Enterra Insights

The Digital Path to Purchase, Part 2

In Part 1 of this 2-part series on the digital path to purchase (DP2P), I explored why some analysts believe that digital technologies have forever altered the business landscape. Kevin Glacken believes, "Society is rapidly approaching a complete digital state." As a result, he writes, "There’s never been a better time for marketers for to see, understand and respond to the customer journey." ["Mapping the Customer Journey with Social Intelligence," Social Media Today, 25 May 2013] He explains:

"Today’s 'open social age' has created a 'looking glass' for companies to understand the complex nature of their customers as millions of them are broadcasting their opinions, attitudes, behaviors, experiences and even unmet needs on a real-time basis. ... New technologies have transformed the way people work, learn, communicate and share. And consumers freely share their opinions and experiences on social networks, blogs, micro-blogs, message boards, forums, mainstream news sites and a variety of other online platforms. According to Dimensional Research, over 90 percent of these consumers rely on independent reviews of products and services before they make a purchasing decision."

The "looking glass" through which companies view their customers is constructed from big data and analytics. Glacken asserts, "While many within the marketing realm point to the customer journey fragmenting between the offline and online worlds, the mobile revolution is actually pulling these worlds more closely together than ever before." Although that may sound counterintuitive, Glacken states the reason for this convergence is that consumers are "no longer ... tethered to their computers." He continues:

"According to a Morgan Stanley study, 91 percent of mobile users keep their device within three feet of them 24-hours per day. Mobile devices are now widely a standardization of life; people watch TV with them, make medical decisions with them and certainly shop with them. This 'always on' state that mobile online accessibility facilitates is particularly transforming the way we all undertake traditional offline shopping activities, from conducting product comparisons and identifying best prices to locating coupons or offers and getting opinions and reviews. This, along with the all-time accessibility of mobile devices has made the wealth of information ubiquitous in the 'offline' world."

In this post, I want to examine why mobile technologies are receiving the kind of attention Glacken discusses as well as look more closely at which consumers are likely to embrace DP2P mobile technologies. Although mobile technologies (e.g., tablets and smartphones) are often lumped together, Monica Ho asserts, "User behavior by device differs greatly – from experience to expectation." ["Smartphone vs. Tablet Commerce: 3 Essential Behaviors You May Be Overlooking," Search Engine Watch, 22 May 2013] She explains:

"With evolving features and functionality, as well as situational needs to consider, there are many unique differences in user behavior by device that can provide marketers with insights on not only the when and where – but how consumers use smartphone and tablet devices for their specific research and purchase-related needs."

Ho reports that even though PCs account for two-thirds "of all time spent in digital media, ... consumers are starting to rely heavily on their mobile devices, utilizing either smartphone or tablet based on distinct needs." Like the analysts discussed in Part 1 of this series, Glacken asserts that the digital world "creates a myriad of paths customers can take towards their purchase." As a result, consumers are becoming more empowered and retailers are finding the business landscape more complex. "The key to driving success," Glacken explains, "is for marketers to deeply understand consumers, continually map the journey and leverage this insight to drive messaging, education, promotions and innovation to align with the customers’ needs (met and unmet) and wants." He continues:

"The basis of understanding the customer journey today is mapping it with advanced social intelligence. To adequately accomplish this it must be derived from the 'big data' mining of millions of daily consumer social conversations. Simple in concept, but challenging in technical execution. This is why so many leading brands are turning to advanced, streaming 'big data' solutions to deliver deep market and customer insights on rapid basis. The ability to analyze millions of customers and prospects allows for deep insights and the construction of key strategic journey components, which enables the organization to strategically drive decisions and innovation."

Although Glacken's emphasis on mobile technology is understandable, Ho points out, "Just 22 percent of mobile users complete a purchase directly via their smartphone or tablet, and therefore the full impact of mobile cannot be measured without tracking conversion activities beyond the mobile device." According to Ho, "26 percent of research and decision activity conducted in tablet will drive sales online via PC, while that number for smartphone is just 9 percent. This revelation affects everything from targeting strategy to mobile ad creative." That means that the vast majority of purchases are still made in person and that realization has some profound implications for marketers and retailers. For one thing, smartphones are more likely to be used in a hybrid path to purchase (i.e., digital/in person) than a tablet. Ho explains:

"Consumers are rarely without their smartphones, constantly relying on them to access information while on the go, while tablet usage is typically done at home or work. This difference in typical usage location leads to a different type of user intent related to consumer expectation of distance. ... Nearly 50 percent of smartphone users leverage their device to look up a business locale or directions, and 20 percent look for a business phone number. While, tablet users typically utilize their devices for research or information, generally unrelated to location, including price comparisons, coupons, and reviews. But this doesn't mean that location is irrelevant to the activity conducted by tablet users. One-third of tablet users do indeed look for information related to their location – be it local events, area restaurants, or even a business phone number. While the immediacy of physical location may not be as important to a tablet user, location is an essential contextual element that should drive relevancy in everything from ad creative, to targeting strategy."

Ho concludes, "Your mobile consumers are essentially telling you what they want and how they want it, and by identifying mobile user activity related to device during the length of their path to purchase, you can better engage and guide their split mobile audiences throughout their interaction with your business – and reap the benefits." That statement begs the question: "Who are your mobile consumers?" It should come as no surprise that different generations have embraced digital technologies in much different ways. To over-generalize a bit, the younger the generation the more likely it is to embrace digital technologies. Consumers from the Baby Boom generation and those known as Generation Xer's have certainly embraced technology, but not to the same extent as following generations.

Generation Y consumers, also known as "Millennials," are often described as the first generation of "digital natives." Even so, a study by the Urban Land Institute (ULI) determined that many of them still embrace a hybrid path to purchase. An article in Consumer Goods Technology reports, "Despite being far more tech-savvy than previous generations, Generation Y, the 80-million strong cohort of Americans between the ages of 18 and 35, has not forsaken shopping in stores for online purchasing — as long as retailers keep their offerings 'fresh' and interesting." ["New Gen Y Shopping Preferences Revealed," 20 May 2013] The generation following Gen Yer's appears to be even more connected to technology.

The Coca-Cola Company certainly believes this and recently announced an all-digital, mobile campaign focused on teenagers. ["Coke Runs First All-Digital Effort, Focusing on Teens and Mobile," by Christopher Heine, AdWeek, 23 April 2013] According to Heine, Pio Schunker, Senior Vice President of integrated marketing communications at Coca-Cola North America, told an online press conference, "This is going to mark the first all-digital campaign by Coca-Cola. And critically, this signals a whole new way in which we've decided to create marketing content. ... Mobile phones are [teens'] lifelines. It's not that they don't watch TV. But mobile is their first screen." Another indicator that mobile technologies (especially smartphones) represent the future of the digital path to purchase is that "Hispanic shoppers are more likely to use their mobile devices to make purchases than general market consumers." ["Mobile Important For Hispanic Shoppers," Marketing Daily, 23 May 2013] Age also plays a role in that demographic. Armand Parra, director of insight and strategy at The Integer Group, told Marketing Daily, "The median age of Hispanics in the U.S. is roughly 10 years younger than the total population. This younger population are adopting technology at a faster rate than the older general population. Secondly, for the majority of Hispanics, mobile is their primary access point to the Web and therefore their whole Web experience is based around a mobile tool set versus the PC-based Web experience."

That description could also apply to much of the developing world. "Mobile phones, which are proliferating and increasingly used to access the Internet in Asia, are becoming a powerful tool for both marketing and market research as they tap into key consumer trends," writes M. Hafidz Mahpar. ["Smartphones seen becoming the 'centre of digital' marketing," The Star, 4 February 2013] James Fergusson, global head of TNS, told Mahpar, "Mobile phones connect location, voice, social, and m-commerce more than any other device. Mobile is becoming the centre of digital. If you are a market research supplier, mobile has to be your primary area of investment. If you don't have a mobile strategy, you're not going to grow."

As the target audience for manufacturers and retailers moves down the generations, the importance of mobile technology and the digital path to purchase are going to move up.

The Digital Path to Purchase, Part 1

"The nature of the digital challenge is evolving rapidly and challenging traditional business models," write McKinsey & Company analysts Francesco Banfi, Paul-Louis Caylar, Ewan Duncan and Ken Kajii. "The initial wave that propelled the dramatic rise in consumer digital usage has already turned into a transformative surge - reshaping the ways consumers buy new products and services." ["E-journey: Digital marketing and the 'path to purchase'," McKinsey & Company Telecom, Media, and High Tech Extranet, 16 January 2013] If the authors are correct and the business landscape is being reshaped, businesses must also change if they are going to traverse the new terrain successfully. "The challenge today is much bigger than simply building an efficient online sales engine," the McKinsey analysts insist. "Instead, it involves creating brand engagement through digital media and platforms, turning that brand engagement into brand preference, and leveraging it to drive sales and loyalty."

