2014 has started with a bang! If this is indicative of things to come – it will be an interesting and exciting year. Two major events usher in our New Year: IBM announcing the formation of the IBM Watson Group and Google acquiring Nest. We’ve heard a lot about the Internet of Things and the growing adoption of Smart Home components. Perhaps not as widely discussed is the emergence of cognitive computing – a space that IBM just made a huge bet on.

In my transformation series last year, I discussed the automation of knowledge work as both an emerging enterprise disruptor, and future enterprise enabler. Cognitive Computing promises to be a major driver of both sides of this equation.  In its simplest form, cognitive computing is technology that allows us to ask natural language-based questions and get answers that support action, smarter decision making, and optimal outcomes. Gartner is weighing in and focused their recent 2013 Hype Cycle on the relationship between humans and machines. The focus – driven by the increased hype around smart machines, cognitive computing and the Internet of Things – is rooted in the belief that the divide between humans and machines is narrowing. Gartner encourages enterprises to look beyond the narrow perspective that only sees a future in which machines and computers replace humans. They see three main scenarios: 1) Augmenting humans with technology 2) Machines replacing humans 3) humans and machines working alongside each other. This is a very reasonable perspective on the likely path. The future enterprise as described through this Blog will use a combination of these scenarios to drive outcomes and transform stakeholder experiences (i.e., customer, employee, citizen, partner, etc.)

This brings us back to IBM Announcing the formation of the IBM Watson Group. For the three scenarios above to play out, several technological advancements must continue to progress, not the least of which is cognitive computing. Cognitive computer systems are data-centric and designed for statistical analytics. Forrester analyst John Brand believes that cognitive computing emerged in response to the failings of what was once termed ‘artificial intelligence’. Others have pointed out that Watson’s Jeopardy success masks the underlying complexity required to achieve an intelligent output. From first-hand experience, the knowledge engineering work required to enable outcomes from cognitive computing is not easy. Some even question whether IBM Watson and others like it are cognitive computing systems at all, arguing that it is not real intelligence but artificial. Despite the reasonable skepticism, I have high hopes. It’s too early on the journey to speculate on the importance of cognitive computing in the world. But, in my opinion, progress in cognitive computing will determine if society and business can tackle some of the major challenges of the past, present and future. A couple examples come to mind:

• Can we effectively address societal challenges like hunger?
• Can we save lives through its medical-related application?
• Can we enable more financial protection through expanded fraud protection services?
• How far can we take the automation of knowledge work?
• Can we effectively solve long standing knowledge management challenges?
• Can we truly enable the sense-and-respond mechanisms required by the speed of business in the age of the customer? 

Some very good examples of cognitive computing’s potential impact can be found here. These and other examples are what must have IBM executives believing that Watson has the potential to be one of the biggest innovations in the company’s 103-year history – alongside the mainframe and personal computer. As such, they have decided to merge its investments in cognitive computing into a single business unit called the IBM Watson Group. According to the recent press, this group will focus on building, marketing, and delivering the technology components and business capabilities to create software-based solutions that understand natural language and communication; formulate and evaluate evidence-based hypotheses; and adapt and learn from training, interaction, and outcomes. IBM also announced a $100 million seed fund to develop a strong partner ecosystem – critical to creating a market.

It is still early days, and much needs to happen before this vision is realized. Early Watson pilots focused on call centers and medical applications. Memorial Sloan-Kettering Cancer Center trained Watson over two years to help 1,000 physicians make better diagnoses and treatment recommendations. Other applications being explored are in financial services, civic management and meteorology.

The Internet of Things (IOT) world is also heating up (pun intended). As mentioned above, Google recently announced its pending acquisition of Nest. It is not really surprising that Google bought Nest – as Google has wanted access to the home for quite some time. Many existing players see the acquisition as a validation of this promising industry and believe that the Nest Buy could Spur IOT Growth. Jason Johnson, CEO of smart lock developer August had this to say:

“We all knew that 2014 was going to be a big year for the Internet of things, and this is just validation that IOT is going mainstream. When you have a company like Google invest this much money, it’s clearly a validation.”

Home automation developer Revolv applauded the acquisition:

“We think that Google’s acquisition of Nest is positive for the smart home industry overall as it will raise awareness for the space, and it “opens up third-party development for Nest devices as well as drives faster adoption of smart home technology by mass consumers.”

Nest and Google are smart enough to know that it will take an entire ecosystem to realize the Smart Home vision. In an ecosystem model, someone needs to emerge as the ecosystem driver – and Nest is now associated with a company that can be that driver. Google gets quite a bit from this relationship as well, as it gets instant access to the ecosystem that Nest’s has formed with a significant number of utility companies around the country. From a technology perspective, Google gets access to a critical piece of the future connected home hub. I’m sure we will hear a lot regarding privacy and Google’s use of user data – but many seem to believe that this is a big data play on Google’s part – but the Nest folks are saying the right things. Tony Fadell, CEO and founder of Nest Labs had this to say:

“We had long discussions with Google about what they do with users’ data today, and we had them read our privacy policy, which clearly limits use of Nest owners’ data only to improving Nest users’ experiences; they looked at us and said that’s what they wanted to do.”

The reaction to the deal seems mostly positive. Forrester Research analyst Frank Gillett believes that Google may have overpaid in the short run, but that “long term, they could look smart if they execute well. This acquisition is about Google getting experience to build the online services platform for the connected home. That will allow them to support lots of third parties beyond just the Nest Company.”

I look for Google to position themselves as the ecosystem driver of the Smart Home – and more broadly, the connected device space.

So two separate moves to start our year – but one story line: 2014 is a year of accelerating transformation – for people, businesses, governments and society.