Tag Archive for: Digitolution

[Intern Insights] Digitolution: The sharing economy

What is a sharing economy and what changes came along with it?

Sharing and exchanging items has been around as long as humanity and digitalisation has brought it to the next level. With the rise of the Internet, people can connect across boundaries, now able to swap, lend, rent, resell, donate, subscribe, and share all kind of item.

The sharing economy movement, collaborative consumption – the definitions for this vary per disciplinary field – as we know it today, is all about people sharing underutilised human, physical and intellectual resources. The concept might have originated from idealism but with the help of digitalisation, it has evolved into a profit-driven business model.

With a sharing economy, the borders between customer and professional have been blurred. In many cases, the middleman has been cut out. Every consumer is now empowered to make business by monetizing their own assets, knowledge, and services.

Behind many peer-to-peer transactions, we often find fast-growing profit-driven, multi-million dollar corporations. Start-ups that had a simple but brilliant idea based on the values and spirit of the sharing economy movement now surpassed the sizes of well-established companies, disrupting several long-established industries and economic structures. With all advantages that have come along, such as a boost of innovation, marketplaces have become less regulated, creating challenges for established industries and businesses.

To quote Tom Goodwin:

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

Reasons why the sharing economy might revive:

 At the core of the sharing economy are the people., Whether it’s individuals, communities, or companies, all are embedded in the sharing system. Aside from the fact that every aspect of out lives is digitalised, changes in demographics have contributed to a sharing economy as well.

Maybe it’s due to our exposure to news on a daily basis, but certainly, our societies experience a shift back to community values.

Especially in developed economies, we can see a shift away from status-driven values, instead, we see that unique and authentic experiences, coupled with convenience, is what people are really after [Escan, 2011].

A sharing economy reflects those changes: trust between the provider and user lies at the core and using a service offered on a sharing platform often is perceived as a more authentic experience than purchasing the same product or service at a traditional store.

Besides this, people’s consumption patterns changed. Just look a few decades back where we lived in an ownership economy and dreams were realised by buying a nice house with garden in a suburban area, owning a car and all. Today ownership often feels like a burden. The dream house now has been swapped for a small rented apartment conveniently located in the city centre.

“We always have been in a culture where more is more, and suddenly we’re in a culture where less is a better quality of life. It’s pretty revolutionary.” – Bill Steward-

People want to be satisfied on the spot, having the product or service delivered instantly and conveniently, without having to put any effort. Connectivity, social media and smartphones make this possible. This is especially true for Millennials, that take part in sharing goods most actively, and for whom sharing is becoming the norm more and more.

Depending on the model, sharing concepts indeed are a more sustainable form of consumption that can contribute to a more circular economy. However, this story is more complex. Sharing can make us consume more as well, but we’ll save that discussion for another time.

How does the sharing economy affect the retail industry?

When hearing about the sharing economy, mostly we link this to companies like Airbnb, Uber, or Spotify, which have changed the concept of travel, transportation, and entertainment. But it is not ending there, small companies based on the sharing economy models are popping up everywhere, letting my wonder, which industry will be next?

In 2015, a survey conducted by PWC found that whilst the percentage of US adults that already have engaged in a sharing economy transaction connected to the entertainment and media industry with 9%is the highest, only 2% did so for a service within the retail industry in 2015.

I would probably have been reluctant letting a complete stranger stay at my house a few years ago, it’s something I could consider doing today. This is because platforms like Airbnb have managed to create trust. People have already opened up their homes for a night’s sleep, sharing cars for carpooling, and so on, and yet, we’re not really ready to share clothes quite yet.

Also read this article: Retail Customer Service: Reality of Retail Industry

How come?

It might be because whilst the examples above provide services, the retail industry is product based. Furthermore, owning assets such as a car comes with a lot of extra costs, such as insurance and ever-rising fuel prices, that make it less attractive to own a car. Owning a normal-priced piece of clothing, on the other hand, does not have further implications for the owner than the initial price and using up some space in the wardrobe – however, the implications on the environment the production and distribution of clothes have is huge. To get a better idea of what impact the fashion retail industry has on our environment you can have a look at this blog.

