I just published an IDC PlanScape report—an executive "why, what, who, how" guide to seizing leadership in health hearth personal services webs (PSW). (IDC PlanScape: Health Hearth Personal Services Webs—Transforming Lives and Industries, #258015, August 2015) To unpack that label, I see financial, loyalty, operational, and brand differentiation opportunities for retail, CPG, health insurance, and publishing enterprises in immersing the food, drug, nutritional customer in a persistent ecosystem of software, devices, apps, content, and online services to help their households eat better, easier at less cost, effort, and time. Nascent PSWs that will be directed at these and other personal domains are emerging in the iOS, Android, Amazon, and Google ecosystems. Compared to the capabilities of PSWs I foresee in 2020 today's capabilities will seem more akin to the PalmPilot than a smartphone.
The Bottom Line
Companies taking leadership positions creating health hearth personal services webs will gain the opportunity to out-uber Uber. Think about it, Uber changes how you use a taxi. Here, companies can help their customers pare down their monthly grocery expenses, save time and effort on shopping chores, and care for themselves and their loved ones day in and day out. Participants will differentiate to increase their revenue, efficiency, and customer loyalty through the utilization of cognitive systems, natural interfaces, next-generation security, and the Internet of Things. They will transform their industries through radically new monetized information flows and value-added services among themselves and the households they serve (see attached illustrative industry participant map).
Today as Prologue: "Why can't [name your company] do that?"
Technology is fundamentally changing domains of our personal lives and our means of living—not just as consumers but in all roles and responsibilities that define the context in which retailers and manufacturers are challenged to differentiate themselves well enough to earn their shoppers' business. Consumer personal technologies and enterprise systems of engagement create webs of interactions within which consumers define their needs and set their expectations and retailers establish their unique selling proposition and generate revenue and margins. For instrumented, informed, and interconnected millennials (a way of life, not an age cohort) their best experience anywhere sets their minimum expectation everywhere. They often ask "Why can't (name your company) do that?"
IDC Retail Insights defines personal services webs as ecosystems of online services, apps, content, and devices that create new relationships between consumers and companies behind them. A few "household names" make the point—Siri, Pandora, Nest, Google Maps and Waze, My Fitness Pal, and Fitbit and FuelBand. Take a quick glance at your smartphone. You'll find bits and pieces of personal service webs—apps for banking, credit cards, shopping, getting a taxi, remotely controlling your home thermostat, and locating gas stations, restaurants, personal belongings, and even family members and friends. You granted some of them the privilege of tracking your location, sending you alerts, and even monitoring your vital signs. You turned off or deleted those that proved useless or annoying.
Today's PSWs extend and enhance existing relationships (personal banking is now mobile banking) and make doing business with them easier—the Mobile/Exxon Fuel Finder makes finding gas stations easier and you more likely to refill your tank with their gas. They help retailers improve selling cycles—awareness, interest, transaction, and service, reduce the friction of commerce, increase share of wallet and frequency of transaction. They are changing the basis of competition and influencing where, with whom, when, why, and how consumers spend their money.
I think it's safe to say that today's PSWs are picking low-hanging fruit. Going forward personal services webs will create demand for new services and form the conduits for efficiently delivering them at low marginal cost and monetizing value they generate. The interweaving of 3rd Platform commercial, healthcare, educational, and public services with personal service webs will be pervasive and support more opportunities to create value in convenience, efficiency, and efficacy in everyday life—as homemakers, students, caregivers and parents, friends, investors, retail consumers, citizens, media consumers, fans, energy users (and energy generators on intelligent girds), commuters, travelers, patients, homebuyers, gamers, collectors, hobbyists, and other roles and pursuits
The Health Hearth PSW Opportunity: Transforming a $1 Trillion-Plus Food, OTC Drug, and Nutritionals Industry
On average 110 million households in the US spend about $700 per month on food plus more on OTC health and beauty products, nutritionals, and associated domestic consumables. That's a $1 trillion-plus market. Related activities include meal and nutritional planning, keeping shopping lists, tracking inventories, shopping, finding specials and using coupons, budgeting, and meeting varied nutrition needs and preferences—in other words, onerous, time-consuming, mistake-prone, and hard to coordinate chores.
Retailers and consumer goods manufacturers waste a few hundred billion dollars in loss-making, break-even, and low-margin efforts in chasing a few basis points of revenue and margin primarily on price and promotion strategies. While business rules management, forecasting, and pricing sciences have improved, all price and promotion strategies suffer two Achilles' heels (a crippling lot for bipedal retailers) running with these strategies: visibility to less than 1% of competitors' store-item prices and zero percent visibility of individual shopper's intent to buy and selection criteria propensities.
