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How IoT Is Poised To Change Retail

Megan Ray Nichols

The Internet of Things (IoT) has been causing quite a stir, and now it seems poised to cause a positive disruption in the world of retail. Here are some specific ways IoT-related technologies may be utilized to boost both in-store and online retail transactions.

Smoother, more connected experiences for in-store consumers

Analysts predict the Internet of Things will revolutionize the ways we shop at our favorite stores. Some technological advancements likely to soon become mainstream include intelligent barcodes customers can scan to get more details about products, in-store advertising that works via facial recognition and can give personalized insights, and the ability for shoppers to sign up for text messages that offer special deals on products as they move around stores.

The overarching goal of all these high-tech hopes is to create fun, exciting shopping experiences that integrate numerous promotional tactics. IoT can also help store employees learn up-to-the-minute details about shelf inventory and make real-time price updates, eliminating the need for workers to manually apply new price tags.

IoT-enabled robots could streamline supply chains and emphasize safety

It’s also expected that before long, robots that are linked to the Internet of Things could shorten the distance between warehouses and store shelves. Lowe’s, the home improvement retailer, has already begun experimenting with a robot to help customers learn whether desired items are in stock.

The IoT-connected technology, nicknamed the LoweBot, can scan items and capture real-time inventory about product availability. It’s easy to see how such technology could make the customer experience more efficient by promoting better connectivity between the stockroom and the sales floor.

Robots linked to the Internet of Things could also theoretically take on some of the characteristically unsafe conditions many warehouse workers must endure, such as temperature extremes and risks from use of heavy equipment. Common occupational hazards for employees include carpal tunnel syndrome and back pain.

In the near future, we may see a shift away from humans handling repetitive and potentially dangerous warehouse duties as IoT robots fill the void. Considering the massive scale of some online retailers’ distribution centers, it’s easy to see how warehouse robotics could have a positive impact in this area as well as in sales at both brick-and-mortar and online stores.

Major brands clearly see how the IoT could reshape retail

Clearly, the IoT is set to dramatically change how we shop for the things we love, regardless of whether we buy them on websites or in traditional stores. If the examples cited above make you feel excited about future possibilities, you’re not alone.

Intel is an example of a major brand that’s pledged to make investments into IoT-related retail ventures. Over the next five years, the company will invest more than $100 million into IoT retail technologies. Already, Intel has unveiled an IoT platform called the Intel Responsive Retail Platform, which will help employees figure out the best placement for different products, help them track sales, monitor inventory levels, and more.

Target is reportedly ready to reopen the Target Open Store, a concept house in San Francisco where customers can interact with IoT devices to explore how they could improve their lives prior to purchasing them.

The Open Store also includes “The Garage,” a section that features IoT products still in development, leading customers to wonder more about what’s in store for the IoT. In total, the Open Store can display up to 70 items simultaneously.

Theorizing about what’s ahead

Only time will tell what’s to come in the months and years ahead, but if headlines are any indication, we can look forward to an enhanced shopping experience that gives employees more flexibility to meet customers’ needs via high-tech platforms that manage formerly human-driven tasks like inventory management and price changes.

It’s also likely we’ll be less dependent on employees to provide details such as whether clothing in a certain color is in stock, or if a nearby store has the specific product we want. As for the giant warehouses that are a necessity for most large online retailers, expect robots to commonly assume some of the tasks that could be dangerous for humans to do.

One thing’s for certain: Thanks to the Internet of Things, the retail industry has already changed in major ways, with more still to come.

For more insight on digital transformation in the retail industry, see SMB Retailers’ Digital Strategy Is All About The Shopper.

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About Megan Ray Nichols

Megan Ray Nichols is a freelance science writer and the editor of "Schooled By Science." She enjoys researching the latest advances in technology and writes regularly for Datafloq, Colocation American, and Vision Times. You can follow Megan on Twitter.

Bridging The Renaissance Period And Digital Era With Leonardo da Vinci

Jonathan Becher

Leonardo da Vinci might have been one of the earliest adopters of exponential thinking.

da Vinci was born more than 500 years ago in semi-rural Tuscany to parents of modest means. Despite little access to formal education, he was able to extrapolate forward-thinking ideas about subjects as diverse as architecture, engineering, mathematics, urban planning, science and astronomy. His ideas were inconceivable to residents of those small Italian towns—and perhaps to everyone at the time.

How did Leonardo do it? The answer, in part, is exponential thinking.

Incremental thinking focuses on improving what exists, while exponential thinking tries to make something new or different. Exponential thinking is, in a way, creating solutions for things that don’t exist yet or solving problems using technology that doesn’t exist yet.