This post is brought to live by AQ’s Undergraduate Alexa V. .
As part of our internship programs, undergraduates and classic interns are encouraged to take part in company culture. Alexa’s primary focus is in digital marketing.

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[Intern Insights] Digitolution: How digitalisation changes the global retail supply chain

A supply chain covers all businesses and individual contributors that are involved in creating a product, ranging from suppliers of raw materials to the end-customer.

Technological innovations can be used to upgrade traditional supply chains to smarter, more connected and highly efficient digital supply chains. This is not an easy process, as supply chains are very complex systems embedded in an even more complex global economy. Contributors often are internationally located, which involves dealing with different politics, trade and traffic laws, and quality control regulations.

I like to imagine it like the Butterfly Effect: a small wing flutter, a slight change of a process or regulation, might affect another stage in the chain.

Today, a supply chain is often a series of isolated steps taken through different stages of logistics such as manufacturing, warehousing, and transportation.

In a digital supply chain, those stages will be seamlessly connected and fully transparent to all individual contributors involved. A completely digital chain does not exist yet, but to keep up with demands and technology, and to profit from the financial benefits, many companies within different industries now started digitising their supply chains.

Whilst industries such as electronics are already further in the process of digitalising their chains, asset-intensive companies or consumer-facing companies, such as retail and fast-moving consumer goods, stayed behind [PWC, 2016].

How is the general supply chain going to change?

A digital chain becomes more transparent, which contributes to a better understanding of what every link in the chain is doing. Amongst others, this leads to:

  • Improved collaboration: Real-time insights in the needs and challenges of others will be possible.
  • Fast communication: Information that used to be delayed, as it had to move through each step and reach all stakeholders will be available to all simultaneously.
  • Demand driven supply chain: Planning will be fast and flexible and away from just forecasting, instead of being demand driven.

The transformation to optimise supply chains becoming more reliable and responsive is driven by new technologies such as track-and-trace technologies, big data, cloud computing or the Internet of Things, but it’s not technology alone. People’s behaviour changed, they became multichannel consumers, more demanding, wanting the product delivered instantly and conveniently.

[PWC, 2016].

What do the changes in people’s behaviour and expectations mean for the retail supply chain?

Today, people purchase digitally. Online shopping is booming, even categories that relied on an in-person shopping experience moved online. In 2016, nearly two-thirds of consumers shopped online at least once a week, an increase of 41% from 2014.

People shop using multiple channels, be it in-store purchases, mobile, tablet or laptop, consistency, high quality and excellent service is expected, of course to the lowest costs (The Future of Retail Supply Chains, McKinsey, 2016).

Comparing competitors’ prices online or ‘showrooming’ – browsing in stores but buying from a cheap competitor online – give the consumer more power. Customers define more and more how companies have to structure their supply chains.

The shift to multichannel, the customer’s expectations such as same-day deliveries or returning online ordered goods free of charge – using any channel – lead to blurring the boundaries of channels. For example, goods ordered online but not liked can be returned back in-store.

This requires adaptation, to give a simple example:

Instant deliveries require a high stock of inventory in strategically positioned distribution centres. One centre might is enough to secure delivery within 2 or 3 days, same-day shipping requires more distribution centres. A piece of clothing that was ordered online gets returned in-store, means that the store now must stock an item that might is not sold usually or bring up time and costs of returning it to the distribution centre.

What does an optimised retail supply chain look like?

In the example above, technology that allows seeing inventory levels across the store network can help managing inventory levels across the store using various channels. A returned item that the store normally does not manage, can be delivered straight away to the next online order that comes in, saving time and operation costs to return that item to a distribution centre whilst cutting time on the delivery side. With technology, information about products that are stored anywhere, be it a store, a warehouse, can be made available to customers instantly.

