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!

 

Barcelona In Brief: Qualcomm, Samsung & Mozilla (BNN Interview)

Watch here. (6 mins)

Mobile Wallet Wars: Winner is the “Final Foot”

As VISA launches the digital wallet V.me, a “digital wallet” in a bid to be relevant in the proliferation of cloud payment credentials, VISA and other incumbent payment providers should be concerned that in a cloud-based economy, it may lose its position in the market.

Presently VISA owns the lion’s share of credit and debit/prepaid plastic in circulation globally. (VISA 2,400MM vs. MasterCard 1,000MM)

Up-starts such as Square and digital innovators such as Paypal are trying to challenge the status quo and change the way people pay with plastic. Google and Apple continue to disintermediate the card vendors by aggregating large volumes of transactions and pass them back to the banks as “prepaid”  with low interchange fees. All in all, new payment players are looking at the old business hegemony of VISA and MasterCard and going OTT (over-the-top).

It is not about eliminating plastic. And it is not really an issue of whether these plastic holders are going the way of vinyl; but more importantly an issue of the business model behind these card and card credentials. Roles are being commoditized.

Cards are simply a way to store and relay banking credentials to the POS in the store and the POS in the cloud. In the US this is no more than a number that is stored on a magnetic swipe and embossed in the plastic. In the rest of the world this number is housed more securely in a chip. A chip that can be emulated securely in the phone chip (or SIM).

It is unlikely that the costly backend systems in the US and Europe that deal with fraud and regulatory issues will be displaced. And that the 2,400MM VISA cards and the 1,000MM MasterCard that use these systems will disappear. (*)

However, as VISA and MasterCard continue to be the trusted brands on every online and physical store they may find that their margins dipping. As banks try to revamp their mobile banking applications and ATMs to be more relevant to their peripatetic customer, fewer value added fees and services will impact their margins.

The question to ask is who owns the customers relationship because it is ultimately this relationship (the final foot) that they can monetize. The emergence of mobile and card-linked offers is making the point-of-sale systems in the cloud and eventually in the store, the new promotional depots for digital deals and coupons. So called “big data” and value added services will ultimately yield the most profit.

*(In emerging markets, where there little infrastructure, companies like M-Pesa service the unbanked via their mobile phone account. VISA has entered these emerging markets through acquisition of Fundamo and MasterCard through a partnership with Telefónica. Similar to the US, these companies are vying for the last-mile relationship.)

Who Owns the Wallet Owns Big Data

MasterCard launched its mobile wallet services at the keynote in New Orleans at the CTIA Wireless Show. Big news? Maybe, if you read between the lines.

The service is comprised of three components. PayPass Acceptance Network, which includes PayPass Online and PayPass Contactless, will help merchants accept electronic payments across multiple channels while giving consumers a simple check-out process. The services will be expanded to the point-of-sale over time, enabling the delivery of targeted offers, coupons and enhanced loyalty programs.

I think there is a battle raging that is not part of the press release. It is a battle to own the financial relationship with the consumer – Apple, Google, Visa, ISIS, all want to be the landlord for the secure credentials. The winner owns big data and all the money that flows from this.

In this scenario, MasterCard is the landlord, Gemalto is the property manager and the tenents are retailers, brands . . .  anyone who needs to leverage the wallets data down stream. Consumers secure credentials come with a full identification profile and of course their purchase behaviour.

Steve Mott and the retailers that are attempting to create their own competitive wallet is in direct response to this exact data scenerio.

MasterCard’s open door policy to third parties is a Trojan strategy to be the gatekeeper — everyone wants this privileged role. The dust has not settled on this two-sided business debate and will not for many years. But remember, the guy who owns the gateway owns big data.

READ FULL ARTICLE HERE

Interview: The Future of Shopping (MSN)

MSN 7 mins: Gary Schwartz, CEO, Impact Mobile, joins BNN to speak about The Future of Shopping

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.