Health Hearth PSW Ecosystems: Household, Marketing-Making, and Wellbeing Services
There are three PSW ecosystems—household services, market-making services, and wellbeing services. Two of them redress these crippling conditions. The household services ecosystem converts intent-to buy signals and selection criteria data into a new expression of personal consumer demand available at scale. Marketing-making services expose 90%-plus of store-item prices to retailers, brands, and consumers, support a community of intelligent agents that negotiate on behalf of consumers, brands, and retailers, and create a reverse auction market for every shopper's shopping basket. Retailers compete not based on item prices and promotions but on lowering the shopper's total cost and meeting as many other selection criteria as possible. Think of meeting each consumer's needs with a personalized consumer decision tree (CDT). But it's a tree with a difference. It's not based on the selling attributes of a category or its product. This CDT is oriented to all of the propensities of this consumer's shopping mission today.
So much for shoring up today's constraints. A third health hearth ecosystem—wellbeing services enlists wellbeing and lifestyle publishers and insurers, pharmacy benefits managers (PBMs), and employers to help households manage their demand for and consumption of better, healthier food easier and cheaper. Think of that old National Cattlemen's Beef Association's "Beef. It's what's for Dinner" advertising campaign. It's hard to believe that question has been around since 1992.
Today's harried household has tougher questions than "What's for dinner?", something like this: "How can I keep two ravenous teenage boys fed and healthy, one on a gluten-free diet, and myself and my partner on paleo diets without breaking the bank and taking up too much time in shopping, food, and meal prep?" A wellbeing health hearth ecosystem with the right data, intelligence, and incentives could give that homemaker a big leg up answering that question. It would need three things:
- Data—product ingredient and nutritional value data (e.g., a USDA source like this), store-item price data, nutritional guideline data, menu data, and home food inventory data
- Analytics—a home economics, nutrition, and convenience "recommendation engine" of sorts
- Incentives—better information ("If I only knew better, I'd do better), helpful guidance, relevant incentives from traditional brand and retailer sources, and a wholly new bucket of incentives from insurers, PBMs, and employers.
Tapping insurers, PBMs, and employers for healthy eating incentives is in their interests. Subsidized health club memberships work on the same principle. Incentive discounts could be applied in the shopping basket auction process.
SaaS, DaaS, Device, Apps, and Cognitive Systems' Critical Roles
Like I started off, you'll find bits and pieces of nascent PSWs on your smartphone today. Look elsewhere and you'll find evidence of an emerging health hearth PSW. Amazon sells Echo, a first generation household services concierge, and offers a Dash service and Dash Buttons for re-ordering consumables. The startup Freshub has its eyes on building out this ecosystem. Retailers are contracting with another startup Engage3 for its big data and analytics competitive store-item DaaS and competitive pricing SaaS. Publishers are actively building new content distribution strategies to increase their value to advertisers at points of inspiration, guidance, and decision. Payers are looking for more effective means to manage down their claims exposure.
Looking in another direction, you'll see cognitive systems—IBM Watson being the most familiar but by no means the only cognitive system available today. Many of the cognitive systems components available or in development today provide functionality to run the three health hearth ecosystems discussed in this blog. Notably, IBM Watson and CVS Health just announced a partnership. Consult the attached figure for a synopsis of these components in the context of health hearth PSW capabilities.
It's a Sam Walton/Lou Pritchett Moment
In 1987 Lou, P&G's vice president of sales and customer development, got Sam into a canoe to ride the rapids of the South Fork of the Spring River in Arkansas. By the end of the ride these two visionaries had agreed to change retailer-supplier relationships forever. Pritchett sums up what they did this way: "Partnering, where vendor and retailer working (sic) together, create, anticipate and deliver product, concepts, and solutions far beyond consumer expectations." Nearly 30 years on, the health hearth opportunity calls for another run of the rapids of digital transformation.
Today clear C-level actions are called for:
- CEO: Champion new commercial, content, data, and analytics relationships with CPG partners and beyond with insurers and pharmacy benefits managers to create new shopper incentives
- CMO: Define value in terms of daily life outcomes beyond product quality and price, shopping convenience, and assortment, and create new relationships with lifestyle and well-being publishers
- Chief Merchant: Change the error-prone, primitive "comp shop" and pricing processes with big data and analytics to outsmart competitors with predictive analytics
- CIO: Lead system, process, analytics, and data strategies for algorithmic shopping markets and new monetizable information flows
- Chief Omni-Channel Officer: Extend customer engagement deep into home online-services, apps, content, and devices
Let Me Finish
I'll finish with a quick recap of the essential guidance my health hearth PSW IDC PlanScape offers primarily addressed to retailers as well as manufacturers:
- Think like Uber only bigger: Uber changes how you get from one place to another but only when you need a taxi. Health hearth services transform how consumers live and care for themselves and loved ones day in and day out.
- Assume Siri Meets Watson: Well, maybe Siri herself won't meet Watson, but her younger sibling Viv, being developed by the team that built and sold Siri to Apple, just might. Then again, IBM and Apple are collaborating on a number of fronts to build out consumer-grade enterprise apps from their respective applications and devices.
- Recognize Google and Amazon as transformational agents and threats: Health hearth personal services webs emphasize the critical importance of managing information and content flows to differentiate any retailer from its competitors. Information management and content distribution are core Google and Amazon competencies.