Moving Your Artificial Intelligence Strategy Forward

The artificial intelligence strategy buzz is everywhere. But now we need to move beyond rule based personalization and predictive analytics based recommendations. That kind of AI has been going on for 20 years if not more. Calling every analytics based project AI using a lot of jargon is definitely fashionable. But it also adversely affects the maturity of your artificial intelligence strategy.

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Our Artificial intelligence strategy should be about traditional statistical approaches plus much more. That “much more” comes from creating conditions that allow your system to learn from data on its own. This learning includes making decisions based on information about both good and bad outcomes. For example, your system monitors commerce data and notes that a purchase is a good thing to have – “a win”. It also figures out that this “win” is positively influenced by offering promotions. And it then figures out when to offer someone a promotion that results in a purchase – a win. And it keeps updating its strategy based on “wins” and “losses”.

In short the ability of your system – not you manually – to figure this out, and learn by itself is already the current frontier in artificial intelligence strategy.  We can sometimes help move this process quicker through “supervised learning”. And our goal should be to constantly expand the boundaries of what’s possible.

So here are 3 tips that I hope will help you advance your artificial intelligence strategy:

1. Always be feeding

Not all good outcomes are actually good – especially outcomes that are limited by channel or product. For example, in the previous paragraph I noted that a purchase on the website or through a chatbot is a “win”. What if I told you that this specific type of customer has an overall negative lifetime value unless other conditions are also satisfied? In addition, what if the product that the customer is browsing is not a good fit for them? In that case even if a sale is good for us in the short term, should we continue to push that product to the customer?

Thinking about the big picture helps you improve your artificial intelligence strategy by constantly feeding updated definitions of what good outcomes are. It can also help integrate the pockets of AI that mushroom everywhere. As this field evolves, narrow applications are natural to implement – such as an NLP based chatbot for customer service. However, the incentives in the artificial intelligence strategy roadmap should be aligned to the goals of constant “expansion of context”. It’s like feeding insights into a central superpower, however menacing that may sound.

2. Always be rewarding

Your artificial intelligence strategy will depend on how well you provide the notion of rewards to your algorithms. After all, to decide what to do, the algorithm must know what happened the last time it did something. And that means that the rewards and penalties should be easy to come by.

Contrast this with how we implemented analytics in the past – we ran regressions, figured out what would influence an outcome, and baked those into rules for our processes to follow. And then we repeated the process often. But now you must build your data and technology strategy around the artificial intelligence strategy. How would you transmit those rewards and penalties to your algorithms?  For example, automatically re-balancing a wealth portfolio based on market triggers is good, but we must also let the AI algorithm know whether this was a “win” or “loss”. That way it can learn and improve. Otherwise it’s just old wine in a new bottle.

3. Always be connecting

As I have outlined in my book “Connected! How #platforms of today will become apps of tomorrow“, the customer experience spectrum is way bigger than our own products and channels. Every company today must be connected to others that serve the same customers. For example, we should think of feeding our algorithms with data – with customer consent of course – about the customer’s overall identity, intent and interactions. This data can come from interaction in retail, fitness, travel etc. And we should be building two way connections between companies to help customers make better decisions.

If we don’t think of connecting with partners to enable cross-industry customer journeys, our artificial intelligence strategy will only partially succeed. We cannot be building jazzy gizmos and expect to survive when competitors (especially the new entrants) are creating customer ecosystems and expanding their product offerings. In fact most innovations today bring together customer interactions across industries. Customers receive tremendous value from these cross-industry customer journeys. We should become better partners to customers too.

In summary

AI is an evolving field but the business landscape is changing at an even faster pace. Your artificial intelligence strategy should look to get beyond its own buzz and complexity. I hope these 3 simple tips provided some perspective so you can give your artificial intelligence strategy a boost. The first step is to not lose sight of defining the right customer experiences and journeys in an increasingly connected world. This definition of purpose and outcomes will automatically help you get ahead of the quest for data as well.

PS:

  1. Image by Geralt. Also I apologize in advance to AI experts for my simplistic treatment of this topic but some good old grounding was due.
  2. Please download the principles of how to define cross-industry customer experiences and personas here, or just get them for free in your inbox.

