Sections

Transforming Automakers Into Connected Platform Makers

William Newman

I love January. As the saying goes, “New Year, New You.” And new cars. Lots of new cars, announcements and demonstrations of how the car will evolve with new features, content, and systems.

This year the volley started early, with huge announcements in week 1 at the Computer Electronics Show in Las Vegas, and it will continue in weeks 2 and 3 the Automotive News World Congress and North American International Auto Show in Detroit. There are some megatrends emerging from these recent announcements and from research SAP has conducted over the past six months, which will become available through social channels over the course of 2016.

Economically, a number of factors are at work. With the fall of crude oil prices and other commodities, and North American volumes hitting pre-recession levels of 17.5M units in the passenger vehicle segment, growth is expected to continue. However, it will be a different kind of growth, based on the evolution of the value chain and the expectancy that global AGR levels will taper from 7.8% (from 2009 to 2015) to 2.8% (from 2016 to 2020) according to IHS, and the retention length of vehicles rising to over 12 years on average. OEM consolidation will also likely follow in the next decade to help keep growth moderate and remove industry structural costs.

The future of the car is changing as well. Cars are evolving from mostly mechanical, metal-based vehicles to a connected set of component platforms, plastics, and next-generation materials, essentially becoming a rolling data center providing safety and entertainment going from Point A to Point B.  Social acceptance of a fully autonomous vehicle – and the regulatory environment supporting that – is likely 5 to 10 years out based on current forecasts (OESA, CAR). However, a connected vehicle – depending on your definition of “connected” and which services that uses – is here today, both on the public highways and in prototype communities like M City.

What does all of this mean for automotive OEM and supplier customers? It means companies have significant choices in product design, value chain placement (and respective participation), and customer experience to define the organization for the next few years to come. Last year I asked executives, “Are you buyers or sellers?” This year I am more likely to ask, “Are you a platform maker or owner?” as makers and innovation will rule the ability of OEMs and suppliers to not only have the profit to make acquisitions but also determine the position of the portfolio in the value chain where they will drive content. Content is profit, and profit means growth. And growth means you survive and prosper in an ebbing business cycle.

Here are some disruptors coming out of this month’s automotive announcements.  As more become available during the month (or as forecasts change, which of course they will) I will update this post.

  1. Technology is not the long pole in the tent. Regulatory needs to catch up. The big database technology to manage petabytes (1,000 terabytes) of information such as music, images, maps, and consumer behavior is already here. How we use these – based on location-based privacy and social norms – and what we are able to implement in products – based on regulations – have only partially been defined. This is a real bummer to consumers and tech-savvy developers, who essentially are releasing only parts of consumable disruption based on business environments. Uber, for example, has taken its disruptive model to court in a number of cities and states, and won. Google has sent its driverless, autonomous vehicles to a number of cities with some relative success. Are we ready to give up control of our driving abilities? Not yet. In Michigan you can’t take a driver’s test at the Secretary of State office using a park assist vehicle to parallel park. Clearly, we aren’t there yet.
  1. The notion of a vehicle platform and how it scales and connects has changed. Typically a vehicle has a number of trim packages, platform sizes, power plants, and features. When a manufacturer builds to a variable platform, usually the platform itself is constant down an assembly line and the features and cosmetics adjust per spec of the vehicle. Faraday Future’s announcement at CES of the FFZero1 platform for variant configuration, where the platform itself can stretch and modularly accommodate different power plant designs (e.g. battery pack stacking), has the potential to change how vehicles are designed at the platform level. Also at CES, Delphi announced its vehicle to everything (V2E) platform, allowing vehicles to sense devices, social behaviors, and “things,” an example of how automotive suppliers are moving to become “connected platform makers.” Other suppliers such as Bosch are developing their own platform to connect devices, components, homes, and information. And GM announced a major $500M investment partnership with Lyft to enable fleet connected B2C vehicles. Being able to scale physical and information platforms using very large data sets with consumers is key to transformation success.
  1. The aftermarket segment will collapse, and everyone wants a share — and for you to love them. The bidding war over Pep Boys is likely the first of many acquisition plays and direct-to-consumer moves by auto parts suppliers to converge its OE and aftermarket businesses. With each stage of the aftermarket value chain adding a full price share of margin from one step to the next (usually 80-100% of margin per value chain step, according to the Automotive Aftermarket Supplier Association), it’s no wonder that auto part makers want drivers to access their products directly, to harvest margin otherwise flowing through more expensive OE dealer channels. Will drivers who hold vehicles longer buy directly? Most do already, through eBay, Amazon, NAPA, and AutoZone, to name just a few of the big players. Often this competes with OE interests to leverage their own proprietary dealer networks. How suppliers go after this high margin space, and how they communicate brand interest and customer experience to drivers who normally buy through dealers and distributors, will be key to success.

