SAP Hybris encourages its partners to be bold when it comes to digital transformation.

Last month, SAP Hybris hosted a number of analysts, clients and prospects in Forth Worth Texas for their North American Customer Days event. The major discussion point for the event was the impact digital has had on the relationship with the customer. How does the continued disruption created by the digitization of our indexeconomy impact the manner in which retailers and brands interact with their customers? SAP Hybris emphasized that due to this digital revolution, retailers and brands that employ a “one size fits all” viewpoint is passé. We at Constellation Research couldn’t agree more. On the contrary, retailers and brands in their continued efforts to tailor experiences to the customer of one – lean on the technology and business processes that will permit these contextual experiences for the customer.

There were two points of emphasis at the event that reinforce the evolution of the retail – customer relations:

  • CRM is dead, long live CRM. CRM as we knew it, is most definitely gone. The days of the CRM systems we saw arise in the late 1990s, such as Seibel and Onyx, addressed a very specific need – a linear repository for organizing customer touch points. Originally these systems were created to organize and keep track of a limited number of touch points between a sales force and a prospect or client. This sufficed when most of those interactions were in person, over the phone or via email. A finite number of touch points. Increased digital growth has given rise to an ever growing number of dynamic communication points between customer and brand. This evolution requires the systems being employed to keep pace. Traditional CRM systems and the mind set behind them are dated. Of course the notion of customer relationship management remains important, maybe more so than ever. Maybe not the term “management” since the customer has more influence in the relationship. Retailers are no longer driving the relationship, but working to understand and anticipate customer needs. In this light, the solutions are truly dated. As the number of communications points between customers and brands is ever shifting, growing and constantly evolving the necessary systems are asked to do more and do so faster and more efficiently. Brands and retailers, more than ever, must have systems in place that properly track, store and provide inputs into customer relationships. Legacy CRM systems are dead; the goals of CRM are more than ever vital for brands.
  • Data is the new fuel. Data is the new oil that drives the digital business; those retailers and brands that will strive in this business environment are the ones that turn this oil into fuel. The importance of data is by no means a news bulletin, but it is the importance of transforming this data that remains the challenge. We all know that retailers and brands have an unprecedented access to data. But, as SAP Hybris points out, it is not about extracting the data it is about being able to transform this raw material, in the form of data, into insights. This transformation is multi-faceted. It must be done quickly, efficiently and intelligently. For example, the NHL (the North American professional ice hockey league, National Hockey League) worked with SAP Hybris to determine which data sources to focus on, how to leverage the data sources and what growth plan to adopt with regards to adding new data sources. With a large and various number of data lakes – individual team data, assets and even fantasy hockey sites – there was no shortage of information for the NHL to choose from. With SAP Hybris, the NHL took a structured and disciplined approach – always keeping the customer at the center of the efforts. Which data pools were the most applicable to start with, and which could be brought in to build on the insights that were being drawn out? This approach has allowed the NHL to create a more efficient customized customer experience – being more contextually aware of the customer’s needs and possible experience with the NHL.

SAP hybris understands that it’s more than technology that will help your business, on the contrary the technology becomes less important. The need for new business processes, through the usage of the data is what distinguishes the leaders from the laggards. The technology needs to support, not lead these efforts.

At the core the focus continues to be on the customer, but it always has been. The nuance is that the focus is on the contextual customer interaction, which continues to be honed in more and more down to the individual. Retailers and brands need to be more nimble and willing to experiment with new technologies and allow for new applications – all with the changing business processes in mind. As SAP Hybris customer Loblaw stated from main stage – brands and retailers need to own digital, they have to think big, take risks and learn from these efforts. If companies don’t they will be left behind in this ever changing digital economy.

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Software AG – pushing all their chips in for the digital platform

A few weeks ago I spent the majority of my time in Las Vegas with Software AG at their Innovation World summit. Unlike Vegas, what happened at Innovation World isn’t going to stay at Innovation World…okay poor attempt at humor. Software AG should be touting what they spoke about during the 3 days at the Aria Hotel and Casino. The main theme of the event is around the digital platform Software AG is doubling down on. Smart move? Time will tell…but a positive move in light of the digital disruption we are in the midst of and what we all believe will only become greater changes moving forward.

