Fall 2016 – SIBC – IBMsibc.nd.edu/assets/228982/sibc_final_deck_ibm.pdf- Virginia M. Rometty, Chairman, ... IBM’s main weaknesses also represent an opportunity for them if they

Fall 2016 – SIBC – IBM

Student International Business Council

Founded in 1989, SIBC is the largest student-run organization on campus and seeks to fulfill its vision of Peace through Commerce by interacting with global companies and

organizations, while educating its members and the Notre Dame community on the different aspects of international business.

Accounting Finance Consulting

Marketing Social Entrepreneurship

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The Team

Sebastien AlvaradoSophomore

Civil EngineeringZahm Hall

Marcela BertiniSophomore

Finance & EconomicsPasquerilla West Hall

Andre ElblingSophomore

FinanceSiegfried Hall

Marina HroszSophomore

Finance & ACMSPasquerilla West Hall

Jack EckmanSophomore

Finance & ACMSFisher Hall

Michael BernardSophomore

BusinessSiegfried Hall

Raphael JafriSophomore

Finance & EconomicsSiegfried Hall

Alejandro AndersonSophomore

Mechanical EngineeringO’Neill Hall

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Executive Summary

Case SummaryRecommend how could the power of Watson and/or

cognitive insights could be applied to weather. Focus on adding value to IBM through the weather industry.

FactorsAnalyzed IBM's financial reports, applications and the recent acquisition of The Weather Company in several

revenue-impacting industries.

RecommendationIBM can add more value to the company by further

exploring agriculture, government and insurance. All areas of cognitive analysis and cloud computing have not reached

its full potential especially in these industries.

Agenda

IBM, Watson & The Weather Industry

Applying Cognitive Insights to Weather

Adding value to IBM & Potential Global Impact

Questions?

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Agriculture Insurance Government

Deep Thunder

EZ Farm

Adding Value to IBM&

Potential Global Impact

Questions?

7Source: IBM, Statista, SelectUSA

Weather Industry Overview

Weather Dependent Industries

The ability to utilize weather as a resource can be a game changer for a company such as IBM that has involvement in so many weather-dependent and consumer-focused industries.

Process of Weather Prediction and Results

Benefits of Weather Predictions

Successful Weather Prediction

Damage Prevention or Accurate Customer

Services/Needs

Positive Consumer Feedback

Decreased Potential Revenue Loss

• Mechanical prevention measures for cell towers or airplanes.

• More efficient transportation.• Increased efficiency in agriculture.• Damage prevention for insured

consumers.

8Sources: IBM, WallStreetDaily.com,

Company Overview

IBM + Weather Company Statistics

“Digital is the wires, but digital intelligence, or artificial intelligence as some people call it, is about much more than that. This next decade is about how you combine those and become a cognitive business. It’s the dawn of a new era.”

- Virginia M. Rometty, Chairman, President and Chief Executive Officer, IBM

• Businesses lose more than $500 billion a year due to weather related issues.

• The Weather Company has built a network of 140,000 weather stations together.

• The Weather Company’s mobile is the 4th most used in the U.S.

• The platform handles upwards of 26 billion daily inquiries to its cloud-based services

Strategic Imperative Revenue

3Q16 Yr/Yr

Analytics $4.8 14%

Cloud $3.4 42%

Mobile $1.2 19%

Security $0.5 11%

Social $0.2 (21%)

Total $8.0 15%

40% of IBM’s Revenue

The Weather Company

Data Solutions

Company data packages

Data solutions for media

Alerts

Alerts for engagements

Alerts for worker safety

Source: IBM

The Weather Company Acquisition

In March of 2015 IBM made a $3 billion commitment to invest in the Internet of Things.

In October of 2015 IBM closed a deal on buying the Weather Company’s B2B, mobile and cloud-based web properties.

The cloud data platform will serve as the technology backbone of IBM’s data services and Watson IoT businesses.

The Acquisition

•Proactively alert customers to adverse weather conditions to help reduce claims and improve customer satisfaction.

Insurance

•Improve on-time deliveries and optimize travel routes by predicting potential disruptions in operations due to weather events.

Travel and transportation

•Accelerate response to outages and improve power distribution forecasting for peak demands.

Energy and utilities

•More effectively determining resource needs and responding quickly during severe weather.

Public sector

•Reduce costly equipment failures caused by weather-related damage.

Manufacturing

Applications in other Industries

The Weather Company Solutions

The recent acquisition of The Weather Company’s Product and Technology businesses, a data platform which powered the fourth most-used mobile app daily in the US at the time of its acquisition, will allow IBM to expand its customer reach.

10Source: IBM

IBM WATSON Overview

Watson Learns

•Data from a given topic is uploaded.