If exponential thinking was so easy, everybody would be able to do it. But few can.

Da Vinci’s ideas were often rejected because of limitations in current thinking and technology. For example, da Vinci:

  • Proclaimed the sun was the center of the universe 40 years before Copernicus.
  • Introduced the theory of gravity 200 years before Isaac Newton.
  • Argued for evolution 400 years before Charles Darwin.

Even when history’s greatest minds weren’t validating his ideas, he still was ahead of the curve. For example, in 1502, da Vinci envisioned an intricate bridge design as part of a civil engineering project in Turkey. However, the project wasn’t pursued because it was believed such construction was impossible. 500 years later, the Turkish government approved da Vinci’s original design. Talk about being ahead of your time!

In addition to exhibiting exponential thinking, da Vinci also showed a digital mindset:

  • Build bridges, not silos. Leonardo did not see a divide between science and art and viewed the two as intertwined disciplines rather than separate ones. Science made him a better artist and art made him a better scientist. Instead of putting the two fields into silos and treating them as two separate units, he merged the two. There’s a lot of talk about the digital vortex, and how the digital revolution is cross-industry. Nobody better exemplified this than da Vinci.
  • Stay curious. Leonardo was insatiably curious by nature, and this curiosity fueled many of his innovations and discoveries. For example, credited inventions include the self-propelled cart and helicopter. Fast-forward to the 21st century and we’re now reading about autonomous vehicles just about everywhere. Earlier this year, the first self-driving bus started regular routes in Vegas, and this summer, autonomous flying taxis should be seen in the skies above Dubai and Paris. If da Vinci could visit us today, would he be astonished to see such things, or perhaps perplexed that it took so long for them to happen?
  • Be hands-on. Leonardo loved tinkering with things and loved the mechanical aspect of design and thinking. But he always tried to go beyond just thinking about an idea, he’d try to bring that idea to life. He’s quoted as saying, “I have been impressed with the urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.”

With his exponential thinking and digital mindset, da Vinci would have felt at home in a startup environment. In 1994, Bill Gates paid $30M for the Codex Leicester, a 72-page notebook with sketches, ideas, and entrepreneurial ideas. This manuscript and sketchbook from da Vinci was a loose collection of ideas he tried to piece together. Like many startups, da Vinci adopted a mentality where there is no blueprint for success and tinkered with his ideas before sketching and fleshing them out. Much like those thinking exponentially today, he experimented often, learned by doing, readjusted and experimented more.

Leonardo Da Vinci was truly a man ahead of his time – the ultimate Renaissance Man and the original exponential thinker.

For more lessons from innovative thinkers, see Postcards From The Digital Edge: Innovation Lessons From The Best.

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About Jonathan Becher

Jonathan Becher is the Chief Digital Officer at SAP. He heads a newly-created integrated business unit which will market and sell traditional e-commerce and digitally native software, content, education and services direct to the consumer via SAP’s digital store.

The Next Three Years: A Critical Inflection Point For Digital Transformation [VIDEO]

Shelly Dutton

The next three years will more critical to business survival than the last 50. Why? According to the 2016 Global CEO Outlook from Forbes Insights, “the force and speed with which technological innovation are moving through the economy is creating an inflection point for the business sector.” And with only 5% of organizations mastering their digital strategies to the point of differentiation from their competitors, there is much work to be done.

At the heart of this shift resides embedded technologies such as artificial intelligence, machine learning, Big Data analytics, the Internet of Things, and blockchain. In their MIT Sloan Management Review article, “Thriving in an Increasingly Digital Ecosystem,” Peter Weill and Stephanie L. Woerner shared that businesses with 50% or more of their revenues from digital ecosystems achieve 32% higher revenue growth and 27% higher profit margins.

For example, Trenitalia announced last year that they improved their customer experience by proactively and detecting machine failures with predictive maintenance. By using real-time insights from sensors and advanced analytics, Italy’s primary rail transportation company completely transformed their asset management, extended efficiencies and equipment lifecycles, and reduced maintenance costs by as much as 10%.

Organizations that embrace digital transformation and system-enabled intelligence are setting the foundation for unprecedented data-driven value. They are unlocking completely new business models and completely transforming their business processes across their supply chain, customer channels, and workforce experience.

Are you ready to reap the same advantages? Watch this replay of the SAPPHIRE NOW session, “Advance Your Digital Transformation Journey with SAP Leonardo” to get started.

