Are You Ready for the HaaS Economy?

Internet of Things innovation is diving hard and fast into the hype cycle’s trough of disillusionment (Check last August’s Gartner’s Hype Cycle).  After all, we have a fridge that can stream video to my phone and…. okay not much going on really.  The real potential for IoT has been in the industrial and B2B space where big “dumb” machines could work together much better with a little “smart” tech.

The cultural quirk that has made innovation in IoT is the enormous emphasis on consumerization of new tech.  If the drone isn’t a personal flying car or the IoT can’t be purchased as a smart home upgrade, people have a tough time caring I guess.  So all the hype is focused on the B2C market while most of the potential for innovation is in the B2B space.

Enter the Hardware as a Service economy.

Having played in the IoT space with several early adopters as a consultant, this is definitely huge.  Essentially, we will see more smart hardware suppliers for both consumer and B2B markets enter.  Containers, logistics, irrigation, experience marketing all have immense potential for startups that can bear the risk of innovation and maintain the expertise of servicing and implementation.  That’s the heart of what makes this a no-brainer – “HaaS transforms an up-front capital expenditure into an ongoing operating expense, which also allows for more accurate cost/value comparisons” via TechCrunch

That’s three huge differences HaaS will make in IoT:

  • Finance is Simpler: Companies don’t need to bear all the risk of innovation in tech they don’t understand.
  • Accounting is Simpler: Companies don’t need to bear all the risk of investment in a massive purchase of tech they don’t understand.
  • Economics is Simpler: Companies can more accurately trace the value-add to their ongoing operations investment, rather than calculating a BullShit ROI for projects based on tech they don’t understand

Are Robots Stealing Our Jobs???

I interview people at all levels of an organization during a Digital Transformation. Since the business case for transformation assumes lean process improvements, I have two goals:
– Make the information that runs the business into data a computer can “understand”
– Replace the non-human, monotonous tasks related to information with computers

To give away the ending here – the robots aren’t taking over. When I am done, all the social context, human relationships, and important judgement calls are still human-made. What we change is how quickly the mundane data-massaging, tiring research, and waiting between email chains that delay all of those human decisions. So I have a goal when I start interviewing: remove inefficiencies and make existing workflows more scalable. This implies automation.

One key thing here: nothing your business does is just chaos. I absolutely spend more time convincing people that an algorithm can capture the complexity of what drives decisions than I do formulating the algorithm. No matter how loosely controlled or gut-feel driven the decisions are, once a business grows into the 100s of employees, I can represent most of your processes with an algorithm. I could even replace the important human decisions with another algorithm that would succeed within a reasonable margin of the average employee, but that’s too risky. Instead, we make notifications and intuitive user interfaces to let one person make the same important decisions 10x or 100x as efficiently, making everyone more scalable. Don’t lay people off. Make it easy for them to increase their value-add.

Interestingly, there is a powerful cultural influence in these conversations due to the mistaken belief that “automation” somehow equals “artificial intelligence” – when what it really means is “fairly basic math equations tied together into one big powerful formula”. The intelligence is completely human-created, human-programmed, and human-managed. So I inevitably but happily show it works prior to convincing someone it works, because depending on their place in the company, the idea of automation replacing humans can be an ideal direction loaded with false optimism or a terrifying slippery slope where unrealistic pessimism prevails.

Both cultural perspectives ultimately distort the conversation.

In its really old roots in the Toyota Production System, the introduction of an “ejector” was a huge benefit to the safety, well-being, and efficiency of a machine worker. Before the ejector, a worker would carry a part to a machine that had just finished its task on a previous part. The employee would put down the part they were carrying, take out the previous part, pick up the next part to put it in the machine, then pick up the previous part. With an ejector system, the machine gets the previous part out of the way so that the worker just walks up and loads the next part, then takes the previous one, checks it for quality, moves it along the line.

Think of all your manual spreadsheet updates, paperwork, phone calls, and email chains just like that. You’ll still check the output for quality before passing along information or making a decision, but automation, notifications, workflow rules, and algorithms can save you a fair amount of your pain by pushing or ejecting what you need when you need it (keeping it out of your way the rest of the time).