•Question-Answer pairs are added.

Watson Thinks

•Analyzes unstructured data from a wide range of sources.

• Interprets complex questions to extract meaning.

Watson Answers

•Presents possible solutions ranked on quality of data and information gathered from a scoring algorithm.

The Cognitive Process

Why WATSON?

“WATSON is a cognitive technology that can think like a human.” IBM

Applications

IBM Watson

Healthcare

Weather Industry

Universities

Businesses &

Developers

1. Understand → Analyze all types of data.2. Reason → Provided personalized solutions

based on user input.3. Learn → Grow in subject as more

information is gathered.4. Interact → Engage in dialog with Watson.

Source: IBM, Fortune, Forbes

SWOT Analysis

Strengths:•First mover•Brand Reputation•Diversified

business•Integrated

services

Weaknesses:•Expensive•Focus on large

enterprises•Low profit

margins

Opportunities:•Expand divisions•Demand for cloud

based services•New APIs•Smaller company

contracts

Threats:•Increasing

competition•Slow economic

growth•Possible security

issues

IBM’s main weaknesses also represent an opportunity for them if they can offer a cheaper option to smaller businesses.

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Adding Value to IBM


Deep Thunder

EZ Farm



Questions?

Temperature increases

Weeds, pests, and

disease

Possible price crashes in

region

Irrigation and rainfall

Profit of certain crops under specific

weather

13Sources: Statista, The New York Times, IBM, Fortune, World Bank

The Agriculture Industry

E.&J. Gallo Winery• irrigation system

using Watson

Fertilyzer• Watson Tradeoff

Analytics

EZ Farm• Watson and

Precision Agriculture

Big data agriculture is becoming more and more of a trend in the agriculture industry, and applying Watson could revolutionize agriculture.

Big data agriculture

Current ApplicationsOverview

The combine harvesting manufacturing industry

was worth US$ 32 trillion.

2-3% industry CAGR

projected.

Using data in

agriculture is

becoming a tendency.

Source: MarketWatch, IBM, Fortune, ArsTechnica

Deep Thunder

Potential in Weather Industry• Weather industry gradually moving from

public sector (National Weather Service) to private sector, which is a $3-6 billion opportunity.

• Businesses want more focused and specific weather information further in advance.

• Deep Thunder offers hyper-localized forecasts unmatched by current offerings.

Deep Thunder can add value to IBM by making it the leader in the developing private weather sector. The primary application of Deep Thunder will be serving large corporate clients that have very specific questions and problems.

Local, high-resolution weather predictions

Weather Company's

global forecasting

model

Machine-learning Tools

Big Data

Deep Thunder Applications

Deep Thunder

Agriculture Weather Forecasts

Insurance Utility Companies

21 thousand people die a day of hunger

related causes

In 2050 the population is estimated to grow

by 34%. It is also estimated that food production will need to increase by 70% to

reach this new demand.

Sources: IBM, Poverty.com

EZ Farm Goal

• Started by IBM to develop a system so that small farmers in underdeveloped countries can better predict the weather, and plan accordingly.

• Currently under testing in several countries.

How it works• IBM first sets up hardware such as water collection tanks throughout

the farm.

• Once installed it allows farmers to get all the crucial information such as water levels in water tanks, when it will rain, and many other statistics through an app on their phone.

Future

90 % of crop losses are due to weather

• Weather related crop losses could be reduce by about 25% using precise weather instruments.

50% of food harvested never reaches the consumer • This number can be significantly

lowered by the use of precision weather tools to make more effective routes and decisions.

70% of the world’s fresh water is used in agriculture

• If farmers can more precisely predict rainfall, they can use irrigation methods more effectively.

EZ Farm has a lot of potential to change the way small-farming agriculture will exist in the future, and if implemented efficiently, can be applied all over the world.

EZ Farm

Source: IBM

Government

Improve Safety

•Integrating data from multiple sources allows a single, consolidated picture of a whole area – leads to better recommendations.

Communicate Effectively

•Give governments access to the 160 million existing users on the Weather Company’s app to easily deliver critical messages.

Decrease Costs

•By making sure that only certain areas evacuate, millions of dollars can be saved.

IBM’s main value to government in the weather industry will be in lives, infrastructure, and money saved. By integrating multiple data sources, IBM can provide real time suggestions about how to proceed to minimize damages.

Intelligent Operations Center for Emergency

Management

Improve time-to action

Create common operating images

Reduce Costs

Evaluate Potential Impact

Potential Value

Intelligent Operations Center Five Weather APIS

Forecast Data

Enhanced Forecast

Enhanced Historic Data

Global Real-Time

US Real-Time

Weather in Insurance

Weather in Insurance

Sources: IBM, Business Weather

Watson has great potential in the insurance industry due to large number of claims weather generates, and the amount of these that can be easily eliminated.