What most people call the "digital path to purchase" (DP2P), the McKinsey analysts call "the consumer decision journey (CDJ)." Whatever you call it, it "describes the iterative and circular process shoppers go through today when selecting brands, products, and services." The analysts assert that the CDJ "has four phases: consideration, evaluation, purchase, and post-purchase." Frankly, there is nothing new about that conceptual framework. What's new, the authors report, is that digital media "has made this already complicated process even more complex." They explain:

"The traditional channels that typically influence consumers during the consideration phase include the 'big three' above-the-line (ATL) media - TV, radio, and print advertising - along with word-of-mouth recommendations from friends and family. With the advent of digital channels, the list expands to include brand Web sites, mobile apps, online advertising, social networks, price comparison engines, as well as blogs and forums. ... Pulling this tangled knot of complexity even tighter, digital touch points themselves have spread far beyond traditional personal computer platforms to include those behind smartphones, tablets, gaming devices, TVs, and even smart applications."

Dion Hinchcliffe agrees with the McKinsey analysts that complexity now characterizes the consumer's journey to purchase. "Businesses planning today to improve their connection to customers in digital channels," he writes, "are increasingly looking at the discipline of mapping out what's being called the 'customer journey'." ["The new digital customer journey: Cross-channel, mobile, social, self-service, and engaged," ZD Net, 19 May 2013] He continues:

"Over the last ten years, the fragmentation of customer engagement across dozens of channels has turned into both a highly vexing problem and an increasingly disruptive challenge to businesses that still keep doing what used to work, but are getting sharply falling off results from old touchpoints like TV, phone, and e-mail. This fragmentation of customer touchpoints cuts across marketing, sales, customer service, and even product development. In short, customers have moved to the digital world en masse, and companies have not kept up."

The McKinsey analysts note that not all "customer touch points" are equal. They concluded, "A brand's Web site has by far the highest touch point 'quality' - or the ability to positively influence a customer toward a particular brand." They claim that "mobile apps also show solid potential." What about social media? The analysts conclude that despite the "impressive growth and strong hype" they have received, "social networks do not appear to drive brand preference among consumers." To learn more about the importance of brand engagement, read my posts entitled Targeted Marketing and Brand Engagement, Part 1 and Part 2. Hinchcliffe agrees that now and in the future it is "imperative for companies to shift from transactions to engagement." Traditional marketing solutions, he believes, "have long been channel-centric, instead of customer-centric. While the majority of companies certainly do have modern call centers, social media marketing plans, e-mail campaigns, a mobile app strategy, an SEO policy, and so on, they are frequently unsynchronized and siloed. It's also highly likely these channels are also not monitored well and fall far short of the participation levels required to achieve ROI." Anytime you hear or read the word "silo" associated with business, you can be assured that alignment challenges are lurking nearby.

Keeping marketing strategies aligned across channels is important because consumers are likely to use several digital touch points during their path to purchase. Just as importantly, they are likely to jump in or depart the path to purchase at any time. As the McKinsey analysts conclude:

"The consumer decision journey is not a onetime process. Customers are continuously engaged and in various stages of multiple processes at any given point in time. For an individual brand, the importance here is its ability to keep customers coming back. Active loyalty plays a significant role in driving repeat purchase decisions - particularly in most developed markets. A broad shift in the way consumers are engaged online becomes apparent - even after the purchase. This can positively influence the repeat purchase decision."

Banfi, Caylar, Duncan and Kajii recommend that companies keep three key considerations in mind when establishing a digital path to purchase strategy. First, identify "the most critical touch points across the consumer decision journey for their own products and services." Second, "have a multichannel orientation and [don't] focus on one digital channel exclusively or on digital at the expense of traditional channels." Finally, balance activities between obtaining new customers and retaining old ones. "Since the consumer decision journey applies to both the retention and the acquisition phases," they write, "the relative focus on digital in either of these phases is organization-specific." Hinchcliffe points out that simply identifying critical touch points is not as easy as it may appear. "New digital channels," he asserts, "are accumulating faster than many companies can integrate them into their customer experience." He continues:

"New social networks, mobile devices, app stores, online touchpoints like fan sites, customer communities, Facebook pages, Twitter accounts, etc. seem to emerge on a weekly basis. If that wasn't enough, customers are more ready to interact than ever before, further creating challenges of scale: Even if a company could integrate a new digital engagement channel into their efforts, these new venues are far more two-way. Customers expect a meaningful response to their attempts to connect with the companies they are interested in or otherwise desire involvement. So this is the opportunity and the challenge combined: Engaged customers generate more revenue and stay more involved with the companies that respond in kind. Yet it's very challenging to meet their demands for engagement without fundamentally changing the rules of how companies connect with them."

Because there is such a dizzying array of touch points for consumers to use on their path to purchase, Hinchcliffe recommends that companies look at each of them with three things in mind. First, use them to "solve a problem. Make a pain point go away, such as seamlessly conveying the current status of orders in any desired channel, or providing an innovative new way to participate in the co-design of a new product or service." Second, "make life simpler. Remove the time, effort, and/or friction the customer has in engaging with you." Finally, "engage the customer. The core of the problem companies have in onboarding new digital channels such as social media, is that customers will then expect the company to respond and participate in conversations. And engagement at scale is one of the hardest things for companies to do as they are organized today." He concludes, "The one thing that is ultimately untenable is ignoring customer needs."

Hayden Sutherland believes that the traditional path to purchase is dead. "The path to purchase is dead," he writes, "long live the path to purchase." Just like royal succession, he knows that something is always ready in the wings to ensure that business moves on. ["The digital path to purchase," Press 2.0, 4 March 2013] He continues:

"Today's shoppers now have a number of tools at their fingertips to help them chose which products to buy and consumer technology has been the facilitator of this. Research from Google Analytics has found that over a two-day period customers now interact with a brand 4.3 times before making a purchase. Furthermore the average U.S. shopper now interfaces with a total of 10.4 traditional and online media sources prior to purchasing. That's a lot of browsing before buying (or looking before booking, if you're in an industry such as online travel). Furthermore, according to further research by Google, online customers are now making the majority of their purchasing decision before engaging with a sales representative. There's no doubt that the traditional way that shoppers purchase has now evolved and the marketing to these people has changed with it."

You might ask yourself, who are "these people" to whom Sutherland refers? That is the subject that I'll address in Part 2 of this series.

Showrooming Remains a Problem (or Does It?)

"Physical retail stores have long been considered both places to research and to purchase products," write McKinsey & Company analysts Francesco Banfi, Paul-Louis Caylar, Ewan Duncan and Ken Kajii. ["E-journey: Digital marketing and the 'path to purchase'," McKinsey & Company Telecom, Media, and High Tech Extranet, 16 January 2013] But with retail stores finding it hard to compete with online prices, today's stores continue to wrestle with a practice known as "showrooming." Showrooming involves consumers using a brick-and-mortar store to physically check out items but then purchasing those items online. How prevalent (and worrisome) this practice is remains the subject of debate. The editorial staff at Consumer Goods Technology writes, "Brick and mortar retailers are painfully aware of the impact of showrooming — the act of consumers using their mobile phones in-store to compare prices with competing retailers — on their bottom line." The staff reports that just before last year's holiday season, Edgell Knowledge Network (EKN), in partnership with eBay Local, conducted a survey of retailers. One of the survey's findings was that "80 percent of retailers expect[ed] to be impacted by showrooming; they expect[ed] the average loss of sales to be 5 percent — a significant number, given the low margins in many retail segments." ["80% of Retailers to be Affected by Showrooming," 20 November 2012]

Gaurav Pant, research director at EKN, told the editorial staff, "Showrooming is a phenomenon that's here to stay. One in four shoppers used their mobile phones to compare prices while in the store during the 2011 holiday season, and those numbers will only grow." Henry Helgeson, CEO and co-founder of Merchant Warehouse, agrees with Pant that showrooming is here to stay, but claims the percentage of shoppers that check prices using their mobile devices is much higher than Pan reports. He writes, "A recent study noted that, while shopping in a brick-and-mortar store, 67 percent of people check their smartphones to see if there's a better price elsewhere, and the majority (62 percent) will leave a store and buy online for a lower price." ["The Best Weapon That Merchants Have To Combat 'Showrooming'," Business Insider, 28 April 2013] It turns out that the 62 percent of shoppers who leave a store to buy elsewhere for a lower price do have turning point for making that decision. Chuck Martin reports that a nationwide study, conducted by Anderson Robbins Research for Linkable Networks, concluded, "The majority (62%) of shoppers would leave a store and buy online for a price up to 20 percent below the one in the store. For a discount of 5% and 10%, a store would lose almost a quarter (23%) of its price-checking shoppers and for a discount of 15% and 20%, another 39%." ["Showrooming & the 20% Mobile Deal Factor," MobileShopTalk, 5 April 2013] The study concluded that only 13 percent of hardcore shoppers would leave a store regardless of how small the savings found elsewhere.

In other words, brick-and-mortar stores have some wiggle room to negotiate with consumers who comparison shop using their mobile phones. Working with customers to get them the best in-store deal may have benefits beyond the initial sale. The McKinsey analysts note that stores play a significant role in retaining customers. They write:

"In today's digital era, the role of stores has evolved significantly. When analyzing customer decision journeys [CDJ] for retention versus acquisition activities, it becomes apparent that stores are essentially 'retention machines'. In other words, while their influence on non-customers is rather low due to very low penetration rates (in the 10 to 20 percent range), they retain strong influence over current customers considering purchasing the same brand again. Such customers visit stores more reliably, with penetration rates in the 25 to 45 percent range."