Platform makers OEMs as well as suppliers – will garner market share moving forward. Tesla, Google, Faraday, Bosch, and Delphi (among others) have stated their interest and staked their claim as disruptors owning a platform,  not necessarily as classic car companies. Companies that are unwilling to digitize their product portfolio along with their business operations and unleash new platform business models will be relegated to “seller” status as we move toward the 2020s.

Based on these and other mega-trends, automakers and suppliers must stake their claim now in order to build their financial assets and continue growth throughout this decade and beyond.

For more on what the future holds for the automotive industry, see Why This One Decision Will Make Or Break Automakers In 2016.

This blog originally appeared on the LinkedIn Pulse

Comments

William Newman

About William Newman

William Newman serves as Industry Value Advisor for SAP’s Midwest Industry Value Engineering team with a focus on digital strategies and transformation in automotive and discrete manufacturing. He brings more than 30 years of experience in strategy, transformation planning, and value realization across multiple industry sectors including automotive, aerospace, industrial machinery and components, and high tech.

How Big Data And IoT Are Transforming How We Buy And Drive Cars

Larry Stolle

In today’s tech-savvy world, most people are familiar with the idea of consumer and technical data collection. Business leaders use this data to get complete view of any given market segment. The sheer amount of business information that is currently collected has inspired the term Big Data. This Big Data means different things to different companies. It can include anything from records of retail purchases and buying patterns to product information and systematic feedback.

Many business professionals view Internet of Things (IoT) as the next big thing in the world of high technology. The online dictionary for IT professionals Webopedia defines IoT as “the ever-growing network of physical objects that feature an IP address for internet connectivity.”

The term also refers to “the communication that occurs between these objects and other Internet-enabled devices and systems.” IoT can accomplish great things in a number of industries when paired with the benefits of big data. Examples of “things” that can fall under the IoT umbrella include many consumer goods, including electronic appliances, connected security systems, household lights, speaker systems, and a full range of automotive vehicles.

Market research/analysis firm IDC recently released a study on the enormous potential of IoT and Big Data in a range of manufacturing industries. The study projected that worldwide manufacturing will generate $746 billion by 2018. This sentiment is echoed by Morgan Stanley, which estimates that IoT-driven automation in manufacturing could save $500 billion (2 to 4 percent based on a penetration rate of 50 percent).

The technological future of the automotive industry

A recent global expert survey by McKinsey & Co. on the manufacture of cars and trucks determined that automotive suppliers have big plans for Big Data and IoT. In fact, 92 percent of automotive industry leaders feel that these technologies will have a “huge impact” in the way their products are designed and manufactured. Big Data and IoT will also influence the way that automotive companies interact with, and sell to, their customer bases.

The global nonprofit Application Developers Alliance (ADA) regards automotive innovations as a microcosm of these digital technologies. According to ADA, industry experts estimate that every car will be connected in some way by 2025. It goes on to report that the market for connected vehicle technology will reach $54 billion by 2017.

Forbes also recently chimed in on this issue with the article “Big Data’s Big Impact Across Industries.” Writer Howard Balwin complied reports from the Center for Automotive Research and the Michigan news site MLive and concluded that Big Data is an “engine of innovation” and “about to get bigger for auto industry.”

Otto Schell of General Motors sums up the whole subject in a few words: “The use of data is not anymore questioned.” He goes on to report that the “entire business is changing.”

