In speeches, presentations, and in his most recent book Customers the Day After Tomorrow, author and entrepreneur Steven Van Belleghem challenges business leaders to rethink how they look at customers, business, and the future. “Companies are asking themselves ‘in which technologies should we invest?’ But that’s the wrong question. Instead, companies should ask ‘what is the best future customer experience,’ and reverse engineer that vision to what they can do, today.”
Van Belleghem has walked among the world’s visionaries. “I’ve spent a lot of time in Silicon Valley, China, and the innovation hubs in Europe: London and Berlin, Barcelona and Dublin. What you see if you talk with the people who are actually leading those changes is that they can tell you in which direction the world is going. About three years ago, for example, you could feel that the switch from mobile first to AI first was starting.”
The Three Phases
Van Belleghem describes in “three phases” the evolution of the technology and it’s influence, from digital to mobile to artificial intelligence. He says “Twenty years ago in the early days of the web, Google was just kicking off. Later, it became part of our day to day lives to sit behind a computer and find all the information you could need in the most convenient way ever.”
A decade ago marked the emergence of mobile, according to Van Belleghem. “For me, it kicked off in 2007 with the launch of the iPhone. It just took four to five years and everyone was hooked on their cell phone. At the same time we had the arrival of the big social media platforms like Facebook and Twitter followed by Instagram and Snapchat, and people became hooked on the platforms on their phones. This changed behavior again, where the fixed screen was no longer the primary source of information, transactions and communication—the phone became the primary screen in our lives.”
What follows the phases of digital and mobile is the emergence of artificial intelligence and machine learning which, for Van Belleghem, took off in earnest in 2017. “What 2007 was for mobile, 2017 is for AI,” he says. “That was when Google’s DeepMind won against the world champion of the Asian board game ‘Go.’ That was the first big signal that showed the world what AI could do, and since that moment, we read about AI almost every day in the press.”
And the pace of both the development and the adoption of that technology is accelerating. Van Belleghem observes, “Because we had the digital and mobile phases before, many business leaders now understand that they had better take the AI phase seriously. They are going to start investing in AI earlier, which means it could take off much faster than the previous phases.”
A Roadmap to the AI Mindset
The big problem, as Van Belleghem sees it, is that not every company is pursuing these emerging capabilities. “I think one of the challenges in this world of AI is that a handful of companies have most of the talent, and talent is one of the scarcest resources to actually create an AI-first mentality in your organization. When you see that the talent is working for either their own company or for the big technology companies in the East and the West, it’s hard for the more traditional companies like financial services, TELCO or energy to keep up with the pace of change.
This is a world where you don’t think in segments—you think in segments size of one. It’s the individual, not the average customer that really matters.
Van Belleghem wrote Customers the Day After Tomorrow to provide those companies a way to structure their thinking “and to define a way forward, to make sure they don’t miss the boat in this new phase.”
What does that thinking look like? Belleghem explains, “I always work with three customer benefits. The first one is “faster than real time” service; the service where you anticipate the problem and you predict them and even try to solve them before a customer knows there is a problem. The second is hyper-personalization, where you personalize everything (products, communication, pricing, sales channels) based on the needs of the individual consumer. And point three is creating the most convenient interface that the world has ever seen.
For example, Belleghem says, “Look at the rising popularity of voice assistants like Alexa and Google Home. These are zero-button interfaces. If you want to buy something, you just speak and it happens. If you want to hear a song, you don’t push buttons anymore. You just ask and seconds later the song starts. And this is just the beginning. I think companies are looking in that direction: faster than real time, hyper-personalization, and convenient interfaces.”
What it Means for Search
Developments in advanced technology are likely to have a secondary impact on the executive search profession. Trusted advisors must understand the impact technology has on their clients’ businesses, as clients depend on search consultants to help them find leaders equipped to succeed in changing environment
Perhaps a key role for AI in the executive search profession is in combining machine and human intelligence in the area of assessment. Van Belleghem says, “If you look at the world of AI it’s always about data, it’s always about interface. And what I think is most important is figuring out ways that the executive search consultants can use technology as a human to make a better assessment. I call that “intelligence augmented.” How can search consultants use certain software? How can they access data? How can they become smarter than they are by using software to make the right assessment of a candidate? And I think those three elements: leveraging data, creating new, smart interfaces, and boosting the intelligence of their employees thanks to technology could be three paths for search firms to think about what they should do.”
A Word on Ethics
A larger conversation about AI and machine learning centers around the difference between what humans can do with technology, and what we should do. Van Belleghem says, “Personally, I’m not afraid of technology—I’m afraid of humans using technology the wrong way.” Van Belleghem says, “I can imagine a world where companies will have to be transparent about their algorithms, to show the world how their algorithms are functioning so we know whether they are ethical or not.