Monica Ho reports that "just 22 percent of mobile users complete a purchase directly via their smartphone or tablet." ["Smartphone vs. Tablet Commerce: 3 Essential Behaviors You May Be Overlooking," Search Engine Watch, 22 May 2013] In fact, she reports that 68 percent of smartphone users (those most likely to be "showroomers") still make their purchases in-person. She continues:

"If a retail chain understands that the majority of their smartphone customers will actually make a purchase in-person, they can modify their targeting to focus on users within the vicinity of their brick-and-mortar stores instead of a broad run of network strategy to drive direct mcommerce. Ad creative would then focus on an offline call to action relevant to the various brick and mortar locations, such as a coupon or limited time offer redeemable on premises. By considering mobile consumers' preferred method of conversion, you can make simple yet powerful changes in strategy and creative that can amount to big results."

The point is, brick-and-mortar stores needn't throw their up hands in despair over the practice of showrooming. Even the first generation of so-called "digital natives" still enjoys shopping in traditional stores. "Despite being far more tech-savvy than previous generations, Generation Y, the 80-million strong cohort of Americans between the ages of 18 and 35, has not forsaken shopping in stores for online purchasing — as long as retailers keep their offerings 'fresh' and interesting, says a new report from the Urban Land Institute (ULI)." ["New Gen Y Shopping Preferences Revealed," Consumer Goods Technology, 20 May 2013] In other words, retailers should take heart but don't get complacent. The article continues:

"The study found that 37 percent of Gen Yers love shopping and 48 percent enjoy it. Half of the men surveyed and 70 percent of the women consider shopping a form of entertainment and something to share with friends and family. The appeal of shopping is particularly strong among Gen Yers who are Hispanic and African American. Gen Yers tend to spread their dollars around generously, the study found, with more than half visiting a variety of retail centers at least once a month, including discount department stores (the retail type most frequently visited by Gen Y), community shopping centers, enclosed malls, department stores, big-box power centers, chain apparel stores, and neighborhood business districts. At the same time, 91 percent of respondents said that they had made online purchases over the previous six months, with 45 percent spending more than an hour a day looking at retail-oriented web sites."

Shoppers are obviously looking for fair prices and good deals; but, as I've noted in previous posts, they are also looking for great in-store experiences (read, for example, my post entitled Retailing Faces a Brave New World). M. Leanne Lachman, president of real estate consulting firm Lachman Associates LLC and executive-in-residence at Columbia University's Graduate Business School, told the CGT staff, "Contrary to what some retailers have feared, we found that Gen Y still does most of its purchasing in stores. Gen Yers use the Internet to research products, compare prices, envision how clothing or accessories might look on them, or respond to flash sales or coupon offers, as well as to purchase items; they are definitely multi-channel shoppers." Lachman pinpointed the most important thing that today's large retailers need to keep in mind -- shoppers are using multiple channels on their journey to purchase.

Evan Schuman believes that showrooming has been overblown. He even calls the phenomenon a "myth." ["The Myth Of Showrooming Takes Another Hit," StorefrontBacktalk, 15 May 2013] He reports that a recent Bizrate survey of shoppers who made purchases on-line found "an overwhelming 78.15 percent of those online purchasers had not looked at those products in any physical store." While that figure does shoot holes in the notion "that tons of shoppers are flooding stores to only use them as a physical showroom," it doesn't address the situation where consumers do engage in comparison shopping while in stores. Not to worry, Schuman writes, he reports that the survey also looked at the "remaining 21.85 percent of shoppers who had looked instore before buying online" (i.e., the showroomers) and found that "most of them (54 percent) ended up buying from the same chain. In other words, they were in a Target or a Best Buy and then purchased from Target.com or BestBuy.com." That strengthens Lachman's point that multi-channel activities are becoming more important for retailers.

Although convenience plays a role in the showrooming arena (i.e., it's more convenient to buy a bulky item online and have it delivered than to wrestle it home from the store yourself), the bottom line is product price. Ann Zimmerman writes, "Lower prices are one of the main reasons people pick Amazon and other Internet-only emporiums over traditional retailers. If brick-and-mortar stores can't compete on price, it is unclear how successful they can be with tweaks to merchandising and customer service." ["Can Retailers Halt 'Showrooming'?" Wall Street Journal, 11 April 2012] Anne Zybowski, director of retail insights for Kantar, told Zimmerman, "Offering people personalized prices through their mobile device may be the most effective way to beat showrooming." These targeted marketing schemes are much more effective when made while the consumer is actually in-store because they have the advantages of time and location. For large retailers with no counter-strategy, showrooming could remain a problem. Innovative retailers, however, can still find ways to make the in-store experience a preferred path to purchase.

Targeted Marketing and Brand Engagement, Part 2

In Part 1 of this two-part series, I discussed how marketing is getting more personal. I also noted that today's successful marketers are providing consumers with "calls to action" and great experiences. Grant Shippey insists that you need to know your customers "up close" if you are going to motivate them. He writes, "The global view risks overgeneralising the customer base and therefore failing to properly accommodate localised needs and wants." ["Nice from far, but far from nice: big data can help retail bring everyone ‘up close’," memeburn, 21 May 2013] In the past, he writes, the inability of businesses to get close to customers was "largely a legacy of the relatively high cost of data in the past, coupled with data scarcity, leaving us with a very dim light from which to garner insights." In the age of big data, those impediments no longer exist. In fact, Shippey insists that today many companies have a data surplus.

By analyzing this data, companies can now engage in what David Armano, Managing Director of Edelman Digital Chicago, calls "Responsive Marketing," Logic + Emotion, 19 May 2013] Even though companies CAN engage in responsive marketing, he writes, many (if not most) don't. He explains:

"Despite the pervasive nature of all manifestations of digital, including social and mobile, much of the marketing emphasis remains dedicated to reaching people in mass, following a tried and true formula for advertising designed to build off consumer insights and craft compelling messages which could be distributed across a myriad of channels (including digital). The approach is designed for the broadcast industrial machine including print, radio and television, which, despite rumors of its demise is likely to stay with us for some time. The problem it poses however is that it is an approach that ... is neither nimble nor flexible and isn't built for rapid change nor does it adapt well beyond the dominant media it was designed for."

Companies that have discovered the importance of responsive marketing, he says, "understand that their customers value content, consume it, create it, and share it." In other words, they respond to calls for action and, as a result, have a great online experience. Because traditional media outlets aren't going away any time soon, Armano believes that companies should take an evolutionary, hybrid approach to marketing. "The solution to the content question," he writes, "lies somewhere between acknowledging that a brand must support both a traditional, linear marketing model in addition to a newer, cyclical construct which is constantly in tune with the current environment and operates in consolidated time frames. Responsive marketing sits at the core of the content evolution." Jim Bampos, Vice President of quality at EMC, also believes that big analytics lie at the heart of providing customers with great experiences. ["Data-Driven Customer Experience, Direct Marketing News, 1 February 2013] He writes:

"Many different types of data elements are captured, analyzed, and turned into information that internal businesses can use to make decisions that are focused on continued improvements in the customer experience. From analyzing unstructured data via sentiment and suggestions in open-ended comments, to analyzing structured data via customer metrics, Big Data analytic technologies and tools are only part of the equation; people and processes are also essential to improving the customer experience and business results."

Steve Goldner, a Senior Director of Social Marketing for Ryan Partnership, reaffirms what others have said, namely, simply having a presence on social media isn't enough to engage consumers. "There is no value added for brands in their social presence," he writes. "That is, unless they have a unique offering for their audience with their content, creativity, and presence on social channels." ["The New Customer Demands New Marketing," Social Steve's Blog, 11 February 2013] He continues:

"Today brand image and style remain extremely important. But more and more consumers feel that they are manipulated by advertising. Many feel that the ads are merely a façade for brands and what they stand for. The new consumer wants to feel that brands stand for something that they themselves value. The new consumer is looking for greater brand transparency and truthfulness. And if a consumer thinks a brand has done an injustice, they will call them out in public space. The consumer opinion and influence is stronger than ever and they are pickier than ever because they now know they hold power. It is tougher and tougher for brands to capture consumer preference. The new consumer is powerful and thus a new marketing approach is required."

The new marketing approach recommended by Goldner clearly relies on big data analytics. He asserts that this approach must have the following elements:

• Complete understanding and empathy for their target audience.


• Brand commitment to their target audience to deliver not only an outstanding product/service but also a strong and engaging ongoing user experience.


• A publisher mentality – brand delivery of valuable content to their audience to reinforce who they are, what they stand for, while having complete understanding of the audience’s wants, needs, and desires.


• Creativity that allows the brand to stand out in saturated marketing channels.


• Listening – the new consumer is very social. Listening to them allows brands to shape their products/services closer to user-perceived perfection. Listening also allows brands to address problems immediately before a PR nightmare occurs. It also provides an opportunity to amplify positive feedback.

