What the Top Restaurant in US Can Teach About the Digital Economy

Stephanie Overby

Celebrity chef Grant Achatz and business partner Nick Kokonas have been shaking up the fine-dining scene in Chicago since launching Alinea in 2005. There, they combined art and science to molecularly deconstruct classic dishes, serving them in unconventional ways. Now they aim to disrupt the decades-old dining reservations process with a cloud-based platform that enables restaurants to sell seats the way theaters and sports teams do: with tiered pricing and same-day discounts to shift demand.

By charging customers ahead of time, the system also transfers the risk of costly no-shows to the customer and enables restaurants to better manage food and labor costs. Their company, Tock, boasts investors such as former Twitter CEO Dick Costolo and restaurateurs Thomas Keller and Kimbal Musk (brother of Tesla Motors CEO Elon).

Recipe for a new revenue model

Kokonas, a derivatives trader and investor in more than a dozen companies, hates it when someone says, “That’s just how we do it.”

2016_Q1_creators_01“I like hackers,” he says. “People who probe for answers. They put together a quick solution, try it, and then quickly improve it. And then they do that again. It’s a mindset. Most corporations do not have that mindset.”

After years of dealing with what Kokonas calls the “absurdity” of reservations at Alinea—70% of people requesting prime-time weekend slots, three full-time employees answering phones just to tell people no, no-shows hovering at 10% or more, and dejected would-be diners—he and Achatz invented another way. When they launched their second restaurant, Next, in 2011, they created a proprietary software application to sell reservations to every seating. Guests buy nonrefundable tickets to enjoy the 18- to 22-course tasting menu, the same way they would if they wanted to see a play or watch a Cubs game. After all, fine dining was itself a sort of theater, Kokonas thought. In 2012, Alinea adopted the system; the restaurant that lost more than a quarter million dollars a year on no-shows virtually eliminated them.

Last year, Kokonas and Achatz hired a chief technology officer and developed a commercial, software-as-a-service version of that system for other restaurants. “I knew it would have demand if we rebuilt it robust enough to handle thousands of restaurants rather than just ours,” says Kokonas, who reportedly raised several million dollars to launch Tock in December 2014. A year later, Tock had 50 customers, from San Francisco’s Coi, where tickets cost US$220–275 per person, to Portland’s midrange Thai restaurant Pok Pok, where patrons pay a nonrefundable $20 deposit per seat. “We are adding three to five customers a week now,” Kokonas says, predicting that Tock will have a few hundred customers by mid-2016.

Spicing Up Bookings

Online platforms such as OpenTable or Yelp’s SeatMe have digitized the old-school reservation process, charging restaurants for each booking. Tock instead charges dining establishments a flat $695 fee and enables them to customize the system. Restaurants can offer patrons traditional, no-cost reservations; tickets that serve as deposits on their final bill; or all-inclusive entry. Journeyman, outside of Boston, for example, offers no-fee reservations, a $10–20 discount for those who prepay for their meal, and tickets for special events and holiday parties. And restaurants are able to price tickets dynamically based on demand. Alinea, for example, has offered heavily discounted tickets on slow days, such as Super Bowl Sunday or July 4.

By making pricing and seat availability transparent, Kokonas thinks restaurants can create more trust with diners. And few appear to have balked at paying more for prime-time seating: Alinea has remained full on weekends. Customers accept the different prices, Kokonas says, so long as the choice is theirs.

The digital ticketing system enables more personal interaction between restaurant and guest. “It’s actually easier to spend more time with customers,” Kokonas says. “Once a customer makes a booking, the restaurant can reach out by e-mail or text or through social media to confirm choices or dietary restrictions or to learn more about customer needs and desires and can do so efficiently and quickly.”

Dining on Data

Deep knowledge of regular customers’ habits and preferences is part of what defines the high-end dining experience. But the CRM system in most traditional reservation systems is “just a glorified Post-it note” of customer information, according to Kokonas. Tock users can import their own data into their existing CRM applications.

2016_Q1_creators_02“We can learn about the demographics, purchasing decisions, and timing of a restaurant’s customers in entirely new ways,” Kokonas says. “We can track customer preferences like type of water, coffee service, whether they’re left- or right-handed—as granular as a restaurant wants to get in order to serve a patron better. That certainly makes service seem more magical to the guest.”

