Tag Archives: Transformation

Why Digital Transformation Should Focus On Growth, Not Disruption

In the tech world in 2017, several trends emerged as signals amid the noise, signifying much larger changes to come.

As we noted in last year’s More Than Noise list, things are changing—and the changes are occurring in ways that don’t necessarily fit into the prevailing narrative.

While many of 2017’s signals have a dark tint to them, perhaps reflecting the times we live in, we have sought out some rays of light to illuminate the way forward. The following signals differ considerably, but understanding them can help guide businesses in the right direction for 2018 and beyond.

SAP Q417 DigitalDoubles Feature1 Image2 1024x572 Why Digital Transformation Should Focus On Growth, Not Disruption

When a team of psychologists, linguists, and software engineers created Woebot, an AI chatbot that helps people learn cognitive behavioral therapy techniques for managing mental health issues like anxiety and depression, they did something unusual, at least when it comes to chatbots: they submitted it for peer review.

Stanford University researchers recruited a sample group of 70 college-age participants on social media to take part in a randomized control study of Woebot. The researchers found that their creation was useful for improving anxiety and depression symptoms. A study of the user interaction with the bot was submitted for peer review and published in the Journal of Medical Internet Research Mental Health in June 2017.

While Woebot may not revolutionize the field of psychology, it could change the way we view AI development. Well-known figures such as Elon Musk and Bill Gates have expressed concerns that artificial intelligence is essentially ungovernable. Peer review, such as with the Stanford study, is one way to approach this challenge and figure out how to properly evaluate and find a place for these software programs.

The healthcare community could be onto something. We’ve already seen instances where AI chatbots have spun out of control, such as when internet trolls trained Microsoft’s Tay to become a hate-spewing misanthrope. Bots are only as good as their design; making sure they stay on message and don’t act in unexpected ways is crucial.

SAP Q417 DigitalDoubles Feature1 Image3 Why Digital Transformation Should Focus On Growth, Not DisruptionThis is especially true in healthcare. When chatbots are offering therapeutic services, they must be properly designed, vetted, and tested to maintain patient safety.

It may be prudent to apply the same level of caution to a business setting. By treating chatbots as if they’re akin to medicine or drugs, we have a model for thorough vetting that, while not perfect, is generally effective and time tested.

It may seem like overkill to think of chatbots that manage pizza orders or help resolve parking tickets as potential health threats. But it’s already clear that AI can have unintended side effects that could extend far beyond Tay’s loathsome behavior.

For example, in July, Facebook shut down an experiment where it challenged two AIs to negotiate with each other over a trade. When the experiment began, the two chatbots quickly went rogue, developing linguistic shortcuts to reduce negotiating time and leaving their creators unable to understand what they were saying.

The implications are chilling. Do we want AIs interacting in a secret language because designers didn’t fully understand what they were designing?

In this context, the healthcare community’s conservative approach doesn’t seem so farfetched. Woebot could ultimately become an example of the kind of oversight that’s needed for all AIs.

Meanwhile, it’s clear that chatbots have great potential in healthcare—not just for treating mental health issues but for helping patients understand symptoms, build treatment regimens, and more. They could also help unclog barriers to healthcare, which is plagued worldwide by high prices, long wait times, and other challenges. While they are not a substitute for actual humans, chatbots can be used by anyone with a computer or smartphone, 24 hours a day, seven days a week, regardless of financial status.

Finding the right governance for AI development won’t happen overnight. But peer review, extensive internal quality analysis, and other processes will go a long way to ensuring bots function as expected. Otherwise, companies and their customers could pay a big price.

SAP Q417 DigitalDoubles Feature1 Image4 1024x572 Why Digital Transformation Should Focus On Growth, Not Disruption

Elon Musk is an expert at dominating the news cycle with his sci-fi premonitions about space travel and high-speed hyperloops. However, he captured media attention in Australia in April 2017 for something much more down to earth: how to deal with blackouts and power outages.

In 2016, a massive blackout hit the state of South Australia following a storm. Although power was restored quickly in Adelaide, the capital, people in the wide stretches of arid desert that surround it spent days waiting for the power to return. That hit South Australia’s wine and livestock industries especially hard.

South Australia’s electrical grid currently gets more than half of its energy from wind and solar, with coal and gas plants acting as backups for when the sun hides or the wind doesn’t blow, according to ABC News Australia. But this network is vulnerable to sudden loss of generation—which is exactly what happened in the storm that caused the 2016 blackout, when tornadoes ripped through some key transmission lines. Getting the system back on stable footing has been an issue ever since.

Displaying his usual talent for showmanship, Musk stepped in and promised to build the world’s largest battery to store backup energy for the network—and he pledged to complete it within 100 days of signing the contract or the battery would be free. Pen met paper with South Australia and French utility Neoen in September. As of press time in November, construction was underway.

For South Australia, the Tesla deal offers an easy and secure way to store renewable energy. Tesla’s 129 MWh battery will be the most powerful battery system in the world by 60% once completed, according to Gizmodo. The battery, which is stationed at a wind farm, will cover temporary drops in wind power and kick in to help conventional gas and coal plants balance generation with demand across the network. South Australian citizens and politicians largely support the project, which Tesla claims will be able to power 30,000 homes.

Until Musk made his bold promise, batteries did not figure much in renewable energy networks, mostly because they just aren’t that good. They have limited charges, are difficult to build, and are difficult to manage. Utilities also worry about relying on the same lithium-ion battery technology as cellphone makers like Samsung, whose Galaxy Note 7 had to be recalled in 2016 after some defective batteries burst into flames, according to CNET.

SAP Q417 DigitalDoubles Feature1 Image5 Why Digital Transformation Should Focus On Growth, Not DisruptionHowever, when made right, the batteries are safe. It’s just that they’ve traditionally been too expensive for large-scale uses such as renewable power storage. But battery innovations such as Tesla’s could radically change how we power the economy. According to a study that appeared this year in Nature, the continued drop in the cost of battery storage has made renewable energy price-competitive with traditional fossil fuels.

This is a massive shift. Or, as David Roberts of news site Vox puts it, “Batteries are soon going to disrupt power markets at all scales.” Furthermore, if the cost of batteries continues to drop, supply chains could experience radical energy cost savings. This could disrupt energy utilities, manufacturing, transportation, and construction, to name just a few, and create many opportunities while changing established business models. (For more on how renewable energy will affect business, read the feature “Tick Tock” in this issue.)

Battery research and development has become big business. Thanks to electric cars and powerful smartphones, there has been incredible pressure to make more powerful batteries that last longer between charges.

The proof of this is in the R&D funding pudding. A Brookings Institution report notes that both the Chinese and U.S. governments offer generous subsidies for lithium-ion battery advancement. Automakers such as Daimler and BMW have established divisions marketing residential and commercial energy storage products. Boeing, Airbus, Rolls-Royce, and General Electric are all experimenting with various electric propulsion systems for aircraft—which means that hybrid airplanes are also a possibility.

Meanwhile, governments around the world are accelerating battery research investment by banning internal combustion vehicles. Britain, France, India, and Norway are seeking to go all electric as early as 2025 and by 2040 at the latest.

In the meantime, expect huge investment and new battery innovation from interested parties across industries that all share a stake in the outcome. This past September, for example, Volkswagen announced a €50 billion research investment in batteries to help bring 300 electric vehicle models to market by 2030.

SAP Q417 DigitalDoubles Feature1 Image6 1024x572 Why Digital Transformation Should Focus On Growth, Not Disruption

At first, it sounds like a narrative device from a science fiction novel or a particularly bad urban legend.

Powerful cameras in several Chinese cities capture photographs of jaywalkers as they cross the street and, several minutes later, display their photograph, name, and home address on a large screen posted at the intersection. Several days later, a summons appears in the offender’s mailbox demanding payment of a fine or fulfillment of community service.

As Orwellian as it seems, this technology is very real for residents of Jinan and several other Chinese cities. According to a Xinhua interview with Li Yong of the Jinan traffic police, “Since the new technology has been adopted, the cases of jaywalking have been reduced from 200 to 20 each day at the major intersection of Jingshi and Shungeng roads.”

The sophisticated cameras and facial recognition systems already used in China—and their near–real-time public shaming—are an example of how machine learning, mobile phone surveillance, and internet activity tracking are being used to censor and control populations. Most worryingly, the prospect of real-time surveillance makes running surveillance states such as the former East Germany and current North Korea much more financially efficient.

According to a 2015 discussion paper by the Institute for the Study of Labor, a German research center, by the 1980s almost 0.5% of the East German population was directly employed by the Stasi, the country’s state security service and secret police—1 for every 166 citizens. An additional 1.1% of the population (1 for every 66 citizens) were working as unofficial informers, which represented a massive economic drain. Automated, real-time, algorithm-driven monitoring could potentially drive the cost of controlling the population down substantially in police states—and elsewhere.

We could see a radical new era of censorship that is much more manipulative than anything that has come before. Previously, dissidents were identified when investigators manually combed through photos, read writings, or listened in on phone calls. Real-time algorithmic monitoring means that acts of perceived defiance can be identified and deleted in the moment and their perpetrators marked for swift judgment before they can make an impression on others.

SAP Q417 DigitalDoubles Feature1 Image7 Why Digital Transformation Should Focus On Growth, Not DisruptionBusinesses need to be aware of the wider trend toward real-time, automated censorship and how it might be used in both commercial and governmental settings. These tools can easily be used in countries with unstable political dynamics and could become a real concern for businesses that operate across borders. Businesses must learn to educate and protect employees when technology can censor and punish in real time.

Indeed, the technologies used for this kind of repression could be easily adapted from those that have already been developed for businesses. For instance, both Facebook and Google use near–real-time facial identification algorithms that automatically identify people in images uploaded by users—which helps the companies build out their social graphs and target users with profitable advertisements. Automated algorithms also flag Facebook posts that potentially violate the company’s terms of service.

China is already using these technologies to control its own people in ways that are largely hidden to outsiders.

According to a report by the University of Toronto’s Citizen Lab, the popular Chinese social network WeChat operates under a policy its authors call “One App, Two Systems.” Users with Chinese phone numbers are subjected to dynamic keyword censorship that changes depending on current events and whether a user is in a private chat or in a group. Depending on the political winds, users are blocked from accessing a range of websites that report critically on China through WeChat’s internal browser. Non-Chinese users, however, are not subject to any of these restrictions.

The censorship is also designed to be invisible. Messages are blocked without any user notification, and China has intermittently blocked WhatsApp and other foreign social networks. As a result, Chinese users are steered toward national social networks, which are more compliant with government pressure.

China’s policies play into a larger global trend: the nationalization of the internet. China, Russia, the European Union, and the United States have all adopted different approaches to censorship, user privacy, and surveillance. Although there are social networks such as WeChat or Russia’s VKontakte that are popular in primarily one country, nationalizing the internet challenges users of multinational services such as Facebook and YouTube. These different approaches, which impact everything from data safe harbor laws to legal consequences for posting inflammatory material, have implications for businesses working in multiple countries, as well.

For instance, Twitter is legally obligated to hide Nazi and neo-fascist imagery and some tweets in Germany and France—but not elsewhere. YouTube was officially banned in Turkey for two years because of videos a Turkish court deemed “insulting to the memory of Mustafa Kemal Atatürk,” father of modern Turkey. In Russia, Google must keep Russian users’ personal data on servers located inside Russia to comply with government policy.

While China is a pioneer in the field of instant censorship, tech companies in the United States are matching China’s progress, which could potentially have a chilling effect on democracy. In 2016, Apple applied for a patent on technology that censors audio streams in real time—automating the previously manual process of censoring curse words in streaming audio.

