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How The World Is Changing, And How IoT Can Change The World

Richard Howells

In 2016, the world population surpassed 7.3 billion, meaning the number of people on Earth has doubled in the past 45 years.

Furthermore, there’s no end insight to this rapid growth. In fact, it has been calculated that the population is increasing by more than 140 people every minute.

This exploding population creates challenges from the perspectives of sustainability and urbanization:

  • The world’s population is outgrowing the available natural resources. If, as predicted, the global population reaches 9.6 billion by 2050, we would, per United Nations figures, require the equivalent of almost three planets to provide the natural resources needed to sustain current lifestyles.
  • Global population is migrating to urban areas, creating a strain on infrastructure. The United Nations predicts that by 2030, 60% of the world population will live in urban areas. In 2000, this number was only 47%. Nearly 180,000 people are added to the urban population each day.

These two facts alone suggest we must innovate to leverage our natural resources in a more sustainable way, and in many cases, do more with less.

IoT revolutionizes farming

In a recent blog post, SAP and Stara: IoT’s New Constellation of Stars, author Judith Magyar explains how tractors can now leverage sensors to capture real-time data and optimize farm management and operations.

By leveraging data analytic capabilities, farmers can:

  • Gain better insights to make more sound decisions
  • Produce more high-quality crops per acre
  • Support sustainable agricultural practices that respect the environment

This is just one example of how the Internet of Things (IoT) can help balance supply and demand for the world’s natural resources to help maximize production, reduce environmental impact, and remediate problems faster.

Check out this video to learn more about how IoT is revolutionizing the farming industry.

Argentina modernizes its capital city with IoT

In another recent article, 3 Ways Buenos Aires Is Leading Smart City Technology, author Christine Donato explains how the Argentinian capital is leveraging IoT solutions to mitigate some of the challenges of a growing urban area.

This includes:

  • Managing and responding to the 30,000 complaints the city receives each month by leveraging real-time data and social media insight
  • Reducing consumption and keeping the city illuminated and safe by converting 91,000 public street lights to modern LED technology, and using real-time insights to quickly address power outages, broken lights, and vandalism
  • Automating maintenance on 1,400 kilometers of drainage pipes to execute cleaning and maintenance at maximum capacity and predict potential flooding

Check out this video to learn more about how Buenos Aires is illuminating the city in a more sustainable way.

These are just two examples of how organizations are leveraging IoT to change the world. For more on these stories and many others, attend the SAP Leonardo Live – IoT for Business event on July 11 and 12 in Frankfurt, Germany. Visit this website for additional details.

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About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.

4 Steps To Revolutionize Your Industrial Manufacturing [VIDEO]

Conor Brophy

For generations, we have lived in a mass production society. Imagine a world where a 50,000-square foot warehouse, once filled with products and inventory as far as the eye can see, now sits empty. Inventory has shifted to a new location: the cloud. Products are now manufactured, or “printed,” on-demand and delivered to the location where the demand exists.

UPS and Fast Radius are two innovative companies with a shared vision for the future of manufacturing. Fast Radius is UPS’s partner in 3D printing and a pioneer in on-demand manufacturing. UPS is a global leader in logistical services. Together, these two companies are teaming up and leveraging IoT technology in order to rewrite the rules of manufacturing.

The digital supply chain

“[There] are problems that [manufacturing] companies have been trying to solve for decades. How do I make my inventory management more efficient? How do I match the supply of product that I’m making with the actual demand?” said Rick Smith, co-founder of Fast Radius, at the Fast Radius facility in Chamblee, Georgia.

To answer these questions, we must take a step back and look at the big picture. Over the last 100-plus years, conventional manufacturing has been based on a simple equation: “The more things you make, the lower the cost of each of those things,” according to Rick Smith. This equation presents problems in cost and infrastructure when considering factory build and maintenance, tooling and molds, and piles of excess inventory. Instead of asking how to simply make this process more efficient, UPS and Fast Radius are taking a step further by enabling a digital supply chain.

Simplifying industrial manufacturing in four easy steps

1. Design

The first step towards on-demand manufacturing requires a seamlessly integrated solution for collaboration. Fast Radius is leveraging a distributed manufacturing solution to virtually collaborate with customers and ensure design specifications and the correct level of certifications are met. This platform is the digital workshop where designers and engineers, on both sides, can make sure a printed product will be the same as one produced on an assembly line.

2. Internet of Things (IoT)

UPS is using an IoT platform which specializes in making machines smarter and drives end-to-end digital transformation. A distributed manufacturing solution, sensors, automation, robotics, and 3D printers feed massive amounts of data processed within an IoT portfolio, enabling more dynamic data leading to seamless customer experiences.

“It’s really an ecosystem of technologies that work together. It’s not just one thing, it’s many things that are working together,” said Alan Amling, VP of strategy at UPS.

