Watson and Block: Tax Preparation and Watson

April 19, 2017

Author’s Note:

Tax season is over. I am now releasing a write up I did in the high pressure run up to tax filing day, April 18, 2017, to publish this blog post. I want to comment on one marketing play IBM used in 2016 and 2017 to make Watson its Amazon Echo or its Google Pixel. IBM has been working overtime to come up with clever, innovative, effective ways to sell Watson, a search-and-retrieval system spiced with home brew code, algorithms which make the system “smart,” acquired technology from outfits like Vivisimo, and some free and open source search software.

IBM Watson is being sold to Wall Street and stakeholders as IBM’s next, really big thing. With years of declining revenue under its belt, the marketing of Watson as “cognitive software” is different from the marketing of most other companies pitching artificial intelligence.

One unintended consequence of IBM’s saturation advertising of its Watson system is making the word “cognitive” shorthand for software magic. The primary beneficiaries of IBM’s relentless use of the word “cognitive” has been to help its competitors. IBM’s fuzziness and lack of concrete products has allowed companies with modest marketing budgets to pick up the IBM jargon and apply it to their products. Examples include the reworked Polyspot (now doing business as CustomerMatrix) and dozens of enterprise search vendors; for example, LucidWorks (Really?), Attivio, Microsoft, Sinequa, and Squirro (yep, Squirro). IBM makes it possible for competitors to slap the word cognitive on their products and compete against IBM’s Watson. I am tempted to describe IBM Watson as a “straw man,” but it is a collection of components, not a product.

Big outfits like Amazon have taken a short cut to the money machine. The Echo and Dot sell millions of units and drive sales of Amazon’s music and hard goods sales. IBM bets on a future hint of payoff; for example, Watson may deliver a “maximum refund” for an H&R Block customer. That sounds pretty enticing. My accountant, beady eyed devil if there ever were one, never talks about refunds. He sticks to questions about where I got my money and what I did with it. If anything, he is a cloud of darkness, preferring to follow the IRS rules and avoid any suggestion of my getting a deal, a refund, or a free ride.

Below is the story I wrote a month ago shortly after I spent 45 minutes chatting with three folks who worked at the H&R Block office near my home in rural Kentucky. Have fun reading.

Stephen E Arnold, April 18, 2017

IBM Watson is one of Big Blue’s strategic imperatives. I have enjoyed writing about Watson, mixing up my posts with the phrase “Watson weakly” instead of “Watson weekly.” Strategic imperatives are supposed to generate new revenue to replace the loss of old revenues. The problem IBM has to figure out how to solve is pace. Will IBM Watson and other strategic imperatives generate sustainable, substantial revenue quickly enough to keep the  company’s revenue healthy.

The answer seems to be, “Maybe, but not very quickly.” According to IBM’s most recent quarterly report, Big Blue has now reported declining revenues for 20 consecutive quarters. Yep, that’s five years. Some stakeholders are patient, but IBM’s competitors are thrilled with IBM’s stratgegic imperatives. For the details of the most recent IBM financials, navigate to “IBM Sticks to Its Forecast Despite Underwhlming Results.” Kicking the can down the road is fun for a short time.

The revenue problem is masked by promises about the future. Watson, the smart software, is supposed to be a billion dollar baby who will end up with a $10 billion dollar revenue stream any day now. But IBM’s stock buybacks and massive PR campaigns have helped the company sell its vision of a bright new Big Blue. But selling software and consulting is different from selling hardware. In today’s markets, services and consulting are tough businesses. Examples of companies strugglling to gain traction against outfits like Gerson Lehrman, unemployed senior executives hungry for work, and new graduates will to do MBA chores for a pittance compete with outfits like Elastic, a search vendor which sells add ons to open source software and consulting for those who need it. IBM is trying almost everything. Still those declining revenues tell a somewhat dismal tale.