Explore how SAP Leonardo can help you integrate breakthrough technologies and run them seamlessly in the cloud.

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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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Small And Midsize Businesses Have The Capacity To Drive Europe’s Future As A Digital Superpower

Katja Mehl

Part 10 of the “Road to Digital Transformation” series

Representing 99.8% of all companies throughout Europe, small and midsize businesses have tremendous power when it comes to impacting the region’s economy. One innovation at a time, they’re transforming entire industries, propelling emerging industries forward with adjacent offerings, and even supersizing a favorite childhood toy to make living conditions better for the poor and homeless. But perhaps the greatest evolution is found in the growing adoption of technology among firms.

According to the IDC InfoBrief “The Next Steps in Digital Transformation: How Small and Midsize Companies Are Applying Technology to Meet Key Business Goals with Insights for Europe,” sponsored by SAP, 35.4% of all European firms feel that their adoption of digital technology is either advanced or well underway. Germany and France are great examples of countries that are embracing advanced business networks and automation technology – such as the Internet of Things – to boost productivity and computerize or consolidate roles left empty due to long-term labor shortages.

Despite the progress made in some countries, I am also aware of others that are still resistant to digitizing their economy and automating operations. What’s the difference between firms that are digital leaders and those that are slow to mature? From my perspective in working with a variety of businesses throughout Europe, it’s a combination of diversity and technology availability.

digital transformation self-assessment

Source: “The Next Steps in Digital Transformation: How Small and Midsize Companies Are Applying Technology to Meet Key Business Goals with Insights for Europe,” IDC InfoBrief, sponsored by SAP, 2017. 

Opportunities abound with digital transformation

European companies are hardly homogenous. Comprising 47 countries across the continent, they serve communities that speak any of 225 spoken languages. Each one is experiencing various stages of digital development, economic stability, and workforce needs.

Nevertheless, as a whole, European firms do prioritize customer acquisition as well as improving efficiency and reducing costs. Over one-third of small and midsize companies are investing in collaboration software, customer relationship management solutions, e-commerce platforms, analytics, and talent management applications. Steadily, business leaders are finding better ways to go beyond data collection by applying predictive analytics to gain real-time insight from predictive analytics and machine learning to automate processes where possible.

Small and midsize businesses have a distinct advantage in this area over their larger rivals because they can, by nature, adopt new technology and practices quickly and act on decisions with greater agility. Nearly two-thirds (64%) of European firms are embracing the early stages of digitalization and planning to mature over time. Yet, the level of adoption depends solely on the leadership team’s commitment.

For many small and midsize companies across this region, the path to digital maturity resides in the cloud, more so than on-premise software deployment. For example, the flexibility associated with cloud deployment is viewed as a top attribute, especially among U.K. firms. This brings us back to the diversity of our region. Some countries prioritize personal data security while others may be more concerned with the ability to access the information they need in even the most remote of areas.

Technology alone does not deliver digital transformation

Digital transformation is certainly worth the effort for European firms. Between 60%–90% of small and midsize European businesses say their technology investments have met or exceeded their expectations – indicative of the steady, powerhouse transitions enabled by cloud computing. Companies are now getting the same access to the latest technology, data storage, and IT resources.

However, it is also important to note that a cloud platform is only as effective as the long-term digital strategy that it enables. To invigorate transformative changes, leadership needs to go beyond technology and adopt a mindset that embraces new ideas, tests the fitness of business models and processes continuously, and allows the flexibility to evolve the company as quickly as market dynamics change. By taking a step back and integrating digital objectives throughout the business strategy, leadership can pull together the elements needed to turn technology investments into differentiating, sustainable change. For example, the best talent with the right skills is hired. Plus, partners and suppliers with a complementary or shared digital vision and capability are onboarded.

The IDC Infobrief confirms what I have known all along: Small and midsize businesses are beginning to digitally mature and maintain a strategy that is relevant to their end-to-end processes. And furthering their digital transformation go hand in hand with the firms’ ability to ignite a transformational force that will likely progress Europe’s culture, social structure, and economy. 

To learn how small and midsize businesses across Europe are digitally transforming themselves to advance their future success, check out the IDC InfoBrief “The Next Steps in Digital Transformation: How Small and Midsize Companies Are Applying Technology to Meet Key Business Goals with Insights for Europe,” sponsored by SAP. For more region-specific perspectives on digital transformation, be sure to check every Tuesday for new installments to our blog series “The Road to Digital Transformation.”

 

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Katja Mehl

About Katja Mehl

Katja Mehl is Head of Marketing for Europe, Middle East, and Africa at SAP.