For example, Van Belleghem warns that machines can be programmed to lie. He says, “This is going to be something new that we’re not used to, but I hope we will get to the point where we will have transparency around algorithms. Right now, programming is so invisible, it is so intangible, that we don’t know if companies are making unethical decisions. The only way out, for me, is that transparency.”
Preparing for The Future of Work
The rise of smart machines also raises the ethical question of what roles will be reserved for humans in the future workforce. Are we looking at an employment doomsday? Van Belleghem says, “I’m an optimist, but I also think we need to plan in scenarios. It’s okay to have a doomsday scenario, and then see what we need to do to get ready for that.”
Still, Van Belleghem projects a brighter image of the future of work. “You know, if you look at the evolution of work, in the past most people worked with their hands while today most people work with their brains. I think in the future, to really add value to society, humans will work with their hearts and excel in fields that computers are not good at.”
Van Belleghem recognizes what the search profession also sees: the high value of soft skills. He says, “I have a feeling that this old economic law is starting to play out: the law of scarcity. When something becomes scarce it increases in value. And true human behavior is becoming really, really scarce. And companies that value that behavior and really motivate their employees to make a difference in a human way, they seem to be winning.”
"Today we work with our brains, and tomorrow we will have to work with our hearts. Empathy may be the most important skill that humans have in the future."
Steven Van Belleghem
The Role of Imagination
When Van Belleghem talks to business leaders about AI and the future, he explains that preparing for the day after tomorrow requires some imagination. For example, he says “at the beginning of mobile we didn’t have a clue how it would change the world. We’re at the same place with AI. It is very unclear how AI will change behavior, communication, and our day-to-day lives. The only thing that we know is that AI will drive a fundamental change.”
Today we work with our brains, and tomorrow we will have to work with our hearts. Empathy may be the most important skill that humans have in the future.
Key to Van Belleghem’s advice is scenario planning—the art and science of anticipating change, and preparing for it. It is an imaginative process, and Van Belleghem observes that search firms and clients who want to “create a tomorrow that is valuable to their customers and stakeholders have two ways to do that: you can take what you have today and improve that a little bit, or you can dare to dream about scenarios of the day after tomorrow, and reverse-engineer it back to what you can start doing, today.” Van Belleghem invites companies to dream about the best customer experience first, ”and then you can decide what kind of technologies you need.” He says “The first question is how to deliver customer value; the second question is about the technology.”
In addition to imagination, preparing for customers the day after tomorrow will also require some courage. “Just incrementally improving your business and not thinking about the potential of AI and working toward that potential simply isn’t going far enough to stay successful as a business,” Van Belleghem says. “I think the changes are going to be so fundamental that the only way to keep that level of success is by daring to dream about the day after tomorrow.”
Excerpt from Customers the Day After Tomorrow: How to Attract Customers in a World of AIs, Bots, and Automation; Chapter 3: “It’s Not the Technology, It’s the Customer”
The best service level ever
For consumers, the AI-first world is going to be wonderful. We will discover new levels of service that we could only dream of in the past. During my hundreds of visits to some of the most innovative companies in the United States, Europe, Africa and Asia, I drew up a list of benefits that we can expect to get from artificial intelligence. Three central aspects - three concrete advantages - keep on recurring, time after time.
- FASTER THAN REAL TIME CUSTOMER SERVICE: the aim is no longer to provide a faultless customer service, but to solve problems before they arise.
- HYPER-PERSONALIZATION: sales and marketing are no longer about the average customer, but about the needs of the individual customer. Joeri [Joeri Van den Bergh, author of How Cool Brands Stay Hot] has rightly pointed out that relevance is one of the most crucial expectations of the next generation. Hyper-personalization will become the most relevant way to communicate with (and produce for) the customer.
- UNPARALLELED EASE OF USE: all of today's interfaces are idiot proof. There is no longer any need for an instruction manual or a help function. This benefit seeks to cash in on what Joeri referred to as the greatest scarcity of future consumers: time.
1. Faster than real time
Until recently, the aim was to provide customers with a good after-sales service. This led to the setting up of well-functioning contact centres, with a team of efficient staff ready to help customers with any problems they might have. Some companies were better than others, but most of them managed to provide a service that was acceptable. With the rise of social media, speed and availability were added as two important new elements to the service equation. People began to ask questions via Facebook and Twitter, and counted on getting answers almost in real time. In reality, service via social media has turned out to be a disappointment for both companies and consumers. The response times on social media are too long for most questions - an average of hours rather than minutes. In other words, the classic telephone call is still currently the best and fastest way to get the information you want. Okay, you may need to listen to muzak for twenty minutes or so, but it's still quicker than social media. But it won't stay that way for long. Automated interfaces will soon make possible customer communication in real time - but even this will not be enough in the years ahead. Anticipating problems and solving them before they bother the customer will be the new norm.