I assume you have watched the Super Bowl ads if not the game. I just watched the ads. I was surprised to see a one minute, very expensive, and somewhat ill conceived commercial for IBM Watson and H&R Block, the walk in store front tax preparer.

The Watson-Block Super Bowl ad featured this interesting image: A sled going downhill. Was this a Freudian slip about declining revenues?

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Does it look to you that the sled is speeding downhill. Is this a metaphor for IBM Watson’s prospects in the tax advisory business?

One of IBM’s most visible promotions of its company-saving, revenue-gushing dreams is IBM Watson. You may have seen the Super Bowl ad about Watson providing H&R Block with a sure-fire way to kill off pesky competitors. How has that worked out for H&R Block?

This morning’s Google Finance snapshot of H&R Block provides this information:

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The first entry’s tells me: “H&R Block Down 4.1 % Since Earnings Report: Can It Rebound?” Who knows? Maybe Watson will lift the company to new heights and cause the turbo charged Turbo Tax to sputter lose power?

I have been monitoring H&R Block’s tie up with IBM since I learned about the deal in 2016. The idea is that IBM Watson will provide information as an H&R Block professional prepares a client’s tax returns. The walk in tax outfit has posted information about the link up of IBM and H&R Block at this link. Well, sort of. In order to locate the information, one has to run the query Watson on the H&R Block Web site, review the list of results, and then slog through a page of results. Here’s what appeared on Tuesday, April 18, 2017:

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The complete result list pointed me to a February 6, 2017, blog post, a link to Jerry Watson, Tax Professional, and to this H&R Block page:

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Although somewhat baffling at first because I expected information, not a link to make an appointment, I located this information:

We’re giving our Tax Pros the power of Watson.

H&R Block has partnered with IBM to provide our clients with a new, one-of-a-kind customer experience. In doing so, we’re combining over 60 years of tax expertise with Watson cognitive computing technology from IBM. With that much knowledge at our fingertips, all we can say is,

“HELLO, MAXIMUM REFUND.”

I like the implication that with IBM Watson, H&R Block implies a “maximum refund.” That’s interesting because it suggests that H&R Block tax preparers without Watson cannot deliver a maximum refund. The statement also smacks of promising a customer of H&R Block something that sounds delicious but slightly out of whack with what I expect my tax preparer to do: Follow the rules and regulations so that I can pay what I owe to the US government. I don’t automatically expect a refund.

So what does the Watson service actually do?

The H&R Block Watson Web page states:

Our Tax Pros and Watson.

NOW IT’S PERSONAL.

Imagine combining the brainpower of our Tax Pros with the cognitive computing of Watson. We’re creating our most personalized tax experience ever. How personalized? For starters, you now have your own monitor. It allows you to follow along with your Tax Pro and Watson. Your info, your credits, your deductions — it’s all there for you to see.

“It’s all there for you to see.” is an interesting declarative statement.

To “see” prompted me to visit the H&R Block office nearest my home in rural Kentucky. I made my way to the office located next to a Kroger food store and in front of a Subway deli. I spoke with two H&R Block professionals, explaining that I was curious about the Watson system. Here are highlights of the conversation which took place in March 2017:

Question: How does Watson appear on your computer screen?

Answer: Information displays in windows or frames. I don’t what you call it.

Question: Have you had a customer ask about IBM Watson.

Answer: No.

Question: Is the information Watson displays useful to you or the customer?

Answer: The information is sometimes useful. But we have to deal with Kentucky regulations. Watson does not understand some of the Kentucky guidelines. Customers just want their taxes done. I have not had a customer use about Watson.

Question: Do you rely on IBM Watson to prepare returns?

Answer: No.

To be fair, I did not conduct anything close to a scientific sample. The people with whom I spoke did not know that I wrote articles about smart software. I did not give my name, and I did not collect the names of the three people whom I socially engineered into a conversation with me. The H&R Block staff were friendly and I detected no public relations type of response to my questions.

