around their cloud capabilities. What we say is, bring those things together and orchestrate them behind this idea of the platforms you want to create, the workflows that are important to you to differentiate yourself. That will also, of course, again, avoid inefficiency in the change process itself at the same time.

These are things that I think clarity of intent and strong leadership are really important, as always. Then I think there are some things that you can do as a large organization to create capability, pools of capability, that start to be models for how you want the whole place to work in the future.

Michael Krigsman: Then you're also talking about rethinking the organizational design, in some cases to be able to take advantage of the technologies and the enterprise, the technology architectures, and the data that are being put into place.

Mark Foster: Absolutely. As I say, it's both the organization and it's the ways of working, of which I touched on my point around truly agile, truly collaborative, truly cross-functional. They all have to go to a different level, I think, of thinking than we have done so far. Again, I think it is about, also, it's purposeful. It really needs to be purposeful.

A lot of these models are designed or can be designed to be very good on the kind of innovation spooling up, but not so powerful on the getting things done. Importantly, for our clients, getting them done in a way that is robust and has to be proven on an industrial scale because we're talking about systems that are going to keep airplanes in the air, systems that are going to manage so much that's at the heart of mission criticality in banks and our financial systems, so many of these processes that are actually, genuinely, not at the edges of organizations; they're at the heart of the organization. Therefore, you need to balance all the time this agile thinking with a way that's going to create solid platforms around really important areas of the business.

Michael Krigsman: You mentioned, earlier, a bank that spun off. I believe you said it spun off a separate unit in order to be a digital bank. Is it really necessary for large companies to kind of spin-off this innovation or can they, in a reasonable way, reasonable timeframe, make the change internally, change their DNA in this way?

Mark Foster: Really interesting. We actually see both models in play, Michael. In a case like that, before, actually, it had created a bank, so that was actually a cross-industry play that was going on there. We have also good examples like Bradesco, a client of ours in Brazil, who have created their own new bank called NEXT, which is designed to be a bank actually for the unbanked in that previously unbanked, young population of Brazil, to create a completely different leapfrog, digital relationship, if you like. Then, what they're using is the learning from that to back reengineer, if you like, and transform the overall Bradesco Bank, which has been a longstanding, heritage bank in the region for many years.

We see people taking that path, but I think also we're increasingly seeing people say, "Well, the trouble with that is that's just going to take too long. These platforms are actually in the heart of my business. If I don't start working on the things that are in the heart of my business, it's going to be a long time until I can make the really big changes that are necessary."

I think that we are seeing people having to step up to the really difficult challenge of, "No, I'm afraid I've got to, in parallel, really start to work on changing my core and changing my core in a thoughtful way, but one that embeds these ideas." Changing my core with a clear view of the platform. Changing my core using agile models and techniques to do it. Doing it in sprints that don't end up being great slab-like implementations over multiple years. All these things start to be techniques to help people solve that very difficult challenge.

Michael Krigsman: Mark, we only have a short time left, but we have an excellent question from Twitter and one I was thinking about and one that I should have asked, so thank you, Twitter. That is, are there specific industries or types of businesses that are making the greatest advances in this?

Mark Foster: Very good question. Certainly, I will say one thing that came through from our C-suite study was that there was evidence of this phenomenon across all industries and, indeed, by the way, across government and as well as nonindustrial sectors too. Actually, the fundamental drivers here are happening everywhere.

I do think that you obviously would see, as expected, that some of the things have been more consumer driven. The digital agenda has been more driven from that kind of consumer, the retail, banking, those kinds of B2C type plays. I would say that this cognitive agenda is also emerging very strongly, though, on the B2B environment as well because, actually, many of that is where a lot of this power of using of IoT, of using different forms of technology like blockchain, et cetera, start to have another place to play out in a way that's not so dependent on there being that immediate kind of B2C prior relationship. Of course, it's allowing B2B models to become more B2C models as well.

I think that, obviously, as you'd expect, the financial services are very much in this space, and the consumer goods industries have been very strong in this space. The telcos have been getting into this area. Actually, what we're increasingly seeing is it moving into perhaps industrial sector, oil and gas and, obviously, energy utilities start to become increasingly leveraging of this model and idea.

Michael Krigsman: Now, we really only have a couple of minutes left, and I have about 20 questions left to ask you.

Mark Foster: [Laughter]

Michael Krigsman: [Laughter] But, I don't think it's going to work to go on for another couple of hours. You mentioned blockchain, so I'll just try to get a few in very, very quickly--how's that--just before we finish up. You mentioned blockchain a couple of times. Is blockchain really happening in a real way with projects, actual projects, yet, or is it still too early?

Mark Foster: No, it is really happening. We at IBM feel we have a very strong leadership position around the fact that we're doing real scale projects around the world, whether it's the Maersk trade example I gave, whether it's the Walmart food safety example. There are many. There are now many networks that we're involved with that are thinking about it that are putting the staff into place and are moving beyond proof of concept into really starting to create the underlying ecosystem that can leverage it.

We're also seeing it beginning to be used, actually, by individual clients to reinforce a process. For Unilever, for example, improving their accounts payable, which we happen to do the business process outsourcing for, but using that blockchain now to really reduce the invoicing, cost per invoice. That's a real example of something we're really doing now and rolling out to more and more of Unilever's suppliers, as we do that right now.

I think that, yes, of course, this is still relatively early days, but I think it's moving into what I call the real world. There's also been a shakedown going on about what's it really work, what's it for, where does it really have the power? Certainly, I do think those kinds of processes do have lots of documentation that can be simplified and taken out, lots of hand-offs down a process. That's a very natural place for this to be applied.

But, there are other things where it won't make sense, other transactional areas where it won't make sense for this to be applied. I think we're helping, also, our clients think through where this particular technology does help, just as we helped them think through where does IoT help, or where does AI help. We try to create, if you like, a map. If you're a bank, where can AI most help you in terms of delivering the most value? We want to try and make sure we're focusing on those value pools that are really worth it, and not actually just creating a series of interesting experiments.

Michael Krigsman: Okay. We are pretty much out of time here. Literally, in 30 seconds, any final? Tell us everything you know in a kind of summed up wisdom in 30 seconds. How is that?

Mark Foster: [Laughter] That's impossible, Michael. But, what I want to say is, first of all, this inflection point is real, and I think it's very exciting. It's a very exciting time for us. It's a very exciting time for our clients. Clearly, this inflection point also has huge dangers and risks to it. I think it's really important, and that's where this is something that we believe the combination of our experience with the visions of our clients have is going to be a really, really powerful combination to make sure that more organizations go on this journey quickly, but safely.

Michael Krigsman: Okay. What a very fast-moving conversation that has been. We have been speaking with Mark Foster, who is the head of IBM Global Business Services, a $16 billion organization. Mark, thank you so much for taking time to be here with us today.

Mark Foster: A pleasure.

Michael Krigsman: Everybody, tell your friends, don't forget to subscribe on YouTube, and we will be back next week with another great show. Thank you so much, everybody.