Sensors linked to automatic service provision facilities are the key to faster than real time customer service. For example, modern central heating systems are already smart. The classic systems of the past can often break down without warning - which is a touch inconvenient if it happens to be the middle of winter. You arrive home after a hard day's work to find that your house has been turned into a fridge. This is where the problems start for you as a customer. You phone the service centre in the hope of getting help quickly. Will the centre still be open? Can they send a technician this evening? Or will it be tomorrow? And does that mean I'll have to take a day off work? Even if everything goes smoothly, customers don't like the uncertainty and they don't like having to invest their precious time in this kind of thing. In contrast, a smart central heating system will tell you a week in advance that a problem is going to happen. So instead of arriving home to an ice-box, you arrive home to the following friendly message: 'Hi Steven, this is your central heating speaking. I'm afraid I'm experiencing some problems at the moment and might break down shortly. If you press now on the 'okay' button, someone will call around tomorrow to fix me - if that's convenient.' It's almost as if the unit has come alive.
Products and services come to life
We have often had the pleasure of working together with Mickey McManus. Mickey is a visiting research fellow at Autodesk. He is also chairman of Maya Design. A few years ago, he wrote the book Trillions. His basic argument is that we are currently living in a world of billions, but in the near future this will become a world of trillions. Today, we have x-billion smartphones. Tomorrow, we will have x-trillion devices connected to the web. According to Mickey, each of these new devices will be capable of coming to life, which will open up whole new fields of application. The explosion of data will have positive consequences for many different sectors. In factories, machines will decide when they need to be serviced. Sensors in furniture will adjust its shape to match individual users. For example, an armchair will be able to take account of the different physical characteristics of the husband, wife, children, etc. Once we have trillions of devices all linked to each other, the quantity of available data increases exponentially. As a result, the number of possibilities to improve service will also increase exponentially. There is a direct correlation.
The most important benefit of the trillions phenomenon will be faster than real time customer service. Our smartphone alone contains something like ten sensors. If you combine the knowledge of these sensors with the general knowledge that the smartphone already possesses about our daily lives, the number of possible applications is almost limitless. In the near future, for example, airline companies will rebook your flight before you even know you are going to miss it. Your smartphone 'sees' that you are stuck in a traffic jam and relays this information automatically to the airport, where your booking is changed to the next available flight. As a result, your delay is kept to a minimum and the airline can resell your empty seat to another passenger. Win-win. In this way, it again seems as though your flight ticket has come to life and can take its own decisions. I was able to interview Mickey McManus Mickey McManus as part of my preparations for this book. Check out to view the full conversation.
The same evolution will be evident in business-to-business markets. In the near future, every machine or part of machine will be able to come to life. The data they provide will again be the key to faster than real time customer service. Spare parts will be delivered before the old parts have broken down. In fact, it will probably soon be possible to print new parts on site, cutting out the logistical link in the supply chain.
From sick care to health care
In the health sector, this new philosophy will lead to the complete change of the existing model. Today, we wait until someone gets sick and then hope that medical science has the answer to make this person better again. This is sick care - a reactive approach. In the future, care will become more pro-active. The new objective will be to ensure that people don't get sick in the first place. This is health care. Not only is this obviously better for the patient, but is also the only way to keep medical care affordable in an era of growing and aging populations.
Self-diagnosis and self-care will also increase. There is already a smartphone app that allows you to scan your skin for skin cancer, producing an analysis that is every bit as good as a dermatologist's. Another similar app is capable of locating eye cataracts at distance. Likewise, Google is working with Novartis to develop a smart contact lens that can measure a person's glucose level on the basis of their tears, so that diabetics can be given accurate information to adjust their medication, if necessary.
The smartphone will help both patients and doctors to make better diagnoses. This makes it much easier for people to monitor their own health. Proactive care of this kind also means that when problems do arise, they can be identified at an early stage, so that the chances of effective treatment are increased. It is not unrealistic to expect that before too long you may get a phone call to warn you of your impending heart attack! Like every other sector, medical care is also evolving towards the faster than real time world.
In The Day After Tomorrow, every customer will be surrounded by sensors and smart technology that will turn the customer experience on its head. Reactive customer service will soon be a thing of the past. Solving problems before the customer discovers them is the new norm.
Acustom Apparel is a great store in New York. If you look at the store window, it seems like a classic gentleman's outfitters. The window is full of elegant designer suits. In fact, Acustom Apparel specializes in personalized made-to-measure suits. Inside the store there is a scanner that scans two million data points on the body of each individual customer. This information serves as input to make the perfect suit. And once a customer's data is known and stored, he can order a new suit from anywhere in the world, delivered to his home in just a few weeks. In 2017, the Adidas store in Berlin also started with the design and customization of personal sportswear. And Nike is also taking its first steps in this direction, offering the option of made-to-measure sport shoes to its customers. Many other brands in the fashion world are thinking about similar ways to personalize their products. The moment companies like Amazon and Zalando succeed in better personalizing their range in this way, the number of return deliveries will fall spectacularly - and so will the associated costs.