H&R Block and Watson have prepared a video explaining how Watson “gets your taxes won.” Here’s the interface:

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The idea is that the H&R Block professional will have an additional computer screen in ze cubicle. The customer will “see” Watson and be able to interact with the system. Alternatively, the H&R Block professional can use Watson as a search system. I have difficulty figuring out what my accountant is saying and asking. Forget shifting my attention between the beady-eyed devil and a computer screen with a bunch of dots on it. The idea is that the H&R Block person will have a better experience and that the H&R Block tax professional will find the “maximum refund.” Not for me. I want the tax return to be accurate, not tweaked to generate a “maximum refund.”

IBM’s Web site speaks to a potential H&R Block customer. The headline at the IBM Block Web page is:

Are you leaving money on the table? H&R Block with Watson can help.

The angle is that Watson can maximize refunds. That appeals to the masses I assume. One of the links on the IBM Watson page is a link to the IBM Super Bowl commercial that touts the deal with H&R Block. There is a link to the press release announcing Watson’s tax expertise at this link.

The news release asserts:

H&R Block, Inc. is reinventing the category it founded more than 60 years ago by introducing a new, exclusive, consumer-facing experience that incorporates IBM Watson. The technology will be used by H&R Block’s tax professionals this tax season to help deliver the best outcome for each unique tax situation, while helping clients better understand how different filing options can impact their tax outcome.

Okay, consumer facing and exclusive. I understand.

I was fascinated by “H&R Block Hires IBM’s Watson to Help Its Tax Preparers.” The idea is that H&R Block paid cash money to IBM to integrate Watson into the H&R Block proprietary tax preparation system. The write up states:

For this tax season, H&R Block has put an additional computer screen on each preparer’s desk, facing the customer, and hired IBM’s famous Watson computer to control what’s on it. Watson’s goal is to solve a problem that plagues all tax preparers, both in person and online: human error.

Why did H&R Block take this step? The article reveals that H&R Block wanted to “wrest back market share from its online tax prep rivals.”

One example of the competition H&R Block faces is explained this way:

H&R Block has been fighting the rise of do-it-yourself tax software for decades. It has its own online service, but in the U.S., its 12,000 storefronts still bring in almost two-thirds of its customers and 89 percent of its tax prep fees. And last year, its arch-rival, Intuit Inc.’s TurboTax, scored a decisive victory: TurboTax filings soared 12 percent from the previous year, while the number of customers who showed up at H&R Block storefronts was down almost 6 percent.

The article says that it took three months of development to “make Watson a tax expert.” The method was explained this way:

The supercomputer absorbed decades of transcripts of conversations between H&R Block preparers and customers and then worked with about 250 tax professionals to refine its understanding of taxes.

What about the “maximum refund” angle? The Daily Herald wrote:

Can Watson actually help H&R Block win over customers? At the very least, the new technology keeps customers in the loop while their taxes are prepared, and it could prevent them from getting bored or confused while their preparers type away. At best, the graphics controlled by Watson could prompt customers to ask more questions, get an additional tax credit, or maybe even avoid an audit.

I like the audit angle. I also find it interesting that a customer will have a graphic display to reduce confusion.

What’s my take on the IBM and H&R Block tie up? I have several observations:

  1. IBM certainly spent serious money on a Super Bowl ad. Maybe H&R Block wrote the check. I am unconvinced that IBM Watson is a consumer service. Admeter pegged the ad at number 55 out of 65 ads. I think this means the ad was not a home run. One of the goslings in my office said, “The ad was weird.”
  2. I am not sure the H&R Block customers in the office I visited knew much about Watson. Heck, I don’t think the staff in that store front knew much about Watson. No one seems to pay much attention to the game show winning technology. My hunch is that the H&R Block project performed like the Super Bowl commercial: A great idea in a PowerPoint. In real life, meh.
  3. IBM has been unable to come up with a product or application of its smart software which has the reach and impact of Google’s voice technology or Amazon’s oatmeal box of info parked in millions of homes. The fact that two other companies have converted smart software into money and buzz is a reminder that making money is more than public relations and arm waving.

