IBM CEO Ginni Rometty: Managers Need To Get Over Relying On 'Gut Instinct'

Last night, IBM CEO Ginni Rometty gave a speech to the Council On Foreign Relations breaking down how much the world has changed as computing gets smarter and more integrated into our businesses and lives.

"I'd like you to think of big data as the next natural resource," she said, "that can be to our era what steam, electricity and oil was for the Industrial Age."

But just having oil or electricity didn't make you a powerhouse, because everyone had access. That's doubly true for data. It's about what you do with it.

For data to be a source of advantage, management and organizations have to completely change. Rometty offers three key lessons on how they need to do so.

"Many, many more decisions at your company or entity will be based on predictive analytics, and not your gut instinct or experience."

When we make decisions by gut instinct, we often make the wrong ones, Rometty argues.

Even in fields that are very scientifically oriented there's something called an anchoring bias," Rometty said. "You know two or three facts, they're in your subconscious, as you hear information and filter it, it guides the decisions you make, and you discount things that don't fit in that lens."

To counter that tendency, you can't just present data. You have to completely change a culture and reverse years of bad habits.

People don't especially like to be told that the way they've been doing things is wrong. The best way to do it is to show results.

"The social network will be the new production line."

The jobs that are still going to be around in the future as things become increasingly automated will be "knowledge jobs," where people do non-routine work and constantly produce and interpret information.

Now, we have more data, better tools, and especially, the ability to connect at any time.

Rometty argues that in a world where the value is knowledge and data rather than simply things, knowledge workers are producers, and increasingly, social networks are the production line.

That means that value comes from how much you share and contribute to others. Now, everyone at IBM has a social network page. In the future, their bonus will be determined by peers based on how much they share knowledge, contribute to the community, and meet clients' needs.

Value will be for individuals, not segments.

Usually, when companies try to reach people, the best they do is a micro segment, an average.

Increasingly, the need for splitting people into groups is disappearing. Because there's so much data about every person, we're going to see "the death of average."

When that's used for marketing, people are wary of it. When it's used to provide better service, they're appreciative.

People expect something in return for their data, and organizations need to figure out what that is for each individual customer.

Each one of these are changes that have been brought on by technology, and will be accelerated by them in the future.

Any organization that didn't adapt to use oil and steam engines isn't around anymore. The same will be true for big data, and it requires a big transition in culture and management as well.

Find the whole speech here