Goldner insists that new marketing approaches must "be completely driven by the consumer." He concludes:

"Understand how your competition is attempting to win customers. Use the channels where your audience goes and produce a most dramatic presence in a creative way. Be bold and stick out way beyond commodized marketing."

The marketing firm Urban Airship believes that future of targeting marketing and customer engagement is going to be driven by mobile devices. The following Urban Airship video offers some compelling reasons why they believe this.

Even if Urban Airship is correct and the future belongs to mobile, more traditional Internet activities aren't going disappear. Websites will continue to be an important outreach medium. There, too, targeted marketed (or whatever you prefer to call it) plays an important online role. Ruben Corbo prefers the term behavioral targeting. The objective of this approach remains the same -- consumer engagement. "Behavioral targeting is a means of creating more efficient marketing strategies," Corbo writes. "It's conducted through use of specific apps and programs that monitor the activity of the site. It also allows visitors to pick and choose their site subscriptions preferences to their liking." ["Why Behavioral Targeting Can Determine Your Website's Niche," Web Hosting Secret Revealed, 22 April 2013] Corbo continues:

"Behavioral targeting is conducted through creating a specific profiling pattern on each customized visitor's page, allowing them the choice to browse topics that are of interest to them. They are also able to receive recommendations about topics, products, or services that would appeal to their tastes. ... Behavioral targeting is best used on sites with high amounts of traffic and activity, as these sites offer the best content and services available. The range of advertising is also increased yet centered on areas that a specific user or client may seem to show a specific interest in, thereby increasing the chance of views which is by far a better alternative to just random ads. ... Nobody likes to receive advertisements that aren't relevant to them – especially in this over-saturated web where everything commands our attention. The benefit of behavioral targeting is it only suggests products or services to the customers based on their unique needs."

It's clear that targeted marketing is discussed under a number of monikers including response marketing, behavioral targeting, and content marketing; but, the desired results remain constant -- engage customers and strengthen brands. Providing consumers with a worthwhile experience is quickly becoming the best way to achieve those goals.

Targeted Marketing and Brand Engagement, Part 1

As businesses have created more ways to reach out to customers, deciding how to reach out has become increasingly complicated. In the days before newspapers, proprietors simply hung a sign on the front of their shop indicating what you could expect to buy inside. Unfortunately, only people passing in front of the shop were able to see the message. When newspapers came along, so did advertising and the ability to reach more people. The ads, of course, were aimed at drawing customers to the shop. As magazines, radio, and television were added to the mix, the ability to reach ever larger audiences increased as did the complexity of the decision of how to spend marketing dollars. The age of personal computers opened up the entire world to businesses and companies that are now wrestling with how best to divide marketing dollars to support multi-channel sales.

Until recently, the larger the audience that a business wanted to reach the more impersonal advertising became. Advertising campaigns had to have broad appeal since they were simply being scattergunned into the marketplace. Perhaps one of the most ironic things that has occurred in recent years is the fact that businesses now have the opportunity to advertise in a more personal way than has been available since the end of the door-to-door salesman era. What allows businesses to get personal with consumers is the collection and analysis of data. Unfortunately, targeted marketing wasn't possible in the early era of personal computers and consumers were blasted with an infinite array of advertisements (mostly in the form of unsolicited emails) that quickly became labeled "spam" or "junk mail." Almost as quickly, spam filters were created to keep annoying solicitations from ever reaching computer screens. To overcome the challenge of getting through junk mail filters without annoying consumers, reputable businesses eventually engaged in permission-based advertising.

Today, big data analytics can help businesses stay engaged with consumers by ensuring that the ads they send them are relevant to their lifestyles and preferences. Because this kind of brand engagement is so critical, Navin Nagiah, President and CEO of DotNetNuke, believes that companies should be keenly aware of the data that is being used to create targeted marketing campaigns. ["In The Age of Big Data - Data Is Power," Huffington Post Blog, 16 May 2013] He writes:

"It is imperative that you and your company understand which side of your bread is buttered and keep what's important (the data) closer to home. To build a successful company, you must own the customer and the prospect. You must own the engagement. You must control or manage the conversation and where it happens. It is critical that you own every aspect of the data as it relates to your prospects, possible buyers and customers, and that you are able to mine this for your own benefit, as you wish. ... If you do that, you will collect data that will you give leverage & power in the marketplace. If you settle for anything else, you are likely frittering away your competitive advantage as both the online world and technology changes around you. To keep the advantage, to stay competitive, you need to own the data."

Although I'm not convinced that you "need to own the data," I do believe that you must understand where you obtain data and ensure that it is the kind of data from which actionable insights can be gained. Although Nagiah focuses on a company's website as being its most important asset for gathering data, many companies believe that if the customer won't come to them they must go to the customer. One place they know that customers hang out is on Facebook. A recent MIT study noted that the types of corporate posts that were "liked" on Facebook "were often also shared." ["How to Create Brand Engagement on Facebook," by Arvind Malhotra, Claudia Kubowicz Malhotra and Alan See, MIT Sloan Management Review, 18 December 2012] Both "liking" and "sharing" are desirable types of consumer engagement. This kind of engagement is often prompted by what Laurent Faracci, the U.S. chief strategy and marketing officer for packaged-goods giant Reckitt Benckiser, labels "calls to action." He states that if he had his way, "100% of our digital media would have a call to action." ["Years After Ditching the Click, CPG Marketers Embrace Web Ads With 'Calls to Action'," by Jack Neff, Ad Age, 25 February 2013] Although a "call to action" might sound like a significant activity, it can be as simple as getting someone to enter a contest, answer a question, download a coupon, and so on.

Malhotra, Malhotra, and See report that lengthy a Facebook wall post "decreases the likelihood of [it] being 'liked'." Surprisingly, however, "length did not influence whether a post was shared." They continue:

"Additionally, there were no negative effects on 'shares' for posts announcing contests, advocating social causes or asking questions. There were two types of posts that drove 'shares' more than 'likes.' First, while posts with video content were not 'liked' more, they were shared significantly more than non-video posts. Second, whereas posts announcing deals did not receive high 'like' totals, these posts were shared much more often. It seems as if consumers chose to share attractive deal information rather than indicating appreciation. Regardless of whether a Facebook fan 'likes,' comments, shares or does some combination thereof, engagement through Facebook is becoming a critical element of any organization's marketing strategy. An opportunity exists to leverage wall posts more effectively to generate greater propagation and richer conversation — and to convert more consumers into brand advocates. In the highly networked social world we live in today, such brand advocates are priceless."

Jason Acidre believes that "the perceived value" that customers get through online engagement helps build trust and, as a result, stronger branding. ["How to Increase Conversions through Brand Strengthening," Kaiser the Sage, 20 May 2013] He writes:

"These processes involve content and strong brand indicators that a site builds to promote itself such as highly-informative blog posts, design/presentation/ experience, reviews and mentions from other people/sites, and a lot more. ... The truth is, it's easier to sell things when people (especially your target consumers) are already aware and fascinated by what your brand is putting out on the web. ... Basically, by building a strong online brand presence, you'll be able to acquire more qualified traffic that can easily be converted into leads and/or sales."

Acidre goes on to discuss a number of ways that brands can be strengthened through engagement, including: awareness, differentiation, and perceived value. He writes:

"Awareness -- Letting your target consumers know how your brand can help solve their problems – through education – is an important aspect of online branding, as it can influence buying decisions and brings them a step closer to your goals.

"Differentiation -- Brand attributes such as unique value proposition and pricing, can also increase a brand's chances of getting more interested users/consumers than its competitors. Highlight how your brand is unique or different in your space through your branding activities. ...

"Perceived value -- The way how people see or think about your brand or the quality of its products/services can extremely affect your site's conversions. It also scales your brand's marketing process, given that it naturally generates endorsements from satisfied users/customers, which then raises your brand's credibility."

Acidre is a proponent of getting your message out through as many channels as possible, such as, "brand mentions, links, social shares, endorsements, brand impressions, traffic – which all can help build trust, authority and conversions." He agrees with the MIT researchers that social media can be a powerful way to engage with consumers. He concludes:

"Offering the best experience possible for your users/visitors is imperative in this age of online marketing. Aside from helping your site perform better in search (as most of Google's algorithmic updates are based on usage), it can also help make your site become more remarkable to its users. It's easier to get endorsements when people are sticking around and getting remarkable experience from your site. Areas of your site's pages that you can continuously test to improve experience and visitor engagement are:

• Call to action
• Readability
• Content structure
• Thematic internal linking
• Design
• Accuracy of headlines and meta tags

"Improving your site's engagement rate can definitely increase its conversions, since people are more willing to take the next necessary action."

Marketing technologist Scott Brinker agrees with Acidre that providing the consumer with the right experience is important. Brinker believes that in the era of big data engaging with consumers should provide a big experience. ["The big data bubble in marketing -- but a bigger future," Chief Marketing Technologist, 21 January 2013] All of the pundits discussed above agree on one thing, engaging with the consumer is essential in today's marketplace.