Car and truck companies are embracing the full potential of Big Data/IoT technologies. Modern digital technology within the automotive sector has already produced some stunning results. Business opportunities that are driven by Big Data and IoT include connected products and logistics that use embedded sensors to communicate.

This communication can occur among “smart” vehicles or between these vehicles and a strong digital core. These technologies can do great things, such as assisting in preventive maintenance and coordinating activities within a fleet of vehicles. They can also help detect engineering defects and determine driving patterns.

There are many other key IoT and Big Data trends in the automotive sector, including tracking customer sales and services and fostering seamless collaborations between automotive companies and high-tech companies such Google.

Perhaps the most exciting product of the marriage between automobile manufactures and IoT/Big Data technology is the self-driving car. These cars are still in development, but they stand to impact the automotive sector in profound ways. Morgan Stanley addressed the enormous potential of autonomous vehicles in its April 3, 2014 Blue Paper. The section entitled “The ‘Internet of Things’ Is Now: Connecting the Real Economy” reported that full penetration of self-driving vehicles would save the U.S. economy a total of $1.3 trillion. This figure increases to $5.6 trillion at the global level.

The Blue Paper goes on to estimate that self-driving cars and other state-of-the-art digital marvels will save the U.S. $158 billion in estimated fuel savings and $488 billion in estimated accident avoidance savings.

So while we look to big things from Big Data and IoT in the future, we cannot underestimate the exciting things that are happening right now. Otto Schell again sums things up nicely: “I think when we talk in general about cars, you see all over the place a lot of things are digitalization, connect the car.” He believes that the automotive industry must use digital technology to serve consumers today. “We give them options to go into their lives. And this option is very clearly digitalized.”

Learn more about digital transformation in the automotive industry here.

Comments

Larry Stolle

About Larry Stolle

Larry Stolle is the senior global marketing director for the Automotive Industry at SAP. He has over 45 years of experience in the automotive industry with experience, ranging from dealerships to manufacturers and importers to technology companies such as IBM. Stolle currently holds two patents for dealer and manufacturer communications and for quality insights.

4 Reasons To Transform Products Into Connected Experiences And Outcomes

Kris Gorrepati

Several months passed before I finally got around to connecting our Nest smart thermostat to the Internet via a Wi-Fi network. And it was only then that I began to understand the power of product connectedness.

What used to be a moderately better, albeit well designed, thermostat suddenly transformed into an intelligent and accessible home comfort assistant that understood our preferences and patterns and worked on our behalf, without asking too much.

Connectedness has always been a highly desired feature for customers. But it’s also useful for engineers and product designers, as well. After all, what product designer wouldn’t want to be able to better understand how customers use their products? This information could help the product designer provide better customer support and continuously improve products, even while customers are actively using them.

This wasn’t that simple or cost-effective as recently as a couple of years ago. But with the near-universal availability of Wi-Fi, Bluetooth, and 3G/4G/LTE, combined with the plummeting costs of low-power computing platforms, it is even less of a problem now.

Four reasons your company’s products should be connected

Many products – toys, medical devices, industrial machinery, autos, kitchen equipment, washing machines, etc. – are candidates for connectedness. Moreover, there are plenty of worthy reasons for designing connected products:

  1. Developing a sticky customer relationship: A non-connected product generally leads toward a transactional customer relationship. A connected product moves the customer toward a long-term relationship – at least through the life of the product and usually beyond – by sharing data and providing more value with the help of cloud services. For example, Fitbit users usually get limited information from the fitness band itself. A connected Fitbit, however, can share information with Fitbit’s cloud services so the customer can receive richer, more insightful analysis. This information sharing and additional insight are prime sources of sticky customer relationships that can last well beyond a single product purchase.
  1. Changing business models: Connected products and services allow many organizations to establish a commercial relationship based on outcomes and performance.
  1. Improving products while they are actively being used: Tesla’s ability to change ground clearance to improve safety with an over-the-air software update is an amazing example of how connected products can be enhanced while in use.
  1. Obtaining extremely valuable usage, performance, and fault data: Companies can use this information to improve existing products, understand what is important for customers, and design even better products in the future. In addition, actual usage and status information can be used to guide customers toward more optimal maintenance and service protocols to reduce total lifecycle costs.

