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From Bob Cratchit’s Basement To Modern Finance Office With Dynamic Planning And Analysis

Pras Chatterjee

“Once upon a time, it was Bob Cratchit slaving away in a small basement doing books manually,” commented Jeff Hattendorf, COO and cofounder of Macrospect, referring to the famous character from Charles Dickens’ A Christmas Carol. “That evolved to systems that pull the numbers together and let us see what happened last month. But the systems we have today enable the CFO to see what happens every single day nearly in real time.”

That was one of many optimistic observations on the Feb. 8, 2017, “Coffee Break with Game Changers Radio” episode presented by SAP and produced and moderated by Bonnie D. Graham (follow on Twitter: @SAPRadio #SAPRadio). Joining Jeff to discuss the “Finance Manager’s Guide to the Future: Dynamic Planning and Analysis” were thought leaders Rob Ried, senior manager at Deloitte Consulting LLP, and Floyd Conrad, global senior director, Analytics Center of Excellence at SAP. Click to listen to the full episode.

Technology finally delivering on its promise for finance

All three panelists agreed that technology has finally come of age for the finance function. They had no qualms about asserting technology’s role in helping CFOs become true strategic business partners and key players in achieving corporate success.

Jeff observed that technology is enabling finance to see beyond traditional, historical data limits so it can now “make course corrections daily.” He also pinpointed the advantages of working with a previously unavailable, wide cross-section of data and using a range of analytics to begin to understand what really drives the business.

Floyd added that technology is now “truly good-to-go” for finance. He noted that in the past, “We’ve said things like ‘real time,’ but we meant ‘near real time.’ We said, ‘single version of the truth.’ Well, kind of, sort of. Today, this isn’t marketing jargon. This is something CFOs really need to look at now.”

But there is urgency to adopting the new technology. Rob had a warning for CFOs: “Failure to capitalize on technology will put you in an unenviable and uncompetitive position.”

Spreadsheets: Future friend or foe?

Panelists looked through different lenses at the future role of Excel spreadsheets. Floyd was the most emphatic about the need to move away from Excel, calling it “yesterday’s toy for finance” and pointing to the need for tools that provide better analysis of the information.

Jeff and Rob took a more middle-of-the-road position, emphasizing the still-current and widespread use and acceptance of Excel. Jeff pointed out, “Excel is the English language of finance and accounting. It’s the way finance and accountants look at numbers. They can do a lot of things with Excel. But it’s not enough by itself today.”

Time to abandon the rear-view-mirror perspective

It should come as no surprise that CFOs are traditionally averse to the unknown. Accuracy and certainty are ingrained in their professional DNA. But according to the panelists, staying stuck in “reporting mode” is a risk to both the finance function and the organization as a whole.

Rob encouraged CFOs to start asking the next-level questions that get them to a greater degree of accuracy in predicting what the next quarter, and the quarter after that, will look like. “If you have a truly integrated, dynamic planning system in place,” added Floyd, “you can be much more accurate, which CFOs like. The information will be incredible, and you can actually go look at what you should do in the future.”

Along the same theme, Jeff gently chided complacent CFOs who believe they are well-served by the organizations in place today. He commented that CFOs who fail to recognize and embrace opportunities provided by new systems and technologies will be less likely than their tech-enabled counterparts to spot imminent threats.

Crystal ball predictions: Who will be 2020’s successful CFO?

There was consensus, with slightly different takes, that the successful CFO of the future will be the one who welcomes and adopts technological innovation.

Jeff predicted the “plan, do, study, and act” model would be espoused by savvy CFOs to enable technology and improve processes.

Floyd anticipated an increase in the number of finance organizations that will be doing dynamic planning and analysis, noting that obsolescence could well be the price of not getting on board. “We could be talking about who didn’t – and maybe who’s still around and who’s not.”

Rob offered this profile: “By 2020, successful CFOs will be thinking in terms of future and predictive: marketing new products, cross-promoting with different organizations.” He cautioned that CFOs coming later to the game will be “working hard to catch up.”

Listen to the SAP Radio show “Finance Manager’s Guide to the Future: Dynamic Planning and Analysis” on demand.

