Wild Turkeys and Mobile Innovation

Part II: Wild Turkeys (continuing from the Nov 26th post)

Here are three tips on identifying elusive innovation and finding a black swan. I had just returned knobbly kneed from a trip through South Asia and Russia. I attended three conferences and was just decompressing on Thanksgiving and felt obligated to continue the turkey analogy from the previous post.

1. Bottling Innovation

On the road at various industry events, the keynote always seems to start with innovation. The word has been peppered into panels and keynotes as in the place of the term “technology.” It is as if by magically by using the word “innovation” it will prime the techno-entrepreneur’s pump.

This is not a bad thing. It certainly gets the attention of the patriarchs. The Moscow Open Innovation Forum was keynoted by Dmitry Medvedev, prime minister of Russia, accompanied by the prime ministers of France and Finland. The World Summit Awards in Colombo, Sri Lanka, was opened by the country’s president, Mahinda Rajapaksa.

Innovation is associated with fresh ideas and out-with-the-old. At each event, the youth innovators are marched out bushy-tailed and bright-eyed. Mr. Medvedev and Virgin founder Sir Richard Branson posed smiling with the winning youth delegates.

The challenge is that while we all want to celebrate innovation, it is a difficult to bottle it. We find it hard to present it as a formula. Disruptive innovation is central for businesses that want to survive and stay competitive.

Incumbent players such as the wireless carrier want to appear light-footed and on the next wave, but the discussion generally gravitates to bemoaning the OTT competitors – that are never in the room – and proposing that the ecosystem is not sustainable.

There is unquestionably innovation, creativity and energy in the room, but we tend to present “wow,” and not the ingredients to cook up the same “wow” at home.

We chase mobile ideas to improve our retail business when, in fact, the sexiest thing about innovation is the resulting customers, sales and EBITDA.

2. Digital Inequality

Clearly, innovation is fueled by connectivity. I met with the Nikolai Nikiforov, Russian minister of communications and mass media and the youngest person in that country’s history to take over a ministerial position at the tender age of 29.

We talked about “digital inequality” in Russia and as well as other nations and how this is one of the biggest inhibitors of innovation. How can Russia future-proof its mobile network infrastructure to allow for universal access to high-speed Internet for the data-dependent business, education, health and entertainment services that will appear over the next decade?

“Electromagnetic spectrum is the crude oil of last-mile connectivity.” Mr. Nikiforov wants high-speed fiber with wireless relay into every community of 500 and above. The challenge is finding the funds and partnership.

When Peter Diamandis, the charismatic cofounder of Singularity University, took the stage, connectivity became a firebrand. “We have not started.” In ten years distance will mean nothing.

“Where you live and where you work do not need to be the same,” Mr. Diamandis said.

3. Crowd-Sourcing Innovation

So, for those of us that cannot cook up innovation, we know there is abundant creativity out there that we can tap into and global access and connectivity is making this possible. 

Apple has shown us that by creating a marketplace for ideas, developers have risen to the challenge. The app store is a case study in innovation: The smarts of Steve Jobs to provide an SDK and audience and the smarts of app shops globally in designing for every possible user need.

So there is much talk about how to best crowd-source innovation globally. After all the discussion of innovation and digital access, we can focus on harvesting business ideas that work.

Mr. Diamandis showed how his first X-Prize challenge of $10 million to build a reusable rocket to take humans into orbit generated more than $100 million in R&D.

This ability to link innovation with connectivity allows entrepreneurs such as Sascha Haselmayer, CEO of CityMart, to build a crowd-sourcing engine for more than 80 cities globally. His engine allows for ideas to be vetted and adopted all through a remote online process. Sascha’s engine is a blueprint for crowd sourcing retail innovation.

So innovation has a retail formula and it is:

Black Swan innovation = connectivity for all + a readily accessible global market place

Mobile Black Swans and Turkeys

Part I: Tame Turkeys

On the return flight home for Thanksgiving this week, I read Nassim Taleb’s book The Black Swan and decided that tis the season to draw profound parallels between innovation and poultry.

And so while busy stuffing the family turkey I thought about how this all applied to my world of consumer engagement, retail sales and payment.

Here are my insights:

  • Chickens: Bertrand Russell’s wrote an anecdote about the benevolent farmer in 1912. The fat and happy chicken thinks the farmer is a benevolent protector until it is hauled away to the slaughter house.
  • Turkeys:  Nassim Taleb, in his book The Black Swan, says that the same holds true for the Thanksgiving turkey. However, he adds that the surprise for a turkey is not a surprise to its butcher.
  • Swans: So the black-swan question for the marketing community is: How do we play the role of the butcher not the turkey?

