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Consumer-Driven Digital Enterprise: The Digital Future Of Consumer Products

Jim Cook

Across industries, there’s a lot of talk about how digital is rewriting the rules of engagement.

We are shown examples of how digital disruption is impacting almost every aspect of businesses – from reinventing business models to transforming business processes. Re-imagining a business platform is almost a requirement in today’s consumer-led and data-driven economy. (You know the businesses that are quoted in every article on digital.)

A key question here, though, is: whether the consumer products industry is indeed facing digital disruption, or does it really need deeper digital innovation? Disruption turns an industry on its head by offering consumers something that previously did not exist, while innovation enhances an existing value proposition – making it better, faster, or cheaper.

It is important to distinguish between the two, because hype often causes businesses to overlook the true value of digital transformation. Companies may presume such radical changes have nothing to do with them, especially if they are already in a dominant market position. So while digital is dramatically changing industries such as retail and healthcare, the disruption in the consumer product industry may not be as severe – not yet anyway. Instead, what consumer products businesses should focus on is how they can transform digitally to gain the capacity to build and grow “live brands.” This is preparation and not protectionism.

Create direct customer experiences: Secure the dominant market position

The digital age has fundamentally shifted customer and consumer expectations. Consumers increasingly value outcomes over products. To build ongoing engagement and loyalty, consumer products companies need to sense and engage consumers and customers in the moment, i.e. build “live brands” by seamlessly delivering highly personalized experiences – anytime, anywhere.

This ability to create direct customer experiences helps consumer products companies create a sharper competitive edge to secure dominant market positions. Leading consumer products companies know this well.

Red Bull sets a fine example in creating direct customer experiences to protect and strengthen its brand. Today, it has moved beyond a beverage company into a content media company spanning web, social, film, print, music, and TV – creating brand experiences of exhilaration and adventure. Red Bull collects data from every touch point that it has with the consumer, building an enhanced profile of every individual so that it can respond with products that consumers desire – whenever and how they want them.

Procter & Gamble recently launched an online, direct-to-consumer subscription business for its Tide Pods (its highest-priced laundry detergent). The service (currently only available in Atlanta), branded Tide On Demand, offers free shipping of Tide Pods at regular intervals. P&G has also been testing its delivery laundry service – Tide Spin – in Chicago. While the direct-to-consumer services may not form a bulk of its revenue, they allow P&G to quickly build a live understanding of its customers, their preferences and habits, and then hone in on these insights to create new offerings that customers want.

Build a real-time supply chain: Support lasting customer loyalty

As consumer products companies move towards sensing and engaging customers in the moment, they also need to ensure a fast and profitable response to dynamic demand.

This necessitates connecting customer insights that brand owners have collated and analyzed with supply chain insights to accelerate time to market. Ultimately, it is about transforming previously linear supply chains into customer-centric demand networks – where demand information is captured through new signals from various sources (such as retailers, wholesalers, sites like Amazon, directly from customers, or the Internet of Things) and fulfilled through the orchestration of a network of internal and external partners.

With that, consumer product companies can start getting answers to questions such as:

  • What are my short-, mid-, and long-term views of expected demand across channels?
  • How can I combine supply chain planning with strategic, financial, sales, and operational goals?
  • How can I extend planning by collaborating with customers, partners, and suppliers?
  • How can the company translate the plan into actionable targets for fulfillment systems?

All these should go full circle to help make manufacturing more responsive, optimizing capacity to help ensure availability of finished goods produced just-in-time to meet demand, thereby also lowering inventory costs.

Consumer products companies need to consider how they can create the digital future today. We invite you to learn more about digital transformation for the consumer products industry, where you will get access to valuable resources including whitepapers and customer case studies.

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Jim Cook

About Jim Cook

Jim Cook is the Vice President and Industries and Digital Leader (South East Asia) at SAP. With over 20 years’ experience of IT and business consulting, he has held various roles such as solution architect, project and program management, business development and manager of an SAP partner organisation. Jim is passionate about transformation within consumer driven organizations and is particularly interested in customer engagement solutions and the value that can be achieved from end-to-end SAP solution deployments.

The Intelligent Supply Chain: A Use Case For Artificial Intelligence

Dr. Ravi Prakash Mathur

The term artificial intelligence (AI) invokes images of robot uprisings, space missions to galaxies far, far away, and lab-created clones that make humans immortal. For years, thought-provoking talks by professors have entertained the notion of whether AI is—or ever will be—self-aware. The more adventurous among us may be drawn toward theosophical discussions on creationism or debates about the realities and influences of the quantum world.