And it's not just products. In future, services and communication will also be tailored more closely to the specific needs and context of the individual consumer. When people spoke about personalization in the past, all they meant was that a mail was introduced with a person's name ('Dear Steven...') rather than an anonymous greeting ('Dear Sir or Madam'). A few years ago, we saw the arrival of the first personalized brochures and magazines, where the cover was adjusted to match the profile of each reader. Digital printing has made more advanced forms of personalization possible, and companies like Nutella and Coca Cola have launched interesting campaigns where even the packaging is personalized on the name of the customer. The next step will be individual made-to-measure adverts and proposals. The data and the algorithms know what the customers like and also the way they are feeling on any particular day. This will lead to a very specific and individualized form of advertising. In fact, it probably won't seem like advertising. If Google Assistant spontaneously makes a recommendation about a possible relaxing activity for the weekend, the Google platform is taking account of your agenda, your mood, and the weather in the place where you live. This kind of advertising can actually sound more like a suggestion from a friend.
The segment of one
Hyper personalization will become an important trend in the world of artificial intelligence. Once again, data is central to making this benefit possible. The more data there is available, the more relevant information and products become. This evolution means the end of the road for the old-style market philosophy of segmentation. Segmentation divides the market into a number of groups with comparable needs. This allows the marketeer to match both communication and product characteristics to the needs of each different segment. Based on this philosophy, marketing people assume a high degree of homogeneity within segments and high level of heterogeneity between them. Segmentation still believes in the world of the average customer. If your market has four segments, this means you have just four types of customer. Each of these groups has its own persona and its own specific requirements. Imagine that your product is targeted at women between the ages of 35 and 40, with two children and a fulltime job. As an old-style marketeer, you will regard all these women as being more or less identical. But if you had the opportunity to see this group in real life, you would soon realize that they are far from identical! Segmentation was a good halfway-house solution in a world where personal data was lacking. But this data is now available in abundance - and it shows that every consumer has a different personal context, which means that their consumption and communication needs are often fundamentally different. Segmentation still works, but only if the maximum size of the segment is one.
One of the major challenges in the telecom market is to provide simple and effective support to customers when they want to change their provider. During a workshop at Telenet, one of the largest telecom players in Belgium, it soon became clear that this transfer process was something of a sore point. Many customers were not satisfied about the way the process was handled, even though Telenet had spent a lot of time and money writing out what it thought was a clear process. The problem was eventually solved when the people at Telenet finally realized that every transfer is different. As one of their managers put it: 'We have made a standard process for the average customer, when we should be offering a personal service to individual customers.' The segment of one in action.
A major transformation at McDonald’s: data and personalized service
McDonald’s was founded in 1955. It is a classic company active in a very competitive and price-conscious market, complicated still further by the trend towards healthier eating. It is impressive how in recent years McDonald’s has reinvented itself. Belgium is a test market for their restaurants of the future. The traditional system of queuing, ordering, waiting for your meal and then finding a table has been scrapped. A modern McDonald’s restaurant has digital kiosks where the customers type in their order and then go and sit down. Minutes later, the meal is brought to their table. Almost everything in the old philosophy has been thrown overboard and replaced by new ideas. The next phase is even more radical: the transformation of McDonald’s into a data company. The McDonald’s app already helps them to learn more about their customers. Sensors in the restaurants will soon be able to recognize customers as they enter. And not just the customers, but also those customers' individual needs. Imagine that a customer is allergic to cheese and taps this into the kiosk when making his/her order. The interface will store this information and, next time the customer visits, the kiosk will proactively ask whether or not the customer would again like the cheese to be removed from the burger. If this answer is confirmed on three separate visits, the cheese is thereafter removed automatically. By using smartphones, sensors and data in this manner, McDonald's can go a long way towards personalizing its products, service and communication. The financial results from the first test restaurants are very encouraging. The majority of the restaurants have seen significant growth during the trial period with the new formula. For a company with its kind of historical background, operating in a hyper-competitive market, this is a remarkable transformation. As result, in the first half of 2017 McDonald's share price rose by 26% to reach new record levels. There is talk that in the second half of 2017 a further 2,500 restaurants will be converted to the new approach.
Today, medicines are developed for the average patient. Don't get me wrong. We are very fortunate to have these medicines. They help a lot of people who are sick. But the effect of an average medicine is often insufficient and their average nature also leads to many different side effects for different people. But now that the price for mapping the human genome has fallen from 100 million dollars (2001) to just 1,000 dollars (2015), we are standing on the threshold of personalized medication. As soon as scientists are able to measure cheaply and effectively all the different elements of a person's body, there is no reason why medicines cannot be prepared to reflect the specific characteristics of those elements. The segment of one at work in health care
Every consumer has a virtual footprint. Almost everything we do leaves a trail of data. This information will be increasingly used to offer hyper-personalized service benefits to customers in a wide range of fields. However, this has led to discussions in some quarters about privacy. But not generally among consumers: the large majority are convinced of the potential benefits. A recent study showed that 71% of the respondents wanted to receive personalized communication and services. Consumers want fast and relevant products and services. If this means sharing some of their data, it is a price they are willing to pay.