 

Conglomerates with a twist

Beating eParadise – How Cross-Industry Collaboration Must Evolve

Cross-industry collaboration must be interpreted in a dramatically different way today. That’s because the most noteworthy competitors in any industry today have among them several non-traditional players. These include upstarts who have started with simple, logical, online models and are now slowly expanding to gobble up adjacent sectors – Amazon, Airbnb, Alibaba, Uber, PayPal, WeChat to name a few. And then there are players rooted in the physical but building smart ecosystems – Costco, JP Morgan, Hyatt, WalMart to name a few.

It can be said that these new competitors are not traditional industry players – instead they are digital conglomerates focused on owning the customer. All of these are building the WalMart of the 21st century – only much more broader than imaginable.

A new definition for cross-industry collaboration is needed

The traditional definition of cross-industry collaboration is obsolete because it was about distribution, or supply chain benefits: different players of all kinds coming together to build a city, or complete an IoT platform, market a product, make a hardware product, or fill up a marketplace. There was one dominant player in the middle of this collaboration.

That’s why in “The red herring of Amazon and Physical Retail“, I outlined how the real battle is not at all about AI, big data, analytics, or being Omni Channel. Instead when we look past this red herring, we find that the real battle is about being a place where one can find almost anything, and about creating a loyalty program that knits together many different businesses.

However times have changed. And today the problem we want to solve is orders of magnitude more complex that just a more robust value chain. We must address cross-industry customer journeys to stay relevant which means the concept of the value chain itself must expand dramatically.

So the real conversation these days should be about upgrading our cross-industry collaboration and innovation models.  But what is this collaboration we speak about – between who? And what kind of innovation?

To help illustrate this new definition of “cross-industry collaboration” better, I’ll use the story of The Paradise, a Netflix show. Stay with me for a minute! The story of The Paradise outlines how an enterprising young woman manages to bring together a diverse collection of main street stores in an effort to work together against Britain’s first department store – The Paradise. She orchestrates the creation of a common loyalty program, links their promotions, provides mechanisms to recommend each others’ goods, and engages in customer service as one entity so they can feed off each other. Unfortunately, the script writers doomed that model to fail in favor of a melodrama instead of an exciting business thriller. But not without leaving us with some very interesting lessons to think about for competing in today’s digital economy.

cross-industry collaboration - Conglomerates with a twist

(source:  The Principle of Completion – being a conglomerate without being one )

How the tables have turned

Fast forward a few decades from that setting, and we see that the model is being reversed in the online space. The protagonists are now innovators such as Amazon.com, while the aggressors of yesterday (aka The Paradise) are actors of the main street marketplace.

There is hope still. In recent years, some enterprising folks have created models that have the potential to be the backbone of tomorrow’s economy. The core concept is not new, but it now has the right backing of technology to propel it forward.

I’ll outline a few below to get your creative juices flowing on this kind of industry collaboration. If you thought Amazon Prime is difficult to reproduce think again!

  • Shoprunner: This rapidly growing program links together about 140 businesses (as of last count) and provides free 2 day shipping and large discounts from member businesses. It’s unique because it brings on its platform multiple card issuers, card networks, and retailers. These member businesses also become sales engines of this program. The program is presently playing at the outside borders of what can be a true revolution. But it has the right foundations to become a future powerhouse of discovery and commerce – provided all parties can collaborate and play nice towards the grander vision. Right now, the program is basically trying to drive a lot of traffic to member retailers (in an affiliate like model) which can be a little frustrating for your inbox, but I’ll be watching this space as they further develop the tools for personalization and goals based selling, and expand the scope of their platform.
  • Plenti: Conceived by American Express, this masterpiece (yes, I really think it is) is a true cross-industry loyalty program. It has brought together gas stations, retailers, pharmacies, restaurants and others as part of a program that very few thought would take off. It is indeed gratifying to punch in your phone number at a store, and see the savings miraculously appear on the receipt. That its owned and operated by American Express should be a trivial problem to solve for businesses looking to build the next generation marketplace. Plenti is largely still a payments based play but it’ll be interesting to see how this story unfolds in the areas of experiential commerce and lifestyle.
  • Ebates: A few internet years ago, I considered this affiliate based marketing model as yet another 1 out of a 1,000,000 online locations to get deals and discounts. But in today’s context, this site (and others like it) have a special meaning because they show how they can provide a common thread that businesses need. There is much evolution to do still and that means plenty of potential for innovation and collaboration.
  • Citi Bonus Cash Center: This at-the-time visionary affiliate based concept was a perfect Amazon of today, and still has the potential to be except that it is loosely built and focused on discounts much like Ebates is. But it is evidence that the model of the future is right there for an overarching cross-industry platform. The big difference from a traditional affilitate model is that being a platform owned by a large bank, it can deliver extreme personalization, integrated financial planning & benefits, along with being your One Drive of the future!
  • Groupon and others:  I think you are beginning to get the drift so I won’t belabor the point any more. On the other side of the world, you can also think about WeChat and Alibaba who are living up this marketplace model to the hilt. 