Big Data Analytics: Good Questions Result in Better Answers

We've all been in classrooms or meetings when the person in charge (be it a teacher or facilitator) has stated, "There are no dumb questions." Of course there are! We've all seen the lists of supposedly real questions asked by trial lawyers in court; such as: "Now doctor, isn't it true that when a person dies in his sleep, in most cases he just passes quietly away and doesn't know anything about it until the next morning?" Comedian Bill Engvall believes that people who ask dumb questions should have to wear a sign that says, “I'm Stupid.” For example, he says: "Last time I had a flat tire, I pulled my truck into one of those side-of-the-road gas stations. The attendant walks out, looks at my truck, looks at me, and I SWEAR he said, 'Tire go flat?' I couldn't resist. I said, 'Nope. I was driving around and those other three just swelled right up on me. Here’s your sign."

Don't get me wrong. If you don't know something, you should ask a question. I believe that. But I also believe that you shouldn't ask dumb questions. Even if a question isn't a dumb one, there might be a better way to phrase it to obtain a clearer or more creative answer. Asking dumb questions is easy. Asking good questions is a lot harder. World-class researchers achieve the best results because they know how to ask the best questions. If you want big data analytic platforms to provide you with the best actionable intelligence, you need to ensure that the question you want the platform to analyze is framed in the best possible way. Good questions result in better answers.

Vijay Vijayasankar reports that, in the past, "a key principle for a good BI [business intelligence] system design" was discovering "the questions a user would ask the system, and then designing a solution around that." ["Big Data Solutions – Do Questions Matter?" Vijay's thoughts on all things big and small, 23 April 2013] While that approach may optimize obtaining "fast and accurate responses to predefined questions," it "also curtails our ability to change our mind and ask different questions." Flexibility is important because businesses may discover they are asking the wrong questions or need to tweak their questions if initial results don't provide all that was desired. Vijayasankar concludes, "I think we should use the big data momentum to make BI systems more intelligent than the rudimentary things it is capable of doing today."

One of the great things about analytic systems driven by artificial intelligence is that such systems can learn as they go. Over time the system itself may discover interesting questions to explore on its own. To be of the most use, Vijayasankar believes that analytic systems should permit natural language questions to be asked. He writes:

"Some training might be needed for the system and for the users to understand the restrictions – but no user should be constrained with the need to know how things work behind the scenes. A minority of people should have the skills to educate the computer – the rest of us should not be burdened with that. Instead, the computers should be smart enough to tell them answers to what questions users ask."

Navin Nagiah, President and CEO, DotNetNuke, notes that the world's most "powerful" companies "are powerful because they have information about you ... your background, your likes, your conversations, your actions, your location, your interests, your friends, your travel schedule, your profession, your hobbies, your kids. ... It is mind-blowing how much information these companies have about you." ["In The Age of Big Data - Data Is Power," Huffington Post Blog, 16 May 2013] I don't believe the age of big data revises the adage that "knowledge is power." Data that lies fallow in storage is no more powerful than gasoline that sits unused in an automobile. Power is only achieved when the data (or gasoline) is used to fuel a machine that does something with it. Mai Bruun Poulsen agrees that it is knowledge (and not data) that makes companies powerful. She believes that many "Companies Are Data-Rich and Insight-Poor." [Mindjumpers, 24 January 2013] "The amount of customer data can be overwhelming," she writes, "and some companies therefore fail to turn the data into useful information and insight." Nagiah implies as much. He writes:

"As science and technology evolves and as there is progress in behavioral economics, data mining, psychology and sociology in the connected world, these different fields will come together and companies that have this data will be able to derive intelligence. It is expected that in at least some scenarios they can predict your actions, and perhaps even know more about you, than you do yourself."

In other words, it is the analysis of data that provides the power -- and analysis is driven by questions. Of course, the questions you ask often depend on the position you occupy. Marketers will ask very different questions than factory managers or supply chain professionals. McKinsey & Company director David Court states, "If you look at the advantages people get from using data and analytics — in terms of what they can do in pricing, what they can do in customer care, what they can do in segmentation, what they can do in inventory management — it's not a little bit of a difference anymore. It's a significant difference." ["Putting big data and advanced analytics to work," McKinsey & Company Insights & Publications, September 2012]

Marketing, of course, is one area where big data analytics is becoming extremely important. Michael Brenner, Vice President of Global Marketing for SAP, believes that questions are particularly important in this area. "Big Data for Marketing," he writes, is more about the questions than the answers." ["Big Data For Marketing? It’s All About The Questions," B2B Marketing Insider, 14 May 2013] He also writes, "[It's] more about the insights than the technology." Gary Lockwood calls the ability to ask good questions a "magic performance tool." ["How to Ask Intelligent Questions With Impact," BizSuccess] He continues:

"The entire medical profession uses this technique. Educators, business leaders, salespeople, researchers, scientists and even business coaches use this method. ... There are thousands of examples to prove that asking good questions is one of the most important success secrets. ... Years ago, as a business consultant, I took pride in always having an answer. Now I realize that in our fast-moving, mile-a-minute world, answers have a very short shelf-life. Having the right questions is more important and more valuable."

Shane Snow agrees with Lockwood. He writes, "Good questions can move your business, organization, or career forward." ["The One Conversational Tool that Will Make You Better at Absolutely Everything," Fast Company, 17 December 2012] Snow shouldn't have limited his headline to "conversations." Good questions are important in any setting where good answers are sought. The point of this post is that good questions will make your business analysis better in every area. Snow doesn't assert there are no dumb questions; but, he does believe, "The worst kind of question is the one left unasked."

Forecasting the Future with Big Data

All of us are curious about what lies ahead of us. We get nervous when our vision is limited. In such circumstances, we proceed cautiously, at best, and fearfully, at worst. It's why at night we carry flashlights and drive with our headlamps on. It's no different in the business world. The reason that companies get involved in forecasting and engage in "what if" scenario planning is that they don't want to be blindsided by the future. Big data is playing a larger role in these processes because such data can be analyzed to discover patterns that make predictions more accurate and timely. You might be surprised at the number of ways that companies are using big data to improve their forecasts about the future.

For example, take the world of entertainment. When Netflix decided to produce a series of its own, it "chose House of Cards as its first big project. Based on a BBC series, the show stars Kevin Spacey and is directed by David Fincher, and it has quickly become the most watched series ever on Netflix." ["The 'Big Data' Revolution: How Number Crunchers Can Predict Our Lives," KRWG, 13 April 2013] In the series, Spacey is a scheming politician from South Carolina hoping to plot his way into the White House. The article continues:

"The success of House of Cards is no accident. Netflix executives knew exactly what their millions of customers were watching; they knew precisely how popular the works of Fincher were, and how many of their customers were fans of Kevin Spacey, and how many people were streaming the British House of Cards. Sifting through that mountain of data, Netflix executives were able to predict that House of Cards would be just what Netflix viewers would want to watch. That kind of decision-making is an example of Big Data: the decade-long explosion of digital information, much of it personal, that has become available to companies and governments."

The article notes, "This trend in predictions and decisions is the topic of a new book, Big Data: A Revolution That Will Transform How We Live, Work and Think." Read my review of the book by clicking this link. One of the stories used in that book involves the retail chain Target. Using algorithms Target was able to figure out which of its customers were pregnant even if the women hadn't revealed that specific tidbit to the company or anyone else. ["How Companies Learn Your Secrets," by Charles Duhigg, New York Times Magazine, 16 February 2012] Duhigg relates the following story:

"A man walked into a Target outside Minneapolis and demanded to see the manager. He was clutching coupons that had been sent to his daughter, and he was angry, according to an employee who participated in the conversation. 'My daughter got this in the mail!' he said. 'She's still in high school, and you're sending her coupons for baby clothes and cribs? Are you trying to encourage her to get pregnant?' The manager didn't have any idea what the man was talking about. He looked at the mailer. Sure enough, it was addressed to the man's daughter and contained advertisements for maternity clothing, nursery furniture and pictures of smiling infants. The manager apologized and then called a few days later to apologize again. On the phone, though, the father was somewhat abashed. 'I had a talk with my daughter,' he said. 'It turns out there's been some activities in my house I haven't been completely aware of. She's due in August. I owe you an apology.'"

Target's objective, of course, was to sell products not reveal secrets; but, the story underscores how analytics can be used to make predictions with great accuracy. Laura Hazard Owen penned an article about a software program developed by Eric Horvitz, of Microsoft Research, and Kira Radinsky, of the Technion-Israel Institute, "that analyzes 22 years of New York Times archives, Wikipedia and about 90 other web resources to predict future disease outbreaks, riots and deaths." ["How two scientists are using the New York Times archives to predict the future," Gigaom, 1 February 2013] Although their work sounds ominous, Owen reports that their aim is to prevent potentially disastrous events from happening. She continues:

"The new research is the latest in a number of similar initiatives that seek to mine web data to predict all kinds of events. Recorded Future, for instance, analyzes news, blogs and social media to 'help identify predictive signals' for a variety of industries, including financial services and defense. Researchers are also using Twitter and Google to track flu outbreaks."