SAP Q417 DigitalDoubles Feature1 Image8 1024x572 Why Digital Transformation Should Focus On Growth, Not Disruption

In March, after U.S. President Donald Trump told Fox News, “I think maybe I wouldn’t be [president] if it wasn’t for Twitter,” Twitter founder Evan “Ev” Williams did something highly unusual for the creator of a massive social network.

He apologized.

Speaking with David Streitfeld of The New York Times, Williams said, “It’s a very bad thing, Twitter’s role in that. If it’s true that he wouldn’t be president if it weren’t for Twitter, then yeah, I’m sorry.”

Entrepreneurs tend to be very proud of their innovations. Williams, however, offers a far more ambivalent response to his creation’s success. Much of the 2016 presidential election’s rancor was fueled by Twitter, and the instant gratification of Twitter attracts trolls, bullies, and bigots just as easily as it attracts politicians, celebrities, comedians, and sports fans.

Services such as Twitter, Facebook, YouTube, and Instagram are designed through a mix of look and feel, algorithmic wizardry, and psychological techniques to hang on to users for as long as possible—which helps the services sell more advertisements and make more money. Toxic political discourse and online harassment are unintended side effects of the economic-driven urge to keep users engaged no matter what.

Keeping users’ eyeballs on their screens requires endless hours of multivariate testing, user research, and algorithm refinement. For instance, Casey Newton of tech publication The Verge notes that Google Brain, Google’s AI division, plays a key part in generating YouTube’s video recommendations.

According to Jim McFadden, the technical lead for YouTube recommendations, “Before, if I watch this video from a comedian, our recommendations were pretty good at saying, here’s another one just like it,” he told Newton. “But the Google Brain model figures out other comedians who are similar but not exactly the same—even more adjacent relationships. It’s able to see patterns that are less obvious.”

SAP Q417 DigitalDoubles Feature1 Image9 Why Digital Transformation Should Focus On Growth, Not DisruptionA never-ending flow of content that is interesting without being repetitive is harder to resist. With users glued to online services, addiction and other behavioral problems occur to an unhealthy degree. According to a 2016 poll by nonprofit research company Common Sense Media, 50% of American teenagers believe they are addicted to their smartphones.

This pattern is extending into the workplace. Seventy-five percent of companies told research company Harris Poll in 2016 that two or more hours a day are lost in productivity because employees are distracted. The number one reason? Cellphones and texting, according to 55% of those companies surveyed. Another 41% pointed to the internet.

Tristan Harris, a former design ethicist at Google, argues that many product designers for online services try to exploit psychological vulnerabilities in a bid to keep users engaged for longer periods. Harris refers to an iPhone as “a slot machine in my pocket” and argues that user interface (UI) and user experience (UX) designers need to adopt something akin to a Hippocratic Oath to stop exploiting users’ psychological vulnerabilities.

In fact, there is an entire school of study devoted to “dark UX”—small design tweaks to increase profits. These can be as innocuous as a “Buy Now” button in a visually pleasing color or as controversial as when Facebook tweaked its algorithm in 2012 to show a randomly selected group of almost 700,000 users (who had not given their permission) newsfeeds that skewed more positive to some users and more negative to others to gauge the impact on their respective emotional states, according to an article in Wired.

As computers, smartphones, and televisions come ever closer to convergence, these issues matter increasingly to businesses. Some of the universal side effects of addiction are lost productivity at work and poor health. Businesses should offer training and help for employees who can’t stop checking their smartphones.

Mindfulness-centered mobile apps such as Headspace, Calm, and Forest offer one way to break the habit. Users can also choose to break internet addiction by going for a walk, turning their computers off, or using tools like StayFocusd or Freedom to block addictive websites or apps.

Most importantly, companies in the business of creating tech products need to design software and hardware that discourages addictive behavior. This means avoiding bad designs that emphasize engagement metrics over human health. A world of advertising preroll showing up on smart refrigerator touchscreens at 2 a.m. benefits no one.

According to a 2014 study in Cyberpsychology, Behavior and Social Networking, approximately 6% of the world’s population suffers from internet addiction to one degree or another. As more users in emerging economies gain access to cheap data, smartphones, and laptops, that percentage will only increase. For businesses, getting a head start on stopping internet addiction will make employees happier and more productive. D!


About the Authors

Maurizio Cattaneo is Director, Delivery Execution, Energy, and Natural Resources, at SAP.

David Delaney is Global Vice President and Chief Medical Officer, SAP Health.

Volker Hildebrand is Global Vice President for SAP Hybris solutions.

Neal Ungerleider is a Los Angeles-based technology journalist and consultant.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

Comments

Let’s block ads! (Why?)

Digitalist Magazine

Business Intelligence Emboldens Digital Transformation

In May 2017, a computational social scientist from The Psychometrics Centre at the University of Cambridge stood before an audience at the Linux Foundation’s Apache Big Data conference and revealed how close we’ve come to the ultimate goal of marketing: an easily scalable, highly accurate way to predict customer preferences using minimal data.

When she was still a PhD candidate, Sandra Matz created a Facebook ad campaign targeting people based on nothing more than how extroverted their Facebook Likes indicated they were. People with Likes associated with extroverts saw ads for a party game played in a group. People with more introverted Likes saw ads for a quiet game meant to be played solo.

The campaign required only simple algorithms and no advanced analytics. Yet over seven days of testing, the targeted ads generated up to 15 times higher click-through and conversion rates—and significantly more purchases and revenue for the game company.

SAP Q317 DigitalDoubles Feature3 Image2 Business Intelligence Emboldens Digital Transformation“We developed this approach to show that you can achieve highly accurate behavioral and psychological targeting with a minimal amount of data and relatively simple machine learning tools,” says Matz, who is now an assistant professor of management at Columbia University’s business school.

As effective as this experiment was, Matz suggests that it’s still rudimentary compared to what could be done with more and richer data from more sources. And it’s downright primitive given the possibilities of applying more sophisticated Big Data analytics.

These possibilities have created a watershed moment for marketing and its role in the business.

Spiraling Down the Marketing Funnel

Tension has always simmered over marketing’s contribution to business success. The business knows it can’t sell products or services if it doesn’t make customers aware of them, but the impact of marketing strategy on sales and revenue is hard to quantify and reliably replicate—which, in the age of the data-driven enterprise, often leaves some business leaders not just undervaluing marketing but actively mistrusting it. No wonder human resources consultancy Russell Reynolds reports that the 2016 turnover rate among CMOs was the highest it has seen since it began tracking the statistic in 2012.

Most companies still determine customers’ readiness to buy by using a primitive model known as the marketing funnel, which sorts customers into increasingly smaller groups as they progress from first becoming aware of a company to buying, using, and finally advocating for the company’s products. Different versions have different definitions and numbers of stages, and some approaches see the model as a circle, but they all have one thing in common: their ability to sort customers into various stages is limited by the amount of knowledge the company has about each customer.

As a result, the marketing funnel ends up leaking. Some customers back away because they feel harassed by campaigns that don’t apply to their needs, while some of those who are interested fall through the cracks from a lack of attention. Many data-hungry business leaders think of the marketing funnel as no more than a variation of “throw something against the wall and see if it sticks,” and with the proliferation of digital channels and diffusion of customer attention, they have less patience than ever with that approach.

The silver lining is that a more precise, quantifiable way to build customer relationships is emerging. Done properly, it promises to defuse the tension between marketing and the rest of the business, too.

SAP Q317 DigitalDoubles Feature3 Image3 1024x572 Business Intelligence Emboldens Digital Transformation

The Defining Moment

The Cambridge University experiment is one more step toward the long-held marketing dream of the “segment of one.” This concept of marketing messages that are highly granular, even individually tailored, has been around since the late 1980s. Over the last 15 to 20 years, as customer behavior has become digitalized as never before, marketers have been optimistic that they could capture this data and use it to tailor their messaging with laser-like precision.

Yet what’s achievable in theory has been impossible in practice. We’re still struggling to find the right tools to move beyond the basics of demographic targeting. The rise of the internet, smartphones, and social media has generated more types of information about customer behavior in larger amounts than ever before. But using digitally expressed sentiment about everything from toys to turbines as the basis for accurately disseminating highly individualized marketing messages is still time consuming and cost prohibitive.

However, experiments like Matz’s are bringing us closer to creating highly personalized customer experiences—perhaps not always at the individual level but certainly at a level of granularity that will let us unequivocally determine how to best target and measure marketing programs.

Liking Lady Gaga

Between 2007 and 2012, Psychometrics Centre researchers gathered seven million responses to a simple questionnaire for Facebook users. The carefully designed questions measured respondents’ levels of extroversion, agreeableness, openness, conscientiousness, and neuroticism, a constellation of basic personality traits known as the Big Five.

With the respondents’ permission, the researchers used simple machine learning tools to correlate each person’s responses with the official Facebook Pages that the person had liked, such as Pages for books, movies, bands, hobbies, organizations, and foods. They soon saw that certain personality traits and certain Likes went hand in hand.

For example, most people who liked Lady Gaga’s Page tested as extroverts, which made liking the Lady Gaga Page a relevant data point indicating that someone was probably an extrovert. By 2016, Matz was able to create a lively Facebook ad to be shown only to people who had liked a significant number of official Pages that seemed to be linked to extroversion. A more serene ad was shown only to those whose Likes suggested that they were introverts.

SAP Q317 DigitalDoubles Feature3 Image4 Business Intelligence Emboldens Digital TransformationDespite the large size of the Psychometric Centre’s data set, what’s most remarkable about its work is how few data points within that data set were necessary to build a reliable profile that could model useful predictions. Matz told EnterpriseTech that the algorithm the Centre developed needs, on average, just 65 liked Pages to understand someone’s Big Five personality traits better than their friends do, 120 to understand them better than their family members, and 250 to understand them better than a partner or spouse. This may be the first sign that the era of true behavioral marketing is upon us.

Of course, most marketers want to know far more about customers than how outgoing or reserved they are. Scraping Facebook Likes isn’t enough to give them the holistic customer understanding they crave—not when they have an entire universe of other data to consider. The race is on to identify from the vast spectrum of available customer data not only which specific online behaviors have a predictive element such as extroversion or introversion but also which ones will drive the most potent response to specific product or service messaging.

Complicated? Yes—but we are within reach of the algorithms we need to connect the dots for greater customer insight. By reaching out over new channels with more accurate behavior-based messaging, companies could transform the entire customer journey.

A Customized Journey for Each Customer

Attribution, the ability to know the source of a sales lead, is key to behavioral targeting. The more details a business knows about what its customers have already done, the more accurately it can predict what they will do next.

In the past, developing a customer profile relied on last-touch attribution analysis, that is, evaluating the impact of the last interaction a prospective customer had with a brand before becoming a lead. The problem was that companies could rarely be certain what that last touch was, given how much activity still takes place offline and isn’t captured or quantified.

Companies also couldn’t be certain how, or even if, a last touch—be it downloading a white paper, visiting a store, or getting a word-of-mouth recommendation—accelerated the customer through the marketing funnel. They could only predict revenue by looking at how many people were deemed to be at a specific stage and extrapolating from past data what percentage of them were likely to move ahead.

SAP Q317 DigitalDoubles Feature3 Image5 Business Intelligence Emboldens Digital TransformationToday, we’re capturing so much more information about people’s activities that we have a far more accurate idea of both what the last touch was and how influential it was. Behavioral targeting makes any content a customer interacts with valuable in analyzing the customer’s journey. A company can use hard data about those interactions to see where each individual prospect is in the customer journey and predict how likely each one is to continue moving forward.

The company can then generate a tailored offer or other event to nudge individuals along based on what has been successful with other customers who buy the same things and behave in the same ways. For example, a large grocer may send out two million individualized offers each week based on loyalty card activity. This may not strictly create a segment of one, but it creates many small segments of customers with similar behaviors based on what the grocer knows to be effective.