Software AG aggressively pushed their digital platform agenda from day one on main stage as their executives took turns highlighting Software AG’s efforts with creating a digital platform to allow their customers to innovate. Karl-Heinz Streibich, Software AG’s CEO, focused on 7 drivers that is the catalyst for digital disruptions:

  • The shared economy, driven in large part by the Internet.
  • Standardization, think of the smart phones we all carry.
  • Asset lite companies, as digital becomes the main asset companies are shedding traditional assets.
  • Transparency brought by greater connectivity, this will only accelerate with the rise of the IoT (Internet of Things).
  • Fast sprints of innovation, digital platforms allows for rapid innovation.
  • Lower costs, with digitization the costs are reduced.
  • Unbridled creativity, once digitization has touched “everything” creativity will only continue to explode.

Such drivers continue to change the way companies and service providers address the market. Of course the undertone from main stage was that the customers know better what their business needs are, while Software AG knows best how to translate this into bites and bytes. This is the nature of the business world we are currently living in – digital has created an acceleration that is unprecedented. Vendors and solution providers cannot predetermine what problems and business use cases their customers will have next quarter let alone in 6-12 months. The idea of providing the platform – truly a Lego set for customers to then go out and create their own solutions. Karl-Heinz was right in saying – you know your business better than anyone, but we know the digital aspects better than you…let us work together.

There is a caveat to this notion – that while digital has greatly disrupted business, there are some truisms that will remain. The majority of business use cases have some basic aspects and needs that are consistent across industry and company. Under this light it is important that companies such as Software AG lean on their industry teams to accelerate focused business processes that are vertically aligned. Verticals such as retail, finance or manufacturing are already looking at how they can bring their industry insights to accelerate the time to productivity with their solution sets. Can Software AG leverages their vertical teams to start creating some standard building blocks that their N+1 customer in that specific vertical take advantage of?

The challenge for the German software vendor lies in their ability to pivot into verticals, compete with other service providers that have longer histories and track records servicing these verticals. The advantage Software AG brings is they are also not wed to their legacy offerings, which many other vendors are still fighting.

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Cost management in the supply chain pays dividends beyond the accountant’s office

We have all heard the statement – you can’t cost cut your way to profitability. Too often in business, CxOs and others forget the spirit of this saying. Cost cutting, or more precisely, cost management, is vital to running your business. In many businesses and their associated supply chains, however, this is achieved in disjointed and siloed departments. This disjointed approach to cost cutting can achieve the basic goal of saving money and therefore “improving” the bottom line. But it falls short of long-term benefits for the businesses. Savvy CxOs need to look at cost through a different lens.

  • Determine the way costs impact the holistic picture of your business. Yes, I know that companies have to produce balance sheets, cash flow and income statements. But these exercises are driven on a quarterly and annual basis. What about the daily activity? When it comes to your supply chain, decisions about cost are made at a much more rapid pace. And their impacts need to be understood at the speed of business, not an accountant’s timetable. CxOs need to strive to get visibility into their costs at this level – not the level that is asked for by their accountants.
  • Understand how becoming more cost-efficient creates opportunities for new business models. Oftentimes when we speak with customers about some of their cost-cutting efforts, they emphasize the savings achieved. A worthy goal indeed, however, most CxOs do not promote or focus on the next level – what are the new business opportunities these efforts have created? Where can assets and resources be shifted because of efficiencies gained? If you can be more efficient in one area, where can you reinvest in others?
  • Change the mentality of cost cutting to waste management. I realize that this might appear to be one and the same. The distinction exists around the notion that waste management is a mentality that distinguishes between bad costs and good costs. It’s similar to when you go to your annual physical, and your doctor looks at both the good and bad cholesterol. Both numbers must be evaluated together, not in isolation. Adding cost is part of doing business but it must be done efficiently – cut waste not just blindly cutting spending.

What does this change in mentality look like? Take for example the work SCA Technologies is doing with one of its customers, a fast-food giant. The Pittsburgh-based supply chain software firm has worked with this client to 048-512implement technology that provides a level of understanding of costs previously not achievable. The outputs have been to understand the nuances in the fluctuations of commodity cost – poultry, eggs, beef, and cheese, to name a few. As a result, the fast-food giant gains a full view of the impact these costs have on their final product – throughout the end-to-end supply chain. Margin impacts, in turn, drive decisions around new product introduction, pricing and promotions. In a business where margins are constantly under pressure, this insight has deep impacts on the day-to-day business.

For example, the fast-food giant was looking to introduce a limited-time offer into its menu, but after assessing cost upticks for specific commodities required for that product, it became apparent that shifting to a more favorable time of year for those commodities would improve profitability. This level of insight into cost structures, and more important, how they impact the entire supply chain, enabled a smarter—and more financially sound—decision to be made.