Too many companies see AI as a direct means to earn more money. You can almost see the dollar signs lighting up in their eyes whenever they hear the words 'big data'. However, the impact of AI and data are indirect. By offering customers extra relevance and personalization, you make those customers more satisfied. And if they are more satisfied, this will have an indirect influence on their future purchasing decisions. This is where you reap your financial reward: in the mid to long term, not the short term.
3. Unparalleled ease of use
Ready for a short test?
- Do you every use Booking.com?
- If you do, please name five positive things about the site in the next 30 seconds.
- Super, thank you.
Third question: are you (secretly) a little bit in love with the brand Booking.com? Are you a big fan?
During the last 12 months, I have done this little experiment as part of keynote speeches in just about every country in Europe. These are my findings (the target group is, of course, a business public).
- There is roughly 90% market penetration for Booking.com in the business community.
- The most common answers shouted out in the allotted 30 seconds include: fast, personal, the app, easy cancellation, no advance payments, the reviews, the photos, the maps, easy, the point scores and the huge range on offer.
- Just 1% is a real fan of the Booking.com brand.
To me, this is amazing. Almost everyone uses the platform. Everyone is very positive about it. But almost no-one is a fan. For classic marketing profiles, this is a remarkable paradox. But in the new marketing world, this is the new normal. People don't fall in love with the brand, but with the brand's interface. If a new platform is launched tomorrow that is faster, easier and cheaper, they'll drop Booking.com like a stone. Even more, they will probably promote the new site amongst their friends.
The interface is increasingly becoming the key determining factor for brand positioning. Consider, for example, your bank. The most crucial interface for a bank, the one that can make or break it as a brand, is the mobile banking app. Why? Because people use it dozens of times each week. The impact of this app is much greater than anything that marketing and advertising can ever hope to achieve. The user interface determines market perception.
'Convenience is the new loyalty' is one of my mantras.
'Convenience is the new loyalty' is one of my mantras. In an impressive recent study, Byron Sharp came to the conclusion that classic loyalty programmes no longer work. These systems are based more on a reduction in the financial margin than on an actual increase in customer loyalty. People are less faithful to their brand than to their favourite interface. Another recent research project into search behaviour on Amazon revealed that consumers nowadays search much less on brand names than they did 10 years ago. If someone wants to buy shoes on Amazon, they search five to six times more by category name than by brand name. Once this has been done, they generally follow the recommendations suggested by the Amazon algorithms. The same is true to a lesser extent for people wanting to buy accessories. Here they only search three times more by category than by brand. One of the few exceptions is some types of beauty products, where the category is 'only' 30% ahead of the brand. But in every category the same general conclusion holds good: generic searching is more important than brand searching. Loyalty to a brand has been transformed into loyalty to the most user-friendly interface.
Platforms are eating the world
We are now living in a world where the individual market sectors are increasingly dominated by a small group of very big players. In the West, companies like Google, Amazon, Facebook, Uber and AirBnB have taken over their specific sectors. And it's the same story in the East, with the evolution of giants like Tencent and Alibaba. Google and Facebook have a duopoly in the field of online advertising, with everyone else pushed to the margin. Amazon and Alibaba tower above the rest of the online retail players, with the number three company light-years behind. Uber has conquered the on-demand mobility sector. In Asia, Tencent has a stranglehold on digital transactions and communication. What all these companies have in common are a gigantic customer base, an internationally dominant position and a huge lead in the technology stakes.
Voices in society sometimes express concern about the concentration of power in just a handful of mega-companies in the platform industry. Viewed from a social perspective, some of these arguments perhaps hold water. But the majority of consumers aren't really bothered: all they see is the benefits. Today's dominant tech- platforms are expert in offering faster than real time service provision, hyper-personalization and unparalleled ease of use, supported by the very smartest state-of-the-art technology. For consumers, this is fantastic; for other smaller companies wanting a little piece of the action, it's a nightmare. The major technology players set the bar, and that bar is very high. 80% of the time spent by consumers on their smartphones is spent on one of the major platforms. Half is spent on Facebook and the rest is shared between YouTube, Google, Amazon, Netflix, etc. They determine the standards in service, interface and personalization, not their direct competitors. And the only way for the rest to survive is to try and follow - if they can.
80% of the time spent by consumers on their smartphones is spent on one of the major platforms. Half is spent on Facebook and the rest is shared between YouTube, Google, Amazon, Netflix, etc.