Early Tock customer Daniel Patterson, owner of Coi, has said that by diminishing reservations uncertainty, the system enables his restaurant to staff more appropriately and spend more time focusing on the customer experience.

Fresh Thinking

The challenge Kokonas and Achatz are facing with Tock is convincing restaurants that there is value in change. “I thought they’d see this great system and immediately go for it,” Kokonas says. “We have to teach restaurants how to think creatively. [Some] are hesitant to embrace change, so we have to do a lot of handholding at first.”

That’s because restaurants typically pay more attention to food and service than to business operations, Kokonas says. And when it comes to technology, they opt for what’s cheapest or best known. As with getting diners excited about a new venue, good word of mouth helps. “In the past few weeks, restaurants have moved from a ‘fear of change’ to a ‘fear of missing out.’”


This story has been updated to reflect information obtained after publication. Tock is no longer hosted on Amazon Web Services and does not pass along its data hosting costs.

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Amazing Digital Marketing Trends And Tips To Expand Your Business In 2015

Sunny Popali

Amazing Digital Marketing Trends & Tips To Expand Your Business In 2015The fast-paced world of digital marketing is changing too quickly for most companies to adapt. But staying up to date with the latest industry trends is imperative for anyone involved with expanding a business.

Here are five trends that have shaped the industry this year and that will become more important as we move forward:

  1. Email marketing will need to become smarter

Whether you like it or not, email is the most ubiquitous tool online. Everyone has it, and utilizing it properly can push your marketing ahead of your rivals. Because business use of email is still very widespread, you need to get smarter about email marketing in order to fully realize your business’s marketing strategy. Luckily, there are a number of tools that can help you market more effectively, such as Mailchimp.

  1. Content marketing will become integrated and more valuable

Content is king, and it seems to be getting more important every day. Google and other search engines are focusing more on the content you create as the potential of the online world as marketing tool becomes apparent. Now there seems to be a push for current, relevant content that you can use for your services and promote your business.

Staying fresh with the content you provide is almost as important as ensuring high-quality content. Customers will pay more attention if your content is relevant and timely.

  1. Mobile assets and paid social media are more important than ever

It’s no secret that mobile is key to your marketing efforts. More mobile devices are sold and more people are reading content on mobile screens than ever before, so it is crucial to your overall strategy to have mobile marketing expertise on your team. London-based Abacus Marketing agrees that mobile marketing could overtake desktop website marketing in just a few years.

  1. Big Data for personalization plays a key role

Marketers are increasingly using Big Data to get their brand message out to the public in a more personalized format. One obvious example is Google Trend analysis, a highly useful tool that marketing experts use to obtain the latest on what is trending around the world. You can — and should — use it in your business marketing efforts. Big Data will also let you offer specific content to buyers who are more likely to look for certain items, for example, and offer personalized deals to specific groups of within your customer base. Other tools, which until recently were the stuff of science fiction, are also available that let you do things like use predictive analysis to score leads.

  1. Visual media matters

A picture really is worth a thousand words, as the saying goes, and nobody can deny the effectiveness of a well-designed infographic. In fact, some studies suggest that Millennials are particularly attracted to content with great visuals. Animated gifs and colorful bar graphs have even found their way into heavy-duty financial reports, so why not give them a try in your business marketing efforts?

A few more tips:

  • Always keep your content relevant and current to attract the attention of your target audience.
  • Always keep all your social media and public accounts fresh. Don’t use old content or outdated pictures in any public forum.
  • Your reviews are a proxy for your online reputation, so pay careful attention to them.
  • Much online content is being consumed on mobile now, so focus specifically on the design and usability of your mobile apps.
  • Online marketing is essentially geared towards getting more traffic onto your site. The more people visit, the better your chances of increasing sales.

Want more insight on how digital marketing is evolving? See Shutterstock Report: The Face Of Marketing Is Changing — And It Doesn’t Include Vince Vaughn.

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About Sunny Popali

Sunny Popali is SEO Director at www.tempocreative.com. Tempo Creative is a Phoenix inbound marketing company that has served over 700 clients since 2001. Tempos team specializes in digital and internet marketing services including web design, SEO, social media and strategy.