As Cambridge University’s experiment in creating an algorithm to identify and target introverts and extroverts proves, more precise messaging is more effective. By using more complex machine learning algorithms to further filter and refine successful messages to target smaller groups, companies could boost their conversion rates to as high as 50%—an exponential increase beyond today’s average rates.

By using machine learning to speed up the testing of different campaigns and to continuously compare results, companies could rapidly create a dataset about every potential customer’s responses and then benchmark it against others’ responses. This would let them determine individual prospects’ likely responses based on concrete actions rather than assumptions.

For super-luxury brands with a limited number of customers and the ability to capture a vast amount of information about each one, this could lead to true segment-of-one marketing. For other brands, the challenge is not just to figure out who the customer is and what messages to send but also how to scale that personalization to segments of tens of thousands (or hundreds of thousands) of customers at a time. To do that both effectively and quickly, companies will need to leverage machine learning, the Internet of Things, and other advanced technologies that enable accurate predictive models. Companies can then benchmark their projected hit rates against their actual results and refine their algorithms for even greater agility and responsiveness.

The Next Steps of Predictive Marketing

Effective behavioral targeting requires companies to identify all the relevant data points, including external data points that indicate which information is valuable. This calls for data scientists who can spot and remove the irrelevant data points that are at the far ends of the curve and distill what remains into meaningful algorithms. It also requires machine learning tools capable of high-volume, high-speed listening, assessing, learning, and making recommendations to improve the algorithm over time.

Once you’ve created a baseline of primary criteria, you can determine the important criteria by which to segment your customer base. To use an oversimplified example, imagine that you own a coffee shop and you want to increase sales of high-margin bakery items. You need to look not at the customers who always get a muffin with their coffee or at those who never do but at those who buy a muffin sometimes, so that you can start to identify the triggers that make them choose to indulge.

To scale this process, look at both user-based and item-based affinities. User-based affinities link customers who have similar interests and shopping patterns. Item-based affinities link customers based on what they buy, individually or in groups of items. Using machine learning to pair and cross-reference these two factors will enable you to create messages that are personalized enough to seem individualized, even though they’re actually targeting small, multi-person segments.

SAP Q317 DigitalDoubles Feature3 Image6 Business Intelligence Emboldens Digital TransformationRetailers of all types collect data about individuals, down to location, date, time, and SKU of the sale. They may experiment with behavioral targeting by making in-the-moment offers based on what they already know about their customers. For example, they may use a mobile app with geofencing to be alerted when a customer using the app is in the store. The alert triggers back-end systems to look up the customer’s purchase history, generate a relevant offer, and deliver that offer to the customer’s smartphone while the customer is still in the store.

The Line Between Marketing and Manipulation

Just the idea of receiving marketing messages influenced by their behavior will disturb some customers. When marketing is designed, as behavioral targeting is, to maximize engagement, the value of the content depends less on whether it’s useful to the audience or even true and more on whether it gets the target audience to engage and reveal another piece of the behavioral puzzle. As a result, companies considering behavioral marketing must consider a question as old as marketing itself: where is the line between advertising and propaganda?

Creating personal profiles of customers based on their actions and personalities will become inexpensive and easy, for better or worse. Better will lead to more relevant and compelling offers based on predictive models of what customers would like to buy next. Worse will create (or at least look like) scalable, granular manipulation.

If companies hope to apply this level of targeted marketing without coming across as intrusive or invasive, they will need to be completely transparent about what they’re doing and how—and with whom they’re sharing the information. Most shoppers say they’re willing to give up data about themselves if it leads to a better shopping experience and more relevant recommendations.

Numerous studies show that customers are comfortable sharing their buying patterns and preferences as long as it doesn’t compromise their personally identifiable information. Nonetheless, they may decide otherwise if they believe that by welcoming you into their lives, they’re throwing open the doors to strangers as well.

SAP Q317 DigitalDoubles Feature3 Image7 1024x572 Business Intelligence Emboldens Digital Transformation

As data mining for behavioral targeting becomes more common, companies will have to offer customers the opportunity to opt in and out at varying levels of detail. They will also need to identify and flag the significant minority of customers who prefer not to be profiled in such depth (or at all). Machine learning will be invaluable in responding to complaints on social media, tracking the relevant details of offers that were ignored or got negative reactions, and otherwise ensuring that companies don’t misuse customer data or misunderstand consumer wants and needs.

“The entire paradigm of targeting and campaign implies a vendor doing something to customers,” says Mark Bonchek, founder and “chief epiphany officer” at Shift Thinking, a Boston-based consulting firm that helps companies pursue digital transformation. “It implies getting people to do what you want them to do rather than helping them do what they want to do,” he says. “Be clear on the mental model behind your behavioral targeting. Is it more like a friend figuring out the right gift for a friend or a salesperson trying to close a deal with a prospect? People don’t want to be targets.”

Instead, Bonchek suggests, think of behavioral targeting as a way to build a reciprocal relationship that lets you enhance the customer experience at multiple touch points, not all of them actual transactions. Utility companies send customers information about their own and their neighbors’ energy use so they can benchmark themselves. The utilities often follow up with suggestions about how to save both power and money. Meanwhile, a credit card issuer could help customers understand their purchasing patterns and discover new stores or service providers.

“Loyalty is an emotion first and behavior second,” Bonchek says. “It’s the difference between pushing customers through a funnel and helping them achieve a shared purpose.”

The Art of Scientific Marketing

In mid-20th century New York City, a small local chain of markets developed a national reputation for customer service. It let favored customers call in orders and pay for them at pickup. Managers kept lists—handwritten lists, no less—of their best customers’ preferred products and called those customers with special offers. People were happy to pay slightly higher prices overall in exchange for exclusive bargains and highly customized service.

Although it leverages new technologies like machine learning and Big Data, behavioral targeting will in many ways bring us full circle to that hands-on era in which companies created relevant offers that made customers feel valued and understood. Matz believes it would be a competitive advantage for companies to let customers interact with their profiles and even correct them to ensure that they only receive offers that meet their needs and preferences.

As more situational data pours in from smartphones and wearables to be analyzed by AI, she adds, behavioral targeting could become something more immersive than mere marketing. “If you know from that data that someone is not just an extrovert with specific preferences but that they’re currently in a good mood, you can start fine-tuning messages for that particular point in time,” she says. “We’ll move beyond static profiles to interactions based on characteristics that fluctuate.”

With enough data to work with, she suggests, behavioral targeting could become less about making offers and more about informing customers about their options at any given moment, in real time. D!


About the Authors

Denise Champion is Vice President of Strategy, Research, and Insights for Global Marketing at SAP.

Jeff Harvey is Global COO, SAP Analytics & Insight at SAP.

Lori Mitchell-Keller is Global General Manager, Consumer Industries at SAP.

Jeff Woods is Global COO, SAP Leonardo | Data and Analytics.

Fawn Fitter is a freelance writer specializing in business and technology.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

Comments

Let’s block ads! (Why?)

Digitalist Magazine

Digital Transformation Enables You to Optimize Operations

CRM Blog Digital Transformation Enables You to Optimize Operations

Your organization runs on data and the more automated and streamlined your data management processes, the more successful you will be at optimizing your operations.

With today’s technology, you can easily transform many of the manual processes that fill your employees’ workdays, freeing them up for more productive tasks.

Connecting and exchanging data across your business units allows you to respond more quickly to challenges and opportunities.

You can have a smooth flow of data and processes across marketing, sales, service, operations, and supply chain. With unified systems, employees can provide better customer service and spend more time on profitable activities.

Optimized operations can:

  • Simplify financial procedures such as workflow-driven purchase approvals and budget reviews to reduce time wasted tracking down signatures.
  • Reinforce consistent business processes by implementing workflows that guide employees to follow critical procedures—such as safety and inspections.
  • Automate functions to improve customer communication. Send emails at critical points in customer order processing—such as order confirmation, production updates, and shipping notices.
  • Track product history.

Optimization in Action:

Making the most of the data required to meet regulatory compliance, a bio-med company automated every aspect of their supply chain. Through automated data collection, the company is prepared for any recall through:

  • Expirations and serialized parts at the lot
  • Tracking back one step to their vendor and forward one step to the receiving physician for every item.
  • Captured e-signatures to document receipt of product and accompanying disclaimers at the time of delivery

This is just one example of how efficient use of data can optimize business operations.

Perhaps digital transformation could work for your business in ways you have not yet explored. Contributing members of the ERP/CRM/ERP Cloud Software Blogs have put together a white paper: What the Heck is Digital Transformation and What Does It Mean for Your Business? Read 6 more real-life experiences of how digital transformation is working in unique ways to enhance business processes.

Download now and feel free to contact our expert authors listed at the bottom of the white paper for suggestions about how digital transformation can help you optimize your business operations.

By CRM Software Blog Writer, crmsoftwareblog.com

Let’s block ads! (Why?)

CRM Software Blog | Dynamics 365

Digital Transformation using Dynamics CRM and SharePoint platforms

Create customer experiences that boost engagement and value to your business

The concept of “digital transformation” has different meaning to different companies. As digital transformation will look different for every company, I use the image of old payphone booth, converted into WiFi hotspot, to best describe one aspect of Digital Transformation for a telco. Digital transformation is the realization that customers will turn away from brands that don’t align with their needs and expectations, in this case Internet access anywhere.  A top-notch customer experience is the way to keep customers involved and engaged with your brand.

Front-end customer experience is not the only focus of digital transformation. Using technology to redesign operational systems has similar impact on the company’s ability to successfully provide great experiences to the customer. For this reason we recommend to harness the power of Dynamics 365 and SharePoint as the main two platforms to support Digital Transformation.

While most Digital Transformation experts support their ideas with business-to-consumer (B2C) ideas and examples, the transformation we are experiencing today is no different from the Business to Business (B2B) model. Business customers want to do everything, faster, easier, simpler, and anywhere. They are no longer happy with getting information the traditional way. Mailing brochures with price proposals does not meet customers’ expectations any more.

When Microsoft CRM was first released, about 15 years ago, it was mainly used as advanced spreadsheet, to manage and update contact details of leads, contacts, and accounts. Since then Dynamics 365 was developed to manage all touchpoints between the business and its clients. In the B2B model, these touch points are mostly Email communications and documents exchanges between commercial businesses. Business documents are either generated within Dynamics 365 or imported / sync with other ERP systems, and other business documents are expected to be stored SharePoint. Theoretically, these two platforms are designed to hold all business documents the organization generates, from price quotations, orders, invoices, payment receipt, and account’s statement, to service agreements and legal / commercial contracts.

It may look like static process between organizations. The reality is that documents are frequently exchanged and worked on. Price quotations are negotiated, orders are modified, invoices need to be signed off and then paid, parties exchange contracts till all details are agreed upon, artwork and creative ideas go through proofing processes before production.

DoxTray (by www.DynamicsObjects.com ) is cloud application scheduled to be released by December 2017. While companies are using SharePoint to internally collaborate between users, DoxTray aims at providing similar functionality for document collaboration between businesses. DoxTray relies on data stored in Dynamics 365 database, as well as documents stored in SharePoint.

DoxTray provides clients the facility to upload documents such as orders and contracts, download invoices, pay for invoices, and use DoxTray to facilitate exchange of notes between two businesses regarding contracts, orders, quotes and artwork / creative design proofing.

DoxTray is free, with paid add-on options.

If Digital transformation is the vision of your business or your customers, we would like to hear from you.

Read More….

.

Let’s block ads! (Why?)