Moving your retail business from a step-by-step evolutionary growth to revolutionary, black swan transformation is not easy. In fact, it may be impossible. Corporations find it difficult to reinvent from within. However, to be aware of the nature of outliers and revolutionary innovation is a good first step.

You can rename your CIO: Chief Innovation Office, your CTO: Chief Transformation Officer and your CDO: Chief Disruption Officer. However this is all for nought if they cannot identify swans or at least the turkeys.

Look to social media. There is a succession of ever faster black-swan innovations starting with email and ending in SnapChat’s self-destructing messaging. Microsoft did not anticipate Google search, Google did not anticipate Facebook communities; Facebook did not anticipate Twitter micro-blogging; the same holds true for Instagram’s social picture publishing or SnapChat’s peek-a-boo messaging.  The same applies to retail as well as broadcast, payments, health, advertising to name a few rudely disrupted verticals.

Retail payments is a classic chase-the-tail solution mashup. But payment vendors have been more astute. The FIs ran a two-sided business to establish MasterCard and VISA credit services. The FIs have fought to be a part of any POS and prepaid activity in retail. With the emergence of digital payment, payment incumbents have aggressively invested and acquired companies in the mobile POS space (VISA/Square) and as well as in the cloud (VISA/Playspan).

VISA’s purchase of PlaySpan was particularly forward thinking. PlaySpan allowed gamers to buy virtual swords and pumpkin seeds for their virtual battle grounds and farms without leaving the game. Frictionless commerce engineering: meet VISA’s present day  V.me.

But even leviathans like VISA and MasterCard have been sidelined to commodity commerce rails.While they make nice transactional revenue, Amazon, iTunes, PayPal and Playstore and other consumer commerce portals have made the card credentials second fiddle. They discount the interchange and grab the CRM and big data.

Shopper marketing, Shopper engagement all follow similar twists. But not always evolutionary:

SMS was the black swan technology revolutionizing communication for the unsuspecting (but delighted) wireless carriers. We all thought QR codes, mobile apps and NFC would supplant this messaging channel.  WhatApp, Skype and Viber all have eaten away at the peer-to-peer traffic; however, for brands, SMS, and for some successful apps, the notification channel, remains the main opt-in and content delivery channel of choice.

Black swan on the horizon? iBeacons, WiFi Direct or LTE Direct? Maybe.

Proximity engagement is essential for a brand or retailer to drive path into purchase.  Shopkick and Beacons are valuable but are ultimately broadcast solutions.  Future solutions such as LTE Direct promise to extend the retail network and add more intelligence and peer to peer interactivity to this engagement.

However, in all the above cases it is difficult, if not impossible, to identify one strategy, vendor, agency that will bring revolutionary black swan ideas.

When attending events whether speaking or listening, it all seems so easy. Innovate they say. . .

Well so my friends, the innovator’s dilemma maybe just to avoid becoming the turkey.

Happy Thanksgiving!

 

Mall Busting with Wal-Mart, Facebook & Zappos

Samsung strikes a deal with the beleaguered Best Buy to subsidize their rent with a store-in-a-store initiative. Borders exits the mall and last-man-standing Barnes & Noble seems to becoming a living room chachka vendor with more book browsers than book buyers. Zappos Labs runs field research in malls and Facebook launches a commerce strategy (again).

Is a retail dust bowl about to blow through the mall nationally? Or is this a digital tempest in a tea cup?

We know that online commerce is booming but it still accounts for a small slice of America’s mall business. Undeniably, this $200 billion digital business (ComScore) is expanding scope daily.

If there was ever a digital demarcator, it is the soap business. When Unilever and P&G, the markets main consumer package goods companies, begin to sell soap on Amazon, and when Wal-Mart begins to ramp up its online business, leveraging its 4,000 stories and 158 warehouses as an online distribution network, then mall property owners possibly need to rethink their role in bricks and mortar.

Inertia as a strategy

Malls are entertainment destinations. Always have been. We go to the mall for a movie or latte just as we bundled the family into the Buick 60 years ago to go shopping. But if Best Buy and Barnes & Noble leave the mall, what is left to attract the consumer? Hours of gizmo browsing and cook-book thumbing gone.

