My speech to the 2015 Internet of Things Global Summit on how the IoT will affect retail.

1. 3 Ways the IoT
Can Change Retail
W. David Stephenson
Stephenson Strategies
Internet of Things Global Summit
October 27, 2015

2. Nope!
To me, this does not represent an advance in retailing through the IoT: it’s the Shopkick alert that I get every time I drive by the Marshalls near my home — at 45 mph. I’m really going to slam on the brakes and hang a looie so I can get some nebulous “kicks” as a reward? In my mind, this is one example of a
frequent problem with IoT-based retailing: just because you can do something doesn’t mean you should do it.
Let’s focus instead on real innovation in marketing through the IoT that will create value for customer and retailer alike, because I believe the only sustainable innovations will be those that are mutually beneficial to both parties.

3. 1st: a Fair Trade
If I give you
access, don’t
violate my privacy,
and give me
something
of value.
Here, instead are three value propositions for the IoT and retail that I believe are sustainable and profitable because they provide real value for customer and retailer alike.
The first relates to one of the most important aspects of the IoT, protecting personal privacy and security. Customers simply won’t give you access to their personal information if they aren’t confident that that you will keep it confidential and that what you offer them in return for this information will be
personalized and valuable for them.
There also needs to be a fair trade of value for the customer in return to access to their personal data.
The Disneyworld Magic Band is a great example. Disney gets to track your path through the park, which both helps with traffic management and improving the customer experience, and avoids irritated customers by allowing you to pay with the bracelet, and in return you get a wide range of benefits, including
accelerated check-in, being able to open your hotel room with your bracelet, and even being able to get quicker pickup curbside at the Orlando Airport. Then there’s the fact that Mickey can say happy birthday to Susie or Johnny — a delight for the kiddies, but perhaps worrisome to the parents.

4. Judgment
Don’t get so
obsessed with
data that you
don’t apply
judgment
Now I love big data as much as the next guy. In fact, I wrote a book about it.
BUT, our obsession with collecting more and better data and combining it in new ways to yield insights about customers must not, cannot cause us to forget that you need to always apply judgment and common sense to use of that data.
You’ve probably heard about the case of the statistical model the marketing analytics team at Target used to inferred based on purchasing data a teen customer was pregnant, “based on an arcane formula involving elevated rates of buying unscented lotion, mineral supplements, and cotton balls.” They started
sending her coupons for baby gear, which upset her father, who was still clueless. Was was there any exercise of judgment in this case, and a recognition on Target’s part that customers should opt in for this sort of coupon?

5. 2ND: Stick With Me
“Our goal is not
to just fix things,
but to make your
car better than
it was.”
— Tesla
A second “what can you do now that you couldn’t do before” benefit of the IoT is the ability to stick with customers after the sale. In the past, as soon as most products were sold, you totally lost contact with the customer about that product, and had no idea how they felt about it, whether it worked properly,
and/or how it might be improved in the future. Now, because of data streams from the product as it is actually used, you can learn, and act on all of this information.
Tesla is perhaps the most advanced company in terms of continuing the relationship after the sale, through the constant data stream they receive from every car.
Thanks to the company's over-the-air updates (a feature Tesla was the first to implement), they were able to avoid a costly recall in 2014, by installing a software patch one night while owners slept — unlike regular recalls, where participation is so low that car companies must now sometimes offer financial
incentives to drivers, every single car had its suspension altered and the problem avoided. Tesla doesn’t just use the system to solve problems, but also to download patches to improve performance.”Our goal is not to just fix things, but to make your car better than it was," Tesla boasts. I’m not a car person: I
hate the fact that the second biggest investment most of us make depreciates in value the second you drive it off the lot. But if it actually became more valuable over time, that might just change my opinion!
GE can speed model upgrades by monitoring the real-time performance data.
What could your company do to use knowledge of how your products actually perform in the field to make more satisfied customers and build their loyalty?

6. 3RD: Precision Retail
Share data
with all
Here’s a way that the IoT could affect retail that really excites me: what I call precision retail, an extension of the concept I first wrote about last year: precision manufacturing.
When you think about it, even the advances that companies such as Walmart have made in terms of coordinating restocking with suppliers such as P & G are at best incremental upgrades of existing technologies, and each function in the retail chain, from production to distribution to inventory control, has been
conducted largely in isolation from the other.
With the IoT, that’s no longer the case. Now, it’s possible to coordinate and integrate EVERY step in the process by sharing real-time data. Because of M2M, you can even remove the human element in many cases: data from one step will automatically trigger action by another.
My favorite example of this new precision is not from a retailer, but my friends at SAP software, using their HANA platform. This prototype smart vending machine would be neat enough just in terms of customer relations: if you opt in (that’s crucial), as you approach the machine it knows your past buying
habits, and greets you by name, then may offer you a discount on “the usual.” It would also automatically record the sale and reduce the machine’s inventory.
But SAP didn’t stop there: it also integrated the distribution network. Say that a delivery truck was headed toward this machine on its regular restocking run. However, it’s a hot, summer day, and HANA combines data from a beachfront vending machine with a data feed from the National Weather Service, and
realizes that machine is a higher priority. Without human intervention, the driver’s iPad informs him of a change in plans, and reroutes him automatically to restock that particular machine first.
Precision vending, by eliminating data gaps between all the partners, can bring about unprecedented coordination, and eliminate overstocks and shortages alike, while also feeding invaluable data to the human decision makers who must make systemwide and long-term buying decisions. This is particularly
critical in industries such as groceries, where overstocks of perishables can lead to major losses and unhappy customers.

7. for more information:
W. David Stephenson
Stephenson Strategies
(508) 740-8918
D.Stephenson@stephensonstrategies.com
Twitter: data4all
So there you have them, three ways the IoT can change retail. But let me leave you with a thought: just harvesting all of this incredible real-time data about shoppers, products, and how the products are used is only half the battle. Equally important, and, under-appreciated in my book, is the dramatic
attitudinal change required: away from the traditional zero-sum approach where proprietary information I have and you don’t makes me a winner and you a loser, to one in which sharing data, both among all levels in your own company, your partners, and even your customers, is the key. That’s going to be a
tough change to make.
Thank you.