You can download a copy of Horvitz' and Radinsky's research paper by clicking on this link. In the paper, they describe how news about natural disasters, like storms and droughts, can be used to predict (and hopefully prevent) outbreaks of cholera that inevitably occur after such disasters in the developing world. Armed with data about such relationships, governments and non-governmental organizations can help educate the public about the dangers involved and how to mitigate them. Owen reports that Horvitz and Radinsky "outline the advantages that software has over humans in this area." They include:

• "Learning: Software 'has the ability to learn patterns from large amounts of data, can monitor numerous information sources, can learn new probabilistic associations over time, and can continue to do real-time monitoring, prediction, and alerting on increases in the likelihoods of forthcoming concerning events.'


• "Tireless researching: Software, with its 'long tentacles into historical corpora and real-time feeds,' can dig up data that humans might never find because they're too focused on 'knowledge that is easily discovered in studies or available from experts.'


• "Lack of bias: Software can assist 'when inferences from data run counter to expert expectations,' or when 'there is a significantly lower likelihood of an event than expected by experts based on the large set of observations and feeds being considered in an automated manner.'


• "Greater access to news: 'A system monitoring likelihoods of concerning future events typically will have faster and more comprehensive access to news stories that may seem less important on the surface (e.g., a story about a funeral published in a local newspaper that does not reach the main headlines), but that might provide valuable evidence in the evolution of larger, more important stories (e.g., massive riots).'

Owen reports, "One of the problems that the researchers faced in developing their software model is the fact that tragic events in poor African countries are often not widely reported." Lack of data is not generally a problem for businesses. Yet, all of the arguments used by Horvitz and Radinsky to convince us that big data analytics can offer significant insights about the future apply in the business setting as well as in the natural disaster setting. Michael Fitzgerald, for example, reports that "combining sensors with analytics allows companies to spot potential equipment problems before they occur." ["Sensing the Future Before It Occurs," MIT Sloan Management Review, 20 December 2012]

In an interview with William Ruh, vice president and general corporate officer of General Electric's global software headquarters, Fitzgerald discussed "a version of the idea of the Internet of things in which industrial machines connect to other machines and share data that will help companies improve operations." Ruh calls this the "Industrial Internet." He told Fitzgerald that GE is interested in the Industrial Internet because it can help the company make machines and systems more intelligent and help its customers run their equipment more effectively and efficiently. Ruh notes, for example, that companies use GE "gas turbines to generate 25 percent of the world's electricity. A one percent savings in fuel is worth $4.5 billion. A one percent change they can take to the bank and to shareholders." The collection and analysis of real-time data is one way that GE can help find that 1 percent improvement. Ruh concludes, "Real-time, no SQL, Hadoop and other kinds of big data technologies are actually very early on. They give us hope that we can manage this data differently than we did before. So the Industrial Internet is economical and feasible at a time when productivity needs to be a focus." As Fitzgerald noted earlier, one of the real advantages of real-time data analysis is the ability to predict an imminent failure. Failures not only shutdown processes they often result in collateral damage that compounds the severity of the failure. Ruh asserts that there are so many sensors being embedded into today's equipment that "the capability and complexity are off the charts, they are the stuff of science fiction, things you see in movies like 'Minority Report'."

Harvard's Doc Searls believes that people need to have the same capability to monitor data about their body's health as GE's clients have for monitoring their machines' health. If you're really connected, he writes, you might be gathering "data produced by your Withings scale, your Zeo sleep manager, your Nike+ sportwatch, your Omron blood pressure monitor, your Fitbit Flex wristband, your Moves smartphone app, your Sportline heart rate monitor, your MoodScope log, your Accu-Check blood glucose meter and your workout machine data from the gym." ["What can people do with data that companies alone can’t?" Doc Searls Weblog, 19 May 2013] The problem, Searls writes, is that data "are silo'd by the companies supplying those devices." He continues:

"If you had that data, you could correlate weight loss or maintenance to specific workout routines, moods or dietary practices. You could present that data to your insurance company or health care provider to get better rates and services from both. The list goes on, and can get very long."

My suspicion is that one of the things on that long list would be the ability to predict a potentially serious health problem. As we all know, prevention is better than cure. That is the power of data and analytics and why we are likely to see an increasing array of products aimed at helping individuals, governments, and organizations forecast the future with greater accuracy by analyzing it. Martin U. Müller puts it this way: "Forget Big Brother. Companies and countries are discovering that algorithms programmed to scour vast quantities of data can be much more powerful. They can predict your next purchase, forecast car thefts and maybe even help cure cancer." ["Living by the Numbers: Big Data Knows What Your Future Holds," ABC News, 18 May 2013] He believes that big analytics could, in some arenas, actually lead to "the end of chance." We'll just have to wait and see.

Supply Chain Analytics

"Now that we're all connected and responding 24x7 via any number of devices," writes Jennifer Baljko, "of course there would be a loud corresponding call to have a 'real-time supply chain,' too." ["Betting on Analytics as Supply Chain's Next Big Thing," EBN, 3 May 2013] A number of supply chain analysts have noted that the clock speed of business has been accelerating for several decades. That's why the term "real-time" is finding its way into more supply chain discussions. Baljko asserts that the vision of real-time, "follow-the-sun supply chains" is coming closer to becoming a reality; but, "a necessary foundation for moving efficiently at real-time speed -- supply chain analytics -- is still very much at the beginning stages of development at many companies, and will take time to build out."

I found it interesting that Baljko singled out analytics as the foundation of an improved supply chain. When you think about it, however, it makes a great deal of sense because each company faces different challenges and has different concerns. Analytics has the potential to address uniquely each of these challenges and concerns. The Strategic Sourceror website puts it this way:

"Each business faces different challenges; some companies may be trying to expand global reach in new markets while, others are attempting to optimize sourcing and manufacturing networks. ... As consumers feel they have more say, other organizations are meeting the challenge of multichannel distribution." ["Betting on Analytics as Supply Chain's Next Big Thing," 8 May 2013]

Even though Baljko began her article by discussing the real-time supply chain (i.e., "there's evidence of increased interest in real-time supply chain support tools to address things like supply chain traceability, multi-level inventory optimization, demand signal repository, sales and operations planning, and leveraging point of sale data"), she spends a lot of her column talking about forecasting. Citing a recent survey, Baljko writes:

"Forecasting improvement remains top of mind for a sweeping majority of the 318 executives polled [in a recent survey]. Seventy-seven percent of respondents said demand and supply forecasting and planning tools were very important in achieving their company's 2012 objectives; and 80 percent said forecasting will be important in 2014."

The Strategic Sourceror adds its voice to Baljko's in noting "supply chain software may need to adapt further before managers can see the benefits of analytics. Technology upgrades and implementing new systems takes some time, and it can be a large investment that companies are unwilling to risk. ... While supply chain executives understand the increased need for analytics as manufacturers and suppliers change, the data capabilities have not caught up to the industry yet. .... Many companies do not currently have accurate data, so new analytics software will not quickly repair supply chain gaps." Baljko concludes:

"Bill Roberts, a consultant for Bloomberg Businessweek Research Services, Triangle Publishing Services, had this to say, adding insight from a survey-related interview he had with a semiconductor executive:

You need to get the underlining systems right before you can build analytics capabilities on top of them. I'm going to quote him [the semiconductor executive] at length here because it's interesting: 'Analytics is the culmination of years of investment in the basic tools. You need the underlying databases; they need to be maintained and structured in a methodical and rigorous way. You need technology that allows basic reporting. These are all key to get value from analytical tools.' He added that he and his staff for the last year, year and a half, have spent fully half of their time building analytics capabilities on top of their existing supply chain tools. I thought that was an interesting way of [noting] his priorities.

With that in mind, analytics (and, importantly, analytics done well) could be a big leap forward in terms of supply chain innovation."

Despite all of the challenges and hurdles that face businesses as they try to obtain better analytics, both Baljko and The Strategic Sourceror are optimistic and believe that supply chain analytics could be the next big thing. Robert L. Mitchell offers an interesting example of how predictive analytics can help boost a business. The example is interesting because it comes from sector not normally discussed in supply chain circles -- sports. ["Putting predictive analytics to work," Computerworld, 27 June 2012] Mitchell specifically discusses how the NBA's Orlando Magic used predictive analytics to improve ticket sales. For his article, Mitchell interviewed Anthony Perez, the franchise's director of business strategy. He writes:

"Perez's team began by using analytic models to predict which games would oversell and which would undersell. The box office then took that information and adjusted prices to maximize attendance -- and profits. 'This season we had the largest ticket revenue in the history of our franchise, and we played only 34 games of the 45-game season due to the lockout,' he says."

Perez indicated that the team was so pleased with how analytics helped "optimize ticket sales" they also use analytic tools "to help the coaching staff predict the best lineups for each basketball game, and which potential players offer the best value for the money." Despite impressive results like those achieved by the Magic, an unexpectedly low number of businesses have jumped on the bandwagon. "The use of predictive analytics is common in industries such as telecommunications, financial services and retail," Gareth Herschel, an analyst at Gartner, told Mitchell. "But overall it's still a relatively small percentage of organizations that use it -- maybe 5%." One of those elite companies is Procter & Gamble. Mitchell writes:

"P&G uses predictive analytics for everything from projecting the growth of markets and market shares to predicting when manufacturing equipment will fail, and it uses visualization to help executives see which events are normal business variations and which require intervention."

