IBM's Rometty: Businesses are in a cognitive era

According to IBM (NYSE: IBM) Chair and CEO Ginni Rometty , businesses need to be addressing the question, "When everyone is digital, what's differentiating?"

The tech company launched a 2,000 person consulting group Tuesday to help businesses do just that.

The new division, Cognitive Business Solutions, will advise companies on how to use IBM's artificial intelligence system, Watson, to their advantage.

Rometty told CNBC's " Squawk on the Street " on Tuesday that this strategic initiative builds on a digital foundation that IBM has been assembling for a quite some time.

IBM has already built big franchises around data analytics, the cloud and mobility, making $25 billion and comprising 27 percent of the company in the last year.

"Think about digital business married with digital intelligence and you get cognitive," Rometty said. "This is an era, cognitive era. It's an era of technology. It's an era of business for companies."

Rometty added that Watson is symbolic of this period.

"What Watson does is it understands information," she said. "It can reason, it can learn and then in the end, you can actually take those characteristics — thinking, learning — and then embed it in a business."

For these reasons, Rometty said, Watson can turn any company into a "thinking business."

"[Cognition] changes how you engage with your clients. It allows you to scale expertise. You'll build thinking into all your products and services, you'll build a cognitive supply chain in your operations and in the end, you'll completely change how you do discovery," she explained.

IBM shares were down slightly Tuesday afternoon and have fallen about 7 percent this year.

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