Ushering in the Era of Connected Experiences

USHERING IN THE ERA OF CONNECTED EXPERIENCES

December 2017 With businesses interacting with their customers in numerous, diverse ways, digital customer experiences are becoming more critical to a company’s success than ever before. Connected experiences leverage data from automated processes and self-learning software to build meaningful relationships with customers across channels. Connected experiences are consumable, adaptable, and can enable customers to achieve their objectives anywhere, anytime, and in a personalized and efﬁcient way. Connected experiences are helping businesses across industries improve their bottom line and strengthen their competitive advantage. Companies that do not work towards accomodating this shift will risk losing their business to disruptive newcomers.

2 Ushering in the Era of Connected Experiences

Connected Experience is King

Digital engagements are at the heart With experience becoming king in the hotels, and activities across different of how enterprises address customer digital age, it is more important now than platforms and through different busi- needs today. People are more connect- ever that businesses create connected nesses. With the rise of connected ed to the world around them than ever experiences for their customers. Con- experiences, planning a vacation will before due to the growth in the volume nected experiences are defined by their become easier and more efficient in the and variety of devices and touchpoints. ability to leverage data from automated future. Vacation planners will work on a Businesses are challenged in response processes and self-learning software to single platform that integrates all travel with integrating multiple channels— effectively build meaningful relationships applications and suggests personalized products, websites, applications, and with customers across channels. These recommendations for travel, activities, other solutions—into seamless and experiences are consumable and adapt- and restaurants. This platform will pull connected experiences for their con- able, and feature seamless connectivity in data from a wide variety of sources, sumers.1 Companies must find a way to support users in achieving their objec- including social media accounts, loyalty to create better experiences for their tives in a personalized way. programs, and other sources such as customers or risk leaving money on the weather and maps. Itineraries will table for their competitors. Think of a person looking to plan a va- adapt to changes and disruptions (flight cation as an example. Today, individuals cancellations, traffic, overbookings) in Companies that are considered to be are usually forced to input data manually real time to ensure that consumers have customer experience ‘Leaders’ have and book airfare, ground transportation, great experiences (Figure 1). been shown to outperform the market and generate a return higher than the average S&P 500 Index by 35%, while companies considered as customer experience ‘Laggards’ trail the broader Customer experience ‘Leaders’ outperform the market by 45%. Even companies with market and generate a return higher than the a slight advantage in customer expe- average S&P 500 Index by 35%, while companies rience ratings have shown a 17% lead in both customer trust and number of considered as customer experience ‘Laggards’ customers willing to spend more, over trail the broader market by 45%. businesses that delivered poor customer experiences.2

Figure 1: From Connected Solutions to Connected Experiences - Vacation Scenario

TODAY TOMORROW Connected Solutions: A Connected Experience: Disjointed Technology & Applications Seamless, Integrated & Interoperable

Hotel Technology Hotel Airline Maps, on the edge Airline Weather

Ground Technology Technology Entertain- Consumer Consumer ment Transport embedded embedded

Ground Restaurants Transport Maps, Technology Restaurants Weather Entertain- on the edge ment

Today different applications /solutions require In the future, consumers won’t have to provide consumers to create the experience they want the context needed but instead technology will because each location or brand is on a play a central role in orchestrating and different technology platform delivering personal experiences

3 Ushering in the Era of Connected Experiences

Shifting to a Digital Landscape

Markets are already changing in re- a new ‘stay-at-home’ economy, where higher margins in the process. Com- sponse to the need for connected customers can fulﬁll more needs from bining in-store information with online experiences with companies such as the comfort of their homes. shopping data will enable Amazon to Uber, Airbnb, Blue Apron, and WeWork expand its foothold in the retail indus- disrupting industries and expanding These drivers enable the shift to try by improving the digital shopping ecosystems to create better customer connected experiences, evidenced by experience for their consumers.5 experiences. Multiple drivers are pushing the expansion into new markets by enterprises to create these experiences non-traditional market players. For ex- for their customers including: ample, when Amazon acquired Whole Foods Market, not only did it gain brick- 1. Digital Natives3: Millennials’ native and-mortar storefronts and distribution comfort with technology and desire for centers, but also the opportunity to better experiences is forcing enterpris- capture a wealth of information on how es to cater to them Whole Foods’ traditionally high-in- come customers shop in stores. Useful 2. Device Proliferation: By 2020, data points that Amazon can leverage there will be 20.4 billion connected from the acquisition include habitual things and consumers will manage purchase data and relationship data 85% of business relationships without between different products being human interaction.4 Growth in personal purchased. Amazon can now predict device usage has made users more ca- when a customer runs out of groceries pable and connected than ever before. and upsell other products in conjunc- 3. Stay-At-Home Economy: Auto- tion. Amazon can also use sales data to mation, IoT, and devices like Amazon build up another private brand, Whole Echo and Google Home have spurred Foods’s 365 label, and beneﬁt from