Developing the right strategies for your connected products

Clearly, the case to develop connected products is compelling for product designers and companies. However, designers and companies should approach connected products with a fundamentally different design and lifecycle management strategy. The normal approach is one of designing and creating a product – even if it is made up of mechanical, electrical, and software components – as a rigid object that is designed, manufactured, sold, and, eventually, forgotten. This approach is at odds with the key tenets of connected products.

Connected products require a product design and lifecycle management viewpoint that takes into consideration the following:

  • Products are malleable and can be improved even when they are being actively used
  • Products can be accessed with customer permission in real time
  • Cloud services are an extension of the product itself

The design strategy then will modularize and parameterize key capabilities, performance issues, and other components in order to modify/improve products with software and technology updates.

Key capabilities of connected products companies

Companies that offer connected products must also be able to:

  • Design, develop, deploy, and operate cloud services that complement and enhance product features and capabilities
  • Develop customer service and relationship management processes that can work directly with and through the connected product
  • Have the capacity to analyze historical performance and fault data to predict likelihood of failure and take appropriate action
  • Adjust maintenance and service recommendation processes to take into consideration the actual use of products
  • Modify existing supply chain and replenishment processes to meet real-time fulfillment needs

In short, connected products force companies to rethink and reimagine how they design products and how they operate to serve customers.

For more on why the Internet of Things’ value will be in the data, not the connections, see the white paper Live Business: The Importance of the Internet of Things.

Comments

Kris Gorrepati

About Kris Gorrepati

Kris Gorrepati is part of the Solution Management team for Extended Supply Chain Solutions. He works with SAP's ecosystem to support customer success and to promote excellence is Supply Chain Management, Manufacturing and Product Lifecycle Management. Kris has extensive experience in Supply Chain, Manufacturing and Product Development as a practitioner, designer and engineer.

Live Businesses Deliver a Personal Customer Experience Without Losing Trust

Lori Mitchell-Keller, Brian Walker, Johann Wrede, Polly Traylor, and Stephanie Overby

Trust is the foundation of customer relationships. People who don’t trust your business are not likely to become or remain customers.

The trust relationship has taken some big hits lately. Beloved brands like Chipotle and Toyota have seen customer trust ebb due to public perception of their roles in safety issues. Consumers continue to experience occasional data breaches from large brands.

Yet these traditional threats have short half-lives. The latest threat could last forever.

Most customers claim they want personalization across all the channels in which they interact with companies. Such personalization should create long-term loyalty by creating a new level of intimacy in the relationship.

sap_Q216_digital_double_feature3_images2But that intimacy comes at a high price. For personalization to work, brands need to gather unprecedented amounts of personal information about customers and continue to do so over the course of the relationship. Customers are already wary: 80% of consumers have updated their privacy settings recently, according to an article in VentureBeat.

Companies must get personalization right. If they do, customers are more likely to purchase again and less likely to switch to a competitor. Personalization is also an important step toward the holy grail of digital transformation: becoming a Live Business, capable of meeting customers with relevant and customized offers, products, and services in real time or in the moments of customers’ choosing.

When done wrong, personalization can cause customers to feel that they’ve been deceived and that their privacy has been violated. It can also turn into an uncomfortable headline. When Target used its database of customer purchases to send coupons for diapers to the home of an expectant teen before her father knew about the pregnancy, its action backfired. The incident became the centerpiece of a New York Times story on Target’s consumer intelligence gathering practices and privacy.

Straddling the Line of Trust

Customers can’t define the line between helpful and creepy, but they know it when they see it.

Research conducted by RichRelevance in 2015 made something abundantly clear: what marketers think is cool may be seen as creepy by consumers. For example, facial-recognition technology that identifies age and gender to target advertisements on digital screens is considered creepy by 73% of people surveyed. Yet consumers were happy about scanning a product on their mobile device to see product reviews and recommendations for other items they might like, the survey revealed. Here’s what else resonates as creepy or cool when it comes to digital engagement with consumers, courtesy of RichRelevance and Edelman Berland (now called Edelman).