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | FacebookYouTube

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Pras Chatterjee

About Pras Chatterjee

Pras Chatterjee is a Senior Director of Product Marketing for Enterprise Performance Management at SAP, specializing in Planning solutions. Prior to joining Product Marketing, Pras was a Practice Manager for SAP Business Analytics Services in North America as a leader in the EPM practice. He has also served as a Solution Architect for SAP Business Planning and Consolidation version for the Microsoft platform and SAP NetWeaver focusing on Planning and Consolidations around the globe. Pras is a Chartered Professional Accountant and has worked with various software firms in the EPM space as well has had a career in Finance with various Fortune 500 organizations.

The CFO Role In 2020

Estelle Lagorce

African American businessman looking out office window --- Image by © Mark Edward Atkinson/Blend Images/CorbisThe role of the CFO is undergoing a serious transformation, and CFOs can expect their role to continue to evolve, according to a recent CFO.com article by Deloitte COO and CFO Frank Friedman.

In the futurist article, Friedman says one of the biggest factors that will contribute to the CFO’s significant change over the next five years is technology.

Digital technology is obviously expected to drive change in high-tech companies, but Friedman says it’s industries outside of the tech sectors that are of particular interest, as they struggle to understand how to grasp and harness the digital capabilities available to them.

Working with high tech in low-tech industries

Five years from now, a finance team may be defined by how well it uses technology and innovative business tools, regardless of what industry it’s in. The article outlines some examples of ways that digital technology will increasingly be used by CFOs in “non-tech” sectors:

  • Predictive analytics: CFOs in manufacturing companies can forecast results and produce revenue predictions based on customer-experience profiles and current demand, instead of comparing to previous years as most companies still do today.
  • Social media and crowdsourcing: You may not think CFOs spend a lot of time on social media or crowdsourcing sites, but these methods can actually expedite finance processes, such as month-end responsibilities of the finance organization.
  • Big Data: CFOs already have a lot of data at their fingertips, but in 2020 they will have even more. CFOs in both tech and non-tech sectors who understand how to use that data to make valuable, informed decisions, can strategically guide their company and industry in a more digitally oriented world.

To do this, Friedman says CFOs can lead the way by addressing some critical areas:

  1. Know the issues: Gather the key questions that leaders expect Big Data analytics to answer.
  1. Make data easily accessible: Collect data that is manageable and easy to access.
  1. Broaden skills: The finance team needs people with the skills to understand and strategically interpret the data available to them.

The tech-savvy CFO

The role of today’s CFO has already expanded to include strategic corporate growth advice as well as managing the bottom line. In 2020, Friedman says expectations placed on the CFO are presumed to be even greater, and CFOs will likely need a much more diverse, multidisciplinary skill set to meet those demands.

The article details several traits and skills that CFOs will need in order to keep up with the pace of digital change in their role.

  1. Digital knowledge: CFOs must be tech-savvy in order to capitalize on technical innovations that will benefit their company and their industry as a whole.
  1. Data-driven execution: CFOs will need the ability to execute company strategy and operations decisions based on data-driven insights.
  1. Regulatory compliance: Regulations continue to be more stringent globally, so CFOs will need to be proficient at working closely with regulators and compliance systems.
  1. Risk management: With the growing global economy comes increased cyber and geopolitical risks worldwide. The CFOs of 2020, especially those in large multinational organizations, will need to have the expertise to monitor and manage risk in areas that may be unforeseen today.

The future CFO’s well-rounded resume

By 2020, the CFO role will require much more than just an accounting background. According to Deloitte’s Frank Friedman, “CFOs may need to bring a much more multidisciplinary skill set to the job as well as broader career experiences, from working overseas to holding positions in sales and marketing, and even running a business unit.”

So if you’re a current or aspiring CFO, you have five years to round out your resume with the necessary skills to be ready for the digitally driven role of the CFO in 2020.

The above information is based on the CFO.com article What Will the CFO Role Look Like In 2020?” by Deloitte COO & CFO, Frank Friedman – Copyright © 2015 CFO.com.