3. 3-D printing

3D printing is the third step in the process to set forth on-demand manufacturing. After taking the world by storm, the technology continues to evolve every day. “Traditionally with printing, you would be stuck with a very limited amount of materials. You could replicate some of the harder types with traditional methods, but with the new technologies and new materials coming to market, you can almost replicate any kind of production,” said Rick Smith.

4. Logistics

Finally, a designed, printed product must do one last thing: Get to the customer. How? By leveraging UPS and its areas of logistical expertise. Simply box it up and slap on a UPS Next-Day Air sticker. The customer will receive the part within 24 hours of initial purchase.

By harnessing the power of an IoT platform, UPS and Fast Radius are quickly revolutionizing product manufacturing. They have streamlined the process of design, IoT, 3-D printing, and logistics to create a seamless customer experience. The impact to manufacturers, to businesses, and to individuals will undoubtedly be disruptive. Watch the video below to learn more.

Effective IoT connectedness requires a unifying foundation. SAP has addressed this need by introducing the SAP Leonardo portfolio, an innovative IoT solution portfolio designed to help organizations digitally transform existing processes and evolve to new digital models. Learn more by downloading an SAP Leonardo brochure, reading about real-world use cases, attending our flagship event Leonardo Live this summer, visiting sap.com/iot, and following us on Twitter at @SAPLeonardo.

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Conor Brophy

About Conor Brophy

Conor Brophy joined SAP as an intern with the SAP HANA Enterprise Cloud go-to-market team. He currently works with the SAP Global Marketing Customer Storytelling team as a content specialist. When he is not writing about stories of "Run Simple," he enjoys golf, hiking and spending time with his fiance, friends and family.

Amp The Supply Chain

Hans Thalbauer and Michael S. Goldberg

Earlier this decade, manufacturing executives were skeptical about the benefits of digitizing their operations. According to various studies, only 37% believed digital business could drive revenue growth; 25% thought the sector would be highly impacted by digital transformation within the following five years; and fewer than 10% were implementing digital technologies to transform their businesses end to end.

That was then. The future is arriving fast.

Now every manufacturing C-suite in the world is on the path to digital transformation, with the supply chain at its heart. A transformed supply chain is the enabler for companies to deploy technology for personalizing products, accelerating delivery, and meeting rising customer expectations—all while constantly probing the boundaries of their existing business models.

Researchers at IDC have identified a clear turning point ahead: they predict that half of manufacturers will be benefiting from digital transformation in their supply chains by 2019.

Charging Ahead with
Supply Chain Transformation

When successfully implemented, digital supply chain technologies will lead to revenue gains, boost service quality, help cut innovation costs, and speed product-to-market times. The evidence is already apparent.

 2018

90% of supply chains will use B2B commerce networks to collaborate. By enabling decentralized collaboration among members of networks, blockchain technology is beginning to demonstrate its potential to automatically speed up supply chain network transactions. CoinDesk reports that BHP Billiton, one of the world’s largest mining companies, has started using blockchain technology to automatically share data with vendors (including geologists and shipping firms) that collect and analyze mining samples instead of relying on spreadsheets.

Manufacturing centers and microfactories with 3D printers will receive 500% more funding. Ford is testing 3D printing to make parts, starting with plastic molding for auto interiors and spoilers that go on racing models. The technology has potential to speed delivery of parts and save money in assembly and service processes.

Data: IDC

2019

Supply chain productivity and efficiency using Internet of Things (IoT) sensors will improve 30%. IoT-based sensors that enable the collection and analysis of data—and the analytics tools that make good on the variety and speed of that data—make productivity and efficiency improvements possible. Following a model with jet engines made famous by General Electric, Kaeser Compressors has fitted its air compressors with internet-connected sensors and is selling metered air compressor services rather than the equipment itself. Not only does this represent a new business model for Kaeser, it also improves uptime and service quality for customers, because the manufacturer, not the user, is responsible for maintenance.

50% of supply chains will benefit from digital transformation, while others will lag due to outdated business models and systems. The creation of local factories and mini-warehouses will put subsets of products closer to where they are needed and will locate production processes and products closer to customers. Adidas is building a “Speedfactory” in Atlanta, slated to open in 2017, that will bring customized products to American retail customers faster than could be done when manufacturing is executed primarily in Asia. The Atlanta facility, modeled after a factory in Germany, will use robots to automate production processes that can, for example,  customize shoe styles and fit to match customer specifications.

Data: IDC

2020

50% of mature supply chains will use artificial intelligence and advanced analytics for planning and forecasting. Intelligent systems can make faster and better predictions than people can. The healthcare unit at Merck KGaA is working on an initiative to bring sensors and intelligent software algorithms to bear on its supply chain, according to The Wall Street Journal. The goals: better data about how products do in the market and an accelerated planning process.

