A.I., Innovation & Watson

The New York Times: “Silicon Valley veterans argue that people routinely overestimate what can be done with new technology in three years, yet underestimate what can be done in 10 years … Predictions made in the ’90s about how the new World Wide Web would shake the foundations of the media, advertising and retailing industries did prove to be true, for example. But it happened a decade later, years after the dot-com bust. Today’s A.I., even optimists say, is early in that cycle.”

“IBM’s early struggles with Watson point to the sobering fact that commercializing new technology, however promising, typically comes in short steps rather than giant leaps … Watson’s early struggles in health care are viewed as a learning experience. The IBM teams, the executives say, underestimated the difficulty of grappling with messy data like faxes and handwritten notes and failed to understand how physicians make decisions.”

“IBM is trying to position Watson as the equivalent of an A.I. operating system, a software platform others use to build applications. Nearly 80,000 developers have downloaded and tried out the software. IBM now has more than 500 industry partners, from big companies to start-ups, in industries including health care, financial services, retailing, consumer products and legal services.”

Jeremy Howard, CEO of Enclitic: “You have to take technology that works and apply it to a known problem. Innovation alone is a mistake.”


The Beatings Will Continue Until Morale Improves

“Gary Friedman, head of Restoration Hardware Holdings Inc., painted a dire picture of the furniture chain in an internal memo to employees, comparing its operations to a burning building with people on fire,” Bloomberg Business reports.

“Upset about customer service and late orders, Friedman fired off the message to the entire organization in late January … ‘We were sitting there discussing how the building caught on fire, why the building caught on fire, how long we expected the building to continue burning,’ he said in the memo … ‘NO ONE WAS FOCUSED ON THE PEOPLE IN THE BUILDING WHO WERE ON FIRE. THEIR CLOTHES BURNING, AND MANY OF THEM DYING. WE HAVE LET CUSTOMERS DIE.'”


Explaining the memo in an interview, Friedman said: “It’s empowering people in the organization,” he said. “We have a leadership culture, not a followship culture.”


Mercedes Replaces Robots With People

Engadget: “Mercedes-Benz is replacing some of its high-tech workers with real live humans. As it turns out, robots can’t keep up with the degree of customization that the automaker offers on its S-Class sedans. The change comes at a time when a number of companies are replacing people with robotic devices … However, as Mercedes continues to expand the options available on its vehicles, the robots aren’t able to adapt to new tasks. They’re better suited for doing the same jobs repeatedly.”

“Robots aren’t getting the boot from Mercedes-Benz Sindelfingen factory entirely, though. The machines will work alongside humans instead of being confined behind glass. Mercedes, BMW and Audi are all working on sensor-packed robots that can operate safely alongside their living breathing colleagues.”


JC Penney To Display Dresses Like Oreos

The Dallas Morning News: “What does a $2.49 package of Oreo cookies have to do with a $24.99 colorful summer dress? … A prominent display of Oreos in the supermarket includes pictures of the cookies, maybe with milk, and a discounted price in big print. Then there’s a rack of cookies right there. If you had to hunt down the Oreos, you might forget about them.”

At Penney’s, a “rack of dresses will be right behind the mannequins where shoppers can find them. Plus there’s a big sign with the price.”

“We’re making it as easy as possible to buy the dress,” says JC Penney CMO Mary Beth West, who “spent most of her career in the consumer packaged goods business devising ways to get us to spend billions of dollars on brands such as Ritz, Philadelphia, Nabisco, Kraft Mac & Cheese, Jell-O and Cool Whip.”


Macy’s Simplifies Its Shopping Experience

The Washington Post:”This week, Macy’s announced that it is shaking up its discounting practices: The coupon system will remain in place for full-priced items, but the retailer is implementing a different strategy to get shoppers to pounce on its clearance merchandise. The move is effectively a bet that shoppers prefer simplicity over the thrill of demonstrating their shopping savvy.”

“Here’s how Macy’s new approach works: When an item is on clearance, you can’t apply coupons or other discounts to it. Macy’s said it will apply deeper cuts to the ticket price than it did previously, but the price you see on the tag is the price you will pay. The retailer has also moved all the clearance items to a centralized area in the store — one for men’s apparel, one for women’s — instead of having the racks scattered throughout the store. So far, Macy’s has seen upbeat results from the change.”

“In a conference call with investors this week, Macy’s chief financial officer Karen Hoguet offered this explanation for why the change was getting traction: ‘I think what happens is, customers want simplicity. And when you are looking for deep clearance goods you could just see the price of the item and not have to do the math in your head. And it’s easier.'”


Bluetooth Can Be a Driving Headache

“The road to the autonomous future, it seems, is not as smooth as it appears,” The New York Times reports. “Problems related to cars’ rapidly advancing technology are now at the top of the list of consumer complaints, according to the 2016 J. D. Power Vehicle Dependability Study.”