Customer Engagement• Insurance companies can use alerts and other methods of

communicating with their policy holders. •More than 50% of people warned take actions.

Fraud Detection•By matching the weather information generated by

Watson and the claims the policy holders filed, these insurance companies will be able to detect suspicious claims with ease.

Personalized Offerings•Weather has a huge affect on how people drive,

companies may offer real time assistance, tips, and even coupons to lower accidents.

Telematics•By combining Telematics to weather companies may be

able to even further decrease the amount of claims. •For example if a customer knows that the telematics in his

car is tracking how he drives in risky weather such as a snow storm he may take even further precautions.

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Deep Thunder

EZ Farm

Questions?

Sources: Food Processing, United Nations, Green Mountain Coffee

Application - Agriculture

More sustainable for companies that actively pursue sustainable practices.

Saves Water so Lower prices for distributors, retailers, etc.

Develops goodwill for brands, suppliers and food services that use IBM’s CSA-verified stamp of approval.

With U.N. approval, IBM could sell their services to farmers/producers which would lower costs and emissions, while also promoting a more sustainable brand to consumers.

Incentive to Use Service: Financially and Socially

IBM/CSA Check of Approval

Possible Commercial Approaches

• Global Alliance Climate-Smart Agriculture (CSA) Initiative at the United Nations.

• Partnership/approval from United Nations Food and Agriculture Association strengthens validity of IBM’s service.

Application - Government

Sources: American Red Cross, Wireless Emergency Alerts, National Oceanic and Atmospheric Administration

With help from Watson, governments can prevent natural disasters’ catastrophic aftereffect by saving more lives and cutting down on relief spending, giving a social value to Watson analytics.

“Amber Alert style” notification system

• Partner with the WEA

How?

Pinpointed accuracy as to where exactly the natural disaster

would hit and to what degree

Broadcast tips to mitigate destruction to your house along

with preemptive warnings

Why?

Extreme weather events cost the US $80 Billion per year

on average

Earlier notification alerts could cut down on traffic,

overall panic, and costs

Billions of Dollars in Damages and Frequency of Billion Dollar Weather

Events

What Would It Look Like

Sources: Apple

Currently, the government uses an emergency notification system, but a partnership with IBM’s Watson weather would significantly improve its effectiveness.

More precise lower costs during and after natural disaster.

Weather predictions can mitigate traffic and panic.

People receives emergency alerts from IBM

Take right measures. Evacuate areas.

Option 2: IBM partners with the government

IBM provides the data that is then broadcasted by the government.

Option 1: IBM gets approval from government

Broadcast pertinent weather information to those living in specific areas.

IBM’s precise weather predictor

Record weather information. Predict outcomes.

Sources: AutoInsurance.org, Progressive

Application - Insurance

● Feature similar to Progressive’s ‘Snapshot’○ Optional device placed in cars/installed in

dashboard software and cell phones■ Warns and discourages driving in dangerous

weather conditions● Rewards may include insurance decrease

● Partner with common fast food restaurants and hotels to offer discounts for safe drivers who pull over in poor driving conditions

● Mutually beneficial:○ Restaurants get more business, brand

promotion, and goodwill through safe driving○ No increased cost to insurance companies,

lower overall costs due to less insurance claims

Watson’s accurate weather predictions can reduce costs to insurance companies while increasing driver safety as approximately 2.7 million weather-related car accidents occur per year.

Car Insurance/Telematics

Partner with Restaurants/Hotels

Summary

Reasons for ImplementationReasons for Implementation

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Cloud Data+

Cognitive Computing

The Weather Company

Deep Thunder

+EZ Farm

Agriculture+

Government+

Insurance

The Weather Industry

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Final Recommendations

AGRICULTURE

Explore Deep Thunder and EZ

Farm.

Get exposure to both emerging

markets and the large corporations.

Sell services to farmers and producers

GOVERNMENT

Establish a partnership with

Government (can be outside the US).

Huge impact. Possibly with low

costs

INSURANCE

Target key insurance companies.

Looking to reduce their costs.

Develop an software that can be

integrated to GPS and smartphones.

Regain influence with the general

public

MORE INVESTMENT(stock price and

assets)

BRAND RECOGNITION(sustainability)

MARKET SHARE

QUESTIONS?

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Fall 2016 – SIBC – IBMsibc.nd.edu/assets/228982/sibc_final_deck_ibm.pdf- Virginia M. Rometty, Chairman, ... IBM’s main weaknesses also represent an opportunity for them if they

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