50% of manufacturers will deliver directly to consumers. The McDonald’s supply chain once stopped at the restaurant door. But after offering delivery services in Asia and the Middle East, the company has begun pilots to bring burgers to customers—even partnering with ride-sharing digital natives at Uber in Florida to deliver meals.

Data: IDC

Digital Power Source

The opportunities for supply chain transformation are real, although the path forward is challenging. An SAP-sponsored study by research and advisory firm Longitude notes that while many enterprises appear to be digitized, the foundations of their operations—supply chain, procurement, and logistics—are still analog. Market forces are placing these companies under great strain, making them susceptible to disruption by digital startups.

Transformation means converting analog processes into digital supply networks—now. While every company’s digitization strategy will be different, enabling these processes requires the following:

  • Ask the right questions. To avoid being overtaken by a lean startup, you need to continually evaluate your operations against competitors. Some questions to ask, according to Peter Weill and Stephanie L. Woerner in the MIT Sloan Management Review: Are the products you make ordered and delivered digitally? Can you equip them with data to make them more valuable? Are there other firms serving your customers that could become competitors? Can a digital offering replace your products now or in the future?
  • Have the right data systems in place. You need information from everything in your production ecosystem—including sensors, machines, factory and warehouse equipment, trucks, and even products—in forms that you can analyze to improve production processes.
  • Commit to automation. Machine-learning technologies make your systems more intelligent, so you can pursue the right opportunities and produce the right outcomes. For example, blockchain technology applied to supply chain systems can configure order processes so they happen immediately.
  • Include every process. The digitization effort should cover manufacturing processes from product design and configuration to supply chain planning, manufacturing, shipping, and after-sales service.

These points are where the discussion starts. Every C-suite will have its own approach to how these elements come together for their firm to succeed. Many companies are executing their strategies now. The rest need to head that way. D!

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Hans Thalbauer

About Hans Thalbauer

Hans Thalbauer is globally responsible for solution management and the go-to-market functions for SAP digital supply chain solutions and the SAP Leonardo portfolio of Internet of Things solutions. In this role, he is engaged in creative dialogues with businesses and operations worldwide, addressing customer needs and introducing innovative business processes, including the vision of creating a live business environment for everyone working in operations. Hans has more than 17 years with SAP and is based out of Palo Alto, CA, USA. He has held positions in development, product and solution management, and the go-to-market organization. Hans holds a degree in Business Information Systems from the University Vienna, Austria.

Michael S. Goldberg

About Michael S. Goldberg

Michael S. Goldberg is an independent writer and editor focusing on management and technology issues.

Primed: Prompting Customers to Buy

Volker Hildebrand, Sam Yen, and Fawn Fitter

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


About the Authors:

Volker Hildebrand is Global Vice President for SAP Hybris solutions.

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

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

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Pulling Cities Into The Future With Blockchain

Dan Wellers , Raimund Gross and Ulrich Scholl

The next wave of the digital economy is just over the horizon, and it could be built on the blockchain.

Blockchain technology has been rapidly growing in influence since 2015, when it became apparent that the technology underlying the relatively arcane concept of cryptocurrency could transform the financial system. By the end of 2016, major players like Bank of America and Goldman Sachs were laying claim to promising blockchain technologies, filing patents at roughly twice the pace they had at the start of the year.

Enthusiasm for blockchain is not just accelerating, but spreading beyond financial services, as SAP and other global organizations consider all the ways it could remove friction and risk in business transactions. From traditional vendors like IBM and Microsoft to leading consultancies including Accenture and Deloitte, some of the world’s biggest companies are acknowledging themany possibilities inherent in the ability to maintain distributed, tamper-proof ledgers that permanently and transparently record transactions. Yet as promising as blockchain already is, the business world may still be underestimating how profoundly it could change transactions, organizations, and industries. It could ultimately change the entire economy.

Trustworthy data and interactions are the cornerstone of the digital economy. As the physical world becomes ever more quantified, being able to guarantee the integrity and provenance of digital and physical assets and the transactions in which they’re involved will become a core competitive advantage — and blockchain is deliberately designed to embed that guarantee in every transaction. Distributed ledgers, smart contracts, and other blockchain technologies could form the foundation on which other exponential technologies combine and scale.

The basic idea is simple: IoT sensors in drones, autonomous vehicles, 3D printers, and augmented/virtual reality gear would collect and record data in blockchain-based decentralized ledgers. This data would be immediately verified and could be made instantly available for use by any application. Smart contracts programmed into the blockchain would then execute business processes by drawing on these vast repositories of live data. Everything could be further automated by adding artificial intelligence into blockchain smart contracts to make decisions without human involvement.