Any model that can span cross-industry boundaries is a candidate for innovation in cross-industry collaboration. Much like the solution to the blockchain hype, the trick is in looking from the outside-in – at our business versus from our business. It’s also a call for reflection and action for those who haven’t pushed the boundaries of this new kind of cross-industry collaboration yet.

The models I’ve outlined are not just for distribution or supply chain anymore. Latest technology such as public API models (Application Programmer Interfaces) and blockchain allow us today to create partnerships without being a partner. But the technology has always existed to help us meet these emerging needs. What we need now is a willingness to look beyond the comfortable and immediate. The pace of business change is accelerating. Can we keep up?

Connected Company - cross-industry collaboration

I outlined The Connected Company in my latest book Connected! and you can get the principles straight to your inbox. An eBook is available FREE for download here.

To save the retail store, think about real customer engagement

It’s human nature. We try to protect what we have even though we know that change is coming. In this post I’ll bring out some real drivers of customer engagement, and provide some tactics to get ahead.

There has been lots of buzz that the store can never die (Amazon is also getting into physical now), and how customer experience must be enhanced instead to make the store a place of enjoyment and social interaction. That’s all very true. However the fact is that if we think of retail as a store, we’ll be in deep trouble. We need to think of deep customer engagement instead, and that starts with knowing who our customers are.

All the analytics so far hasn’t gotten us any closer and I’ll explain why here. You’ll see that the analytics needs to be directed differently.

Plain vanilla eCommerce won’t help either. Because eCommerce itself is changing as the world is connected. The game is not about channels, its about the customers and creating context aware visibility. “20% other customers also bought a tent” was a great model when it came out, but is not the way of the future.

What you need is tcustomer engagement anywhere retail o think beyond the store, about how the store stocks items, how we run promotions, what amazing digital technology we have,  and how the supply chain feeds into the store.

Instead let’s turn the entire paradigm on its head.

Ignore the store, and just think of who our customers are, what they want, and why they want it?

Because thinking of the  store and our catalog is like looking inward. Instead, let’s look from the outside at what our business looks like – from the customer’s eyes.

When we start thinking like that we’ll notice that we don’t really know that much about the customers. What we really need is to think like a “marketplace” from the vantage point of our customers so that we can embark on a customer engagement strategy.

Here’s a supermarket example which will carry well to other scenarios as well:

1. What are customers thinking? Why do they pick up a Lean Cuisine meal?  Why are they buying 3 packs of Tofu when they normally buy one? Why did they pick up both soy and dairy yogurt?

2. Then let’s go back to the drawing board for our business. How can we meet their needs better? We’ll find that they are buying for a party they’re hosting, they are on a diet trying to prepare for that upcoming full marathon, and they have a kid at home with food allergies.

3a. Then let’s bring together all the actors who will make our retail business aka “marketplace” thrive? Perhaps the local fitness center, the local nutritionist,  a local restaurant, and the list will go on depending on what you want your business to be. You must engage customers in context, and tie in the places they go to.

3b. Then we establish a relationship with customers by finding a way to get in touch, and begin to address the core issue of customer engagement. It’s amazing how many retailers have no way to contact their customers?