CRM Software Blog | Dynamics 365

Wonders Of Wood: Transformation In The Forest Products Industry

When outspoken venture capitalist and Netscape co-founder Marc Andreessen wrote in The Wall Street Journal in 2011 that software is eating the world, he was only partly correct. In fact, business services based on software platforms are what’s eating the world.

Companies like Apple, which remade the mobile phone industry by offering app developers easy access to millions of iPhone owners through its iTunes App Store platform, are changing the economy. However, these world-eating companies are not just in the tech world. They are also emerging in industries that you might not expect: retailers, finance companies, transportation firms, and others outside of Silicon Valley are all at the forefront of the platform revolution.

These outsiders are taking platforms to the next level by building them around business services and data, not just apps. Companies are making business services such as logistics, 3D printing, and even roadside assistance for drivers available through a software connection that other companies can plug in to and consume or offer to their own customers.

SAP Q317 DigitalDoubles Feature1 Image2 Wonders Of Wood: Transformation In The Forest Products IndustryThere are two kinds of players in this business platform revolution: providers and participants. Providers create the platform and create incentives for developers to write apps for it. Developers, meanwhile, are participants; they can extend the reach of their apps by offering them through the platform’s virtual shelves.

Business platforms let companies outside of the technology world become powerful tech players, unleashing a torrent of innovation that they could never produce on their own. Good business platforms create millions in extra revenue for companies by enlisting external developers to innovate for them. It’s as if strangers are handing you entirely new revenue streams and business models on the street.

Powering this movement are application programming interfaces (APIs) and software development kits (SDKs), which enable developers to easily plug their apps into a platform without having to know much about the complex software code that drives it. Developers get more time to focus on what they do best: writing great apps. Platform providers benefit because they can offer many innovative business services to end customers without having to create them themselves.

Any company can leverage APIs and SDKs to create new business models and products that might not, in fact, be its primary method of monetization. However, these platforms give companies new opportunities and let them outflank smaller, more nimble competitors.

Indeed, the platform economy can generate unbelievable revenue streams for companies. According to Platform Revolution authors Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary, travel site Expedia makes approximately 90% of its revenue by making business services available to other travel companies through its API.

In TechCrunch in May 2016, Matt Murphy and Steve Sloane wrote that “the number of SaaS applications has exploded and there is a rising wave of software innovation in APIs that provide critical connective tissue and increasingly important functionality.” ProgrammableWeb.com, an API resource and directory, offers searchable access to more than 15,000 different APIs.

According to Accenture Technology Vision 2016, 82% of executives believe that platforms will be the “glue that brings organizations together in the digital economy.” The top 15 platforms (which include companies built entirely on this software architecture, such as eBay and Priceline.com) have a combined market capitalization of US$ 2.6 trillion.

It’s time for all companies to join the revolution. Whether working in alliance with partners or launching entirely in-house, companies need to think about platforms now, because they will have a disruptive impact on every major industry.

SAP Q317 DigitalDoubles Feature1 Image3 1024x572 Wonders Of Wood: Transformation In The Forest Products Industry

To the Barricades

Several factors converged to make monetizing a company’s business services easier. Many of the factors come from the rise of smartphones, specifically the rise of Bluetooth and 3G (and then 4G and LTE) connections. These connections turned smartphones into consumption hubs that weren’t feasible when high-speed mobile access was spottier.

One good example of this is PayPal’s rise. In the early 2000s, it functioned primarily as a standalone web site, but as mobile purchasing became more widespread, third-party merchants clamored to integrate PayPal’s payment processing service into their own sites and apps.

In Platform Revolution, Parker, Van Alstyne, and Choudary claim that “platforms are eating pipelines,” with pipelines being the old, direct-to-consumer business methods of the past. The first stage of this takeover involved much more efficient digital pipelines (think of Amazon in the retail space and Grubhub for food delivery) challenging their offline counterparts.

What Makes Great Business Platforms Run?

SAP Q317 DigitalDoubles Feature1 Image8 Wonders Of Wood: Transformation In The Forest Products Industry

The quality of the ecosystem that powers your platform is as important as the quality of experience you offer to customers. Here’s how to do it right.

Although the platform economy depends on them, application programming interfaces (APIs) and software development kits (SDKs) aren’t magic buttons. They’re tools that organizations can leverage to attract users and developers.

To succeed, organizations must ensure that APIs include extensive documentation and are easy for developers to add into their own products. Another part of platform success is building a general digital enterprise platform that includes both APIs and SDKs.

A good platform balances ease of use, developer support, security, data architecture (that is, will it play nice with a company’s existing systems?), edge processing (whether analytics are processed locally or in the cloud), and infrastructure (whether a platform provider operates its own data centers and cloud infrastructure or uses public cloud services). The exact formula for which elements to embrace, however, will vary according to the use case, the industry, the organization, and its customers.

In all cases, the platform should offer a value proposition that’s a cut above its competitors. That means a platform should offer a compelling business service that is difficult to duplicate.

By creating open standards and easy-to-work-with tools, organizations can greatly improve the platforms they offer. APIs and SDKs may sound complicated, but they’re just tools for talented people to do their jobs with. Enable these talented people, and your platform will take off.

In the second stage, platforms replace pipelines. Platform Revolution’s authors write: “The Internet no longer acts merely as a distribution channel (a pipeline). It also acts as a creation infrastructure and a coordination mechanism. Platforms are leveraging this new capability to create entirely new business models.” Good examples of second-stage companies include Airbnb, DoubleClick, Spotify, and Uber.

Allstate Takes Advantage of Its Hidden Jewels

Many companies taking advantage of platforms were around long before APIs, or even the internet, existed. Allstate, one of the largest insurers in the United States, has traditionally focused on insurance services. But recently, the company expanded into new markets—including the platform economy.

Allstate companies Allstate Roadside Services (ARS) and Arity, a technology company founded by Allstate in late 2016, have provided their parent company with new sources of revenue, thanks to new offerings. ARS launched Good Hands Rescue APIs, which allow third parties to leverage Allstate’s roadside assistance network in their own apps. Meanwhile, Arity offers a portfolio of APIs that let third parties leverage Allstate’s aggregate data on driver behavior and intellectual property related to risk prediction for uses spanning mobility, consumer, and insurance solutions.

SAP Q317 DigitalDoubles Feature1 Image4 Wonders Of Wood: Transformation In The Forest Products IndustryFor example, Verizon licenses an Allstate Good Hands Rescue API for its own roadside assistance app. And automakers GM and BMW also offer roadside assistance service through Allstate.

Potential customers for Arity’s API include insurance providers, shared mobility companies, automotive parts makers, telecoms, and others.

“Arity is an acknowledgement that we have to be digital first and think about the services we provide to customers and businesses,” says Chetan Phadnis, Arity’s head of product development. “Thinking about our intellectual property system and software products is a key part of our transformation. We think it will create new ways to make money in the vertical transportation ecosystem.”

One of Allstate’s major challenges is a change in auto ownership that threatens the traditional auto insurance model. No-car and one-car households are on the rise, ridesharing services such as Uber and Lyft work on very different insurance models than passenger cars or traditional taxi companies, and autonomous vehicles could disrupt the traditional auto insurance model entirely.

This means that companies like Allstate are smart to look for revenue streams beyond traditional insurance offerings. The intangible assets that Allstate has accumulated over the years—a massive aggregate collection of driver data, an extensive set of risk models and predictive algorithms, and a network of garages and mechanics to help stranded motorists—can also serve as a new revenue stream for the future.

By offering two distinct API services for the platform economy, Allstate is also able to see what customers might want in the future. While the Good Hands Rescue APIs let third-party users integrate a specific service (such as roadside assistance) into their software tools, Arity instead lets third-party developers leverage huge data sets as a piece of other, less narrowly defined projects, such as auto maintenance. As Arity gains insights into how customers use and respond to those offerings, it gets a preview into potential future directions for its own products and services.

SAP Q317 DigitalDoubles Feature1 Image5 1024x572 Wonders Of Wood: Transformation In The Forest Products Industry

Farmers Harvest Cash from a Platform

Another example of innovation fueling the platform economy doesn’t come from a boldfaced tech name. Instead, it comes from a relatively small startup that has nimbly built its business model around data with an interesting twist: it turns its customers into entrepreneurs.

Farmobile is a Kansas City–based agriculture tech company whose smart device, the Passive Uplink Connection (PUC), can be plugged into tractors, combines, sprayers, and other farm equipment.

Farmobile uses the PUC to enable farmers to monetize data from their fields, which is one of the savviest routes to success with platforms—making your platform so irresistible to end consumers that they foment the revolution for you.

Once installed, says CEO Jason Tatge, the PUC streams second-by-second data to farmers’ Farmobile accounts. This gives them finely detailed reports, called Electronic Field Records (EFRs), that they can use to improve their own business, share with trusted advisors, and sell to third parties.

The PUC gives farmers detailed records for tracking analytics on their crops, farms, and equipment and creates a marketplace where farmers can sell their data to third parties. Farmers benefit because they generate extra income; Farmobile benefits because it makes a commission on each purchase and builds a giant store of aggregated farming data.

This last bit is important if Farmobile is to successfully compete with traditional agricultural equipment manufacturers, which also gather data from farmers. Farmobile’s advantage (at least for now) is that the equipment makers limit their data gathering to their existing customer bases and sell it back to them in the form of services designed to improve crop yields and optimize equipment performance.

Farmobile, meanwhile, is trying to appeal to all farmers by sharing the wealth, which could help it leapfrog the giants that already have large customer bases. “The ability to bring data together easily is good for farmers, so we built API integrations to put data in one place,” says Tatge.

Farmers can resell their data on Farmobile’s Data Store to buyers such as reinsurance firm Guy Carpenter. To encourage farmers to opt in, says Tatge, “we told farmers that if they run our device over planting and harvest season, we can guarantee them $ 2 per acre for their EFRs.”

So far, Farmobile’s customers have sent the Data Store approximately 4,200 completed EFRs for both planting and harvest, which will serve as the backbone of the company’s data monetization efforts. Eventually, Farmobile hopes to expand the offerings on the Data Store to include records from at least 10 times as many different farm fields.

SAP Q317 DigitalDoubles Feature1 Image6 1024x572 Wonders Of Wood: Transformation In The Forest Products Industry

Under Armour Binges on APIs

Another model for the emerging business platform world comes from Under Armour, the sports apparel giant. Alongside its very successful clothing and shoe lines, Under Armour has put its platform at the heart of its business model.

But rather than build a platform itself, Under Armour has used its growing revenues to create an industry-leading ecosystem. Over the past decade, it has purchased companies that already offer APIs, including MapMyFitness, Endomondo, and MyFitnessPal, and then linked them all together into a massive platform that serves 30 million consumers.

This strategy has made Under Armour an indispensable part of the sprawling mobile fitness economy. According to the company’s 2016 annual results, its business platform ecosystem, known as the Connected Fitness division, generated $ 80 million in revenue that year—a 51% increase over 2015.

SAP Q317 DigitalDoubles Feature1 Image7 Wonders Of Wood: Transformation In The Forest Products IndustryBy combining existing APIs from its different apps with original tools built in-house, extensive developer support, and a robust SDK, third-party developers have everything they need to build their own fitness app or web site.

Depending on their needs, third-party developers can sign up for several different payment plans with varying access to Under Armour’s APIs and SDKs. Indeed, the company’s tiered developer pricing plan for Connected Fitness, which is separated into Starter, Pro, and Premium levels, makes Under Armour seem more like a tech company than a sports apparel firm.

As a result, Under Armour’s APIs and SDKs are the underpinnings of a vast platform cooperative. Under Armour’s apps seamlessly integrate with popular services like Fitbit and Garmin (even though Under Armour has a fitness tracker of its own) and are licensed by corporations ranging from Microsoft to Coca-Cola to Purina. They’re even used by fitness app competitors like AthletePath and Lose It.