But it can go further than just inventory management.

Imagine that drones could be used to deliver goods faster, a move Amazon is looking into. Or imagine virtual reality, used to shop online, letting customers enter a virtual store with products they actually can engage with whilst just sitting on their sofa in the living room. A whole new level of customer experience! – and a way to collect more data about the customer than was possible before. Every move, every product just looked at could be tracked.

Retailers that want to stay competitive need to find a right balance between quick wins and long-term strategic vision. The supply chain needs to become more customer-focussed, agile to fast respond to the changing needs of the consumers and cost-effective. Big data helps better predicting demand, even though combining internally available data with external, less transparent data as well as correctly interpreting the data will be challenging [KPMG, 2016].

What will change is the way the supply chain is looked at, seen as a cost driver – factors such as total cost of ownership, spend analysis and so on are very well understood – however, with technology, that brings an understanding of how customers’ behave, the supply chain will become a sales driver.

This post is brought to live by AQ’s Undergraduate Alexa V.
As part of our internship programs, undergraduates and classic interns are encouraged to take part in company culture. Alexa’s primary focus is in digital marketing.

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[Intern Insights] Digitolution: Digitalisations contribution towards a circular economy

To start, let’s check out the difference between a Linear and circular economy:

A linear economy exploits resources and puts pressure on the environment because of its reliance on large quantities of cheap, easily accessible materials and energy. It follows the “take – make – consume – waste” pattern.

Contrarily, a circular economy aims to reduce the leakage of resources and waste to a minimum. It does this by extending the cycle of use; preserving, rebuilding, and increasing the utilisation of assets or resources of any form by sharing, reusing, repairing, and recycling, thus closing the loop.

As good as this sounds, in reality, it’s still a fantasy. Even though some steps have been taken to bring our world closer to a circular economy, for now, there is a huge gap between the theoretical concept and the practical appliance. It is predicted that the annual consumption of minerals, fossil fuels and biomass double by 2050.

Implementing the Circular Economy requires multi-level governance and actions at local and international levels. Other challenges to overcome are the reluctance of people to adapt to new business models that point away from ownership, such as the sharing economy, and the significant changes needed in consumer behaviour and habits at all levels [EPRS, 2016].

Before going into the topic of how digitalisation can contribute towards a more circular economy, let’s talk about the complexity of a circular economy, using food wastage as an example:

To illustrate customer behaviour changes, think about an apple. Would you buy an apple in a supermarket if it had a brown spot? You would pick the shiny red apple next to it even if the other apple still is perfectly edible.

Did retailers adapt to the customer’s behaviour, not selling imperfectly shaped or blemished food or did they shape the customer’s purchase behaviour by not providing the option?

This is just an example within a complex supply chain, of a system that has evolved and captured consumers and retailers alike.

In our linear economy, the production of food that remains uneaten occupies 1.4 billion hectares of land, an area bigger than Canada, and close to 30% of the total agricultural land available. Next, to an immense amount of water, energy, fuel, fertilisers and pesticides that are used to grow food, agriculture uses up space to grow crops for which rainforest is clear-cut. Food wastage exacerbates this problem for no reason [FAO, 2013].

Next to food loss, which is unintended due to a lack of knowledge of farmers or food damage, steps where food waste happens, meaning throwing away edible food, occur at the process, retail and final consumption stages due to behaviour and legal restrictions such as many countries not allowing retailers to donate expired still edible food.

Whilst there are so many steps where food is wasted, it’s sad but true that in developed economies, the highest percentage of total food wasted, almost 50%, happens at household level (Determinants of consumer food waste behaviour. Two routes to food waste. Appetite, Stancu et al, 2016).

Amongst others, reasons for this are social trends such as an increasing number of single households, more woman working but also declining food prices that change the shopping routine (Food waste prevention in Europe, Priefer et al, 2016).