In every industry platforms will appear on the scene that rapidly accelerate the market dynamic. The more users they have, the greater the power of these platforms becomes. Nowadays, you have little choice other than to join in this platform economy. There are two strategic options. The first is to build your own platform. This is what BMW decided to do: it built its own mobility platform. They want to make BMWs available in the world's major cities to provide a ride-sharing service à la Uber. Today, a BMW is sold once for 30,000 euros; in The Day After Tomorrow, a thousand BMW s will each be sold for 30 euros. In this way, BMW hopes to evolve as a car manufacturer with a mobility platform. Unfortunately, for many of these new platforms it is already too late to make a difference. Once a leader has established its position, it is mightily difficult to overthrow them. Even a quality brand like BMW can already see the writing on the wall and has conceded that it will never be the biggest fish in the pond. Tony Douglas, their director of strategy, has even said it explicitly: 'BMW won't be the biggest player in this field, but we hope to be the coolest.' The strategic choice to build your own platform certainly sends out a powerful signal, but it is difficult to do and costs a fortune.
The second strategic option is to hang on to coat tails of an existing platform. In this way, for example, Walmart has chosen to collaborate with Uber's logistic network for its e-commerce deliveries. Walmart's much bigger rival, Amazon, has already developed a gigantic logistic network of its own. It would take Walmart far too long to build something similar, even if they had the financial resources to do it. Making use of existing platforms is therefore the smart choice for the vast majority of companies. Volvo also works with Uber. Uber doesn't make cars, but needs lots of them if they want to maintain their dominance in the world mobility market. Closing a big deal with an existing platform giant can often kick start accelerated growth. And Volvo is not alone in this approach. Many other companies, often major players in their own right, use Amazon or Alibaba as their most important distribution channel. In all honesty, they don't really have much choice - because there is no viable alternative option. Some companies try to avoid collaborating with the giants, for fear of making them even more powerful. This is nice in principle, but near suicidal in practice. These companies either eventually see sense, or else they go to the wall. If option 1 is not feasible - and 999 times out of a thousand it isn't - then option 2 is all that's left. The only way out of the devilish dilemma is to accept the rule of the strongest - and seek their co-operation.
WeChat: the operating system in China
The most influential platform in the world is undoubtedly WeChat. WeChat is part of the Chinese company Tencent. Some people call WeChat the Facebook and/or Whatsapp of the East. But that's not strictly true. WeChat has a totally different business model from Facebook. And is light-years ahead in its development.
At the time of writing (mid-2017), WeChat has some 938 million users. Most of them, as you might expect, are in China. Internationally, it scores best where there are large Chinese communities - or so say some of the more mischievous commentators. In reality, WeChat can best be described as the operating system of China. Almost every business transaction in the country takes place through WeChat. People buy flowers via the platform. They book restaurants and taxis. They even manage their finances through it, and not via their bank's app. The Chinese government is also happy to make use of the platform's immense power. For example, Chinese citizens can download and keep their identity cards and driving licenses on it, while all the administration linked to hospital visits are processed and stored in its data banks. The largest part (66%) of WeChat's turn-over comes from these 'value added services'. The company receives a micro-payment for every transaction consumers, companies and organizations carry out. In the western world, if Facebook failed to work for a day it would be headline news, but the world would keep on turning. If WeChat failed to work for a day in China, the whole nation would grind to a halt.
The platform is the primary communication channel for the business community in China. E-mail is only used to communicate with foreigners. If you meet a new business contact, you show him/her your WeChat QR code. He/she scans the code and communication can begin. The WeChat QR code is also given a prominent place on Chinese business cards.
QR codes are very important for WeChat. In China they are often referred to as the gate between the digital and analogue worlds. Almost every payment is made by scanning a QR code in the WeChat application. 15% of WeChat's revenue comes from financial transactions, a functionality it only made available some three years ago. Before then, AliPay (the Alibaba mobile payment app) had a 100% monopoly. In just a few years WeChat has already clawed back 50% of the market. During our innovation tour in China, it was noticeable how people gave you a strange look if you wanted to pay with a credit card, almost as though it was something from the Middle Ages!
Equally noticeable was just how proud the Chinese are of their super-app. In the western world, some people are critical of the power of Facebook. Nobody in China would ever dream of criticizing WeChat. In part, that's because the benefits to the Chinese people are huge.
- FASTER THAN REAL TIME CUSTOMER SERVICE: the data held by WeChat is phenomenally impressive. They know everything: every transaction, every hospital visit, where people spend their money, what restaurants they eat in, what cars they drive, etc. They use this mine of information to anticipate in fields as diverse as mobility, healthcare and security. For example, their analyses of financial transactions to can help to identify and stop certain criminal activities.
- HYPER-PERSONALIZATION: everyone uses WeChat in his or her own specific way. People choose their own value added services and therefore organize their lives the way they want, quickly and efficiently.
- CONVENIENCE: if you can do everything (business communication, purchases, payments, reservations, administrative matters, etc.) on a single platform, it is difficult to imagine anything that could be more convenient for the user.