Creepy

  • Shoppers are put off when salespeople greet them by name because of mobile phone signals or know their spending habits because of facial-recognition software.
  • Dynamic pricing, such as a digital display showing a lower price “just for you,” also puts shoppers off.
  • When brands collect data on consumers without their knowledge, 83% of people consider it an invasion of privacy, according to RichRelevance’s research, and 65% feel the same way about ads that follow them from Web site to Web site (retargeting).

Cool

  • Shoppers like mobile apps with interactive maps that efficiently guide them to products in the store.
  • They also like when their in-store location triggers a coupon or other promotion for a product nearby.
  • When a Web site reminds the consumer of past purchases, a majority of shoppers like it.

There are no hard-and-fast rules about which personalization tactics are creepy and which are cool, but trust is particularly threatened in face-to-face interactions. Nobody minds much if Amazon sends product recommendations through a computer, but when salespeople approach customers like a long-lost friend based on information collected without the customer’s knowledge or permission, the violation of trust feels much more personal and emotional. The stage is set for an angry, embarrassed customer to walk out  the door, forever.

sap_Q216_digital_double_feature3_images3It doesn’t help that the limits of trust shift constantly as social media tempts us to reveal more and more about ourselves and as companies’ data collection techniques continue to improve. It’s easy to cross the line from helpful to creepy or annoying (see Straddling the Line of Trust).

Online, customers are similarly choosy about personalization. For example, when online shoppers are simply looking at a product category, ads that matched their prior Web-browsing interests are ineffective, an MIT study reports. Yet after consumers have visited a review site to seek out information and are closer to a purchase, personalized content is more effective than generic ads.

Personalization Requires a Live Business

Yet the limits of trust are definitely shifting toward more personalization, not less. Customers already enjoy frictionless personalized experiences with digital-native companies like Uber, and they are applying those heightened expectations to all companies. For example, 91% of customers want to pick up where they left off when they switch between channels, according to Aspect research. And personalization is helpful when you receive recommendations for products that you would like based on previous in-store or online purchases.

sap_Q216_digital_double_feature3_images-0004Customers also want their interactions to be live—or in the moment they choose. Fulfilling that need means that companies must become Live Businesses, capable of creating a technological infrastructure that allows real-time interactions and that allows the entire organization—its structure, people, and processes—to respond to customers in all the moments that matter.

Coordinating across channels and meeting customers in the right moments with personalized interactions will become critical as the digital economy matures and customer expectations rise. For instance, when customers air complaints about a brand on social media, 72% expect a response within an hour, according to consulting firm Bain & Company. Meanwhile, an Accenture survey found that nearly 60% of consumers want real-time promotions; 48% like online reminders to order items that they might have run out of; and 51% like the idea of a one-click checkout, where they can skip payment method or shipping forms because the retailer has saved their preferences. Those types of services build trust, showing that companies care enough to understand their customers and send offers or information that save them time, money, or both.

So while trust is difficult to earn, once you’ve earned it and figured out how to maintain it, you can have customers for life—as long as you respect the shifting boundaries.

“Do customers think the company is truly acting with their best interests at heart, or is it just trying to feed the quarterly earnings beast?” asks Donna Peeples, a customer experience expert and the former chief customer experience officer at AIG. “Customer data should be accurate and timely, the company should be transparent about how the data is being used, and it should give customers control over data collection.”

sap_Q216_digital_double_feature3_images-0005How to Earn Trust for a Live Business

Despite spending US$600 billion on online purchases, U.S. consumers are concerned with transaction privacy, the 2015 Consumer Trust Survey from CA Security Council reveals. These concerns will become acute as Live Businesses make personalization across channels a reality.

Here are some ways to improve trust while moving forward with omnichannel personalization.