4 Ushering in the Era of Connected Experiences

Key Capabilities for Connected Experiences

There are three foundational capabili- data visualization tools provide access The third capability of a connected ex- ties that help distinguish between static to a huge amount of data and analytics perience is the seamless connectivity digital engagements and connected that can be easily consumed for rapid required to constantly deliver real-time experiences: consumability, adaptive insights. As technologies like voice-to- insights without interruption. As IoT engagement, and seamless connectivity. voice communication and AR become expands, a nonstop stream of data will For businesses to successfully create more sophisticated in their ability to be generated, at annual rates of 15.3 connected experiences, the following reason and understand context, con- Zettabytes by 2020.6 Connected ex- questions need to be addressed: nected experiences will become more periences will need infrastructure and consumable and engaging. connectivity to handle diverse sets of 1. Consumability: How do we create structured and unstructured data and a fresh and engaging user experience Adaptive engagement is another key input from sensors, images, audio, and with each customer interaction? capability. At the core of all connected video in the future. experiences is a comprehensive and 2. Adaptive Engagement: How can integrated platform that continuous- The seamless connectivity technolo- we quickly leverage vast amounts of ly learns and adapts to improve the gies delivering connected experiences data available to increase the engage- quality of engagement. The platform will create a network-of-networks sup- ment quality needed to drive consumer ingests and analyzes different types ported by 5G/spatial spectrum, block- intimacy and loyalty? of data (consumer, shopping history, chain for consistent records, wireless 3. Seamless Connectivity: How do environmental, etc.) to understand the power, and next-generation sensors. we securely stream real-time insights consumer and take intelligent, proac- 5G wireless technologies will provide at all times even in remote or compro- tive actions to improve the quality of consumers and enterprises with the mised environments? the experience. For example, in the stable connectivity capacity and speed previous vacation scenario, an inte- needed to power a future with billions Consumability helps create an excep- grated, interoperable vacation platform of connected devices. Companies such tional and fresh experience with each exploits user data to ensure restaurant as the Kymeta Corporation are working engagement. These experiences are recommendations are dynamically on enabling a future state of constant interactive, immersive, and collabo- adapted to preferences and dietary connectivity by developing new an- rative, all while delivering a specific restrictions. The underlying platform, tenna technology that can tap into the trusted outcome. Consumability not or “platform of platforms,” uses inter- satellite spectrum and offer more than only ensures consistency and person- connected data platforms, dynamic 5,000x the spectrum compared to ter- alization, but also seamless orches- synchronization, deep learning and restrial networks. Kymeta’s networks tration of the technologies involved, artificial intelligence capabilities (e.g., work across land, sea, and air, ensur- which may include any combination natural language processing and se- ing communication, connectivity, and of augmented and virtual reality, 3D mantic analysis) to adapt in real-time secure streaming of real-time insights imagery, and gamification. Additionally, based on changing scenarios. even in the most remote areas.7

Figure 2: Key Capabilities for Connected Experiences

Connected Experiences Dynamic │ Hyper-Local │ Industry Depth │ Streaming │Evolving

Consumability Adaptive Engagement Seamless Connectivity Enabling Technologies Enabling Technologies Enabling Technologies