We have seen the same in the consumer electronics business. For example, Apple understands the strategic advantage inherent in looking at the cost of items such as flash drives and taking a forward position. When Apple looks forward to new product introductions, it also looks to buy future production and inventory of key items – this is a massive cost creation. However, the assurance of being able to capture market share by having the right inventory on hand is vital. The issue of absorbing and adding costs is not the concern – identifying a possible business opportunity is the priority. They can do this because they have a holistic view of how near-term cost can impact long-term market share.

The bottom line for CxOs is that cost isn’t bad! Of course incurring costs for employee sushi lunches and paying for all your employees’ cell phone bills might not lead to the greatest business outcomes. Unless you are Google when you use these “perks” to ensure your minions are kept in the mothership as many hours as possible. But focus on those areas where waste management can open up avenues otherwise neglected. Look to cost as the basis for short-term and long-term innovation and laying the groundwork for new product introduction and new business processes.

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CSCMP – three lessons from San Diego – think digital disruption

Last week  spent the majority it of it in San Diego, enjoying the warm southern California weather and sun. Why was I there? Attending the annual CSCMP conference. The conference was, as usual, well attended by an array of supply chain professionals. As in previous years, the event offered a wide array of break out sessions and interactions with fellow professionals. Three take aways from the event:

  1. The importance of labor – it’s the people stupid. To borrow a line from James Carville, well at least part of the line. What was interesting and I was glad to hear, was the importance being placed on labor in the supply chain. We have seen this rise in labor importance in the retail world. We are all keenly aware of the growing change in the store front. Retailers, with brick and mortar, are looking to these assets under a different light. They are looking to transform these assets into destinations, think Restoration Hardware or Williams Sonoma. Others, such as Finish Line and Macy’s are looking to fulfill eCommerce orders directly from stores. While these changes to how their supply chain fulfills orders has a direct impact on inventory strategies they also have a secondary effect on labor. Employees both within the store but also in warehouses and logistics will have to add skills and new responsibilities to their daily routines. CxOs will have to ensure they empower this labor with the proper training, incentives and technology to ensure success. Bottom line is labor in the supply chain often is the touch point between

    The coffee giant’s greatest assets – the ones in green.

    the supply chain and the customer. CxOs cannot afford to ignore this crucial link. As Howard Shultz CEO of Starbucks stated from main stage – the most important asset for Starbucks are the ones wearing the green aprons.

  2. Mission impossible for logistics – okay that might be an overstatement, but the reality is that our logistics networks, both warehousing and transportation, are being asked to do more. Logistics professionals should not expect this to abate any time soon. Delivery to the home, to lockers, even to the trunk of your car are all pushing last mile delivery capabilities to their limit. What will happen when the FAA loosens up drone regulations? This is driven entirely by the empowered consumer. As role and influence of the consumer continues to force supply chains to react to their demands, logistics will have to shoulder a greater amount of the burden. Supply chains will have to be ever nimble with their logistics to meet these demands. For example, Hostess had to ensure they have the necessary distribution centers (DCs), strategically located to meet exploding demand when they reintroduced their delicious Twinkies and Cupcakes to the market. The challenge became being able to readjust their strategy on the fly as the demand patterns became apparent. The success for Hostess rested in large part to their ability to have the proper levels of inventory in the right DCs. CxOs will need
    Can your warehouse and logistics keep up?

    Can your warehouse and logistics keep up?

    to be constantly evaluating all their logistics components of their supply chains to ensure they are in the best position to satisfy their customers’ expectations. They must also be willing to change strategies and tactics as needs evolve. Look for new business services such as the ones offered by Flexe who is using crowd-sourcing to fill excess warehousing space. As well as Amazon who announced the launching of Amazon Flex. Bring the same business model as Lyft, Uber and Airbnb to package delivery. Amazon Flex will open up package delivery to anyone who has a vehicle to become last mile delivery assets.

  3. Eat your own lunch otherwise someone else will – digital continues to accelerate disruption all across the supply chain.  Disruptive technologies such as IoT, robotics and augmented reality were all on display at CSCMP. Smart labels by Johnny Walker were discussed and how they can provide the consumer with additional insight about what they are consuming but also the distributor with regards to the location of inventory and the pace of consumption. Computing giant HP is leveraging connected printers to proactively order ink when the machine detects the level drops below a certain range. Companies such as are using robotics from Swisslog to manage their DCs. Distribution companies such as DHL replacing traditional handhelds with augmented reality for their packing professionals, reducing errors and increasing velocity. Manufacturers such as GE are adding connectivity capabilities to their high end refrigerators…not because they have a use case for a connected ice box but to lay down the ground work for possible use cases. More than ever, CxOs must be watching for digital disruptions that are are currently impacting their businesses or those that are just over the horizon. These are also going to impact different parts of their supply chain – just complicating the matter.