3c. Finally let’s think of context every time we get in touch. Context means that we toss the catalog aside and begin the communication template with the customer – who are they? What did they buy before? Is there a pattern or anomaly in the latest behavior or transactions? Is there an intelligent guess we can make? Can we know something more about them by asking them? These questions lead to real customer engagement.

Because, capital, size, infrastructure, technology, and presence are not the real constraints. Those who have those things are not engaging customers any better either. But once you begin to think of your business as a customer engagement powerhouse, not a physical store or website, the momentum you generate will provide the solution to the constraints you face for customer engagement, and hence growth & commerce.

Photo credit: oliva732000 / Foter / Creative Commons Attribution 2.0 Generic (CC BY 2.0)

Based on the principals from my book Connected! How Platforms of Today Will Become Apps of Tomorrow. Get the models in your inbox for FREE by signing up.

The Big Red Herring of Amazon & Physical Retail

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For many years now we’ve been witnessing the phenomenal rise of Amazon.com. Retailers and manufacturers of all kinds have been scurrying to get their digital act together. The media has been rife with questions about traditional business models of stores and distributor channels.

And now finally, Amazon has opened physical stores in key categories – grocery and books to name a few. The Whole Foods acquisition has come as a recent big announcement.

What’s going on with Amazon & physical retail and how to make sense of the game plan that Amazon has?

red-46564_640First, here’s the red herring – the battle is not about digital or physical, or any combination of the two. It’s not even about innovation and leadership. Its a given that people are going to go digital given enough time and experience. Every channel needs time to develop and be a comfortable experience for customers. And slowly but surely, goods of various categories are falling into that bucket. We thought it will never be clothes, except that we find now that clothes are actually pretty commoditized if we know what we want, and if we’ve bought them before. Same for grocery and food which are after all the same shopping list being created and executed week after week. Its been that way for a long time with electronics and spare parts as well.

The biggest hurdle to digital commerce was the risk factor – what if the purchase is not what we think it will be? And Amazon, like many retailers, has solved for that already through an easy and simple returns process. Its no wonder then that people who shop heavily are folks who get free shipping and an easy returns process. in fact, Amazon Prime members in many categories have much higher return rates than customers shopping at stores. That’s simply because we buy more than we need (extra sizes, different colors, different styles etc. ) and then we return  what we don’t need. It’s pretty darn convenient.

So Amazon entering physical retail cannot be a threat on its own. Sure, they may have better online presence, and fast shipping and distribution mechanisms, but they also have lower margins.

Instead, almost everyone is missing the real point that this is a battle for building a connected ecosystem. It was never about individual product lines being sold digitally which we should take for granted as a universal certainty. In fact, the biggest competitor for established businesses (and their Achilles heel) is the combination of Amazon Marketplace, their diversity of product businesses, and their Prime membership model. Think of what we get with this combination – movies, books, free and fast shipping, TV – and not to mention almost everything under the sun on Amazon.com from marketplace sellers.

Not surprisingly, in 2016, Amazon.com had already beaten Google as the top search engine for product search (55%) when customers reasonably know what they want. More than 70% of customers do so because of the wide variety of product availability on Amazon. These 2 capabilities together are a lynchpin of modern commerce. These two capabilities help get customers in, and then all these customers have frictionless (and free) access to commerce transactions. Everything else is easily competed against – better online presence, personalized recommendations, easy purchase process, good shipping, good returns, etc. These are all table stakes. In fact Amazon is not really that great at many of these things and like everyone else is constantly improving.

So Amazon.com buying  Whole Foods is not at all threatening if you apply the traditional lens and consider only the grocery business. There are plenty of players who will beat Amazon hands down in that business. Instead, what is missing in the media headlines right now is that this play is not just about grocery or retail. It’s actually about building a connected ecosystem that brings everything a customer needs under one nice umbrella called Amazon Prime, and a marketplace that has unlimited choice.