§ Visualization: Data presentation § Data Platform: Centralized § Next Gen Sensor Technology: in a graphical format or a system for collecting, integrating Intelligent MEMs, etc. used to pictorial/visual context and managing data from disparate measure pressure, temperature.) § Collaboration: Constant real-time sources and formats § Blockchain: Digital ledgers teaming & unified communications § Machine Learning / AI: Ability to § Wireless Power: Wire-free § Orchestration: Organize and automatically learn and improve energy transfer automate processes to improve § Robust Semantics: Information § Edge / Fog Computing & productivity consistency extraction and retrieval techniques Security: Data processing at § Interactive / Immersive (AR, VR, from text and speech cloud edge before transmission gamification): Multi-sensory § Dynamic Synchronization: § D2D Integration: Device-to- engagement to develop powerful, Dynamically adapts to different device communications using a lasting experiences situations. shared frequency spectrum

5 Ushering in the Era of Connected Experiences

Building Connected Value Chains

Both consumers and enterprises stand Tomorrow’s food ecosystem can improve to significantly gain from connected on business model aspects and trans- Tomorrow’s food ecosystem experiences in the future. As digital form into a connected experience with interactions and programs progress to- the integration of solutions including can improve on business wards connected experiences, business precision agriculture, digital markets, model aspects and transform models will shift in response to in- Blockchain, and 3D printers. Precision into a connected experience creased interoperability across platforms agriculture solutions with sensors to and expanded ecosystems and result in measure and analyze soil for data on with the integration of hyper-personalized goods and services temperature, nutrients, and vegetative solutions including precision for customers (Figure 3). health will provide fertilizer and irriga- agriculture, digital markets, tion recommendations to help farmers Today’s food quality and safety experi- track crop yield and improve produc- Blockchain, and 3D printers. ence, which is currently inadequate for tivity. Farmers around the world could the enterprise side of the food supply collaborate with each other as part of chain, is a great example. Farmers, dis- this ecosystem to share best practices seconds, as opposed to seven days 9 tributors, and restaurants are faced with through social networks, similar to what using previous methods. the challenges of eliminating food waste, the French company Agrifind enables.8 increasing productivity, and preventing Additionally, with 1/3 of the food pro- outbreaks from diseased food. To add Blockchain can help to expand this duced, lost, or wasted globally, there to these difficulties, they are also faced ecosystem beyond farmers and allow is a large opportunity to apply digital with bad data quality, which makes it everyone involved from farmers to markets and custom food production 10 difficult to find insights and improve. consumers to monitor their food from to help food producers reduce waste. production to consumption. Questions Companies like Full Harvest connect The current food ecosystem dynamic re- around how certain ingredients are farmers and food distributers to sell sults in a predominantly static business grown, whether products are geneti- imperfect produce at a discount with 11 model for farmers, distributors, and con- cally modified (GMO) or organic, or how dynamic pricing. Bringing consumers sumers. Most inventory follows a supply- locally grown crops are could be easily directly into this equation to pick the to-stock model in which consumers are answered. Blockchain could also help produce they want directly from farm- limited to buying only what is available stop the outbreak of contaminated ers could increase process efficiency at a grocery store at the moment they products before they reach consum- in the future. As part of tomorrow’s shop. Horizontal collaboration bringing ers. For example, IBM partnered with connected food quality experience, 3D together groups of farmers is mostly Walmart to pilot a study demonstrating printers can be used to create custom nonexistent, as is vertical collaboration the benefits of tracing food products foods locally based on consumer de- that pulls farmers, distributors, and con- using blockchain. Results showed that mand and dietary needs at the moment sumers together. tracking information took only 2.2 of intended purchase, increasing fresh- ness, efficiency, and waste reduction.

Figure 3: Food Quality & Safety Connected Experience Example

TODAY TOMORROW ATTRIBUTES BUSINESS MODEL BUSINESS MODEL ATTRIBUTES User picks specific farm for each Farmer to Distributor B2B B2B2C type of produce

Food grown based on nutritional Supply to stock stores Inventory on hand Engineer-to-order needs/custom food

All parties have views into data Limited data visibility Feedback loop Food value chain engagement from producers to consumers

Pricing is dynamic based on value Distributorship-based model Standard pricing Value-based pricing of product design & engagement

Minimal points of entry for Ecosystem is open and shares best Limited ecosystem Collaborative ecosystem collaboration practices to decrease food waste