Browse-verse-buy business has whittled way the margins of many stores making Blockbuster and Gamestop digital road kill. It forced Target Chief Executive Gregg Steinhafel and Kathee Tesija, Target’s executive vice president of merchandising to cry uncle on “showrooming” in a memo to its suppliers in 2012.

However, muscling your supplier’s prices down is a pharic victory. Even with the volume sales of Target and Wal-Mart know that they need to move some of their business into the cloud. During Wal-Mart’s August 2013 earnings call it announced that eCommerce sales rose by 30 percent in two trailing quarters. Neil Ashe, Wal-Mart’s CEO indicated its total online sales could pass $10 billion in fiscal year 2014.  This is only two percent of the stores earning and only 12 percent of Amazon which sales totaled $61 billion in 2012 but it is a marked trend and a harbinger of the exodus of earns from the mall.

What incumbent stores presently have in their favor is inertia.  The cloud and the mall are still not fluidly connected. Although each shopper is armed with a mobile computer which has the capability of scanning, sourcing and saving the consumer in every aisle, there are too many hurdles and friction between the idea of digital buying and the products within arms reach.

The mandate of any red blooded digital retailers is to eliminate this inertia.

No-click Cloud Checkout

Apple’s iTunes, Amazon and Paypal built their business on simplifying checkout: making sure that the act of buying does not get in the way of intent to buy.

One-click checkout or combining stored customer credentials with a simple password is the sole reason that these companies continue to grow their market share. Their UX team would tell you that every informational and graphic design is based on optimizing clicks to checkout. Each click makes a precipitous drop off and abandoned shopping carts litter the web.

But digital checkout demands trust and mindshare. Even online real estate barons such as Facebook have been unable to enter this market.  Although “Social” and “commerce” seems natural allies, Facebook has not been able to delivered on its promise to leverage its millions of customers to shop cross-channel.  The company launched Facebook Credits in 2009 and phased them out last year. “F-commerce” experiments abound. Remember Facebook + Amazon + P&G partnering in 2010 to change the world. Unilever followed suit launching a storefront on Facebook for its Dove brand. Retailers including JCPenney and Gamestop have attempted to monetize their Facebook community by opening stores inside the Facebook network. After underwhelming results they shut their virtual doors.

Apple and Amazon have proven that community plus one-click checkout works. These digital wallet holders started their business explicitly to sell stuff. And they are poised to remove the inertia from online shopping and with it the last refuge of the mall owner. Online shopping provides advantages with an endless aisle allowing for access to more sizes and categories. According to Nielson the average basket size is much larger for consumer package goods ($80 online to $30 offline) and beauty purchase ($30 online to $10 offline).

The question is that when the households put soap and diapers on their shopping list will they log into Amazon to buy Dove Body Wash 24 Ounce Bottles (Pack of 4) and Pampers Sensitive Wipes 7x Box?

Baked Beans & Apple Pie

The last refuge of the American mall maybe a can of baked beans and fresh produce. If the household shopper wants to grabs a can for dinner tonight or smell the oranges and squeeze the melons before buying, then off to the store they will go. Grocery stores are big box convenience stores.

However, should mall owners that are grocery-anchored feel safe? Their clientele should come from a weekly shopping list.

Well, hold your Kraft peanut butter!

The traditional grocery retailers are faced with increased competition. In March, Wal-Mart opened grocery concept stores about a tenth of the size of their supercenters. With big box and online retailers entering the grocery space, specialty grocers capturing the “foodie culture” consumer and brands creating direct relationship with the consumer, perhaps this is not a safe bet for mall owners.

Google Wallet, ISIS and other phone wallets promise to make in-store shopping more digitally fluid, but what is the digital wallet never makes it to the mall.  Online grocery shopping has grown five fold over the past eight years to $25 billion. Tablets devices have made shopping more leisurely and couch commerce has accelerated.  With CPGs moving their diaper and detergent business into the mainstream online stores like Amazon, the inertia may soon come from the home.

Poaching People

Since Tesco opened their virtual grocery store on the subway in Seoul, Korea two years ago, scan and shop on-the-go signage has become more common. While it is still a media gimmick, it has the potential of becoming a way of luring the shopper online. In every mall or transit hub America at least one brand has attempted to use the in-mall media to engage with the shopper and move them into their cloud store.

In CNET interviews with Zappos Labs’ (an Amazon-owned online retailer) the Director, Will Young, confesses that his team sits around malls stalking shoppers. Their goal is to emulate these shoppers’ behavior online. Young is asking “How can you make the digital experience feel like the in-store experience?”