The processing phase further contributes to 30% of food wasted [Tagesanzeiger Zurich, 2016]. Needing to deliver what supermarkets and thus, the end-consumer wants, at this stage, the bad apple is pre-sorted from the shiny apple. Logistics and packaging further add up waste: for example, crooked cucumbers are thrown out, as they need more space than straight cucumbers during transport [Hatz, 2013].

To my surprise, food waste at the retail stage is relatively small, fluctuating per country. Nevertheless, retailers play a crucial role, being the “interface” between producers and consumers. Retailers are getting more and more aware of their role in educating consumers and the positive impact they can have on consumption, usage and disposal, reducing food waste, supermarkets are in control of food promotions that nudge a consumer to buy food not needed.

So, for the circular economy fantasy to become true, we have far to go.

Just looking at one piece of the puzzle, and just talking about a few factors that shape the human food supply chain as it is today, deep changes are needed at every link chain to not only reduce food wastage but preventing it. Ranging from educating farmers, improving post-harvest management, optimising package processes, to changing the consumers’ behaviour.

Aside from environmental benefits, a circular economy comes along with advantages such as the creation of new jobs and an innovation drive across many sectors, due to the need to redesign materials and products for a circular use [EPRS, 2016].

So, how can digitalisation contribute towards a more circular economy?

Combining digital developments such as intelligent assets – physical objects that are able to sense, record and communicate information about themselves and/or their surroundings – with the circular economy principle provides room for new innovations. Objects with embedded information technology, for example, smart cars or smart energy systems, will reshape the way people make, use, and reuse assets. It is predicted that by 2020, the number of such objects quintuples.

In a circular economy, global economic developments are decoupled from finite resource consumption. Intelligent assets increase asset utilisation and cycle use length, which creates new sources of value.

Sensors will gather data about the device location, the device condition and the device availability:

  • Location: Real-time knowledge of the location of a car aids to optimise route planning, which reduces vehicle wear and extends the cycle use. Through knowing the location, shared assets can be localised, which increases the utilisation.
  • Condition: Knowledge of the condition of a car can help to change user patterns to minimise vehicle wear and to take predictive maintenance prior to failure, which extends the user cycle. This information then aids to make founded decisions for improving future loops.
  • Availability: Data on an asset’s availability could lead to a shift in the way products are used as transparency about supply and demand is boosted. Information of available parking space is sent to a driver, which saves driving around looking for space, reducing vehicle wear and blocked roads.

Knowledge of availability furthermore features the reuse and repurposing of assets that are no longer in use and also contributes to sharing assets by automatically connecting available assets to the next user.

Also read this article: Retail Customer Service: Reality of Retail Industry

[WEF, 2015].

To close the loop, back to food waste:

Intelligent assets with sensing technology are improving the agricultural sector enabling greater output with less input. The agricultural sector is becoming very high-tech and software based. Digitalisation will help to overcome land and resource productivity challenges by enabling monitoring soil nutrients, better pest and disease control, increasing the yield per square metre without using more fertilisers, pesticides and fuel [WEF, 2015].

A digitalised supply chain where location, condition and availability play a role to be optimised, will improve the steps from food being harvested until reaching the end-consumer – bringing us a step closer to the circular economy.

“Failing to reap the benefits that the Internet of Things and the circular economy present, is the biggest waste of all.“ – Kenneth Cukier

This post is brought to you by one of AQ’s Undergraduates, Alexa V. As part of our internship programs, undergraduates and classic interns are encouraged to take part in company culture. Alexa’s primary focus is in digital marketing.

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[Intern Insights] Digitolution: Social Media’s impact on society

I own a smartphone, but I belong to the few people that do not have a data plan. So, during my commute, instead of staring at the screen I – rather ironically perhaps – enjoy watching other people staring at their screens.

Then I arrive at work, and I stare at a screen all day long too… For me, however, this is purely a work activity. In my spare time, it’s entirely up to me to choose to “be plugged in” or not. I have to admit, even without a data plan, I’m plugged in way too much – thank you Wi-Fi.