6 Ushering in the Era of Connected Experiences

Just as connected experiences encour- rience that integrates smart fridges. to track calorie intake and nutritional age industry collaboration, tomorrow’s These appliances can send alerts when needs, creating a holistic experience improved connected food quality and certain ingredients are running low around food consumption. In this way, safety experience will also integrate and locate stock of preferred brands connected experiences will enable into other connected experiences, such in real time. Consumers will be able consumers to achieve their objectives as health and wellness. Consumers to prepare meals according to dietary in a seamless fashion by integrating with dietary or weight-loss restrictions restrictions with recipes and portion personalization, various digital interac- will ﬁnd value in a connected expe- information integrated with wearables tions, and technologies together.

Delivering Value Through Connected Experiences

While it’s evident that connected cation. Through the app, customers the use of data like this to adjust the experiences provide consumers with a are able to create shopping lists, order lights, temperature, and other home host of benefits, enterprises creating items, speak with an expert, and see conditions to personalized prefer- connected experiences will also ben- what products might look like in their ences, while data from their smart efit their bottom line by extracting the homes through augmented reality. fridge could be used to provide a list of value of the data generated throughout Home Depot is seeing the benefits of restaurant recommendations gener- the customer journey. The arrival of helping customers through their deci- ated at the apartment based on foods connected experiences facilitates a sion-making and purchase journey in eaten at home. While the ecosystem continuous feedback loop for enter- this way, with a 21% increase in online benefits from increased customer prises, enabling them to access the sales in 2016, and 5% y/y growth in insights and intimacy, the platform voice of their customers in real time. store sales.12 owner (in this case Home Depot) could When the data from disparate plat- collect royalty fees, produce powerful forms combines and creates a “Plat- Home Depot has also been actively data and insights, and own the overall form of Platforms,” companies will be selling home automation systems. On customer engagement. able to create new solutions and expe- the Home Depot website, customers riences that drive greater loyalty and are provided an informative guide on revenue opportunities with the ability smart bulbs, plugs, thermostats, and to use customer insights and predictive cameras, as well as all-in-one bundles analytics to tailor unique experiences to create a connected home. Compa- The companies that do not (Figure 4). nies who make these products, such embrace this new era of as Philips, Wink, and Samsung, have personalized, connected Today, connected devices are frag- an opportunity in the future, to gather mented across platforms and brands usage data from each customer, and experiences will become and require manual input from custom- partner with companies like Home irrelevant, while the Depot to leverage their platform and ers for any degree of customization. enterprises that are the Tomorrow, these devices will speak to create a complete customer profile each other across platforms, brands, with aggregated data. This data could first-movers will hold a and channels to proactively infer the be used to create ideal environments competitive advantage for customers at all times that is not needs of customers without requiring over laggards. direct input from solutions that already limited to the scope of the home know customers. Home Depot, for improvement or consumer products example, has seen success by deliv- industries, and provides constant end- ering a seamless omnichannel service to-end engagement. A traveler’s next experience through its mobile appli- stay at an AirBnB could be elevated by

7 Ushering in the Era of Connected Experiences

Figure 4: Monetizing Connected Experiences

Ecosystem Platform of Platforms Consumer

Consumer Insights Royalty Fees End-to-End Engagement

Customer Intimacy Subscription Fees Solution that Learns “You”