After leaving San Diego my believe that we are on the verge of seeing some major changes through out our supply chains was reinforced. While it may sound cliche, the digital supply chain is going to change how we approach this space in ways we have not even imagined. CxOs are in the midst of exciting times. Those that embrace this will flourish, those that cling to their old thinking will be left behind. Quickly.

Looking forward to CSCMP next year back on the East Coast in Orland Florida.

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The hidden dark side of connected vehicles – Volkswagen’s electronic tinkering

The big bombshell news today on the IoT (internet of things) front was that Volkswagen was caught programming their diesel vehicles to behave better during emission testing. I guess that is much more sophisticated then when a car dealer would roll back the odometer on a used car! The fall out of this news was immediate. The company’s stock tumbled as much as 20%, seeing almost $17b of market value disappearing from Volkswagen AG. Unfortunately for the German automotive giant the pain is not about to end. The United States Environmental Protection Agency, warned that it could levy a fine as high as $18billion for the infractions. Ouch.


This will be a severe blow to Volkswagen, but it will have some other repercussions as well.  A new reason for some to pooh pooh IoT. I recently wrote a blog post that called out some backlash we are seeing when it comes to connected things. While some may scoff and laugh at such connected items as cat water bowls, jars and socks, I would argue the business plans behind those are not as silly as one might think. Click here for my post. But the cause of that backlash is real. Over-hyped and overpriced connected objects for the sake of it, does not make sense. There has to be a business model associated with the connected item.

It is the same with the stories that come out about someone’s connected skate board being hacked. Yes there is the potential for mischievous acts being perpetrated. But remember that over a decade ago online banking and shopping also fell under the fear mongering – your accounts and credit cards are not safe!!!!! And yes…some breaches have occurred. But as I recall Jesse James and Billy the Kid robbed brick and mortar banks long before the internet. That created a lot of fear, yet people in modern society still having bank accounts…in brick and mortar banks as well as do plenty of on line banking and shopping.

Now I am sure we will hear fear mongering about the companies that are doing the connecting finding some way to “get away” with something. And from the looks of it Volkswagen is guilty of doing so. But this just means that regulators and governments will have to do a better job monitoring. This does not mean that a connected car is now a bad thing. With all new technologies there is a learning curve: for consumers, the creators of the technology, the oversight of the usage and the business models best served. We are only beginning to scratch the surface when it comes to IoT. There will be bumps and abuses of the technology, but there continues to be great promise. Let’s not let the worry mongering detract from the possible.

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Instacart at the edges of the retail IoT network with help from a humble device

The on demand retail economy is in full bloom. Companies from AirBnB, Washio, Favor, Shortcut to Lyft are all offering consumers a new retailing experience when it comes to services or procuring goods. These new business models are also pushing the edges of the retailing envelope – changing how retailers look at servicing the end customer. One shift that is taking place as well is how the physical stores are being leveraged. eCommerce giants such as Amazon and Alibaba began to drive the conversation around why have stores at all? With large logistic networks, strategically placed distribution centers and savvy order capture systems the need indexfor physical stores for customers to come and look at products and then purchase were a relic of the past. Not so fast. Stores are making a come back. As they should. The reality remains, that as a percentage of all retail, the dollars spent via online are still dwarfed by those spent in stores. For every $11 spent in retail, more than $10 of that sum is transacted within a physical store. However retailers are facing the challenge of how to leverage the physical stores in new ways.

An example of this is the services Instacart is offering. The basic premise for the service is to offer consumers the flexibility of having someone else do their grocery shopping and having the items delivered within a finite time. Instacart has partnerships with the likes of Whole Foods, Safeway and Costco. So the grocery store is where the inventory is being held, no carrying costs for Instacart. However, Instacart relies on their pickers as well as their mobile devices to ensure that orders are properly received and most importantly properly picked and packed. This is where problems arise for such a service. The service is similar to a warehouse pick and pack operation, but a warehouse is staffed by professional warehouse employees and is…well a warehouse! Whole Foods is not configured like your local distribution center. So how can you ensure the order is properly handled? This is where the promise of IoT comes into play.

While these grocers are not going to become fully IoT operational overnight – having sensors throughout store infrastructure (shelves, aisles, freezers, carts etc), on certain inventory as well as on other essential assets – the ground work is beginning, in large part driven by the services provided by Instacart. Instacart is really similar to a store within a store – or personal shoppers within stores. And with that they also need their own systems in place to manage their business. While they can lean on the mobile assets their pickers carry, they require a more robust and industrial strength solution. This is where they are working with Zebra Technologies to place printers within certain Whole Foods. Printers? You may look at this as a non-digital play, but on the contrary this is a perfect example of how IoT can start being infused into retail.