Hence, the issue of Amazon & physical retail is a red herring. But the situation is not hopeless. Here’s what everyone else can do to counter this juggernaut:

  1. Redefine your identity and start connecting: In today’s connected age, we cannot operate in a small silo and expect not to be disrupted. So long as grocers think of themselves as grocers, banks as banks, and pharmacies as pharmacies they will continue to see invasion of broader players into their space. Digital has made that a near certainty. Instead, we must expand our identity and build a connected, digital business. Becoming connected doesn’t mean becoming a conglomerate like Amazon.com. That’s neither easy nor possible for many. Instead its time to start being a trader / seller of different kinds of services that consumers need, and not just the products we’ve sold for decades. Take for example a grocery chain creating a local network of fitness centers, health food brands and dieticians. Its a win-win for everyone involved. All parties see increased retention and higher wallet share from the customer. That’s a partnerships model and much more doable. Especially because its also local. The possibilities for this network are endless and can include banks, local sports clubs, farmers markets, restaurants, and many others. That’s the only way to win in today’s customer centric economy. We cannot be selling in silos and expect to win. Some examples do exist today (like health insurers working with fitness centers) but those at-an-arm’s-length partnerships are not enough. These relationships must become more intense, more deliberate, and much more obsessed about customer experience.
  2. Build a connected loyalty model: Those of you who’ve read my 3-Tier loyalty model will know that a connected business can build what others (or even Amazon) can’t today. Loyalty today is all about instant discounts and rebates. But loyalty must move towards experiential and aspirational rewards. A connected ecosystem can accomplish that so easily and keep the costs down as well. Can a loyal member of the network in the example above win a wonderful candlelight dinner on Valentine’s day at a restaurant, or can customers build their rewards towards great seats at the Super Bowl next year? The possibilities are limited only by our imagination. That’s the loyalty model a connected business can build with its partners. And it could easily be in addition to the 20c off the salad dressing, or 20% off the first 2 months of the gym membership.
  3. Orient the org to look beyond legacy and focus on CX: How can multiple companies from different sectors come together and make this happen. The short answer is that they can’t unless they reorient to focus on CX, not product lines. Fortunately the solution is simple for those willing to dare. They must create a CX layer on top of their products and services business. The CX layer will be made up of folks from all partners across industries and their only job is to manage just one product – the connected CX. This layer of product managers will create exciting and innovative journeys, and then make them happen through existing products. Read more about this model here.

To be clear, online and digital is the way forward. So there is no reason to think Amazon.com entering physical retail is any vindication of physical stores being a must for business. Quite the contrary – physical stores are a complement to digital but they will most definitely become a specialized channel for retail (or banking or automobiles for that matter).

The real challenge is to build a connected business. The part about Amazon entering through buying up the physical stores is just a big fat red herring.

unicef-discover-the-movement

Lessons in Customer Engagement from the UNICEF Kid Power Program

In today’s fast paced, connected world, it has become crucial to engage with our customers, not just find ways to advertise to them. Customer engagement is actually a strong branding vehicle because it helps us align with the causes our customers love. And it can drive more profitable growth because it realigns our business with its higher purpose.

The UNICEF Kid Power program provides some great lessons for how businesses can drive such programs.

The purpose of our products

unicef-williamWhen my son brought home the UNICEF Kid Power band, I could see just 1 thing on his mind – he was doing good for someone else by being fit. The other features of the band such as counting steps, iPhone pairing, sharing with people etc. were not important at all. They were taken for granted. It was almost as if they didn’t matter because the decision criteria was different. In other words all the other devices were commoditized. He discarded other sophisticated devices once he knew his daily steps with this band would help a kid somewhere get better. This fitness band was different. The band drives fitness by driving a higher purpose. Perhaps, the struggles of the leading fitness wearable providers is probably because of this simple reason. They are fighting on features, while customer engagement is done on aspirations.

What is UNICEF?

UNICEF (United Nations International Children’s Emergency Fund) is an organization dedicated to helping children worldwide. It was established in 1946 and is headquartered in New York. Their primary stated goals are to:

  1. Solve the global problem of malnutrition: About 25% of the children worldwide are malnourished (with more in developing and poor countries) leading to severe health issues.
  2. Get children to be more physically active: In developed countries, the levels of physical activity have reduced by almost 50% leading to obesity and related health problems.

The Kid Power Program

unicef kidspowerThis is such a creative program by UNICEF! Essentially, through a fitness wristband, they encourage children and families to be active and unlock points, which in turn are used to unlock nutritional food packets supporting children worldwide that need help.