A large part of Under Armour’s success is the sheer amount of data its fitness apps collect and then make available to developers. MyFitnessPal, for instance, is an industry-leading calorie and food tracker used for weight loss, and Endomondo is an extremely popular running and biking record keeper and route-sharing platform.

One way of looking at the Connected Fitness platform is as a combination of traditional consumer purchasing data with insights gleaned from Under Armour’s suite of apps, as well as from the third-party apps that Under Armour’s products use.

Indeed, Under Armour gets a bonus from the platform economy: it helps the company understand its customers better, creating a virtuous cycle. As end users use different apps fueled by Under Armour’s services and data-sharing capabilities, Under Armour can then use that data to fuel customer engagement and attract additional third-party app developers to add new services to the ecosystem.

What Successful Platforms Have in Common

The most successful business platforms have three things in common: They’re easy to work with, they fulfill a market need, and they offer data that’s useful to customers.

For instance, Farmobile’s marketplace fulfills a valuable need in the market: it lets farmers monetize data and develop a new revenue stream that otherwise would not exist. Similarly, Allstate’s Arity experiment turns large volumes of data collected by Allstate over the years into a revenue stream that drives down costs for Arity’s clients by giving them more accurate data to integrate into their apps and software tools.

Meanwhile, Under Armour’s Connected Fitness platform and API suite encourage users to sign up for more apps in the company’s ecosystem. If you track your meals in MyFitnessPal, you’ll want to track your runs in Endomondo or MapMyRun. Similarly, if you’re an app developer in the health and fitness space, Under Armour has a readily available collection of tools that will make it easy for users to switch over to your app and cheaper for you to develop your app.

As the platform economy grows, all three of these approaches—Allstate’s leveraging of its legacy business data, Farmobile’s marketplace for users to become data entrepreneurs, and Under Armour’s one-stop fitness app ecosystem—are extremely useful examples of what happens next.

In the coming months and years, the platform economy will see other big changes. In 2016 for example, Apple, Microsoft, Facebook, and Google all released APIs for their AI-powered voice assistant platforms, the most famous of which is Apple’s Siri.

The introduction of APIs confirms that the AI technology behind these bots has matured significantly and that a new wave of AI-based platform innovation is nigh. (In fact, Digitalistpredicted last year that the emergence of an API for these AIs would open them up beyond conventional uses.) New voice-operated technologies such as Google Home and Amazon Alexa offer exciting opportunities for developers to create full-featured, immersive applications on top of existing platforms.

We will also see AI- and machine learning–based APIs emerge that will allow developers to quickly leverage unstructured data (such as social media posts or texts) for new applications and services. For instance, sentiment analysis APIs can help explore and better understand customers’ interests, emotions, and preferences in social media.

As large providers offer APIs and associated services for smaller organizations to leverage AI and machine learning, these companies can in turn create their own platforms for clients to use unstructured data—everything from insights from uploaded photographs to recognizing a user’s emotion based on facial expression or tone of voice—in their own apps and products. Meanwhile, the ever-increasing power of cloud platforms like Amazon Web Services and Microsoft Azure will give these computing-intensive app platforms the juice they need to become deeper and richer.

These business services will depend on easy ways to exchange and implement data for success. The good news is that finding easy ways to share data isn’t hard and the API and SDK offerings that fuel the platform economy will become increasingly robust. Thanks to the opportunities generated by these new platforms and the new opportunities offered to end users, developers, and platform businesses themselves, everyone stands to win—if they act soon. D!


About the Authors

Bernd Leukert is a member of the Executive Board, Products and Innovation, for SAP.

Björn Goerke is Chief Technology Officer and President, SAP Cloud Platform, for SAP.

Volker Hildebrand is Global Vice President for SAP Hybris solutions.

Sethu M is President, Mobile Services, for SAP.

Neal Ungerleider is a Los Angeles-based technology journalist and consultant.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

Turn insight into action, make better decisions, and transform your business.  Learn how.

Comments

Let’s block ads! (Why?)

Digitalist Magazine

Transformation Doesn’t Happen From The Sidelines

When outspoken venture capitalist and Netscape co-founder Marc Andreessen wrote in The Wall Street Journal in 2011 that software is eating the world, he was only partly correct. In fact, business services based on software platforms are what’s eating the world.

Companies like Apple, which remade the mobile phone industry by offering app developers easy access to millions of iPhone owners through its iTunes App Store platform, are changing the economy. However, these world-eating companies are not just in the tech world. They are also emerging in industries that you might not expect: retailers, finance companies, transportation firms, and others outside of Silicon Valley are all at the forefront of the platform revolution.

These outsiders are taking platforms to the next level by building them around business services and data, not just apps. Companies are making business services such as logistics, 3D printing, and even roadside assistance for drivers available through a software connection that other companies can plug in to and consume or offer to their own customers.

SAP Q317 DigitalDoubles Feature1 Image2 Transformation Doesn’t Happen From The SidelinesThere are two kinds of players in this business platform revolution: providers and participants. Providers create the platform and create incentives for developers to write apps for it. Developers, meanwhile, are participants; they can extend the reach of their apps by offering them through the platform’s virtual shelves.

Business platforms let companies outside of the technology world become powerful tech players, unleashing a torrent of innovation that they could never produce on their own. Good business platforms create millions in extra revenue for companies by enlisting external developers to innovate for them. It’s as if strangers are handing you entirely new revenue streams and business models on the street.

Powering this movement are application programming interfaces (APIs) and software development kits (SDKs), which enable developers to easily plug their apps into a platform without having to know much about the complex software code that drives it. Developers get more time to focus on what they do best: writing great apps. Platform providers benefit because they can offer many innovative business services to end customers without having to create them themselves.

Any company can leverage APIs and SDKs to create new business models and products that might not, in fact, be its primary method of monetization. However, these platforms give companies new opportunities and let them outflank smaller, more nimble competitors.

Indeed, the platform economy can generate unbelievable revenue streams for companies. According to Platform Revolution authors Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary, travel site Expedia makes approximately 90% of its revenue by making business services available to other travel companies through its API.

In TechCrunch in May 2016, Matt Murphy and Steve Sloane wrote that “the number of SaaS applications has exploded and there is a rising wave of software innovation in APIs that provide critical connective tissue and increasingly important functionality.” ProgrammableWeb.com, an API resource and directory, offers searchable access to more than 15,000 different APIs.

According to Accenture Technology Vision 2016, 82% of executives believe that platforms will be the “glue that brings organizations together in the digital economy.” The top 15 platforms (which include companies built entirely on this software architecture, such as eBay and Priceline.com) have a combined market capitalization of US$ 2.6 trillion.

It’s time for all companies to join the revolution. Whether working in alliance with partners or launching entirely in-house, companies need to think about platforms now, because they will have a disruptive impact on every major industry.

SAP Q317 DigitalDoubles Feature1 Image3 1024x572 Transformation Doesn’t Happen From The Sidelines

To the Barricades

Several factors converged to make monetizing a company’s business services easier. Many of the factors come from the rise of smartphones, specifically the rise of Bluetooth and 3G (and then 4G and LTE) connections. These connections turned smartphones into consumption hubs that weren’t feasible when high-speed mobile access was spottier.

One good example of this is PayPal’s rise. In the early 2000s, it functioned primarily as a standalone web site, but as mobile purchasing became more widespread, third-party merchants clamored to integrate PayPal’s payment processing service into their own sites and apps.

In Platform Revolution, Parker, Van Alstyne, and Choudary claim that “platforms are eating pipelines,” with pipelines being the old, direct-to-consumer business methods of the past. The first stage of this takeover involved much more efficient digital pipelines (think of Amazon in the retail space and Grubhub for food delivery) challenging their offline counterparts.

What Makes Great Business Platforms Run?

SAP Q317 DigitalDoubles Feature1 Image8 Transformation Doesn’t Happen From The Sidelines

The quality of the ecosystem that powers your platform is as important as the quality of experience you offer to customers. Here’s how to do it right.

Although the platform economy depends on them, application programming interfaces (APIs) and software development kits (SDKs) aren’t magic buttons. They’re tools that organizations can leverage to attract users and developers.

To succeed, organizations must ensure that APIs include extensive documentation and are easy for developers to add into their own products. Another part of platform success is building a general digital enterprise platform that includes both APIs and SDKs.

A good platform balances ease of use, developer support, security, data architecture (that is, will it play nice with a company’s existing systems?), edge processing (whether analytics are processed locally or in the cloud), and infrastructure (whether a platform provider operates its own data centers and cloud infrastructure or uses public cloud services). The exact formula for which elements to embrace, however, will vary according to the use case, the industry, the organization, and its customers.

In all cases, the platform should offer a value proposition that’s a cut above its competitors. That means a platform should offer a compelling business service that is difficult to duplicate.

By creating open standards and easy-to-work-with tools, organizations can greatly improve the platforms they offer. APIs and SDKs may sound complicated, but they’re just tools for talented people to do their jobs with. Enable these talented people, and your platform will take off.

In the second stage, platforms replace pipelines. Platform Revolution’s authors write: “The Internet no longer acts merely as a distribution channel (a pipeline). It also acts as a creation infrastructure and a coordination mechanism. Platforms are leveraging this new capability to create entirely new business models.” Good examples of second-stage companies include Airbnb, DoubleClick, Spotify, and Uber.

Allstate Takes Advantage of Its Hidden Jewels

Many companies taking advantage of platforms were around long before APIs, or even the internet, existed. Allstate, one of the largest insurers in the United States, has traditionally focused on insurance services. But recently, the company expanded into new markets—including the platform economy.

Allstate companies Allstate Roadside Services (ARS) and Arity, a technology company founded by Allstate in late 2016, have provided their parent company with new sources of revenue, thanks to new offerings. ARS launched Good Hands Rescue APIs, which allow third parties to leverage Allstate’s roadside assistance network in their own apps. Meanwhile, Arity offers a portfolio of APIs that let third parties leverage Allstate’s aggregate data on driver behavior and intellectual property related to risk prediction for uses spanning mobility, consumer, and insurance solutions.

SAP Q317 DigitalDoubles Feature1 Image4 Transformation Doesn’t Happen From The SidelinesFor example, Verizon licenses an Allstate Good Hands Rescue API for its own roadside assistance app. And automakers GM and BMW also offer roadside assistance service through Allstate.

Potential customers for Arity’s API include insurance providers, shared mobility companies, automotive parts makers, telecoms, and others.

“Arity is an acknowledgement that we have to be digital first and think about the services we provide to customers and businesses,” says Chetan Phadnis, Arity’s head of product development. “Thinking about our intellectual property system and software products is a key part of our transformation. We think it will create new ways to make money in the vertical transportation ecosystem.”

One of Allstate’s major challenges is a change in auto ownership that threatens the traditional auto insurance model. No-car and one-car households are on the rise, ridesharing services such as Uber and Lyft work on very different insurance models than passenger cars or traditional taxi companies, and autonomous vehicles could disrupt the traditional auto insurance model entirely.

This means that companies like Allstate are smart to look for revenue streams beyond traditional insurance offerings. The intangible assets that Allstate has accumulated over the years—a massive aggregate collection of driver data, an extensive set of risk models and predictive algorithms, and a network of garages and mechanics to help stranded motorists—can also serve as a new revenue stream for the future.

By offering two distinct API services for the platform economy, Allstate is also able to see what customers might want in the future. While the Good Hands Rescue APIs let third-party users integrate a specific service (such as roadside assistance) into their software tools, Arity instead lets third-party developers leverage huge data sets as a piece of other, less narrowly defined projects, such as auto maintenance. As Arity gains insights into how customers use and respond to those offerings, it gets a preview into potential future directions for its own products and services.