What is it that makes people spend so much time online?

I went online – of course – to answer this question, and found a research paper that offers some possible answers.

It’s not news, but people go online to find information, explore, research and to find advice – Just Google it! We’re also seeing more and more people go online for social interaction: to chat, share photos and videos, and to build relationships. They go online to express themselves, to seek recognition, and to be entertained. The online world also provides people with plenty of opportunities to procrastinate.

Basically, aside from looking up information, people go online to satisfy their social needs.

Needs that social media caters to.

But how does this affect society?

Whether or not social media actually connects people – or tears them apart – is an on-going debate. There is plenty of research out there that analyses social media’s effect on society.

A quick look at a few aspects of our Internet activities reveals that the boundaries between being online for work or leisure are blurred. Social media network sites have become a platform for all kind of activities, for personal and business uses. This is especially the case for younger employees today, who expect to have the freedom to interrupt work to manage their private affairs. That said, this is also the generation that answers emails and takes phone calls after official office hours.

Smartphones definitely help create and perpetuate this phenomenon. Smartphones give us the flexibility of connectivity. The downside of this flexibility is the created pressure to be available around the clock, the where, when and how work gets done is less static. Employees are mobile, thanks to digitalisation and the Internet. This, of course, can improve the work-life balance, but also runs the risk of increasing stress.

How does online connectivity affect the way people perceive and interact with information?

Back in the day – actually less than 10 years ago – people were focused on one device when consuming media, today’s digital media is absorbed using different mediums, usually simultaneously. However, while watching TV is rather a passive activity, interaction on social media platforms is alive. People share and engage with content and expect real-time management and live chat services when interacting with companies.

This development requires companies to adapt. 24/7 connectivity and access to information from the remotest corners of the globe means that consumer behaviour is more complex.

Consumers can look up information anywhere at any time, meaning they know everything – well, at least everything listed on Google’s first page. Digitalisation and social media put the consumer in the driver’s seat. They now have a stronger voice. A voice that has the power to advocate for or against a brand just by hitting the “post” button on any social media platform. Today the consumer is king – a king with the power to decide which company lives and dies.

“A brand is no longer what we tell the consumer it is – it is what consumers tell each other it is.” – Scott Cook

Whilst many people use reviews to express recognition for a job well done, even more, write product reviews with the aim to protect others from bad experiences. Such reviews and product rates then also are the most preferred source where people inform themselves about the quality of a product or service.

That’s also valid outside the business world:

Social media empowers people. It gives people a voice, allowing us to spread ideas and initiatives easier and faster than ever. This enhances free speech, giving people the opportunity to express their opinions about things like environmental sustainability and politics. Whilst traditional media originally had the power to choose what information is relevant to the world, often choosing to focus on particular subjects. Essentially, traditional media was the information gatekeeper. Now, digital media – in most countries – has given us the keys to global communication, revolutionising the way the world is connected.

This post is brought to you by one of AQ’s Undergraduates, Alexa V. As part of our internship programs, undergraduates and classic interns are encouraged to take part in company culture. Alexa’s primary focus is in digital marketing.

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[Intern Insights] Digitolution: Is digitalization truly green?

Most people have a positive reaction when they see ‘digitalisation’ and ‘environmental sustainability’ in the same sentence. It’s the same feeling we get when encouraged to “go paperless and save trees!”

It’s true, digitising data saves trees. That’s a good thing. However, we all know that the true motivator for most corporations is the bottom line. Honestly, though, we don’t really mind whether they truly care about ‘going green’ because it’s good for the environment.

In addition, IT innovation, digitisation, digitalisation, allow us to cut down on our personal energy usage. It’s a fact that our society has moved to a cloud-based information storage and streaming system. Consider: emails instead of regular mail, conference calls instead of flying in, or online streaming of music and movies instead of taking up space on a physical hard disk, and so on. What great times we live in! All that aside, however, there is little understanding of the negative implications digital actions really have on the environment.