Guy Peri, director of business intelligence for P&G's Global Business Services organization, underscored the point that analytics can be used to address a lot of challenges; nevertheless, it's critical you that you identify exactly what you want your analytics to address. He told Mitchell, "'Be clear on what the question is, and what action should be taken' when the results come back. It's also important to keep the scope focused. Mission creep can destroy your credibility in a hurry, Peri says." Peri made another critical point, "Analytics is only valuable when you take action on the insight." Mitchell writes:

"P&G once developed a model designed to provide an 'early warning' on how each business was going to perform. 'It was actually quite accurate, but the warnings were given in such a way that people didn't understand how to take action on them, and so we didn't get the proactive decisions we wanted,' [Peri] says."

Although people can intellectually accept the fact that analytics are important, Mitchell notes, "People can also feel threatened by analytics." That fear normally arises because they see analytics as a threat to, rather than a supporting tool for, their job. "Users need to understand that the predictive model serves as a decision support tool," Mitchell writes. He also stresses that they need to learn "how to use the output in their own decision-making processes."

There is plenty of empirical evidence to support the notion that big data analytics provides value to businesses and their supply chains. The fact that 95% of companies have yet to adopt significant analytic approaches is the reason that Baljko can reasonably predict that predictive analytics is likely to be the next big thing in supply chain management. There is simply a lot of room for growth.

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 6, Getting Personal

In the final segment of this series on tomorrow's population, big data, and personalized predictive analytics, I want to get personal. The series has primarily focused on cities because that is where the majority of the world's population lives. We must remember, however, that the world's cities are occupied by millions of individuals. Too often we lump all city dwellers together and treat them as a homogenous group (e.g., we say, "He's a New Yorker"). New York City residents know, however, that the city is a melting pot of cultures and individuals. Understanding these differences is at the very heart of what makes a city smart -- and only big data analytics can provide that understanding.

Big data can be empowering and transformative. Individuals, corporations, and governments all over the globe are generating zettabytes of data every year as they connect to networks using their computers and cell phones. People all over the world can search for and purchase consumer products; make dinner reservations at their favorite restaurants; perform research; conduct banking transactions across country boundaries; interact socially with their friends; perform activities associated with their careers; and deepen the interactions of their lives. And, as recent events have demonstrated, newly connected individuals in the developing world can also transform countries and drive social change using mobile telecommunications and social media. As these developing countries grow and millions of more people come "on-line," the next large marketplace in the global economy is being created for consumer goods and services that cater to the needs and desires of these newly connected consumers (who are estimated to be more than 2 Billion in number). ["Capturing the world’s emerging middle class," David Court and Laxman Narasimhan, McKinsey Quarterly, July 2010]

However, big data presents challenges for today's networks and computing systems. Major challenges include: data comes from everywhere, is mostly unstructured, is in many shapes and forms, and is far too large to move. Historically, data has come from traditional structured sources, such as corporate and governmental computer systems. Today it increasingly comes from unstructured data sources such as the Internet, mobile devices, social media interactions, GPS location information, weather models, RFID, transportation and logistics scans that do not reside neatly within the tables and columns of traditional uniform databases and computer systems. What this means is that big data is too "Big" and too "Unstructured" to be currently leveraged by most organizations.

Even if the data could be centralized, today's computing systems still have difficulty making sense of the data (i.e., understanding and learning) from the interactions between both related and seemingly unrelated data elements. Using current analytic techniques, most decision-making frameworks are challenged to process and understand volumes of data and then instigate actions that foster desired outcomes within timely decision cycles.

That is why it is essential in today's business and government environments to employ technologies that process and analyze big data in a way much like the human mind senses its environment and processes data. For example, an individual assesses the risks of crossing a street when a car is approaching. The mind processes variables like car speed, distance, obstacles, personal motor skills, and so forth, before making the decision to cross or wait. Like human thought processes, cognitive reasoning ingests and transforms data into prioritized information; creates rich referential connections between data elements; enables understanding and learning; and is then presented as actionable intelligence (within relevant timeframes). This kind of cognitive reasoning can be used by businesses and governments to take on some of today's most vexing challenges. Many of these challenges are cross-industry and cross-discipline in nature. They require complex simultaneous analysis on many levels that can model real, or open, world considerations. Some of these interdisciplinary challenges that apply to the global Consumer Products/Food and Retail Industries include, amongst many others, how to:

• Feed and provide water to a hungry and thirsty planet;
• Efficiently develop and deliver energy to a highly consumptive population without increasing the carbon footprint;
• Motivate consumer-centric outcomes with differentiated insights to maximize value for the consumer, Consumer Packaged Goods companies, and retailers alike;
• Personalize recommendations for global consumers about the products they purchase;
• Develop and deliver new drugs to cure disease and increase quality of life;
• Manage the global supply chain efficiently and with fewer risks; and,
• More accurately predict weather and its impacts on the environment.

As noted in previous posts, each of the world's 50 largest cities is unique. Some have deep historical roots as large cities and others have only recently joined the list as a result of massive building efforts in places like China (see the attached map -- based on a map from Free World Maps). As the global population continues to grow, new "greenfield" cities are likely to emerge. Regardless of whether a city labeled a "brownfield" (i.e., older) or "greenfield" (i.e., newer) city, some challenges they face are universal (e.g., infrastructure, sanitation, education, healthcare, food security, and so forth). Meeting those challenges, however, can differ significantly. That is where big data analytics plays its most important role.

Making smart decisions about urban growth and lifestyles is important. I agree with Parag Khanna, Director of the Hybrid Reality Institute and a leading geo-strategist, that cities will play a leading role in world affairs. ["Cities, Not Countries, Will Once Again be Key to World Order," The National, 26 March 2013] He argues, "Urban corridors are a force multiplier, a source of great strength." Such corridors can exist within a country as well as between countries. These corridors exist because they link the largest number of people and, therefore, provide the most opportunities (and challenges) associated with life's endeavors. At the international level, most of the traffic along these corridors involves the flow of information, goods, and services. Ensuring that these flows are optimized is going to require cooperation and technology. Khanna believes there are seven activities that cities must embrace if they are going to provide a good quality of life for their residents. They are:

• First, use technology to empower the population. ...
• Second, the use of scenario planning to forecast diverse possibilities and strategies for a turbulent world. ...
• Third, complement urban master planning with economic master-planning. This means investing in the vocational training systems that prepare the labour force for rapidly shifting supply chains.
• Fourth, use data and social media as a tool of governance to more efficiently deliver public services and manage traffic.
• Fifth, constantly upgrade infrastructure to meet sustainability standards.
• Sixth, expand the economic footprint through investing in special economic zones in neighbouring countries.
• Seventh, and finally, think of all residents of increasingly multinational/ethnic cities not as citizens versus non-citizens, but as stakeholders.

For the remainder of this post, I want to concentrate on three of those activities: Using technology to empower people and companies; improving "rapidly shifting supply chains"; and upgrading infrastructure.

Using technology to empower people and companies

Since most of the new consumers that form the global middle class are found in cities, companies want to connect with them. Because business, like politics, is local, global companies need to act like local enterprises, regardless of their size, if they want to succeed in this new business landscape. That's because cities are so diverse. Each neighborhood has its own character, lifestyle, and preferences. From one street to the next, the culture can change dramatically. If companies want to get in front of the money, they need to understand neighborhood differences and tailor their offerings to meet local preferences. Although some of those offerings will be made available in local brick-and-mortar stores, tomorrow's business landscape is going to be dominated by mobile devices. This makes the digital path-to-purchase a critical element of any company's business strategy. The most successful companies will find a way to seamlessly weave together multi-channel sales opportunities.

In order to sell a product or service, however, manufacturers need to ensure that consumers know about it. That's where technology can empower consumers, manufacturers, and retailers. In mega-cities, the ability to target consumers will be the sine qua non of successful business strategies. For a more in-depth discussion of targeted marketing, read my posts entitled Personalization and Targeted Marketing, Part 1 and Part 2. Even areas that are supposedly "off the grid" have been penetrated by mobile phone technology. The so-called "bottom billion" who live in these areas still require products and services. There are profits to be made selling to the bottom billion, if the products and services can be tailored to their circumstances. Big data analytics can help companies and governments better understand the requirements of people living in these "off the grid" areas so that they are not destined to live forever in poverty and squalor.

Improving "rapidly shifting supply chains"

At Enterra Solutions, we believe that companies must obtain full visibility into their supply chains -- from the issuance of a purchase order (PO), continuing through production milestones, transportation (i.e., ocean shipping, rail/truck), to warehouse delivery, and ultimately shipping to a customer. In order to achieve this, they need to implement what we call Global Network Synchronization. For a company, Global Network Synchronization refers to the ability to understand the complex interactions and dependencies within its supply chain. If a supply chain can be synchronized, it can quickly adjust to disruptive events (e.g., production delays, raw material shortages, weather, port delays, labor disputes, and other events). Global Network Synchronization can also reduce systemic risk by looking for supply chain risk exposures and pre-planning to mitigate those exposures. A company's global sourcing strategy requires real-time supply chain visibility and understanding the perturbative effects of any delays, so that action can be taken to mitigate any negative consequences. Understanding the perturbative effects of a supply chain disruption is a complex multi-threaded analysis that must take into account the entire range of critical supply chain issues and risks.