Real-time Feedback Own the Engagement Optimizes Time & Cost

Embedded Revenue Data Producer New Social Opportunities

Tangential Services Software & Device Bundling Builds Trust in Products/Services

Value: Value: Value: Market Maker Foundation of Ecosystem Optimized Engagement

It Takes a Village to Deliver a Connected Experience

For the vast majority of companies, it the hospital facilities or background ment a new set of competencies to be will be impossible to develop these information on physicians.13 able to harness connected experience experiences on their own. To deliver opportunities. an excellent customer experience, As IBM and HARMAN expand their enterprises will need to develop a web ecosystem to include retailers, restau- Designing an interactive user interface of partnerships and ecosystems that rants, and other technology providers, that combines disparate data sourc- stretches across industries. the connected experience will become es to baseline environmental norms more complete, and Cognitive rooms and prescribe relevant actions will be IBM and HARMAN, for example, are will become capable of offering more imperative in allowing organizations partnering to create voice-enabled services to customers. This is just one to relate to and target a diverse set of cognitive rooms that deliver more possible example of how this partner- customers to provide great experienc- natural and intuitive connected expe- ship can evolve to demonstrate how es. The best and most successful con- riences for customers. These spaces determining which partners to help nected experiences will be provided combine IBM’s cognitive technology deliver outstanding connected experi- by enterprises that integrate multiple with HARMAN soundbars to create ences to customers is a key challenge software and device assets including interactive rooms that allow people that most organizations face. IoT, wearables, cloud, semantics, secu- to control their in-room subsystems rity, and visualization, into an intuitive and discover businesses near their Supporting this new business approach engagement. location with natural language inter- will require organizations to imple- actions. With an adaptive system, the room can learn about people and their preferences from user data over time and execute automatic commands based on previous interactions. The The best and most successful connected technology is already being used by experiences will be provided by enterprises that Thomas Jefferson University Hospital in patient rooms. Patients now have integrate multiple software and device assets the ability to interact with in-room including IoT, wearables, cloud, semantics, security speakers connected to the IBM Watson and visualization, into an intuitive engagement. IoT Platform, to enhance their hospital experience by asking the room to automatically operate lights and temperature settings, and ask questions about

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A Connected Tomorrow

The rise of connected experiences identifying segments ripe for disruption creation of connected experiences. is inevitable. As connected solutions at the market level and then develop- These include regulations around and the variety and volume of digital ing ecosystem partnerships, after de- how customer data is shared between relationships between customers and ciding which experiences will success- companies and across industries and enterprises continue to grow in the fully integrate connected technologies ensuring that collaboration efforts near future, the need for simpliﬁed and enable the creation of a “platform across silos and expanded ecosystems experiences that integrate intelligent of platforms.” Businesses will eventu- run smoothly so that connected experi- platforms and help consumers achieve ally need to build up to constructing ences are not fragmented or confusing their objectives in an easier and more engagement models that focus on for users. efﬁcient way will permeate industries. revenue generation and channel strate- Companies that do not work towards gies that effectively pull together touch Enterprises are already working towards accommodating this shift will risk points, improving consumer experienc- connected experiences today by building losing their business to disruptive es in the process. out data sources and ecosystems. newcomers. While these developments already exist As with the rise of any emerging trends in pockets today, tomorrow they will be To start building connected experienc- and technologies, a few impediments found across market segments and will es, businesses should use a phased need to be addressed and overcome change the way enterprises conduct approach (Figure 5). First steps include in the process by enterprises in the business and consumers live their lives.

Figure 5: How to Get Started with Connected Experiences

PHASE I PHASE II PHASE III

Build engagement model focused on Build channel strategy: the ecosystem Identify the market segments consumer retention and revenue of each experience creates channels to ripe for disruption generation market

Establish / Augment communities Examine existing engagements and Determine pricing structures that focused on experiences selected in experiences within these segments rewards engagement / interaction Phase I

Establish commercial and service level Assess software and device Establish white label opportunities for constructs including incentives capabilities deployment (e.g., gamification)

Engage ecosystem partnerships to fill Ingest ecosystem, industry and Develop reference architecture and voids community data data models

Develop technical roadmap Evaluate which experiences cross Acquire the competencies necessary segmented by consumption, platform segments to build and support the environment of platforms and infrastructure

Evaluate which experiences unify / Craft the initial design based on Build digital replicas for ideation and integrate existing connected solutions engagement model design refinement

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Notes and sources

1. As customers expand their buying journeys, digital touchpoints have increased as much as 20% annually. “Brand Success in an Era of Optimism” McKinsey 2015

2. Leaders are the ten rated public companies in Forrester’s 2007-2015 Customer experience index study. Forrester’s CX Index score measures how successfully a company delivers customer experiences that create and sustain loyalty and advocacy, measured by effectiveness, ease, and emotions. The study using Forrester’s segmentation to measure ROI was done by Watermark Consulting. “The 2015 Customer Experience ROI Study” Watermark Consulting 2015