Current thinking about AI may border on science vision (if not science fiction or philosophy)—perhaps for a good reason. Technologies once imagined only on the movie screen now bring convenience and value to our daily lives. Some examples include gestural interfaces, machine-aided purchases, facial recognition, autonomous cars, miniature drones, ubiquitous advertising, and electronic surveillance. Machines are now making predictions on trading stocks, customer purchases, traffic flows, and crime—much as we saw in the 2002 movie “Minority Report.”

From movie screen to real-world applications

Technology leaders have placed big bets on technologies such as brain-computer interfaces, AI in medicine, and deep learning and machine learning tools. AI is expected to lead the new economy, which is becoming known as the Fourth Industrial Revolution or the Second Machine Age. AI is at the forefront of business innovation, along with emerging technologies such as robotics, the Internet of Things3D printingquantum computing and nanotechnology.

Companies are still deciding how AI can be designed to fit into their processes. However, burning questions persist around whether self-learning machines will replace or assist humans in white-collar and blue-collar jobs:

  • Can machines learn common sense and empathy?
  • Who owns the insights that are generated by AI technology, and who owns the responsibility for an erroneous decision made by a machine?
  • Can you teach a machine how to make a decision when dealing with an ethical dilemma?

While these concerns still require much deliberation, most industries understand that the application of AI in businesses brings immense potential. Currently, the top 10 use cases for the technology are data security, personal privacy, financial trading, healthcare, marketing personalization, fraud detection, recommendations, online search, natural language processing (NLP), and smart cars.

Considering how quickly these new technologies are adopted and adapted to new use cases, it is only a matter of time before we start seeing AI capabilities become a part of the fabric of normal business processes. While routine transactions have already been automated, many companies that are higher on the learning curve use predictive and prescriptive analytics to guide their operations.

In the supply chain management function, people talk about degrees of autonomy in the planning process. From use of historical data for planning, it goes through use of automation that can be overridden and ends at nonoptional automation, where planners cannot review the recommendations of the algorithms. The algorithmic supply chain requires organizational maturity and cultural readiness to embed and regularly rely on systems. The concept of an intelligent supply chain goes a step further by incorporating self-learning capabilities of the machine to make better supply-chain decisions.

An opportunity to “learn” and improve–without disruption

Common wisdom tells us that organisations compete on the strength of their supply chain ecosystems. Future organisations would compete on the strength of intelligence embedded in their systems. Ultimately, the winner will be the supply chain that learns most quickly with greatest precision.

At a fundamental level, machine-learning algorithms are a teaching set of data. The machine then answers a question by adding every possible correct or incorrect answer to the teaching set. The algorithm keeps getting better and smarter over time.

Organisations learn in a similar fashion: Every organisation has its own embedded intelligence, which manifests itself through the behavior of its managers and their response to the environment. Supply-chain managers use it to review and modify machine-generated forecasts, production plans, or procurement plans.

Putting a self-learning loop into the system will allow a machine to analyse, for example, why a manual override was made to its recommendation, and it can then check for it during the next cycle. This capability is helpful with managing transactions such as fixing incorrect settings, changing norms, or addressing evolving market dynamics. Over a period of time, machines would learn how managers prioritize their plans based on emerging business scenarios, not just optimization algorithms.

For more on how advanced technology is transforming traditional business models, see Are You Joining The Machine Learning Revolution?

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Dr. Ravi Prakash Mathur

About Dr. Ravi Prakash Mathur

Dr. Ravi Prakash Mathur is Senior Director of Supply Chain Management (SCM) and Head of Logistics and Central Planning at Dr. Reddy’s Laboratories Ltd. He heads the global logistics, central planning, and central sourcing for the pharmaceutical organization. Winner of the 2015 Top 25 Digitalist Thought Leaders of India award from SAP, Dr. Mathur is an author, coach, and supply chain professional with 23 years of experience and is based in Hyderabad. He is also actively involved in academic activities and is an internal trainer for DRL for negotiation skills and SCM. In 2014, he co-authored the book “Quality Assurance in Pharmaceuticals & Operations Management and Industrial Safety” for Dr. B. R. Ambedkar University, Hyderabad. He is also member of The Departmental Visiting Committee (DVC) for Department of Biotechnology, Motilal Nehru National Institute of Technology (MNNIT) Allahabad. Professional recognitions include a citation from World Bank and International Finance Corporation for his contribution to their publication “Doing Business in 2006” and the winner of the Logistics-Week Young Achiever in Supply Chain Award for 2012.

Flash Briefing: Why 3D Printed Food Just Transformed Your Supply Chain

Peter Johnson

Today, we’re talking 3D printing and how it could disrupt operations and supply chains in markets around the world.

 

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Peter Johnson

About Peter Johnson

Peter Johnson is a Senior Director of Marketing Strategy and Thought Leadership at SAP, responsible for developing easy to understand corporate level and cross solution messaging. Peter has proven experience leading innovative programs to accelerate and scale Go-To-Market activities, and drive operational efficiencies at industry leading solution providers and global manufactures respectively.