  • Determine the value of trust. Customers want to know what value they are getting in exchange for their data. An Accenture study found that the majority of consumers in the United States and the United Kingdom are willing to have trusted retailers use some of their personal data in order to present personalized and targeted products, services, recommendations, and offers.
    “If customers get substantial discounts or offers that are appealing to them, they are often more than willing to make that trade-off,” says Tom Davenport, author of Big Data at Work: Dispelling the Myths, Uncovering the Opportunities. “But a lot of companies are cheap. They use the information but don’t give anything back. They make offers that aren’t particularly relevant or useful. They don’t give discounts for loyalty. They’re just trying to sell more.”
  • Let customers make the first move. Customers who voluntarily give up data are more likely to trust personalization across the channels where they do business. Mobile apps are a great way to invite customers to share more data in a more intimate relationship that they control. By entering the data they choose into the app, customers won’t be annoyed by personalization that’s built around it.
    For example, a leading luxury retailer’s sales associates may offer customers their favorite beverages based on information they entered into the app about their interests and preferences.
  • Simplify data collection and usage policies. Slapping a dense data- use policy written in legalese on the corporate website does little to earn customers’ trust. Instead, companies should think about the customer data transaction, such as what information the customer is giving them, how they’re using it, and what the result will be, and describe it as simply as possible.
    “Try to describe it in words so simple that your grandmother can understand it. And then ask your grandmother if it’s reasonable,” suggests Elea McDonnell Feit, assistant professor of marketing at Drexel University’s LeBow College of Business. “If your grandmother can’t understand what’s happening, you’ve got a problem.”
    The use of data should be totally transparent in the interaction itself, adds Feit. “When a company uses data to customize a service or offering to a customer, the customer should be able to figure out where the company got the data and immediately see how the company is providing added value to the customers by using the data,” Feit says.
  • Create trust through education. Yes, bombarding customers with generic offers and pushing those offers across the different Web sites they visit may boost profits over the short term, but customers will eventually become weary and mistrustful. To create trust that lasts and that supports personalization, educate the customers.

Procter & Gamble’s (P&G’s) Mean Stinks campaign for Secret deodorant encourages girl-to-girl anti-bullying posts on Twitter, Facebook, and Instagram. The pages let participants send apologies to those they have bullied; view videos; and share tips, tools, and challenges with their peers.

P&G has said that participation in Mean Stinks has helped drive market share increases for the core Secret brand as well as the specific line of deodorant promoted by the effort. Offering education without pushing products or services creates a sense that companies are putting customers’ interests before their own, which is one of the bedrock elements of trust. Opting in to personalization seems less risky to customers if they perceive that companies have built up a reserve of value and trust.

“Companies that do personalization well demonstrate that they care, respect customers’ time, know and understand their customers and their needs and interests,” says Peeples. “It also reinforces that interactions are not merely transactions but opportunities to build a long-term relationship with that customer.”

Laying the Foundation for Live, Personalized Omnichannel Processes

sap_Q216_digital_double_feature3_images-0006Creating a personalized omnichannel strategy that balances trust and business goals starts with knowing the customer. This can happen only when multiple aspects of your business are coordinated in a live fashion. But marketers today struggle to collect the kind of data that could drive more meaningful connections with customers. In an Infogroup survey of more than 500 marketers, only 21% said they are “very confident in the accuracy and completeness of their customer profiles.” A little over half of respondents said they aren’t collecting enough data overall.

Collecting enough of the right types of data requires more holistic data-collection techniques:

  • Take advantage of the lower costs for processing and storing terabytes of data, and develop a data strategy that combines and crunches all the customer data points needed to drive relevant interactions. This includes transactional, mobile, sensor, and  Web data.
  • Social media analytics is also a central tactic. Social profiles and activity are rich sources of data about behavior and character, merging what people buy or look for with their interests, for instance. Such data can feed predictive analytics and personalization campaigns.
  • Experiment with commercial tools that can filter and mine the data of customers and prospects in real time. This is a significant step beyond basic demographic data collections of the past.

sap_Q216_digital_double_feature3_images-0007Once the necessary data is available, companies need the technology, processes, and people to make sensible use of it in an omnichannel personalization strategy. Only when a company is organized as a Live Business can that happen. Here’s how your company can move toward being a Live Business:
Be live across channels. Having a consistent customer journey map across channels is core to omnichannel personalization. It requires integration across multiple systems and organizational silos to enable core capabilities, such as inventory visibility and purchase/pickup/return across channels. This integration also constitutes a major chunk of the transition to becoming a company that can act in the moments that matter most to customers. If all channels can sync in real time, customers can get what they want in the moment they want it.