SAP Q317 DigitalDoubles Feature1 Image5 1024x572 Transformation Doesn’t Happen From The Sidelines

Farmers Harvest Cash from a Platform

Another example of innovation fueling the platform economy doesn’t come from a boldfaced tech name. Instead, it comes from a relatively small startup that has nimbly built its business model around data with an interesting twist: it turns its customers into entrepreneurs.

Farmobile is a Kansas City–based agriculture tech company whose smart device, the Passive Uplink Connection (PUC), can be plugged into tractors, combines, sprayers, and other farm equipment.

Farmobile uses the PUC to enable farmers to monetize data from their fields, which is one of the savviest routes to success with platforms—making your platform so irresistible to end consumers that they foment the revolution for you.

Once installed, says CEO Jason Tatge, the PUC streams second-by-second data to farmers’ Farmobile accounts. This gives them finely detailed reports, called Electronic Field Records (EFRs), that they can use to improve their own business, share with trusted advisors, and sell to third parties.

The PUC gives farmers detailed records for tracking analytics on their crops, farms, and equipment and creates a marketplace where farmers can sell their data to third parties. Farmers benefit because they generate extra income; Farmobile benefits because it makes a commission on each purchase and builds a giant store of aggregated farming data.

This last bit is important if Farmobile is to successfully compete with traditional agricultural equipment manufacturers, which also gather data from farmers. Farmobile’s advantage (at least for now) is that the equipment makers limit their data gathering to their existing customer bases and sell it back to them in the form of services designed to improve crop yields and optimize equipment performance.

Farmobile, meanwhile, is trying to appeal to all farmers by sharing the wealth, which could help it leapfrog the giants that already have large customer bases. “The ability to bring data together easily is good for farmers, so we built API integrations to put data in one place,” says Tatge.

Farmers can resell their data on Farmobile’s Data Store to buyers such as reinsurance firm Guy Carpenter. To encourage farmers to opt in, says Tatge, “we told farmers that if they run our device over planting and harvest season, we can guarantee them $ 2 per acre for their EFRs.”

So far, Farmobile’s customers have sent the Data Store approximately 4,200 completed EFRs for both planting and harvest, which will serve as the backbone of the company’s data monetization efforts. Eventually, Farmobile hopes to expand the offerings on the Data Store to include records from at least 10 times as many different farm fields.

SAP Q317 DigitalDoubles Feature1 Image6 1024x572 Transformation Doesn’t Happen From The Sidelines

Under Armour Binges on APIs

Another model for the emerging business platform world comes from Under Armour, the sports apparel giant. Alongside its very successful clothing and shoe lines, Under Armour has put its platform at the heart of its business model.

But rather than build a platform itself, Under Armour has used its growing revenues to create an industry-leading ecosystem. Over the past decade, it has purchased companies that already offer APIs, including MapMyFitness, Endomondo, and MyFitnessPal, and then linked them all together into a massive platform that serves 30 million consumers.

This strategy has made Under Armour an indispensable part of the sprawling mobile fitness economy. According to the company’s 2016 annual results, its business platform ecosystem, known as the Connected Fitness division, generated $ 80 million in revenue that year—a 51% increase over 2015.

SAP Q317 DigitalDoubles Feature1 Image7 Transformation Doesn’t Happen From The SidelinesBy combining existing APIs from its different apps with original tools built in-house, extensive developer support, and a robust SDK, third-party developers have everything they need to build their own fitness app or web site.

Depending on their needs, third-party developers can sign up for several different payment plans with varying access to Under Armour’s APIs and SDKs. Indeed, the company’s tiered developer pricing plan for Connected Fitness, which is separated into Starter, Pro, and Premium levels, makes Under Armour seem more like a tech company than a sports apparel firm.

As a result, Under Armour’s APIs and SDKs are the underpinnings of a vast platform cooperative. Under Armour’s apps seamlessly integrate with popular services like Fitbit and Garmin (even though Under Armour has a fitness tracker of its own) and are licensed by corporations ranging from Microsoft to Coca-Cola to Purina. They’re even used by fitness app competitors like AthletePath and Lose It.

A large part of Under Armour’s success is the sheer amount of data its fitness apps collect and then make available to developers. MyFitnessPal, for instance, is an industry-leading calorie and food tracker used for weight loss, and Endomondo is an extremely popular running and biking record keeper and route-sharing platform.

One way of looking at the Connected Fitness platform is as a combination of traditional consumer purchasing data with insights gleaned from Under Armour’s suite of apps, as well as from the third-party apps that Under Armour’s products use.

Indeed, Under Armour gets a bonus from the platform economy: it helps the company understand its customers better, creating a virtuous cycle. As end users use different apps fueled by Under Armour’s services and data-sharing capabilities, Under Armour can then use that data to fuel customer engagement and attract additional third-party app developers to add new services to the ecosystem.

What Successful Platforms Have in Common

The most successful business platforms have three things in common: They’re easy to work with, they fulfill a market need, and they offer data that’s useful to customers.

For instance, Farmobile’s marketplace fulfills a valuable need in the market: it lets farmers monetize data and develop a new revenue stream that otherwise would not exist. Similarly, Allstate’s Arity experiment turns large volumes of data collected by Allstate over the years into a revenue stream that drives down costs for Arity’s clients by giving them more accurate data to integrate into their apps and software tools.

Meanwhile, Under Armour’s Connected Fitness platform and API suite encourage users to sign up for more apps in the company’s ecosystem. If you track your meals in MyFitnessPal, you’ll want to track your runs in Endomondo or MapMyRun. Similarly, if you’re an app developer in the health and fitness space, Under Armour has a readily available collection of tools that will make it easy for users to switch over to your app and cheaper for you to develop your app.

As the platform economy grows, all three of these approaches—Allstate’s leveraging of its legacy business data, Farmobile’s marketplace for users to become data entrepreneurs, and Under Armour’s one-stop fitness app ecosystem—are extremely useful examples of what happens next.

In the coming months and years, the platform economy will see other big changes. In 2016 for example, Apple, Microsoft, Facebook, and Google all released APIs for their AI-powered voice assistant platforms, the most famous of which is Apple’s Siri.

The introduction of APIs confirms that the AI technology behind these bots has matured significantly and that a new wave of AI-based platform innovation is nigh. (In fact, Digitalistpredicted last year that the emergence of an API for these AIs would open them up beyond conventional uses.) New voice-operated technologies such as Google Home and Amazon Alexa offer exciting opportunities for developers to create full-featured, immersive applications on top of existing platforms.

We will also see AI- and machine learning–based APIs emerge that will allow developers to quickly leverage unstructured data (such as social media posts or texts) for new applications and services. For instance, sentiment analysis APIs can help explore and better understand customers’ interests, emotions, and preferences in social media.

As large providers offer APIs and associated services for smaller organizations to leverage AI and machine learning, these companies can in turn create their own platforms for clients to use unstructured data—everything from insights from uploaded photographs to recognizing a user’s emotion based on facial expression or tone of voice—in their own apps and products. Meanwhile, the ever-increasing power of cloud platforms like Amazon Web Services and Microsoft Azure will give these computing-intensive app platforms the juice they need to become deeper and richer.

These business services will depend on easy ways to exchange and implement data for success. The good news is that finding easy ways to share data isn’t hard and the API and SDK offerings that fuel the platform economy will become increasingly robust. Thanks to the opportunities generated by these new platforms and the new opportunities offered to end users, developers, and platform businesses themselves, everyone stands to win—if they act soon. D!


About the Authors

Bernd Leukert is a member of the Executive Board, Products and Innovation, for SAP.

Björn Goerke is Chief Technology Officer and President, SAP Cloud Platform, for SAP.

Volker Hildebrand is Global Vice President for SAP Hybris solutions.

Sethu M is President, Mobile Services, for SAP.

Neal Ungerleider is a Los Angeles-based technology journalist and consultant.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

Turn insight into action, make better decisions, and transform your business.  Learn how.

Comments

Let’s block ads! (Why?)

Digitalist Magazine

Misco selects NetSuite OneWorld to deliver business transformation

og image Misco selects NetSuite OneWorld to deliver business transformation

Reseller of IT Hardware and Services Chooses Leading Cloud ERP for Rapid Implementation, Breadth of Functionality and Local Data Centres

LONDON—26 September 2017—Oracle NetSuite, one of the world’s leading providers of cloud-based financials / ERP, HR, Professional Services Automation (PSA)</a> and omnichannel commerce software suites, today announced that Misco, a leading European B2B reseller of IT products and services has selected NetSuite OneWorld to modernise and transform its business.

Misco selected NetSuite OneWorld for its multi-language and multi-currency capabilities to manage international operations in the UK, Italy, Spain, the Netherlands and Sweden, as well as a shared services centre in Hungary. As the market for IT products and services undergoes rapid change, Misco was confident NetSuite’s flexibility could meet its dynamic needs to provide a customer centric hybrid business model for its portfolio of products and services on a single platform.

Founded more than 30 years ago, the Wellingborough, UK-based company offers 40,000 different technology products from leading manufacturers and has been steadily growing its services business across Europe. After a new management team backed by a private equity firm acquired Misco from parent company Systemax earlier this year, it set a target to migrate off two legacy software systems, spread across six countries, before the end of the year. The new Misco management team, led by CEO Alan Cantwell, chose NetSuite OneWorld for its broad range of functionality, rapid deployment and ease of implementation. Furthermore with data centres across Europe and in particular the Netherlands, NetSuite could assure Misco and its growing number of service customers that their data would be stored locally.

Misco plans to implement NetSuite OneWorld in a multi-phased approach to go live on core ERP components, financials, CRM, supply chain management, inventory management, order management and procurement. Additionally Misco is evaluating NetSuite’s ecommerce, marketing and Professional Services Automation (PSA) functionality for future deployment across its sales and service operations.

“We wanted to replace our legacy systems with a modern cloud-based ERP system in a very short time frame,” said Paul Baldwin, CIO of Misco. “NetSuite provided a functionally rich platform that can scale with our growth and meet future market dynamics. We expect the automation of business processes through this implementation to create greater efficiencies and improve the customer experience.”

Misco is working with RSM, a UK-based NetSuite systems integration partner with international experience in successfully managing cloud ERP implementations under tight deadlines. Chris Knowles, RSM’s Head of Technology Consulting in the UK said, “This project provides a fantastic opportunity for Misco to standardise its operations from the front office to the back-office and achieve improved productivity through NetSuite’s leading cloud ERP platform. Misco has an ambitious implementation timeline and RSM was able to demonstrate a rapid but viable approach to achieve their objectives.”

With support for 190 currencies, 20 languages, automated tax calculation and reporting in more than 100 countries and transactions in more than 200 countries, NetSuite OneWorld will provide the following benefits to Misco:

  • Rapid implementation. With implementations measured in months, not years, NetSuite OneWorld will speed Misco’s time to value.
  • 360-degree customer view. With a unified view of customers across the organization, Misco can provide better customer support and service with better visibility.
  • Unified order-to-billing-to-revenue. With advance billing and revenue recognition, Misco can easily adopt hybrid business models to adapt to market changes.
  • Significant savings in IT costs and complexity. NetSuite’s proven, securely featured cloud solution will help eliminate the complexities of managing, maintaining and upgrading business applications, allowing Misco to rededicate staff to business growth.
  • Real-time visibility. NetSuite OneWorld will give Misco visibility across its operations with one unified financial system of record to provide visibility into standard costs with detailed breakdowns.
  • Data-driven decisions. With a unified platform, Misco will have real-time access to a single source of data across its entire enterprise enabling more informed decisions.
  • A broad range of robust international capabilities. NetSuite OneWorld will provide a highly scalable system for growth with the ability to quickly and easily add global functionality as Misco expands into new markets.