Retailers do not need to invest in snazzy new beacons, cameras, sensors, smart shelves or RFID but rather can look at items such as label printers as a foray into IoT. Zebra printers are being rolled out into Whole Foods where they are tied to the Zatar IoT platform. The Zatar platform is able to tie these printers into a greater IoT platform. Currently the system is handling the order processing for the pick and pack of groceries. Through simple printing and labeling, it is targeting a more efficient and proper order.

This is addressing a current need for the grocer and Instacart – making sure orders are error free. But think about how this could evolve. The printer is but one item that is becoming smarter. Instacart is able to place this smart, IoT enabled device, in the property of another entity and run their business within someone else’s store. As the printer becomes “smarter” for example adding camera technology, this innocuous looking device now becomes part of an IoT infrastructure within a grocer’s store. The platform that it is tied can now take on new IoT enabled devices – suddenly the network effect takes off.

The long-term impact of relationships between the likes of Instacart and Zebra is in the ability of companies like Zebra to begin to plant the seeds for connectivity, tied back to their platform, within these physical locations. The promise of IoT will not happen overnight, but will start on the foundation created by the infusion of connecting humble machines such as printers into a greater IoT network.

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IoT – don’t focus on the hype, keep the use cases in mind.

An interesting article came out end of August that looked at some “gadgets” that should have just stayed dumb. A good read that highlights some everyday items that probably should have stayed out of the IoT spot light. Click here for the article.


But are we missing the bigger picture with IoT? I agree with Christopher Mims from the Wall Street Journal about the over smartening of banal items – plates, pans, drinking cup to name a few. Click here for the piece. Not every object in our every day lives need to be connected. However, as prices come down, use cases for some of these gadgets might become more appealing. Let’s look at some that @internetofshit called out:

  • The connected bottle of wine – yes tracking my $5 bottle of wine is a little silly. But think about the importance of track and trace for items such as your cough syrup or baby formula. Ensuring they have not been tampered with or counterfeited. How about monitoring perishables such dairy. From a distributor stand point, being able to track and trace a bottle of Coke or Pepsi could have long reaching impacts on the supply chain, being much more precise with regards to stocking and inventory management.
  • Smart water fountain for pets – do you really need to monitor your pets’ water intake? Probably not. But having access to controlling the dispensing of water and food? There are already plenty of products on the market that have timers to dispense these items. Why not make that smarter? The pet business is a $55b + annual market in the United States alone, with over 3% growth annually. Providing customers with a smart pet food/water dispenser where the pets’ intake could offer an alternative for those who are not always home but still want to ensure their loved pets get the necessary food and water. Consumers spend money on their pets, as if they were their children. In many ways they are. That $55b market doesn’t seem too silly, that seems like real money.
  • Connected socks – Wow, $199 socks…yikes. Even someone like me who loves their socks (just check my instagram page – @gcourtin – for my sock selection) that is a high price tag. But let’s imagine that price tag comes down. At $20 – $50 consumers might start purchasing these items. Why? Companies like Adidas are already putting connected devices in their soccer boots to provide players and coaches with a large amount of data to craft better training regimes. Think it is silly? Click here to read a great piece on how the German national soccer team used this to win the World Cup. Runners, soccer players, basketball players, football teams and the list goes on, of athletes that could gravitate to this type of performance data. Granted this might already become available via the shoes, but if the socks are less expensive they might get to that market first.
  • Smart jars and water bottles – These could fall under the connected kitchen/home category. Do I need to know exactly how much water I drink a day? Or exactly what the nutrition content of the items in my jars? It might sound like a little overkill. What about a use case of tying in your water intake with your Fitbit or Apple Watch or smart phone? Does anyone not believe that personal health tracking devices are not firmly entrenched? Extending this into our consumption does not seem like a big stretch. The smart jar might one day be connected to a larger food supply chain. Large CPG companies such as P&G and Unilever are always interested in getting better data on the actual usage of their products. Even players such as Amazon and Google might want to find a way to have customers use these smart containers so they can better replenish items at the home.

I agree that sometimes these devices appear to be technology looking for a problem to solve. But with some aspects of IoT it might be just that at some level. We are still in the early stages of IoT. And with that there remains many skeptics, issues that still need resolution (privacy and security being two of them) and at times too many things being made “smart” for the sake of it. What we need to focus on is not the devices and gadgets that are being connected, rather the use cases that these connected devices might open up.

Now where are my connected socks?

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