3. Mark Prensky deﬁned the term, ‘Digital Native,’ using it to refer to the newer generation, that were brought up as ‘native speakers’ of the digital language of computers, videos, social media, games, and the greater Internet. “Digital Natives, Digital Immigrants,” Prensky 2001

4. “Gartner Says 8.4 Billion Connected “Things” Will Be in Use in 2017, Up 31 Percent From 2016,” Gartner, https://www.gartner.com/ newsroom/id/3598917

5. Greg Petro, “Amazon’s Acquisition Of Whole Foods Is About Two Things: Data And Product,” Forbes, https://www.forbes.com/sites/ gregpetro/2017/08/02/amazons-acquisition-of-whole-foods-is-about-two-things-data-and-product/#1a202f8ba808

6. “Cisco Global Cloud Index Projects Cloud Trafﬁc to Nearly Quadruple Representing 92 Percent of Total Data Center Trafﬁc by 2020,” Cisco® Global Cloud Index (2015-2020), https://newsroom.cisco.com/press-release-content?articleId=1804748

7. “Why Kymeta: The World Needs a New Way to Connect,” Kymeta Corporation, https://www.kymetacorp.com/why-kymeta- connectivity/

8. Myriam Roche, “Agriﬁnd organizes self-help between farmers,” FW Radar, https://www.frenchweb.fr/fw-radar-agriﬁnd-organise- lentraide-entre-agriculteurs/282344

9. Roger Aitken, “IBM Forges Blockchain Collaboration With Nestlé & Walmart In Global Food Safety,” Forbes, https://www.forbes.com/ sites/rogeraitken/2017/08/22/ibm-forges-blockchain-collaboration-with-nestle-walmart-for-global-food-safety/#7f5620d23d36

10. “SAVE FOOD: Global Initiative on Food Loss and Waste Reduction,” Food and Agriculture Organization of the United Nations, http:// www.fao.org/save-food/resources/keyﬁndings/en/

11. Natasha Lomas, “Full Harvest wants to ﬁx the big farm food waste problem at source,” Techcrunch, https://techcrunch. com/2016/03/14/full-harvest-is-trying-to-ﬁx-the-big-farm-food-waste-problem/

12. Simon Jefferson, “Creating More Personal Connections At Retail,” Forbes Agency Council, https://www.forbes.com/sites/ forbesagencycouncil/2017/08/16/creating-more-personal-connections-at-retail/#60c6dc917d82

13. “HARMAN and IBM Watson Internet of Things Introduce Cognitive Rooms that Bring Connected Experiences to the Consumer,” IBM, https://www-03.ibm.com/press/us/en/pressrelease/51958.wss

10 Ushering in the Era of Connected Experiences

Authors

Albert (Al) Opher IBM Global IoT Services & Digital Operations Leader © Copyright IBM Corporation 2017 [email protected] IBM Global Services Padma Krishnan Route 100 Somers, NY 10589 IBM Market Development U.S.A. & Insights Advisor [email protected] Produced in the United States of America December 2017 All Rights Reserved Michael Del Casino IBM Market Development IBM, the IBM logo, ibm.com and Cognos are trademarks or registered & Insights Senior Analyst trademarks of International Business Machines Corporation in the United [email protected] States, other countries, or both. If these and other IBM trademarked terms are marked on their ﬁrst occurrence in this information with a trademark symbol (® or ™), these symbols indicate U.S. registered or common law Mary Nguyen trademarks owned by IBM at the time this information was published. Such IBM Market Development trademarks may also be registered or common law trademarks in other & Insights Principal Advisor countries. A current list of IBM trademarks is available on the Web at [email protected] “Copyright and trademark information” at: ibm.com/legal/copytrade.shtml Other product, company or service names may be trademarks or service Brendan Cooper marks of others.

IBM Market Development References in this publication to IBM products or services & Insights Director do not imply that IBM intends to make them available in all countries in [email protected] which IBM operates.

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For more information Acknowledgements To learn more about IBM Global Business Services, contact your IBM sales representative or visit: ibm.com/gbs The authors would like to acknowledge the support they have received from a number of people in IBM while researching this publication, including Alex Chou, Hila Mehr and Brad McVicker. We would also like to thank Robert Mindzak for leading the publication design.