About Misco
A leading provider of IT products, solutions and services to businesses and public sector organisations, Misco has operations in the UK and Ireland and also across Europe in Italy, Spain, the Netherlands and Sweden.

With over 30 years’ experience and a portfolio of 40,000 information technology products from all the leading manufacturers, Misco is an independent supplier, offering great deals and solutions for consumers, businesses and public sector organisations.
www.misco.co.uk

About Oracle NetSuite
Oracle NetSuite pioneered the Cloud Computing revolution in 1998, establishing the world’s first company dedicated to delivering business applications over the internet. Today, it provides a suite of cloud-based financials / Enterprise Resource Planning (ERP), HR and omnichannel commerce software that runs the business of companies in more than 100 countries. For more information, please visit http://www.netsuite.com.

Follow Oracle NetSuite Global Business Unit’s Cloud blog, Facebook page and @NetSuite Twitter handle for real-time updates.

About Oracle
The Oracle Cloud offers complete SaaS application suites for ERP, HCM and CX, plus best-in-class database Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) from data centers throughout the Americas, Europe and Asia. For more information about Oracle (NYSE:ORCL), please visit us at oracle.com.

Trademarks
Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.

Let’s block ads! (Why?)

NetSuite's Latest Press Coverage

At TIBCO NOW in October: Customers’ Digital Transformation Perspectives and Use Cases

tn blog At TIBCO NOW in October: Customers’ Digital Transformation Perspectives and Use Cases

At TIBCO NOW in San Diego, October 25 and 26, TIBCO customers and industry experts will deliver industry perspectives and use cases in breakout sessions with Q&A. A partial listing is shown below.

Come to TIBCO NOW to learn about tools, practices, and strategies that can support your company’s successful digital transformation. Learn more and register.

Wednesday, October 25

Industry Perspectives: Manufacturing
Ahmer Srivastava, director of analytics, Western Digital

Industry Perspectives: Travel
Mike Schuman, senior manager of operations and enablement, United Airlines

Innovation Panel
Christine Watts, chief enterprise architect, University of Chicago Medicine.

Thursday, October 26

How EagleView Created Real Value with TIBCO Cloud Integration
Bruce Harris, director of business applications, EagleView

Connecting SaaS applications goes beyond just integration. It changes processes and has material impact on your business. When done right, these impacts can be transformational. EagleView, a provider of aerial imagery, data analytics, and geographic information system solutions, will share how TIBCO Cloud Integration both changed the way things were done and set the basis for transformational change.

Delivering High-quality Master Data in Real-time for Trusted Insights
Erik McConathy, Tractor Supply Corporation; Barry Wooffitt, TIBCO

Your organization has access to an increasing volume and variety of data, which is fast becoming one of your most important assets for fueling decisions and driving innovation. But you really can’t depend on it ― and more importantly, the insights and business decisions based on it ― unless you’re governing master data, synchronizing it in real time, and managing quality. Learn how Tractor Supply is using TIBCO Spotfire and TIBCO MDM to improve product data quality and pave the way for additional investments and find out what lies ahead for TIBCO MDM.

Design Reports that Make Data “Over-the-Counter” & Easy to Use
Jenny Grant Rankin, Ph.D, author/lecturer, University of Cambridge

Most people misunderstand most data. Fortunately, misunderstandings can be easily avoided when data reports adhere to research-based reporting standards. The speaker will share a checklist of best practices synthesized from over 300 research studies that can make data easy to use without expert assistance. You’ll receive these standards, other free resources, and an understanding of how to design reports so users can understand data easily, quickly, and accurately using TIBCO Jaspersoft.

Real-time Monitoring for IoT Use Cases
Christine Watts, chief enterprise architect, University of Chicago Medicine; Michael O’Connell, chief analytics officer, TIBCO

Remote real-time monitoring of equipment, combined with modern analytic techniques, drives significant value in industries such as Energy, Logistics, and Manufacturing. We will show how to use TIBCO Spotfire, R, TIBCO Statistica, TIBCO StreamBase, and TIBCO Live Datamart to address use cases such as improving operating room efficiency, reducing re-admissions, and preventing cardiac arrest. The presentation includes a customer IoT case study.

Let’s block ads! (Why?)

The TIBCO Blog

How We Have Seen Digital Transformation Impact Three Clients

Digital transformation refers to the introduction of technology into your business processes to help your team work smarter, not harder. We’ve seen companies evolve into paperless offices with better organization of documents, centralized security and the automation of certain processes to reduce costs and improve productivity. We’ve also see how better communication technology, for instance Microsoft’s Skype software, which provides video and voice calls as well as instant messaging, can help a company move faster and maintain accuracy.

Digital technology can help facilitate employee workforce mobility programs, providing a big boost to employee productivity and morale while improving an organization’s culture.

Here are just a few of the ways we have seen our clients benefit from digital transformation:

1) An insurance agency that used to manage their client information on separate spreadsheets. Using Microsoft Dynamics 365 (formerly Microsoft Dynamics CRM) has:

  • provided a consolidated system of all client information across every Broker relationship.
  • significantly reduced the administrative time needed for tracking and updating policy renewal details.
  • resulted in implementation of commission tracking functionality that saves 20 hours a month on what used to be a very tedious manual process.

2) A web design agency wanted to efficiently manage project tasks and budget for individual customer projects. We designed a project management process in Microsoft Dynamics 365 that has:

  • provided Project Templates for each type of project, for quick and consistent setup of new projects.
  • streamlined task management through workflow rules based on project milestones.
  • simplified time entry allowing for real time analysis of project budget vs. project costs.

3) A technology company needed to automate their sales processes based on their newly designed sales methodology. We created a sales workflow in Microsoft Dynamics 365 that:

  • aligns defined opportunity sales stages to the order and completion of relevant sales activities.
  • drives adoption of new sales methodology by providing clear definition of the sales process.
  • reduces sales pipeline subjectivity for better visibility and accuracy of the sales forecast.

Could your business benefit from digital transformation? We think it could, and we’d like to show you how. Download the free whitepaper at www.crmsoftwareblog.com/digital for more examples.

Contact our digital transformation experts at Crowe Horwath at 877-600-2253 or [email protected].

By Ryan Plourde, Crowe Horwath, Microsoft Dynamics 365 Gold Partner, www.crowecrm.com

Follow on Twitter: @CroweCRM

728X90 13 625x77 How We Have Seen Digital Transformation Impact Three Clients

Let’s block ads! (Why?)

CRM Software Blog | Dynamics 365

The Digital Transformation Mindset that Matters Across Geographies

When it comes to buying things—even big-ticket items—the way we make decisions makes no sense. One person makes an impulsive offer on a house because of the way the light comes in through the kitchen windows. Another gleefully drives a high-end sports car off the lot even though it will probably never approach the limits it was designed to push.

We can (and usually do) rationalize these decisions after the fact by talking about needing more closet space or wanting to out-accelerate an 18-wheeler as we merge onto the highway, but years of study have arrived at a clear conclusion:

When it comes to the customer experience, human beings are fundamentally irrational.

In the brick-and-mortar past, companies could leverage that irrationality in time-tested ways. They relied heavily on physical context, such as an inviting retail space, to make products and services as psychologically appealing as possible. They used well-trained salespeople and employees to maximize positive interactions and rescue negative ones. They carefully sequenced customer experiences, such as having a captain’s dinner on the final night of a cruise, to play on our hard-wired craving to end experiences on a high note.

sap Q217 digital double feature1 images1 The Digital Transformation Mindset that Matters Across Geographies

Today, though, customer interactions are increasingly moving online. Fortune reports that on 2016’s Black Friday, the day after Thanksgiving that is so crucial to holiday retail results, 108.5 million Americans shopped online, while only 99.1 million visited brick-and-mortar stores. The 9.4% gap between the two was a dramatic change from just one year prior, when on- and offline Black Friday shopping were more or less equal.

When people browse in a store for a few minutes, an astute salesperson can read the telltale signs that they’re losing interest and heading for the exit. The salesperson can then intervene, answering questions and closing the sale.

Replicating that in a digital environment isn’t as easy, however. Despite all the investments companies have made to counteract e-shopping cart abandonment, they lack the data that would let them anticipate when a shopper is on the verge of opting out of a transaction, and the actions they take to lure someone back afterwards can easily come across as less helpful than intrusive.

In a digital environment, companies need to figure out how to use Big Data analysis and digital design to compensate for the absence of persuasive human communication and physical sights, sounds, and sensations. What’s more, a 2014 Gartner survey found that 89% of marketers expected customer experience to be their primary differentiator by 2016, and we’re already well into 2017.

As transactions continue to shift toward the digital and omnichannel, companies need to figure out new ways to gently push customers along the customer journey—and to do so without frustrating, offending, or otherwise alienating them.

sap Q217 digital double feature1 images6 1024x572 The Digital Transformation Mindset that Matters Across Geographies

The quest to understand online customers better in order to influence them more effectively is built on a decades-old foundation: behavioral psychology, the study of the connections between what people believe and what they actually do. All of marketing and advertising is based on changing people’s thoughts in order to influence their actions. However, it wasn’t until 2001 that a now-famous article in the Harvard Business Review formally introduced the idea of applying behavioral psychology to customer service in particular.

The article’s authors, Richard B. Chase and Sriram Dasu, respectively a professor and assistant professor at the University of Southern California’s Marshall School of Business, describe how companies could apply fundamental tenets of behavioral psychology research to “optimize those extraordinarily important moments when the company touches its customers—for better and for worse.” Their five main points were simple but have proven effective across multiple industries:

  1. Finish strong. People evaluate experiences after the fact based on their high points and their endings, so the way a transaction ends is more important than how it begins.
  2. Front-load the negatives. To ensure a strong positive finish, get bad experiences out of the way early.
  3. Spread out the positives. Break up the pleasurable experiences into segments so they seem to last longer.
  4. Provide choices. People don’t like to be shoved toward an outcome; they prefer to feel in control. Giving them options within the boundaries of your ability to deliver builds their commitment.
  5. Be consistent. People like routine and predictability.

For example, McKinsey cites a major health insurance company that experimented with this framework in 2009 as part of its health management program. A test group of patients received regular coaching phone calls from nurses to help them meet health goals.

The front-loaded negative was inherent: the patients knew they had health problems that needed ongoing intervention, such as weight control or consistent use of medication. Nurses called each patient on a frequent, regular schedule to check their progress (consistency and spread-out positives), suggested next steps to keep them on track (choices), and cheered on their improvements (a strong finish).

McKinsey reports the patients in the test group were more satisfied with the health management program by seven percentage points, more satisfied with the insurance company by eight percentage points, and more likely to say the program motivated them to change their behavior by five percentage points.

sap Q217 digital double feature1 images2 The Digital Transformation Mindset that Matters Across Geographies

The nurses who worked with the test group also reported increased job satisfaction. And these improvements all appeared in the first two weeks of the pilot program, without significantly affecting the company’s costs or tweaking key metrics, like the number and length of the calls.

Indeed, an ongoing body of research shows that positive reinforcements and indirect suggestions influence our decisions better and more subtly than blatant demands. This concept hit popular culture in 2008 with the bestselling book Nudge.

Written by University of Chicago economics professor Richard H. Thaler and Harvard Law School professor Cass R. Sunstein, Nudge first explains this principle, then explores it as a way to help people make decisions in their best interests, such as encouraging people to eat healthier by displaying fruits and vegetables at eye level or combatting credit card debt by placing a prominent notice on every credit card statement informing cardholders how much more they’ll spend over a year if they make only the minimum payment.