Want to learn more about best practices for transforming your finance organization? View the SAP/Deloitte Webinar, “Reshaping the Finance Function”.

For an in-depth look at digital technology’s role in business transformation, download the SAP eBook, The Digital Economy: Reinventing the Business World.

To learn more about the business and technology factors driving digital disruption, download the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.

To read more CFO insights from a tech industry perspective, read the Wall Street Journal article with SAP CFO Luka Mucic: Driving Insight with In-memory Technology.

Discover 7 Questions CFOs Should Ask Themselves About Cyber Security.

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Estelle Lagorce

About Estelle Lagorce

Estelle Lagorce is the Director, Global Partner Marketing, at SAP. She leads the global planning, successful implementation and business impact of integrated marketing programs with top global Strategic Partner across priority regions and countries (demand generation, thought leadership).

Get Your Payables House In Order

Chris Rauen

First of 8 blogs in the series

Too many organizations ignore the business potential from streamlining accounts payable operations. In a digital economy, however, this may represent one of the best opportunities to improve financial performance and boost the bottom line.

In its recent report, ePayables 2015: Higher Ground, the research and advisory firm Ardent Partners made a strong case for accounts payable transformation. “In 2015, more AP groups are accelerating their plans to transform their operations and scale to new heights,” states the report.

The digital makeover

From a payables perspective, how you go about fixing outdated procure-to-pay (P2P) practices is much like the decision to improve an aging home. Do you tear your house down and build a new one, or leverage as much of the existing structure as you can and begin a major home improvement project?

There is, of course, a third option. Take no action and make calls to plumbers, electricians, roofers, and other specialists as needed before the house falls apart altogether. While few organizations would consider a “triage” strategy the best option to address deficiencies in P2P operations, many still do. (Just don’t share that with your CFO.)

This blog post is the first in a series that will examine options for upgrading procure-to-pay processes from outclassed to best-in-class. Continuing to focus time and effort on managing transactions just doesn’t make sense. With today’s business networks, organizations have new ways to collaborate with suppliers and other partners to buy, sell, and manage cash.

Automation handles low-value activities, eliminating data entry, exception management, and payment status phone calls. That leaves more time for benchmarking operations, monitoring supplier performance, expanding early payment discounts, and improving management of working capital – the kinds of things that can dramatically improve business performance.

Where do you start?

To begin, you have to recognize that getting your payables house in order is much more than a process efficiency initiative. While cost savings from e-invoicing can be 60% to 80% lower than paper invoicing, there’s much more to the business case.

Improving contract compliance and expanding early payment discounts are other components of a business case for P2P transformation. According to various procure-to-pay research studies and Ariba customer results, the cost savings from getting your payables house in order are conservatively estimated to be $10 million per billion collars of spend. We’ll break down these ROI components in greater detail in future posts on this topic.

The value of alignment

Another important first step, validated by the Ardent Partners report, is getting procurement and finance-accounts payables in alignment. As this is a holistic process, you’ll need to make sure that both organizations are in sync, and you have support from upper management to make it happen.

Now, back to the question: Do you approach a payables makeover to support P2P transformation as a tear-down or a fixer-upper? If your procurement-accounts payable teams are out of alignment, your P2P processes are predominantly paper, and decentralized buying leaves little control over spend, you’re looking at a tear-down to lay the foundation for best practices payables. We’ll share a blueprint with you in the next post in this series.

Chris Rauen is a solution marketer for Ariba, an SAP company. He regularly contributes to topics including e-invoicing and dynamic discounting as well as the value of collaborating in a digital economy. 

Learn more about how to take your payables to the next level of performance in Ardent Partners’ research report “ ePayables 2015: Higher Ground.”

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Chris Rauen

About Chris Rauen

In his role at SAP Ariba, Chris Rauen educates procurement, finance, and shared services professionals on the business value of accounts payable automation, procure-to-pay transformation, and collaboration via business networks. Chris has addressed these topics at finance and shared services conferences, in articles for trade and business publications, and in blogs for online communities. Chris has more than 15 years of experience in e-payables, and holds a B.A. in Economics from the University of California, Santa Barbara.

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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Dan Wellers

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.