While opinions are divided about our society going digital, we all feel that at least it’s beneficial for the environment – namely, because we assume that digital is greener than paper. Despite the information available, we often turn a blind eye to the unintended consequences of society’s digitalisation.

One of the main points of digitalisation – aside from making our lives easier – has been about reducing our carbon footprints. However, when going digital, we actually create a “digital carbon footprint”.

People often imagine that saving data somewhere ‘on the cloud’ is purely virtually, while in reality the data is stored physically. And the carbon footprint of this physical storage location, the data centre, should not be underestimated!

These data centres can vary from a small room to huge cloud server farms bigger than a soccer field – are not too old yet. In the beginning, the main focus for operators was keeping up with demand. Being energy efficient was not a priority. Today, when setting up one of these centres, issues surrounding sustainability are taken into account more and more [Data Knowledge Centre, 2016].

Still, there is a lot of room for improvement.

The centres consume an incredible amount of energy, as they require a steady flow of electricity to run the servers, no matter the demand. Only 6 – 10% of this energy is actually used, the rest is kept in case of a surge or crash. Spikes for servers hosting data related to online shopping, for example, happen during Christmas times, when all want to buy presents.

In addition, servers need to be cooled down constantly. According to Greenpeace, 50 to 80% of energy comes from coal-generated power – the thought of this is so contradictory, using coal power to keep the digitalisation of society moving forward.

What’s more, the NY Times stated that a single data centre can use more power than a medium- size town and that worldwide data storage uses as much electricity as the output of 30 nuclear power plants.

This creates CO2 emissions. In fact, The Independent wrote that data centres are responsible for 2% of the global CO2 emissions, that’s about the same number of emissions coming from global aviation, and this number will increase! Think about the fact that 2 years ago, 90% of data did not exist! (Mallach, E., 2016).

Besides all advantages innovations such as the Internet of Things, digital supply chains and so on bring, the amount of data that will be created is huge. The Independent further stated that considering the fact that innovations in hardware allow an increased capacity to store data and assuming that a switch to renewable energy won’t happen that fast, it’s still predicted that in the next decade, data centres will use triple as much electricity as today.

So, whilst writing this article, I did not support the environment.

Our seeming to be harmless everyday actions sum up and foster global warming. Whilst sending a text message, streaming movies or music, commenting on social media, we all increase our carbon footprint.

I’m not saying that watching an old-school DVD is greener; it’s hard to compare options with so many factors in play, such as if the DVD is picked up by car and so on. I’m just personally astonished that my online activities are not as green as I believed.

To give examples:

  • One Google search produces around 0.2g of CO2, that’s about the energy used to heat half a cup of water.
  • Sending out 65 short emails is equal to driving an average-sized car for 1km. Even if I do not send out 65 emails a day, I certainly receive too many useless spam mails. An unopened spam mail produces 0.3g of CO2, more than a Google search. This means that the global carbon footprint for spam is equal to emissions produced by 3.1 million passenger cars that use 7.6 billion litres of gasoline yearly.

It’s not only our personal use; businesses shifted to “the cloud”. It’s easy, allows real-time online collaboration between people and gives access to real-time data worldwide. And let’s not to forget, it reduces licensing and purchasing costs for hardware, software and servers.

The good news is that social, economic, environmental and political pressure are pushing big players to publicly commit to using renewable power and reduce both their physical and digital carbon footprints. However, it’s also the countless numbers of small centres that add to the problem. Furthermore, it’s very hard to measure the global carbon footprint that digitalisation leaves behind.

If data centres continue to use coal power or will switch to renewable energy will impact on global warming. A switch to renewable energy definitely would boost investments and thus innovation for green energy.

This post is brought to you by one of AQ’s Undergraduates, Alexa V. As part of our internship programs, undergraduates and classic interns are encouraged to take part in company culture. Alexa’s primary focus is in digital marketing.

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