“The biggest issues are balky voice recognition systems and problems with Bluetooth pairing, accounting for 20 percent of all customer complaints. Over all, the discontent drove a 3 percent decline in vehicle dependability in the study … Complaints about technology have gone from being fifth most troublesome in the 2014 study, to third last year, to now being first.”


Customer Service Declines When The Economy Improves

Quartz: “Consumers are more unhappy with customer service at department and discount stores than ever. According to the University of Michigan’s American Customer Satisfaction Index, satisfaction is at its lowest level since 2008, falling during the last year by 3.8%. Consumers are griping about store cleanliness and slow checkout lines, specifically.”

“Of the bigger companies, the steepest decline in satisfaction—an 8% drop—went to Macy’s … While an improving housing market increased competition between Lowe’s and Home Depot, both groups saw drops of 9% and 4%, respectively. Among supermarkets, Whole Foods took a 10% hit, knocking its ranking below Trader Joe’s, Kroger and Meijer.”

“The relatively buoyant economy is partly to blame. After 2008, competition for consumer dollars intensified, prompting discounts and better service. Employees fearful of losing their jobs stayed motivated to work hard pleasing shoppers. Then, things got better.”


Loyalty Is a Two-Way Street at Starbucks

What defines loyalty in the customer-brand relationship? Until this week, Starbucks defined it as the number of times the customer bought a cup of coffee; buy 12 cups and you get one for free. The retailer has now re-defined loyalty as the amount of money spent. This has caused upset among some of its “loyal” customers, who now must purchase 32 cups of coffee to get that free cup. Starbucks apparently was inspired by certain airlines — Delta and United — that now award loyalty points based on the amount of dollars spent, and not on the number of miles traveled. This might telegraph as: We want your money but we don’t want you.

The Starbucks switch was at least partly motivated by profits; obviously it is more profitable to motivate its most profitable customers. However, it also suggests a change in culture. As reported in The New York Times, the Starbucks loyalty program previously was premised on a warmer, fuzzier idea, as articulated by a Starbucks marketing manager in a 2012 blog post: “At Starbucks, our rewards program comes from a different philosophy. At its simplest, we like seeing you, regardless of whether your purchase is a short-brewed coffee or four Venti White Chocolate Mochas. My Starbucks Rewards is designed to show our appreciation simply for stopping by.”

This would be consistent with the way Starbucks famously welcomes everyone to hang out as long as they like at their stores, even if they buy nothing at all. Sadly, such “customers” are the poor cousins of those who gamed the Starbucks loyalty program by asking cashiers to ring up each item separately to artificially inflate their number of visits. This subterfuge also caused lines to slow, making the Starbucks experience worse for everyone else.

The Starbucks-customer relationship in total calls into question the very meaning of “loyalty,” and whether it even exists in a commercial context. As the Times article notes: “Starbucks fell into a trap that is common with loyalty programs: establishing not just an exchange relationship with its customers based on mutual benefit, but a communal relationship based on mutual caring and support … If customers are going to take a ‘hey, it’s just business’ approach to their relationship with Starbucks, they should expect the company to do the same — and it has.”


Zappos Pushes for National Leap Day … Day

Fast Company: “On February 29, everyone at Zappos will get a paid day off. It’s the first time, since the company opened, that its call center—normally open 24 hours a day, all year—will ever close. Their reasoning: Leap Day is extra time, and we should probably use it for something we normally wouldn’t do.”

“On Change.org, the company is leading a push to get 100,000 signatures on a petition to make Leap Day an official national holiday. Because the petition only ensures that congress and the president will have to consider the idea—and they’ll still need support—they’re also trying to convince other companies to give employees a paid day off, and pushing for states to adopt it as a holiday too.”


Does Diversity Fuel Innovation?

The Economist: “Ronald Burt, a sociologist at the University of Chicago, has produced several studies which suggest that people with more diverse sources of information consistently generate better ideas … And internal surveys at Google have found that diverse teams are often the most innovative.”

However: “Diversity does not produce better results automatically … It does so only if it is managed well. (Source: David Livermore, author, Driven By Difference). The biggest challenge is to do with trust. Employees need to trust each other if they are to produce their best work … it is easier to establish trust with those you have a lot in common with … Diverse teams … are more likely to produce truly innovative ideas, but they are also more likely to fail completely.”

“A second challenge is to do with culture. Too many companies fail to rethink their management styles as they open their doors to new groups. They issue ambiguous instructions which presume that everyone comes from the same background … They evaluate people on their willingness to speak up without realising that some people—women especially, in many countries—are brought up to hold their tongues and defer to authority.”

“It is easy for companies to think that they have embraced diversity if they appoint the right number of people with the right biological characteristics. That can be hollow if they all come from the same backgrounds … Companies will find it hard to make a success of diversity if they refuse to recognise that it brings challenges as well as opportunities.”