Free the data scientists. Marketing rarely has full control over the omnichannel experience, but it is the undisputed leader in understanding customer behavior. While data science is part of that understanding, it has traditionally played a background role. Marketers need to bring the data scientists into efforts to sort through the different options for digitizing the omnichannel experience. The right data scientists understand not only how to use the tools but also how to apply the data to make accurate decisions and follow customers from channel to channel with personalized offers.

Walgreens’ Technology Approach to Personalization

Walgreens is a leader in building the kind of technology base that can enable real-time, omnichannel personalization. Its digital transformation is 16 years in the making, according to Jason Fei, senior director of architecture for digital engineering at Walgreens. At the heart of its infrastructure is a Big Data engine that feeds many customer interaction and omnichannel processes, including customer segmentation. The company adds third-party systems in areas such as predictive analytics and marketing software. Walgreens has a cloud-first strategy for all new applications, such as its image-processing and print-ordering applications. Other elements of the drugstore chain’s technology platform include:

  • Application programming interface (API)-driven architecture. Walgreens’ APIs enable more than 50 partners to connect with its apps and systems to drive customer-facing processes, including integrations with consumer wearables to drive reward points for healthy habits, as well as content partnerships with companies such as WebMD. “With APIs we can be an extensible business, allowing other companies to connect to us easily and help in the digital enablement of our physical stores,” Fei says.
  • Responsive Web sites. The company’s Web site is built using responsive and adaptive design practices so that the site automatically adapts to the consumer’s device, whether that is a mobile phone, tablet, or desktop computer. “We have a single code base that runs anywhere and delivers a consistent, optimized experience to all of our customers,” Fei says.

Making the Most of the Technology Base

This technology foundation has allowed Walgreens to push forward in personalization. For example, according to Fei the company uses sophisticated segmentation and personalization engines to drive outbound e-mail and text campaigns to customers based on their purchase history and profile. “We don’t blast out messages to customers; we use our personalization recommendations to be relevant,” says Fei.

The next phase of this strategy is to develop live inbound personalization tactics, such as recognizing customers when they come back to the Web site and tailoring their experience accordingly. These highly automated, self-learning systems improve over time, becoming more relevant at the moment a customer logs back in.

“When you search for a product, the Web site will take a good guess of what you might actually want. If you always print greeting cards at the same time of year, for example, the system would automatically deliver content around that,” Fei explains. “Everyone comes to Walgreens with a mission, so we can be very targeted with our communications.”

Walgreens’ mobile app combines real-time personalization with convenience. You can scan a pill bottle to refill a prescription, access coupons, send photos from your phone to print in the store, track rewards, and find the exact location of a product on the shelf.

Walgreens also recently deployed a new integrated interactive voice-response system that includes a personalization engine that recognizes the individual, says Troy Mills, vice president of customer care at Walgreens. The system can then predict the most probable reason for the customer’s call and quickly get them to the right individual for further help.

How to Get Started with Live Customer Experiences

sap_Q216_digital_double_feature3_images-0008As Fei can attest, getting Walgreens’ omnichannel and personalization infrastructure to this point has involved a lot of work, with much more to come. For companies just now embarking on this journey, especially midsize and large companies, getting started will mean overhauling an outdated and ineffective technology infrastructure where duplicate systems and processes for managing customer data, marketing programs, and transactions are common.

A bad internal user experience often transcends into a bad customer-facing experience, says Peeples. “We can’t afford the distractions of the latest app or social ‘shiny penny’ without addressing the root causes of our systems’ issues.”