WeChat is such a powerful platform that Chinese people, companies and organizations have no option but to use it. There is no Plan B. All you can do is accept its benevolent dominance and make best use of its many powerful facilities to extract the maximum amount of benefit.
Amazon Prime is the modern Trojan horse
During the past 20 years, Amazon has evolved from a small online bookseller into the most powerful retail platform in the world. The Amazon share was launched on the stock market in 1997 at a price of 18 dollars. After various stock splits, this 18 dollars actually had a real value of just 2 dollars. Twenty years after the IPO, on 30 May 2017, the share finally passed the magical landmark of 1,000 dollars per share. In others words, if you bought 5,000 dollars of Amazon shares at the time of the stock market launch, in 2017 these shares are now worth around 2,500,000 dollars.
In recent times, the company has undergone a remarkable metamorphosis. Not only have we seen the evolution from an internet bookseller to an online store where you can buy almost anything, but alongside their retail activities they have also been developing a cloud hosting service known as the Amazon Web Services. This cloud service has been amazingly successful and in 2016 had a turn-over of more than 12 billion dollars. Not bad for something that stated as a side line. In June 2017, Amazon bought Whole Foods to enhance its footprint in the physical world. The company has also started to make its own hardware, with the Amazon Echo as its most successful product. It is a story of non-stop progress and success. But the most brilliant innovation of all is the introduction of Amazon Prime.
Prime was developed after Jef Bezos gave a group of high potentials the task to design a business model that could break the Amazon empire. After a period of intense brainstorming, the group came up with the Prime concept. Jef Bezos thought that it was such a good idea that he decided to implement it himself. In that way, he could beat the competition to the punch. And so Prime was born.
Prime is a modern loyalty programme. But it doesn't work like the classic loyalty card, where you need to buy ten loaves before you get an eleventh loaf for free. The Prime model works the other way around. You first pay an annual fee to be recognized as a loyal customer. But once you are an Amazon Prime member, you can enjoy many different kinds of benefits, such as the faster and cheaper delivery of the products you order. Prime has been another bull's-eye for the company. In mid-2017 some 64% of American families have an Amazon Prime subscription. The secret of the system's success lies in its psychology. Once people have paid for the extra service, they want to make sure that they get the most out of it. Human self-interest and greed does the rest. The more you buy from Amazon, the lower the Prime fee per transaction becomes. The annual fee for Amazon Prime is 99 dollars per year. So if you buy something from the platform 99 times that year, the Prime cost is just 1 dollar per transaction. But if you only buy something 10 times, the Prime cost rises to 9.90 dollars per transaction. In other words, the more you buy, the cheaper it gets - or that's what the customer thinks.
Amazon continues to invest in new interfaces that make it even easier to buy things via Prime. We have already mentioned Amazon Echo, an interface used by 30% of its owners to order products from Amazon by voice command, which is faster (and more fun) than via a number of mouse clicks on the website or in the app. Amazon has also invented the Dash button. These are little reordering buttons that you can put in convenient places, like next to your coffee machine. Once you run out of coffee, you just press the button and within an hour Amazon has delivered a new supply of your favourite brand. The next step will be an interface that the customer doesn't even have to press. When Amazon starts working with the manufacturers of household devices, it will install smart sensors in every conceivable domestic appliance. These sensors will be able to measure the objective consumption of, say, your coffee percolator or washing machine. Before the customer even knows it, Amazon will deliver a new supply of washing powder or coffee beans before the old supply has been used up. Once Amazon succeeds in doing this, it will have built the biggest Trojan horse the business world has ever seen.
The result will be to strengthen Amazon's already huge dominance, based on satisfied and loyal Amazon Prime customers. Why? Because Amazon score well on the three core benefits from the third phase of digitalization.
- FASTER THAN REAL TIME CUSTOMER SERVICE: thanks to their data analysis, Amazon can already predict with reasonable accuracy when someone needs to buy something. In the near future, it will have even more information about its customers via interfaces like Amazon Echo and sensors in domestic appliances. This will means that consumers no longer have to think about routine purchases. Amazon will deliver the necessary products before the customers even know they need them.
- HYPER-PERSONALIZATION: Amazon's recommendation engine is world-famous. From day one Amazon has been focused on personalization. Thanks to the Prime system, Amazon will get even greater insight into the needs and preferences of its individual customers, so that the personalization of recommendations, communication and deliveries will become even better than it already is
- CONVENIENCE: struggling to carry heavy bags from your car to your house will become a thing of the past. Visiting your local supermarket will no longer be necessary. Amazon will allow you to order everything you need, quickly and easily, and will deliver it to your front door. And the quicker and easier it becomes, the more people will buy.