Running Future Cities on Blockchain

Dan Wellers , Raimund Gross and Ulrich Scholl

Building on the Blockchain Framework

Some experts say these seemingly far-future speculations about the possibilities of combining technologies using blockchain are actually both inevitable and imminent:


Democratizing design and manufacturing by enabling individuals and small businesses to buy, sell, share, and digitally remix products affordably while protecting intellectual property rights.
Decentralizing warehousing and logistics by combining autonomous vehicles, 3D printers, and smart contracts to optimize delivery of products and materials, and even to create them on site as needed.
Distributing commerce by mixing virtual reality, 3D scanning and printing, self-driving vehicles, and artificial intelligence into immersive, personalized, on-demand shopping experiences that still protect buyers’ personal and proprietary data.

The City of the Future

Imagine that every agency, building, office, residence, and piece of infrastructure has an entry on a blockchain used as a city’s digital ledger. This “digital twin” could transform the delivery of city services.

For example:

  • Property owners could easily monetize assets by renting rooms, selling solar power back to the grid, and more.
  • Utilities could use customer data and AIs to make energy-saving recommendations, and smart contracts to automatically adjust power usage for greater efficiency.
  • Embedded sensors could sense problems (like a water main break) and alert an AI to send a technician with the right parts, tools, and training.
  • Autonomous vehicles could route themselves to open parking spaces or charging stations, and pay for services safely and automatically.
  • Cities could improve traffic monitoring and routing, saving commuters’ time and fuel while increasing productivity.

Every interaction would be transparent and verifiable, providing more data to analyze for future improvements.


Welcome to the Next Industrial Revolution

When exponential technologies intersect and combine, transformation happens on a massive scale. It’s time to start thinking through outcomes in a disciplined, proactive way to prepare for a future we’re only just beginning to imagine.

Download the executive brief Running Future Cities on Blockchain.


Read the full article Pulling Cities Into The Future With Blockchain

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Dan Wellers

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

Raimund Gross

About Raimund Gross

Raimund Gross is a solution architect and futurist at SAP Innovation Center Network, where he evaluates emerging technologies and trends to address the challenges of businesses arising from digitization. He is currently evaluating the impact of blockchain for SAP and our enterprise customers.

Ulrich Scholl

About Ulrich Scholl

Ulrich Scholl is Vice President of Industry Cloud and Custom Development at SAP. In this role, Ulrich discovers and implements best practices to help further the understanding and adoption of the SAP portfolio of industry cloud innovations.

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Are AI And Machine Learning Killing Analytics As We Know It?

Joerg Koesters

According to IDC, artificial intelligence (AI) is expected to become pervasive across customer journeys, supply networks, merchandizing, and marketing and commerce because it provides better insights to optimize retail execution. For example, in the next two years:

  • 40% of digital transformation initiatives will be supported by cognitive computing and AI capabilities to provide critical, on-time insights for new operating and monetization models.
  • 30% of major retailers will adopt a retail omnichannel commerce platform that integrates a data analytics layer that centrally orchestrates omnichannel capabilities.

One thing is clear: new analytic technologies are expected to radically change analytics – and retail – as we know them.

AI and machine learning defined in the context of retail

AI is defined broadly as the ability of computers to mimic human thinking and logic. Machine learning is a subset of AI that focuses on how computers can learn from data without being programmed through the use of algorithms that adapt to change; in other words, they can “learn” continuously in response to new data. We’re seeing these breakthroughs now because of massive improvements in hardware (for example, GPUs and multicore processing) that can handle Big Data volumes and run deep learning algorithms needed to analyze and learn from the data.

Ivano Ortis, vice president at IDC, recently shared with me how he believes, “Artificial intelligence will take analytics to the next level and will be the foundation for retail innovation, as reported by one out of every two retailers globally. AI enables scale, automation, and unprecedented precision and will drive customer experience innovation when applied to both hyper micro customer segmentation and contextual interaction.”

Given the capabilities of AI and machine learning, it’s easy to see how they can be powerful tools for retailers. Now computers can read and listen to data, understand and learn from it, and instantly and accurately recommend the next best action without having to be explicitly programmed. This is a boon for retailers seeking to accurately predict demand, anticipate customer behavior, and optimize and personalize customer experiences.

For example, it can be used to automate:

  • Personalized product recommendations based on data about each customer’s unique interests and buying propensity
  • The selection of additional upsell and cross-sell options that drive greater customer value
  • Chat bots that can drive intelligent and meaningful engagement with customers
  • Recommendations on additional services and offerings based on past and current buying data and customer data
  • Planogram analyses, which support in-store merchandizing by telling people what’s missing, comparing sales to shelf space, and accelerating shelf replenishment by automating reorders
  • Pricing engines used to make tailored, situational pricing decisions

Particularly in the United States, retailers are already able to collect large volumes of transaction-based and behavioral data from their customers. And as data volumes grow and processing power improves, machine learning becomes increasingly applicable in a wider range of retail areas to further optimize business processes and drive more impactful personalized and contextual consumer experiences and products.