Why am I critical of this type of smart software “play”? There are three reasons:

First, Watson is a search and retrieval system. Its plumbing indexes text and tries to create meaningful relations among entities and other extracted information and metadata. The idea that IBM has cracked the problem of making search and finding answers to questions reliable, easy, and economical is a work in progress. IBM and many other companies are trying to figure out how to deliver answers to user questions. The Watson thing is no more crazy that Microsoft’s effort to do search without having the user do search. If this is not crystal clear, wait until you fire up the next version of Word. The real time information display will make Windows 10 ads look tame. IBM has not been able to create a product that captures my imagination and obviously not the imagination of companies looking to solve information access problem. IBM does not have an Amazon Alexa Echo which demonstrates cool technology as it drives revenue from Amazon’s music and eCommerce businesses.

Second, IBM’s marketing has created a semantic platform which other companies are  exploiting aggressively. IBM’s free spending to burn the word cognitive into the minds of most sentient beings allows IBM’s competitors to say: “We have a cognitive system. It works. It is available today.” This recycling of the IBM buzzword works because IBM does not have a product or application that has traction. The Google Home is an okay me too product because Amazon Echo was successful. IBM has not created an Echo or Home type of product to showcase its technology and generate revenue. IBM has made a buzzword familiar to people outside of Psychology 101 classes. IBM is all marketing push. IBM has no revenue pull from a Watson product.

Third, IBM has decided ex cathedra that its approach to artificial intelligence is the next big thing. Consequently billions of projected revenue allegedly hang on the success of Watson. Today Watson is analytics, consulting, medical problem solving, education assistant, recipe maker, etc., etc.

I do not know what Watson is. Is it Omnifind? Is it Analyst’s Notebook? Is it a variant of Recorded Future’s predictive analytics? Is it a Bitext Deep Linguistics Analysis variant? I know that it has entertained me with some wild and crazy marketing. I roared with laughter when I saw Watson represented as chemical diagrams in the Wall Street Journal ad. That was a rib tickler, but I think IBM thought it would make clear that IBM works like elements. You know. Instead of creating triphosphate, one could create a smart software system to help out cancer doctors.

The Watson marketing campaigns are excellent examples of what a large marketing budget, a lack of fungible products, and a bit of desperation can combine to form. I actually feel a bit of the pain the Watson team may be experiencing. I have watched dozens of companies try to sell “search” using manifold angles, gimmicks, and come ons. Based on my experience, Autonomy in the 1990s did more to drive sales than any other search vendor I have tracked over the decades. The “portal in a box” is one high point which other search vendors—excuse me, artificial intelligence system vendors—have yet to match.

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This is IBM’s box in the H&R Block Super Bowl commercial. Autonomy put a “portal” in a box. IBM/Block put nothing in the box except another box. What’s the concept, folks? Is this why the commercial ranked 55th in impact and popularity on the Admeter scale. The companies ranking below IBM/Block were Nintendo, the American Petroleum Institute, Paramount, Fiji Water, 20th Century Fox, Hulu, Kentucky Fried Chicken, Wargaming (Teensy House Buyers), Top Games US, Machine Zone, Wargaming (Real Awful Moms).

To close, I ran an interview with a wizard who used to work at–wait for it–IBM. The fact that this developer of smart software is now running a fast growing “cognitive” Deep Linguistic Analysis company speaks loudly to me. To IBM, nah. I think it’s deaf. Perhaps IBM should buy this former IBMer’s company and get some mojo back in the Big Blue machine.

As for H&R Block and Watson. I will wait until next year to learn if the deal blooms in 2018.

Stephen E Arnold, April 19, 2017

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