Compelling Shopping Moments: 4 Creative Ways Stores Connect With Their Customers

Ralf Kern

compelling shopping momentsOn a recent morning, as I was going through my usual routine, my coffeemaker broke. I cannot live without coffee in the morning, so I immediately looked up my coffeemaker on Amazon and had it shipped Prime in one day. My problem was solved within minutes. My Amazon app, and my loyalty account with that company, was there for me when I needed it most.

It was in this moment that I realized the importance of digital presence for retailers. There is a chance that the store 10 minutes from my house carries this very same coffeemaker; I could have had it in one hour, instead of one day. But the need for immediate access to information pushed me to the online store. My local retailer was not able to be there for me digitally like Amazon.

Retail is still about reading the minds of your customers in order to know what they need and create a flawless experience. But the days of the unconnected shopper in a monochannel world are over. I am not alone in my digital-first mindset; according to a recent MasterCard report, 80% of consumers use technology during the shopping process. I, and consumers like me, use mobile devices as a guide to the physical world.

We don’t need to have an academic discussion about multichannel, omnichannel, and omnicommerce and their meanings, because what it really comes down to for your consumers, or fans, is shopping. And shopping has everything to do with moments in your customers’ lives: celebration moments, in-a-hurry moments, I-want-to-be-entertained moments, and more. Most companies only look for and measure very few moments along the shopping journey, like the moment of coupon download or the moment of sales.

Anticipating these moments was easier when mom and pop stores knew their customers by name. They knew how to be there for their shoppers when, where, and how they wanted it. And shoppers didn’t have any other options. Now it is crucial for companies to understand all of these moments and even anticipate or trigger the right moments for their customers.

In today’s digital economy the way to achieve customer connection is with simple, enjoyable, and personalized front ends that are supported by sophisticated, digital back ends. Then you can use that system to support your customer outreach.

Companies around the world are using creative and innovative methods to find their customers in various moments. Being there for customers comes in many different shapes and forms. Consider these examples:

Chilli Beans

A Brazilian maker of fashion sunglasses, glasses, and watches, Chilli Beans has a loyal following online and at over 700 locations around the world. Chilli Beans keeps its customers engaged by releasing 10 limited-edition styles each week. If customers like what they see, they have to buy fast or risk missing out.

Bonobos

Online men’s fashion retailer Bonobos reaches its customers with its Guide Shops. While they look like traditional retail outlets, the shops don’t actually sell any clothes. Customers come in for one-on-one appointments with the staff, and if they like anything that they try on, the staff member orders it for them online and it is shipped to their house. The 20 Guide Shops currently open have proven very successful for the company.

Peak Performance

Peak Performance, a European maker of outdoor clothing, has added a little magic to its customer experience. It has created virtual pop-up shops that customers can track on their smartphones through CatchMagicHour.com, and they are only available at sunrise and sunset at exact GPS locations. Customers who go to the location, be it at a lighthouse or on top of a mountain, are rewarded with the ability to select free clothing from the virtual shop that they have unlocked on their phones.

Shoes of Prey

The customer experience is completely custom at Shoes of Prey, a website where women can design custom shoes. From fabric to color, the customer picks every element, and then her custom creation is sent directly to her house. Shoes of Prey has even shifted its business model based on customer feedback. Its customers wanted to get inspiration and advice in a physical store. So Shoes of Prey made the move from online-only to omnicommerce and has started to open stores around the world.

While the customer experience for each of these connections is relatively simple – a website, a smartphone, an online design studio – the back end that powers them has to be powerful and nimble at the same time. These sophisticated back ends – powering simple, enjoyable, and personalized front ends – will completely change the game in retail. They will allow companies to engage their customers in ways we can’t even begin to imagine.

Technology will help you be there in the shopping moment. The best technology won’t annoy your customers with irrelevant promotions or pop-up messages. Instead, like a good friend, it will know how to engage with customers and when to leave them alone – how to truly connect with customers instead of manage them. Consequently, customer relationship management as we know it is an outdated technology in the economy of today – and tomorrow. Technologies that go beyond CRM will help retailers to differentiate. Aligning your organization and those technologies will be the Holy Grail to creating true and sustainable customer loyalty.

Learn more ways that business will never be the same again. Learn 99 Mind-Blowing Ways The Digital Economy Is Changing The Future Of Business.

Find out how SAP can help you go beyond CRM and support your retail business.