Whether they’re altruistic or commercial, nudges work because our decision-making is irrational in a predictable way. The question is how to apply that awareness to the digital economy.

sap Q217 digital double feature1 images7 1024x572 The Digital Transformation Mindset that Matters Across Geographies

In its early days, digital marketing assumed that online shopping would be purely rational, a tool that customers would use to help them zero in on the best product at the best price. The assumption was logical, but customer behavior remained irrational.

Our society is overloaded with information and short on time, says Brad Berens, Senior Fellow at the Center for the Digital Future at the University of Southern California, Annenberg, so it’s no surprise that the speed of the digital economy exacerbates our desire to make a fast decision rather than a perfect one, as well as increasing our tendency to make choices based on impulse rather than logic.

sap Q217 digital double feature1 images3 The Digital Transformation Mindset that Matters Across Geographies

Buyers want what they want, but they don’t necessarily understand or care why they want it. They just want to get it and move on, with minimal friction, to the next thing. “Most of our decisions aren’t very important, and we only have so much time to interrogate and analyze them,” Berens points out.

But limited time and mental capacity for decision-making is only half the issue. The other half is that while our brains are both logical and emotional, the emotional side—also known as the limbic system or, more casually, the primitive lizard brain—is far older and more developed. It’s strong enough to override logic and drive our decisions, leaving rational thought to, well, rationalize our choices after the fact.

This is as true in the B2B realm as it is for consumers. The business purchasing process, governed as it is by requests for proposals, structured procurement processes, and permission gating, is designed to ensure that the people with spending authority make the most sensible deals possible. However, research shows that even in this supposedly rational process, the relationship with the seller is still more influential than product quality in driving customer commitment and loyalty.

sap Q217 digital double feature1 images8 1024x572 The Digital Transformation Mindset that Matters Across Geographies

Baba Shiv, a professor of marketing at Stanford University’s Graduate School of Business, studies how the emotional brain shapes decisions and experiences. In a popular TED Talk, he says that people in the process of making decisions fall into one of two mindsets: Type 1, which is stressed and wants to feel comforted and safe, and Type 2, which is bored or eager and wants to explore and take action.

People can move between these two mindsets, he says, but in both cases, the emotional brain is in control. Influencing it means first delivering a message that soothes or motivates, depending on the mindset the person happens to be in at the moment and only then presenting the logical argument to help rationalize the action.

In the digital economy, working with those tendencies means designing digital experiences with the full awareness that people will not evaluate them objectively, says Ravi Dhar, director of the Center for Customer Insights at the Yale School of Management. Since any experience’s greatest subjective impact in retrospect depends on what happens at the beginning, the end, and the peaks in between, companies need to design digital experiences to optimize those moments—to rationally design experiences for limited rationality.

This often involves making multiple small changes in the way options are presented well before the final nudge into making a purchase. A paper that Dhar co-authored for McKinsey offers the example of a media company that puts most of its content behind a paywall but offers free access to a limited number of articles a month as an incentive to drive subscriptions.

Many nonsubscribers reached their limit of free articles in the morning, but they were least likely to respond to a subscription offer generated by the paywall at that hour, because they were reading just before rushing out the door for the day. When the company delayed offers until later in the day, when readers were less distracted, successful subscription conversions increased.

Pre-selecting default options for necessary choices is another way companies can design digital experiences to follow customers’ preference for the path of least resistance. “We know from a decade of research that…defaults are a de facto nudge,” Dhar says.

For example, many online retailers set a default shipping option because customers have to choose a way to receive their packages and are more likely to passively allow the default option than actively choose another one. Similarly, he says, customers are more likely to enroll in a program when the default choice is set to accept it rather than to opt out.

Another intriguing possibility lies in the way customers react differently to on-screen information based on how that information is presented. Even minor tweaks can have a disproportionate impact on the choices people make, as explained in depth by University of California, Los Angeles, behavioral economist Shlomo Benartzi in his 2015 book, The Smarter Screen.

A few of the conclusions Benartzi reached: items at the center of a laptop screen draw more attention than those at the edges. Those on the upper left of a screen split into quadrants attract more attention than those on the lower left. And intriguingly, demographics are important variables.

Benartzi cites research showing that people over 40 prefer more visually complicated, text-heavy screens than younger people, who are drawn to saturated colors and large images. Women like screens that use a lot of different colors, including pastels, while men prefer primary colors on a grey or white background. People in Malaysia like lots of color; people in Germany don’t.

This suggests companies need to design their online experiences very differently for middle-aged women than they do for teenage boys. And, as Benartzi writes, “it’s easy to imagine a future in which each Internet user has his or her own ‘aesthetic algorithm,’ customizing the appearance of every site they see.”

Applying behavioral psychology to the digital experience in more sophisticated ways will require additional formal research into recommendation algorithms, predictions, and other applications of customer data science, says Jim Guszcza, PhD, chief U.S. data scientist for Deloitte Consulting.

In fact, given customers’ tendency to make the fastest decisions, Guszcza believes that in some cases, companies may want to consider making choice environments more difficult to navigate— a process he calls “disfluencing”—in high-stakes situations, like making an important medical decision or an irreversible big-ticket purchase. Choosing a harder-to-read font and a layout that requires more time to navigate forces customers to work harder to process the information, sending a subtle signal that it deserves their close attention.

That said, a company can’t apply behavioral psychology to deliver a digital experience if customers don’t engage with its site or mobile app in the first place. Addressing this often means making the process as convenient as possible, itself a behavioral nudge.

A digital solution that’s easy to use and search, offers a variety of choices pre-screened for relevance, and provides a friction-free transaction process is the equivalent of putting a product at eye level—and that applies far beyond retail. Consider the Global Entry program, which streamlines border crossings into the U.S. for pre-approved international travelers. Members can skip long passport control lines in favor of scanning their passports and answering a few questions at a touchscreen kiosk. To date, 1.8 million people have decided this convenience far outweighs the slow pace of approvals.

sap Q217 digital double feature1 images9 1024x572 The Digital Transformation Mindset that Matters Across Geographies

The basics of influencing irrational customers are essentially the same whether they’re taking place in a store or on a screen. A business still needs to know who its customers are, understand their needs and motivations, and give them a reason to buy.

And despite the accelerating shift to digital commerce, we still live in a physical world. “There’s no divide between old-style analog retail and new-style digital retail,” Berens says. “Increasingly, the two are overlapping. One of the things we’ve seen for years is that people go into a store with their phones, shop for a better price, and buy online. Or vice versa: they shop online and then go to a store to negotiate for a better deal.”

Still, digital increases the number of touchpoints from which the business can gather, cluster, and filter more types of data to make great suggestions that delight and surprise customers. That’s why the hottest word in marketing today is omnichannel. Bringing behavioral psychology to bear on the right person in the right place in the right way at the right time requires companies to design customer experiences that bridge multiple channels, on- and offline.

Amazon, for example, is known for its friction-free online purchasing. The company’s pilot store in Seattle has no lines or checkout counters, extending the brand experience into the physical world in a way that aligns with what customers already expect of it, Dhar says.

Omnichannel helps counter some people’s tendency to believe their purchasing decision isn’t truly well informed unless they can see, touch, hear, and in some cases taste and smell a product. Until we have ubiquitous access to virtual reality systems with full haptic feedback, the best way to address these concerns is by providing personalized, timely, relevant information and feedback in the moment through whatever channel is appropriate. That could be an automated call center that answers frequently asked questions, a video that shows a product from every angle, or a demonstration wizard built into the product. Any of these channels could also suggest the customer visit the nearest store to receive help from a human.

sap Q217 digital double feature1 images4 The Digital Transformation Mindset that Matters Across Geographies

The omnichannel approach gives businesses plenty of opportunities to apply subtle nudges across physical and digital channels. For example, a supermarket chain could use store-club card data to push personalized offers to customers’ smartphones while they shop. “If the data tells them that your goal is to feed a family while balancing nutrition and cost, they could send you an e-coupon offering a discount on a brand of breakfast cereal that tastes like what you usually buy but contains half the sugar,” Guszcza says.

Similarly, a car insurance company could provide periodic feedback to policyholders through an app or even the digital screens in their cars, he suggests. “Getting a warning that you’re more aggressive than 90% of comparable drivers and three tips to avoid risk and lower your rates would not only incentivize the driver to be more careful for financial reasons but reduce claims and make the road safer for everyone.”

Digital channels can also show shoppers what similar people or organizations are buying, let them solicit feedback from colleagues or friends, and read reviews from other people who have made the same purchases. This leverages one of the most familiar forms of behavioral psychology—reinforcement from peers—and reassures buyers with Shiv’s Type 1 mindset that they’re making a choice that meets their needs or encourages those with the Type 2 mindset to move forward with the purchase. The rational mind only has to ask at the end of the process “Am I getting the best deal?” And as Guszcza points out, “If you can create solutions that use behavioral design and digital technology to turn my personal data into insight to reach my goals, you’ve increased the value of your engagement with me so much that I might even be willing to pay you more.”

sap Q217 digital double feature1 images10 1024x572 The Digital Transformation Mindset that Matters Across Geographies

Many transactions take place through corporate procurement systems that allow a company to leverage not just its own purchasing patterns but all the data in a marketplace specifically designed to facilitate enterprise purchasing. Machine learning can leverage this vast database of information to provide the necessary nudge to optimize purchasing patterns, when to buy, how best to negotiate, and more. To some extent, this is an attempt to eliminate psychology and make choices more rational.

B2B spending is tied into financial systems and processes, logistics systems, transportation systems, and other operational requirements in a way no consumer spending can be. A B2B decision is less about making a purchase that satisfies a desire than it is about making a purchase that keeps the company functioning.

That said, the decision still isn’t entirely rational, Berens says. When organizations have to choose among vendors offering relatively similar products and services, they generally opt for the vendor whose salespeople they like the best.

This means B2B companies have to make sure they meet or exceed parity with competitors on product quality, pricing, and time to delivery to satisfy all the rational requirements of the decision process. Only then can they bring behavioral psychology to bear by delivering consistently superior customer service, starting as soon as the customer hits their app or website and spreading out positive interactions all the way through post-purchase support. Finishing strong with a satisfied customer reinforces the relationship with a business customer just as much as it does with a consumer.

sap Q217 digital double feature1 images11 1024x572 The Digital Transformation Mindset that Matters Across Geographies

The best nudges make the customer relationship easy and enjoyable by providing experiences that are effortless and fun to choose, on- or offline, Dhar says. What sets the digital nudge apart in accommodating irrational customers is its ability to turn data about them and their journey into more effective, personalized persuasion even in the absence of the human touch.

Yet the subtle art of influencing customers isn’t just about making a sale, and it certainly shouldn’t be about persuading people to act against their own best interests, as Nudge co-author Thaler reminds audiences by exhorting them to “nudge for good.”

Guszcza, who talks about influencing people to make the choices they would make if only they had unlimited rationality, says companies that leverage behavioral psychology in their digital experiences should do so with an eye to creating positive impact for the customer, the company, and, where appropriate, the society.

In keeping with that ethos, any customer experience designed along behavioral lines has to include the option of letting the customer make a different choice, such as presenting a confirmation screen at the end of the purchase process with the cold, hard numbers and letting them opt out of the transaction altogether.

“A nudge is directing people in a certain direction,” Dhar says. “But for an ethical vendor, the only right direction to nudge is the right direction as judged by the customers themselves.” D!

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.


About the Authors:

Volker Hildebrand is Global Vice President for SAP Hybris solutions.

Sam Yen is Chief Design Officer and Managing Director at SAP.

Fawn Fitter is a freelance writer specializing in business and technology.

Comments

Let’s block ads! (Why?)

Digitalist Magazine