Live Business Requires Striking the Right Balance

The boundaries of trust are a moving target. Sales tactics that used to be acceptable decades ago, such as the door-to-door salesperson, are unwelcome today to most homeowners. And consumers’ expectations are unpredictable. At the dawn of social media, many people were anxious about their photos unexpectedly showing up online. Now our identities are tagged and our posts and photos distributed and commented on regularly.

But while consumers are getting more comfortable with online technology and its trade-offs, they won’t put up with personalization efforts that make use of their data without their knowledge or permission. That data has value, and customers want to decide for themselves when it’s worth giving it away. Marketers need to strike the right balance between personalization and a healthy respect for the unique needs and concerns of individuals. D!

 

Comments

Lori Mitchell-Keller

About Lori Mitchell-Keller

Lori Mitchell-Keller is the Executive Vice President and Global General Manager Consumer Industries at SAP. She leads the Retail, Wholesale Distribution, Consumer Products, and Life Sciences Industries with a strong focus on helping our customers transform their business and derive value while getting closer to their customers.

Tags:

Technology Trends Shaping The Way Utilities Work

Lloyd Adams

No one needs to tell you that the digital revolution is here to stay. Digital business is big business. This is especially true now that one-time novelties like the Internet and mass-scale analytics have exited their infancies. It’s safe to assume that while the digital transformation is not yet complete, it has extended to almost every corner of industry.

Chief among the ways in which technology is changing the world is in the realm of utilities. How we get our power matters, as does how it’s metered and distributed. Too little of it and the system isn’t working; too much and it becomes wasteful and inefficient. A happy middle ground both satisfies consumers and conserves resources. So how might the utility organizations use digital resources to make utilities more efficient?

How can we use technology to create a better world?

The wide array of digital resources makes it easier than ever before for utility companies to track their operations. This in turn enables them to respond to energy supply and demand more immediately. It also allows them to deliver electricity in a more responsive and less wasteful way.

The smart grid is a great example of how hyperconnectivity and supercomputing combine. Together they enable a much smarter means of energy distribution. The smart grid uses smart-meter technology in homes, renewable energy, and new data-driven systems to maintain efficient operations and save non-renewable resources.

The digital energy network is another cutting-edge idea. It enables a two-way flow of both power and information. Large stakeholders still help control the flow of electricity and energy. But now consumers can help as well. The result? Better efficiency, less waste.

Who showcases digital business models at their best?

Luckily, some utility front-runners are offering valuable insight into the future for all. Consider CenterPoint Energy. It integrates information technology and operational technology to emphasize streamlined results and conservation.

Or the Tokyo Electric Power Company. It aims to install 27 million residential smart meter devices by 2020. These meters track energy usage and relay it back to the central utility company. Such metering will help the company make better, greener decisions about energy usage.

Then there’s Tesla, which already has a reputation for cutting-edge environmentalism. Its Powerwall lithium ion battery enables homes to store solar energy. This historically tricky feat will allow residents to “go net zero.” That means keeping their home off the grid entirely.

Each digital business models showcases a different strategy. Together, these strategies can transform our current energy economy. The result? Environmental resource management on a scale never before seen.

Will you benefit from going digital?

Yes. Like any powerful technology, these digital business models reward utility companies who adopt them early. Using digital tools to monitor operations and output has many benefits. You can grow your company for stakeholders and shareholders. You can differentiate from competitors. And you can clean up power for the sake of your city and the world.

Of course, most likely you’ve already incorporated a fair bit of digital technology into your operations. If you’re like many utility companies, though, there’s much more you can do. Engage with customers more meaningfully by making them partners in the metering process. Digitize your business to streamline information gathering. Pair up with same or similar businesses to achieve economies of scale

These approaches enable energy portfolio management on scales never before seen. The result for your business goes well past innovation. You’ll also see differentiation, growth, and competitiveness on a whole new level.

For more information on Digital Transformation for Utilities, click here.

Comments

Lloyd Adams

About Lloyd Adams

Lloyd Adams is national vice president of Utilities for SAP North America. In this role, he is responsible for sales and customer relations in the SAP Utilities North America practice.