Ralf Kern is Global Vice President Retail for SAP and a retail ambassador for SAP. Interested in your feedback. You can also get in touch on Twitter or LinkedIn

This blog also appeared on SAP Customer Network.

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Ralf Kern

About Ralf Kern

Ralf Kern is the Global Vice President, Business Unit Retail, at SAP, responsible for the future direction of SAP’s solution and global Go-to-Market strategy for Omnicommerce Retail, leading them into today’s digital reality.

More Than Noise: Digital Trends That Are Bigger Than You Think

By Maurizio Cattaneo, David Delaney, Volker Hildebrand, and Neal Ungerleider

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.

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.

This 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.

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

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.

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.

However, 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.

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.

Businesses 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.

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.”

A 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.

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Death Of An IT Salesman

Jesper Schleimann

As software shifts from supporting the strategy to becoming the strategy of most companies, the relationship and even the sales process between the vendor side and the customer side in the IT industry is subsequently also undergoing some remarkable changes. The traditional IT salesman is an endangered species.

I recently had the pleasure of participating in a workshop with one of Scandinavia’s largest companies to create new business models in the company’s operations business area. As an IT vendor, we worked with the customer in an open process using the design thinking methodology—a creative process in which we jointly visualized, defined, and solidified how new flows of data can change business processes and their business models.

By working with “personas” relevant to their business, we could better understand how technology can help different roles in the involved departments deliver their contributions faster and more efficiently. The scope was completely open. We put our knowledge and experience with technological opportunities in parallel with the company’s own knowledge of the market, processes, and business.

The results may trigger a sale of software from our side at a point, but we do not know exactly which solution—or even if it will happen. What we did do was innovate together and better understand our customer’s future and viable routes to success. Such is the reality of the strategic work of digitizing here on the verge of year 2018.

Solution selling is not enough

In my view, the transgressive nature of technology is radically changing the way businesses and the sales process works. The IT industry—at least parts of it—must focus on completely different types of collaboration with the customer.

Historically, the sales process has already realized major changes. In the past, you’d find a product-fixated “used-car-sales” approach, which identified the characteristics of the box or solution and left it to the customer to find the hole in the cheese. Since then, a generation of IT key account managers learned “solution selling,” with a sharp focus on finding and defining a “pain point” at the customer and then position the solution against this. But today, even that approach falls short.

Endangered species

The challenge is that software solutions now support the formation of new, yet unknown business models. They transverse processes and do not respect silo borders within organizations. Consequently, businesses struggle to define a clear operational road. Top management faces a much broader search of potential for innovation. The creation of a compelling vision itself requires a continuous and comprehensive study of what digitization can do for the value chain and for the company’s ecosystem.

Vendors abandon their customers if they are too busy selling different tools and platforms without entering into a committed partnership to create the new business model. Therefore, the traditional IT salesperson, preoccupied with their own goals, is becoming an endangered species. The customer-driven process requires even key account managers to dig deep and endeavor to understand the customer’s business. The best in the IT industry will move closer to the role of trusted adviser, mastering the required capabilities and accepting the risks and rewards that follow.

Leaving the comfort zone

This obviously has major consequences for the sales culture in the IT industry. Reward mechanisms and incentive structures need to be reconsidered toward a more behavioral incentive. And the individual IT salesperson is going on a personal journey, as the end goal is no longer to close an order, but to create visions and deliver value in partnership with the customer and to do so in an ever-changing context, where the future is volatile and unpredictable.

A key account manager is the customer’s traveling companion. Do not expect to be able to reduce complexity and stay in your comfort zone and not be affected by this change. Vendors should think bigger, and as an IT salesperson, you need to show your ability for transformational thinking. Everyone must be prepared to take the first baby steps, but there will definitely also be some who cannot handle the change. Disruption is not just something you, as a vendor, deliver to a customer. The noble art of being a digital vendor is facing some serious earthquakes.

For more on how tech innovation is disrupting traditional business models, see Why You Should Consider Disrupting Your Own Business.

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Jesper Schleimann

About Jesper Schleimann

Chief Technology Officer, Nordic & Baltic region

In his role as Nordic CTO, Jesper’s mission is to help customers unlock their business potential by simplifying their digital transformation. Jesper has a Cand.polit. from the University of Copenhagen as well as an Executive MBA from Copenhagen Business School.