Whether they succeed or not, there is no question that malls need to re-evaluate their passive media deals. When a brand buys signage on an ad impression basis but uses this media to poach customers then this signage perhaps should not be sold as an impression but as a “mini-storefront”.

Mall owners nationally are holding strategy sessions to evaluate how technology is affecting their business. These stakeholders need to re-evaluate their real estate assets and start to see media as leasable square footage.

Part Two: Mapping the Mall (to be continued)

Black Friday Mobile “Mall Buster”

By Gary Schwartz

As I sit thoughtfully, wedged between Black Friday and Cyber Monday, I have a mobile premonition that times are a’changing.

Black Friday may be becoming Cyber Friday – which would mean a dark Monday for many retailers and malls in North America.

On November 28, 2005, Shop.org started discussing an online shopping phenomenon following the Thanksgiving weekend that it coined Cyber Monday. After fighting for sale items in the aisles, shoppers starting surfing the web for remnant deals.

However over the past year, Matt Shay and his team at the National Retail Federation should realizing that the online shopping cloud (that was politely situated on a separate day with separate deals for online shoppers) is now disruptively moving into our primetime shopping calendar.

While most mobile shopping on Black Friday still tends to be mobile marketing focused: Price comparison hunting with Amazon PriceCheck, ShopSavvy or eBay’s Redlazer App; Mobile couponing clipping for show-to-save deals that drive impulse door swing into the mall and retail store.

These shopping APPs and mobile web services are great for hardcore price hunters but the small-screen experience is not optimal. The mobile phone may help the shopper better navigate high value items such as shoes or electronics in their local mall. The mobile phone may steer the shopper to a purchase or may rudely interrupt an in-aisle purchase.

But what is beyond price hunting? If a PriceCheck shows a better deal online, many folk are likely to close their phone and choose to buy the item that evening on the web on a large screen in the comfort of their home.

This is about to change.  There is a new breed of shopping disruption entering the market.  Apple’s iPad has hybridized:

  • mobile & fixed internet
  • small screen & large screen
  • impulse & thoughtful shopping

Kindle Fire: The Mall Buster

The new commerce-tablet is a portable mall buster. The iPad allows for an elegant portable internet experience, Apple focus continued to be the APP economy and digital checkout on iTunes.

Other tablets have entered the market on Apple’s terms and had mix results  . . . until the Amazon’s new tablet Kindle Fire. The Kindle Fire is all about one-click commerce. The device is optimized for in-store, in-mall deal hunting, price comparison and most importantly one-click checkout.

Amazon has always been a commerce disrupter. They battled and beat the book store. Now they are taking on the entire mall.

Amazon reinvented book browsing. In 2007, we saw the first Kindle, the harbinger of a new power game and more importantly a new relationship with the mobile consumer. In order to promote its Kindle device, Amazon sold electronic books below wholesale prices.  A tactical loss. Owning the commerce platform was the ultimate reward for Amazon.

Amazon won the book battle: Borders bookstore went out of business and Barnes & Noble opened coffee shops and began selling household furniture.

The Kindle Fire (which combines book commerce with the immersive Kindle experience) is the final commerce frontier.  Amazon is so confident in the commerce that they will generate in the mall that they are selling the unit at a loss ($199 while the unit cost is $210).

Amazon’s One-Click commerce along with VISA’s V.me service, Billing Revolution’s Single-Click and a flood of cloud commerce options will enter the market this year.

What does this mean to the great American Black Friday tradition?

It means that shoppers on Friday, November 30th, 2012 may move from comparison price hunting in the mall to disruptive purchasing in the cloud. No longer are Cyber Monday and Black Friday neatly separated: the cloud is in the mall . . .  to stay.

Dark Clouds

We anticipate over 5000 store closings in 2012 – nearly 40% up from 2011. Many of these closings will be due to continuing shopper malaise; however, as in-mall cloud shopping accelerates, stores particularly in the apparel, shoe and electronics vertical will need to reinvent themselves. They will need to focus on breaking down the channel barriers between their online presents and the physical store. Tackling “cross-channel disconnect” will be key to survival.

Stores will need to focus on the non-Black-Friday days – all 364 of them and work to build a loyalty, one-to-one relationship with the shopper using their phones to bridge the store experience with the store’s cloud experience.

Content curation, sensory experience, customer service and love are all the store has. It will not win on price alone.