Consumer Sophistication

The buzz throughout 2006 was Innovation. Every issue of the trade press in 2006 was full of ads promising innovation if you would only buy this or that product. I believe it’s true that innovation drives competitive advantage and I believe that innovation is the single most important success factor in the highly competitive and connected retail industry.

I also believe it is the single hardest thing for a company to do on purpose.

Very successful companies tend to have a culture that breeds innovation in organization, in development, in products and in service to the customer. While technology does not create that type of culture, it can enable it. Technology can give executives throughout the company the same version of the truth at the same time. Technology can give a retail company the research tools to develop insight. Insight can lead to innovative and compelling consumer facing capabilities that will make a customer drive past many stores to get to their favorite store.

Technology can allow a retailer with insight to rapidly take advantage of new consumer trends such as the shift to ‘communities’ like MySpace, Facebook, YouTube, Citizendium, LinkedIn and Second Life. It’s very important to understand what a customer expects of you and even more important to understand who set that expectation. This is insight.

The most important emerging technologies that touch the consumer right now are pervasive computing technologies. In North America, Internet usage is now over 70% of the population and cell phones outnumber households two to one.

Innovation Enabling Technologies
Consumer lifestyles
So just what are your customers and employees doing with this new technology? They are forming and joining communities on the Web. They are connected.

First it was blogs which are very Web 1.0. Then came the Web 2.0 communities, already more than a Billion dollar business. The younger set is in My Space which is now available on the Helio cell phone. Some have outgrown MySpace and are joining Facebook. Facebook claims to be a Social Utility and was primarily College students until they recently opened to anyone. New social community niches are starting to come and go like fashion fads but overall this need to connect looks very much like a long term trend. Several of the bigger and more successful communities will be around as long as they continue to evolve with the consumer.

The most sophisticated of these Web 2.0 applications right now seems to be Second Life. https://secondlife.com Check out why Irving Wladawsky-Berger, IBM’s Vice President of Technical Strategy and Innovation, is there and why IBM has offices in the virtual world with thousands of IBM employees living there. Many companies are using Second Life to showcase their products and services. This is one of the most important ways a company can connect with the new e-luminati.

Retailers are starting to set up shop in Second Life and you can buy clothes for your Avatar. You can buy land and build a house or open a business. Starwood Hotels even has a place to stay while you are in Second Life.

According to, IBM VP Wladawsky-Berger "I really believe that highly visual and collaborative interfaces will become very important in the way we interact with all IT applications in the future,"

IBM is starting a new emerging Business Opportunity in 2007 to get ahead of this trend and create technology to enhance it. The enabling technology here is software, software that runs on very fast servers over broadband Internet and in very powerful terminals and phones. This is one of the new arenas for retail.

Location Based Services
Some of this new Web 2.0 content is location based. The social communities are fast moving onto the mobile consumer devices.

Companies like Loopt, ( http://www.loopt.com ) a social mapping company, lets you put your contact list on your cell phone and shows a map with the location of each person along with their status. You can see where you friends are and what they are doing. If a couple of friends are in a Starbucks a block away – why not join them.

This type of location based application has been popular in Japan and Korea for some time now.

Another example is the ability to list your company on Google Maps so that when someone looks at the map, your store is highlighted. Google Maps is now available on cell phones. This makes it very easy to find you in a busy city.

Consumer computing: The cost of storage is still going down and the speed of computation is going up. This trend shows no sign of slowing. A recent announcement of joint research results by scientists from IBM, Macronix and Qimonda discussed a new type of computer memory that is likely to be the successor to flash memory chips, which are widely used in computers and mobile consumer electronics like digital cameras, cell phones and portable music players. The technology is "phase-change" memory, which can be more than 500 times faster than flash memory while using less than one-half the power. This new technology can be scaled to dimensions much smaller than the current flash memories used in consumer devices.

Cheap, small storage and computing capabilities have the ability to allow an explosion of new mobile applications directed at niche consumer communities. They can allow a retailer to be much more than a commodity supplier.

Retail Action items
Start experimenting. It doesn’t have to be on a big scale but start working on it.
Set up a lab to understand the impact of these types of technologies
Sign on to www.alphaworks.ibm.com and download some free research software.
Open a store on Second Life
Join LinkedIn
Add your company to Facebook
Put your stores on Google Maps
Start working on Bluetooth to talk to your customers
Start taking contactless payments
Make a plan to get on the Next Generation Internet

Copyright © Daniel Hopping

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