Upgrading infrastructure

Cities are not going to get smarter if their infrastructure remains dumb and outdated. The single most important infrastructure a city needs is a good electrical grid. Without a stable and reliable source of electricity, cities can't attract businesses, create new jobs, or become an "always on" hub of activity. The next most important infrastructure requirement is a good water and sanitation system. Without such a system, the population is likely to remain unhealthy and exposed to disease. With water forecast to be in short supply in the future, having a state-of-the-art water system could mean survival for some cities. For more on this topic, read my posts entitled Water, Water, Every Where -- What Can We do About It? -- Part 1, Part 2, and Part 3.

Transportation infrastructure is essential for economic growth. Goods cannot move on dirt roads during severe storms. Container-laden ships cannot offload at ports whose harbors are not deep enough or whose docks can't handle the containers. Some analysts believe, however, that the greatest infrastructure shortfall in the developing world is found in the so-called "last mile" of distribution. For example, Andrew Youn and Nicholas Fusso write, "Today’s greatest need is not for scientists and engineers to create new tools. The real need is for better distribution of solutions that already work." ["Distribution, the Key to Unlocking the Development Toolbox," Next Billion, 25 April 2013] Although developing countries suffer from significant infrastructure shortfalls, even countries like the United States have infrastructure issues (see my post entitled Infrastructure, the Supply Chain, and Economic Growth. You cannot discuss transportation-related infrastructure issues in isolation. The logistics world has always been intermodal, but the complexity of orchestrating intermodal shipments is increasing. Only technology can deal with this complexity; which leads to the final infrastructure that is becoming essential for economic growth -- an information grid.

Analysts are predicting that we will shortly have an Internet of Things that will primarily involve machine-to-machine communication. Smart buildings, smart grids, smart robots, smart cars, and every other "smart" machine will be communicating on the Internet of Things ensuring that systems are functioning efficiently and effectively. Technology has always made progress easier and improved the quality of life for millions of people. I don't see this trend ending any time soon.

Making Everyone an Innovation Champion

Drew Boyd, a professor of marketing and innovation at the University of Cincinnati, believes that if your organization has an innovation champion you should kill him or her. Not literally, of course. He means if you have a position with innovation in the title, that position should done away with. ["Kill Your Innovation Champion," Psychology Today, 13 May 2013] He believes that such positions stifle rather than foster innovation. "Assigning a champion lets everyone off the hook, he writes. "Why innovate when we have our 'champion' to do it?" He continues:

"A study by the Association of Innovation Managers found that when companies assign innovation champions and establish separate funding, it threatens the R&D and the commercial departments. 'This kind of sponsorship opens the door for subtle forms of sabotage if the established business units believe that the innovation funding is inhibiting their ability to accomplish short-term objectives and take care of current customers. Without involvement, the commercial arm of an organization can also claim no responsibility for success or be blamed for failure.'"

A number of organizations have established a position titled something like "Chief Innovation Officer," but Boyd claims that people don't stay in those positions very long. He explains:

"If you won't kill your champion, no worry - they will go away on their own. The study also looked at what puts innovation managers at risk. Of the 15 innovation champions in the study, 10 left their organizations and became consultants, 4 joined smaller or start-up companies, and 1 retired. None returned to a Fortune 500 company."

Frankly, there is nothing wrong with the concept of innovation champions per se. Good ideas need people to push them from concept to reality. Rather than having a single "champion," most pundits recommend empowering everyone with the opportunity to become a champion. Ron Ashkenas, a managing partner of Schaffer Consulting, believes "the reality is that unless they're in research or product development, most people in organizations don't think of themselves as innovators." ["Innovation Is Everyone's Job," HBR Blog Network, 6 December 2011] He claims that employees are often discouraged from being innovative. "Many managers discourage their people from inventing new ways of doing things," he writes, "pushing them instead to follow procedures and stay within established guidelines." Another contributing factor, he asserts, is that too often employees think of innovation only in terms of "new products, services, or technology." That perception, he writes, "is problematic." He continues:

"Apple's success has been fueled not only by new products, but also by innovative approaches to packaging, retail sales, customer access, and partner agreements. Similarly, Toyota's growth has come as much from innovations in manufacturing, inventory control, and management systems as it has from new automobiles."

For Ashkenas, the bottom line is:

"Great organizations don't depend on a small number of exclusive people to come up with innovations. Instead they create a culture in which every employee is encouraged and empowered to innovate — whether it's in processes, products, or services. This leads not only to new customer offerings but also better margins, stickier customer relationships, and stronger partnerships with other firms. Moreover it leverages the brains and talents of thousands of people, any one of whom might generate either an incremental innovation or a breakthrough idea."

Tim Huebsch agrees with Ashkenas. "We often look right past our best sources of innovation," he states, "our own employees and everyone else around them. It isn't that we need to find someone else to do it but instead it needs to be part of everyone's job. Each and every person has ideas of how we can do things better. Some ideas are small and won’t have a huge impact on the organization themselves, but by finding ways to encourage, support and implement these small ideas builds a foundation that will foster innovative thought throughout an organization. As employees see their voices are heard and continue to be encouraged to come forward with ideas, it is amazing to see the energy, creativity and passion that is so easily ignited." ["Innovation — It isn’t someone else’s job; It is everyone’s job," Leadership and Community, 22 April 2013] Admittedly, it is easier to assert that innovation is everyone's responsibility than it is to create the environment, culture, and structure that make it a reality.

Ron Thomas, a human resources officer, believes that the first step in making everyone an innovation champion is cultivating better listening skills in executives. ["Best Ideas? They Can Come From Anyone – IF You’re Willing to Listen," TLNT, 5 November 2012] He's correct. If employees know that their ideas are going to fall on deaf ears, there is no reason to speak up. Thomas believes there are three dynamics that foster an innovative environment. They are:

• Having an organization that creates an environment where everyone brings value and feels comfortable in being heard;
• Having employees who believe that their voices can be heard;
• Having leadership that will acknowledge and give credit to their employees.

Personally, I agree with Thomas that employees deserve to be recognized for their contributions. Boyd, however, doesn't agree. He believes that giving credit for good ideas is a bad idea. He bluntly writes, "Don't give credit for good ideas." He explains why:

"Tanya Menon from the University of Chicago describes the paradox of an external idea being viewed as 'tempting' while the exact same idea, coming from an internal source, is considered 'tainted.'

'In a business era that celebrates anything creative, novel, or that demonstrates leadership, "borrowing" or "copying" knowledge from internal colleagues is often not a career-enhancing strategy. Employees may rightly fear that acknowledging the superiority of an internal rival's ideas would display deference and undermine their own status. By contrast, the act of incorporating ideas from outside firms is not seen as merely copying, but rather as vigilance, benchmarking, and stealing the thunder of a competitor. An external threat inflames fears about group survival, but does not elicit direct and personal threats to one's competence or organizational status. As a result, learning from an outside competitor can be much less psychologically painful than learning from a colleague who is a direct rival for promotions and other rewards.'"

It seems to me that Boyd and Menon are trying to throw the baby out with the bathwater. There are actually two problems discussed. The first is jealously. Only a change in culture can correct that problem. The second problem described is failing to give the same credit to employees for their good ideas that executives give to ideas that come from outside the organization. It's the opposite of the "not invented here" paradigm that has traditionally plagued large companies. The solution to the second problem is, in fact, to acknowledge and give credit to employees just like Thomas suggests.

Perry Rotella, a senior vice president and chief information officer at Verisk Analytics, accepts the notion that innovation is everyone's job but goes a step further. He believes that employees should be encouraged to become innovation leaders (i.e., innovation champions). ["If Innovation Is Everyone's Job, Why Not Be a Leader?" Forbes, 11 June 2012] That will only happen, he insists, if the right environment is created. That environment, he writes, is one that encourages risk-taking, gives people the time and tools to experiment, and encourages collaboration.

Supporting innovation champions with more than words and back slaps is important. "In order for innovation to flourish in your organization," writes Chuck Ferry, "your innovation champions must be supported through properly structured responsibilities, goals and resources. Otherwise, they will leave to pursue other opportunities, taking their energy and ideas with them." ["Cultivating Innovation Champions," Innovation Management.se, 30 January 2013] Although Ferry doesn't dismiss the notion that innovation is everyone's job, he clearly doesn't believe that everyone can be an innovation champion. He believes that innovations champions share unique characteristics that make them leaders. He cites a book written by Gerard J. Tellis, entitled, Unrelenting Innovation. Tellis identifies four characteristics shared by true innovation champions. They are: Having a vision for the future mass market; being a maverick and dissenter; having the conviction to persist against heavy odds; and, a willingness to take extraordinary risks to bring their idea to fruition (including the ability to instill this trait in their teams).

Whether everyone in your organization is capable of becoming an innovation champion isn't really the point. Leaders will emerge if the right culture and environment exist. While it is important to recognize that good ideas can come from anywhere, those ideas will fall on barren ground if there isn't an innovation champions to push them through to the end. It doesn't require a title or special position to become an innovation champion; but, it does require a bit of courage.