Here are just a few of the possibilities that could be someday realized on a blockchain framework:

  • Democratized design and manufacture: A blockchain-enabled design and manufacturing platform would allow individuals and small businesses to play a larger role in the digital economy. Products designed from scratch in virtual reality, as well as copies of existing objects scanned with machine vision, could be easily bought, sold, shared, or even digitally remixed, at an affordable cost while protecting intellectual property rights. This would be true whether the work was complex multi-material physical products made with distributed 3D printers — or text, music, and images.
  • Autonomous logistics: Intelligent, self-driving delivery vehicles could shuttle products and materials to their destinations, or even use onboard 3D printers to create them in the location where they’re needed, while using blockchain technology to execute and verify every transaction. Machine learning apps programmed into smart contracts, which are also embedded in the blockchain, could optimize routing. This could make the current centralized model of warehousing and logistics obsolete.
  • Distributed commerce: Combining blockchain with virtual reality, 3D scanning and printing, artificial intelligence, and autonomous vehicles could create immersive, personalized shopping experiences anywhere consumers want to have them. Shoppers could grant permission for vendors to access their purchase history, preferences, and other data stored on a blockchain ledger. Vendor AIs could then generate more accurate recommendations and interact with ecommerce bots that complete purchases automatically. Customers would receive promotions for new styles, medication refills, or replacement parts without even having to think about it. Critically, blockchain would allow buyers to limit access to their personal or proprietary data to specific organizations over a defined period of time, for example, until the end of their shopping experience or the close of their fiscal year.

This may seem like far-future speculation, but a provocative white paper from consulting firm Outlier Ventures Research claims this shift is both inevitable and already underway.

Envisioning the future city

The more technologies we connect using the blockchain as a framework, the more value we can derive. Imagine that a city has a digital ledger in which every house or apartment has a presence containing all relevant information about the home, from property ownership and mortgage balance to transactional data like utility use, property tax assessment, and past and current contractor relationships. The city could access this “digital twin” to coordinate services and perform administrative tasks related to the property more efficiently and with greater accuracy. The property owner would have a verified, trustworthy way to perform transactions like renting a room, hiring contractors to do lawn work, or selling power generated by solar panels back to the grid. The city utility company could feed power consumption data into an AI to generate energy-saving recommendations, and leverage smart contracts that automatically manage power consumption between smart appliances and the grid to lower costs and improve energy efficiency.

By linking together multiple technologies, this “smart city” could then begin to automate basic city services. For example, IoT sensors could instantly sense a problem (say, a downed electrical cable) and alert the appropriate city agency’s AI to dispatch a technician. The AI might help the technician assess the necessary repair through AR glasses, send templates for parts to the 3D printer in the technician’s truck, reimburse the parts designer through a smart contract, and guide the repair via the AR glasses before finally informing the city agency and property owner when the repair is complete.

Now imagine extending that to the city’s broader infrastructure. A business traveler hops into an autonomous electric taxi at the airport and tells it to take her to a meeting in the city center. Knowing from traffic sensor data that there’s been an accident on the highway, the car automatically chooses an alternate route that ends at the parking lot nearest its destination with an available outlet for charging. As the car parks itself, it connects to an outlet that bills the taxi company in real time for the amount of electricity needed to top up the car battery. As the traveler leaves the parking lot and connects to the city’s public wifi via a social media account, she immediately receives a push notification with a discount at the nearby coffee shop. She stops for coffee and heads for her destination, where the elevator recognizes her phone and automatically takes her to the correct floor for her meeting, right on time.

Meanwhile, city staff can monitor the taxi’s safe operation and ensure the taxi company bills accurately for the ride, check traffic status and push out notifications to all affected drivers, make sure parking is available, confirm the traveler’s opt-in agreement for city wifi, provide the coffee shop’s owner with information on the effectiveness of the day’s coupon, and confirm that the building’s elevators are functioning according to the latest safety codes. Every interaction is transparent, verifiable, and nearly impossible to fake or alter — and just as importantly, it adds to a vast store of data the city can then use machine learning to analyze for future improvements and efficiencies.

A multitude of possibilities

The disruptive potential of already exponential technologies multiplies by orders of magnitude when they can intersect and combine. With blockchain creating the framework for that to happen, it’s not entirely hyperbole to put the potential economic transformation on par with the Industrial Revolution. But companies can’t simply wait until digital transformation is upon us.  Organizations need to start right now to think through the likely impacts in a disciplined and proactive way. Developing scenarios for the multitude of possibilities prepares us to maximize positive outcomes.

Read the executive brief Running Future Cities on Blockchain.


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About Dan Wellers

Dan Wellers is the Global Lead of Digital Futures at SAP, which explores how organizations can anticipate the future impact of exponential technologies. Dan has extensive experience in technology marketing and business strategy, plus management, consulting, and sales.

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.