This makes the value-add or revenue potential of every existing Customer Service or Sales or Marketing employee scalable beyond what additional hiring can accomplish. Lean Process automation doesn’t mean replacing all operations with an AI. This is the foundation of “Autonomation” – where a worker no longer manually labors at one machine, but becomes a manager of multiple “machines” – multiplying the value-add per employee. Replace the painful, slow, or unnecessary steps with a computer, while keeping the human element – the important decisions, the social context, the gut feel, human.

B2B eCommerce Segmentation and Why You Need It

 

In B2B Commerce, customer segmentation and personalization is a complex topic. At one end of the spectrum I’ve seen companies who need to be convinced there is any way to segment their market. They’ve used the same 4″ binder for selling to their customers so long you get the occasional “We’ve always done it this way” instead of an explanation. At the other end of the spectrum, a company’s pre-digital-transformation business processes seem to rely exclusively on personal relationships, email, and witchcraft – prices, behavior, and even products are unique for every customer (or so they tell me).

When a small shop commits to a completely out-of-the-box, fully-configured SAAS product, you find one that seems close enough and work with it (or work around it) to get the job done. More frequently, I consult with major players moving to major-league platforms. These platforms have virtually unlimited freedom to configure catalogs, localization, customer segments, and unique pricing per User Group. The net result of this total freedom, of course, is going digital without transforming anything about the business process, or the company’s sustainable competitive advantage.

So if you’re at the ultra-complicated end of the spectrum, here are some ways get thinking about segmentation and personalization:

Unique Catalogs –

Catalogs are structured around two things typically: the category structure that groups products together and the classifying attributes that are shared by all products at a given category level. A great commerce site creates a selling hierarchy that makes it intuitive and fast for a customer to drill down to the products they want to purchase. Don’t underestimate the flexibility you have to customize this selling hierarchy based on geography, seasonal changes, or user group. Essentially, segmentation (and custom catalogs) needs to follow the distinct ways each kind of shopper completes their drill-down and purchase. If the main difference in behavior is average annual spend, segment that way. If the primary distinction is limited to a handful of major customers, you can give each of them a unique catalog. If there is a clear distinction in procurement methods, segment by purchase processes. Like anything else, draw a line in the sand, watch your metrics, and talk to your customers!

Unique Pricing –

When I shop on Amazon, it is pretty simple to compare two identical products based on price and reviews. In the B2B space, life isn’t so simple. That said, there are B2C equivalent best practices for most B2B problems. If pricing differences perfectly follow the distinct catalogs you’ve created, you can manage prices that way. If you have multiple price lists (even one for each customer) you can integrate with your ERP or use hot folders to keep these update. Beyond known pricing differences, however, there may be customers who don’t have a price yet and need to negotiate a quote, customers who have a price but want to re-negotiate a quote, and customers who are purchasing against multiple contracts for the same commodity. Any industry that has embraced negotiated price differences will need to pay special attention to personalization of prices. That requires you to segment user experience related to pricing as well. After all, combining all the options in one experience when it isn’t applicable invites misery and customer missteps. Get this really wrong and you can expect angry phone calls.

Unique Service Levels –

Generally, B2B buyers are less whimsical and (hopefully) drunken-impulse driven in their buying decisions. They are less likely to find you through social media rather than search engine results, and questions of omnichannel experience and conversion funnels are often inapplicable. So while pricing is more complex, buyer behavior is likely simpler in B2B – this leaves you the opportunity segment based service level either explicitly (with a service agreement) or behind the scenes. Segmenting based on opportunity size, customer lifetime value, or average spend can be a powerful was to tailor the digital user experience to the unique level of service you’ll provide. For a corollary in the B2C world, think Amazon Prime or AppleCare. If you have a top 20% of B2B customers that high revenue and high margin, give them the concierge treatment in their eCommerce experience too. If your lowest 20% needs to buy additional support or service, you know what that costs – make a product for it, cross-sell it, and let them choose based on their needs.

No Segmentation, Less Scalability

The most important takeaway is that if you haven’t thought about market segmentation for your B2B eCommerce experience, do it right away! If you are either assuming a one-size-fits all approach or chaotically customizing every transaction, neither are scalable.

 

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