The transformation of retail has already begun

The impacts of AI and machine learning are already being felt. For example:

  • Retailers are predicting demand with machine learning in combination with IoT technologies to optimize store businesses and relieve workforces
  • Advertisements are being personalized based on in-store camera detections and taking over semi-manual clienteling tasks of store employees
  • Retailers can monitor wait times in checkout lines to understand store traffic and merchandising effectiveness at the individual store level – and then tailor assortments and store layouts to maximize basket size, satisfaction, and sell through
  • Systems can now recognize and predict customer behavior and improve employee productivity by turning scheduled tasks into on-demand activities
  • Camera systems can detect the “fresh” status of perishable products before onsite employees can
  • Brick-and-mortar stores are automating operational tasks, such as setting shelf pricing, determining product assortments and mixes, and optimizing trade promotions
  • In-store apps can tell how long a customer has been in a certain aisle and deliver targeted offers and recommendations (via his or her mobile device) based on data about data about personal consumption histories and preferences

A recent McKinsey study provided examples that quantify the potential value of these technologies in transforming how retailers operate and compete. For example:

  • U.S. retailer supply chain operations that have adopted data and analytics have seen up to a 19% increase in operating margin over the last five years. Using data and analytics to improve merchandising, including pricing, assortment, and placement optimization, is leading to an additional 16% in operating margin improvement.
  • Personalizing advertising is one of the strongest use cases for machine learning today. Additional retail use cases with high potential include optimizing pricing, routing, and scheduling based on real-time data in travel and logistics, as well as optimizing merchandising strategies.

Exploiting the full value of data

Thin margins (especially in the grocery sector) and pressure from industry-leading early adopters such as Amazon and Walmart have created strong incentives to put customer data to work to improve everything from cross-selling additional products to reducing costs throughout the entire value chain. But McKinsey has assessed that the U.S. retail sector has realized only 30-40% of the potential margin improvements and productivity growth its analysts envisioned in 2011 – and a large share of the value of this growth has gone to consumers through lower prices. So thus far, only a fraction of the potential value from AI and machine learning has been realized.

According to Forbes, U.S. retailers have the potential to see a 60%+ increase in net margin and 0.5–1.0% annual productivity growth. But there are major barriers to realizing this value, including lack of analytical talent and siloed data within companies.

This is where machine learning and analytics kick in. AI and machine learning can help scale the repetitive analytics tasks required to drive leverage of the available data. When deployed on a companywide, real-time analytics platform, they can become the single source of truth that all enterprise functions rely on to make better decisions.

How will this change analytics?

So how will AI and machine learning change retail analytics? We expect that AI and machine learning will not kill analytics as we know it, but rather give it a new and even more impactful role in driving the future of retail. For example, we anticipate that:

  • Retailers will include machine learning algorithms as an additional factor in analyzing and  monitoring business outcomes in relation to machine learning algorithms
  • They will use AI and machine learning to sharpen analytic algorithms, detect more early warning signals, anticipate trends, and have accurate answers before competitors do
  • Analytics will happen in real time and act as the glue between all areas of the business
  • Analytics will increasingly focus on analyzing manufacturing machine behavior, not just business and consumer behavior

Ivano Ortis at IDC authored a recent report, “Why Retail Analytics are a Foundation for Retail Profits,” in which he provides further insights on this topic. He notes how retail leaders will use new kinds of analytics to drive greater profitability, further differentiate the customer experience, and compete more effectively, “In conclusion, commerce and technology will converge, enabling retailers to achieve short-term ROI objectives while discovering untapped demand. But implementing analytics will require coordination across key management roles and business processes up and down each retail organization. Early adopters are realizing demonstrably significant value from their initiatives – double-digit improvements in margins, same-store and e-commerce revenue, inventory positions and sell-through, and core marketing metrics. A huge opportunity awaits.”

So how do you see your retail business adopting advanced analytics like AI and machine learning? I encourage you to read IDC’s report in detail, as it provides valuable insights to help you invest in – and apply – new kinds of analytics that will be essential to profitable growth.

For more information, download IDC’s “Why Retail Analytics are a Foundation for Retail Profits.

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Joerg Koesters

About Joerg Koesters

Joerg Koesters is the Head of Retail Marketing and Communication at SAP. He is a Technology Marketing executive with 20 years of experience in Marketing, Sales and Consulting, Joerg has deep knowledge in retail and consumer products having worked both in the industry and in the technology sector.