In addition, the program has created “Missions” which have a celebrity champion from sports or entertainment. These celebrities own a mission. For example, a mission to help 100 children in Haiti in 6 months. Every child worldwide who has the kid power band now can join the mission and start earning points by being more active. Every 2400 steps unlocks a point, and every 25 points unlock a food packet. Right now the key sponsors are Target and Star Wars, and  more are expected.

This year there are 170,000 children participating in the UNICEF Kid Power Schools Program – a teacher-led experience. In spring of 2016 alone, 61,000 students in over 2600 classrooms across 13 Kid Power Cities participated in the program. That was a 500% increase over 2015.

How does it apply to us?

What a wonderful way to be part of the community, and build a community. I hadn’t heard of UNICEF in so many years and then I heard it from my son. I remember how we had to be told what UNICEF and its mission was, and even then it was something remote, to be appreciated and admired, and join once we had the means. And now our kids are actually participating directly and contributing to the mission – without any money!

The simple – and not novel by any means – business lesson I took away was this: as the world becomes digital, and traditional business models fall by the wayside, who will win? My guess is that a business that has established an ecosystem and customer engagement through the right emotional connections with its customers will win.

Isn’t this just another advertising gimmick?

Depends on how you run it. By being in the middle of such an engagement program, you promise 5 things to participating members / customers:

  1. You will help them meet their aspirations
  2. You will bring like minded businesses and customers together
  3. You will not sell at every chance you get
  4. You will adapt your business model to align with aspirations of your customers
  5. You will engage continuously and actively

unicef-make-a-differenceThe first one is obvious. The second promise above means that you will get started with enabling a platform that other businesses can join to boost the program. In short, you will  do what today’s digital world is all about – build ecosystems. Just like health insurers are partnering with fitness centers, banks and retailers can join in too.

The 3rd and 4th promises above are linked because you will not sell, but you will adapt to provide enough value and reduce friction to the right level so that selling is natural and automatic. It’s a proven fact that value is no longer measured only in monetary terms if it enables something aspirational (that’s why branding exists). I might invest with my bank if the rates are reasonably comparable and if it helps me easily support  my favorite causes (aspiration), and if it makes it seamless to invest my surplus funds (feature). Moreover, I might favor one brand over another just because it aligns better with my personal passions – just like I am now a Unicef Kid Power dad although they don’t have anything like that yet. Ultimately that’s what a brand is if you equate away the core quality and price.

Such a program also forces you to look at continuous customer engagement and reinforcement, and not just when an offer is available. In fact, customers who have more meaningful touch-points and interactions with a brand or product are likely to spend more and be more loyal. An engagement program like this solves that problem comprehensively.

The UNICEF Kids Power program is only a model

The possibilities for customer engagement in a community are endless. The UNICEF Kid Power program shows again a model that is proven – people care and every business can help. For example, banks can solve the financial security and inclusion problem, health insurers and fitness centers can solve the problem of people coming out together and socializing, and retailers can solve the problem of clothing and food for all. We can be as inventive as we want to be with our goals, and the power of working together multiplies everyone’s reach manifold. Every hobby and passion in the world can be part of such a program, with every business driving what it chooses to. The model can of course be extended by introducing tiers of engagement, promoting social status, providing meaningful rewards  and recognition, linking different types of organizations and so on.

As we get connected, and go digital, the basic need for people to form communities and work together towards a cause must still be met. As business models are under pressure, some of these activities have taken a hit. But the UNICEF model shows how with a little bit of creativity, we can adapt our customer engagement models to become an integral part of our customers lives. When we speak of Omni Channel customer engagement, perhaps this kind of engagement should be a part of that strategy. Examples do exist such as the Amex OPEN program for small business, the CVS fitness program among others. Our business must mean something to our customers, because the products don’t make a brand (well, some do).

PS:

  1. Images taken from the Unicef Kid Power website. I encourage you to take a look at the program. I am in no way affiliated with them so this is not an advertisement.
  2. This blog is based on the principles in my latest book Connected! How #Platforms of today Will Become Apps of Tomorrow. Its free for Kindle Unlimited members. You can also write to me for a discounted paperback(signed by me if that matters at all!)