Start with the customer experience and work backwards
There are lots of legendary videos with Steve Jobs. In my field of expertise, the most classic video of them all dates back to 1997. During an Apple developers' congress, a member of the audience asked an aggressive question. This man was disappointed that Apple was planning to scale back its OpenDoc platform. So disappointed, in fact, that he insulted Jobs by telling him that he didn't know what he was doing. When you read Steve Jobs' biography, you might expect him to hit back hard at this kind of attack. But precisely the opposite happened. He said that the man was right on some points. After this, he launched my favourite Steve Jobs quote: 'You have to start with the customer experience and work backwards.' This quote dates from before the mega-success of the iPod, iPhone and iPad. But it was at the heart of the vision that Steve Jobs wanted to develop for Apple. The customer experience has to come first, not the technology. If you start with the perfect customer experience, you will always end up with a positive result. If you start with the technology, the chance of ultimate disappointment is greater.
AI is capable of helping customers in a faster, more personalized and more user-friendly manner. To determine your first AI applications, it is necessary to first think about the biggest frustrations of your customers. Make a list of the things about your company that you know are inconvenient or even irritating for them. Then search for ways to automate the processes involved. This is the way to achieve AI success.
Good for the customer! Good for society?
Good times are coming for customers. Service levels will be quicker, easier and more personal. The effort needed to buy things - personally or professionally - will diminish. We will all get used to the new AI world pretty fast. But there is another side to this story. A question I often hear during my presentations is this: 'Fine, Steven, we can all see the benefits for the individual customer, but is this a good thing for society as a whole?'
Everyone knows that I am a positive person. The purpose of my books is to make people enthusiastic for the future. I hope that my ideas and opinions encourage entrepreneurs to take action that will make their customers happier. And so yes, I have a positive view of AI as well. The evolution towards artificial intelligence also offers many benefits to society. A number of major societal problems will be solved thanks to the power of automation. Driverless cars are probably the best example. Once the majority of cars are self-driving, the problem with traffic jams will disappear. According to the World Health Organization, more than 1.2 million people die each year from traffic-related causes. This figure will fall dramatically. Parents will be less worried if their kids ride to school each day on their bike or take the car at weekends to visit their friends. At the same time, we won't need as much space for car parking, so that more green zones can be introduced back into our towns and cities, improving both air quality and general public health. In fact, AI is expected to help solve a number of crucial medical problems. A cure for cancer and several other currently fatal conditions is not beyond the bounds of possibility and it is certain that diagnosis and treatment of these conditions will significantly improve, increasing average life expectancy as a result. Even the major technology giants are enthusiastic about playing the health card. Microsoft, for example, has the ambition to eradicate cancer by 2027. They want to fight the disease in the same way they fight computer viruses. If they are successful, a longer and healthier life is a clear positive consequence for society.
The potential benefits of AI are huge and the leaders of the major industrial players are anxious to use their 'new power' for the good of the planet. In a conversation with the MIT Technology Review, Demis Hassabis, CEO of Google Deepmind, outlined his company's main objectives. He wants nothing less than to use Deepmind to tackle the world's great problems, starting with climate change and the global food shortage. In the same interview, Mike Schroepfer, the Chief Technology Officer of Facebook, expressed similar ambitions. 'The real power of AI is it scalability for dealing with big problems. The things that we are carrying out today on a small scale, we will soon be able to carry out on a large scale.' Yes, there are reasons to be positive.
At the same time, it would be naive to pretend that there is no potential downside. Even the greatest optimists can see possible dangers and major challenges in the years ahead. At the end of his second term of office, President Obama gave a frank interview to Wired Magazine. Obama demonstrated a good knowledge of the world of technology and in general he supports the current evolution of AI. According to the former president: 'History shows that new technology leads to new jobs and improves people's standard of living'. But he also sounded a note of warning, pointing to a number of possible threats that we need to think about seriously. 'Imagine that someone develops an AI that can crack the codes for nuclear rockets, so that they can programme them to launch. If that happens, we've got a real problem.'
However, the biggest problem is not likely to be military, but socio-economic. AI will lead to sudden and unexpected unemployment in a wide variety of sectors. 'Highly educated people will no doubt be able to reap the rewards of the new developments. But for blue collar workers and for people who do work that is today important but repetitive, AI will probably make their jobs redundant,' says Obama. AI expert Pieter Abbeel also talks of 'sudden and large-scale unemployment' as a result of artificial intelligence. The possibility that we will create a 'useless' class' is real. The most serious threat posed by AI is not a terminator scenario, where machines take over the world, but rather its potential to undermine the foundations of our social system. For this reason, conducting a debate about the possible impact of automation must be high on the agenda of all the world's leaders. It is a global problem that needs to be solved at a global level. Local solutions will not be enough.
In the book's last chapter, I will look more closely at these problems and the ethical debate related to the evolution of artificial intelligence. For now, suffice it to stay that the years ahead promise us mixed fortunes and a bumpy ride. The world is standing on the eve of radical change. Some of these changes will be highly positive for the individual and for society. Sadly, some of them will be highly negative for the individual and society.
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