CONNECTED STRATEGY...2020/10/06  · Instacart, BigBasket Tesco Homeplus Amazon Go JD stores ef New...

37
CONNECTED STRATEGY BUILDING CONTINUOUS CUSTOMER RELATIONSHIPS FOR COMPETITIVE ADVANTAGE BY NICOLAJ SIGGELKOW AND CHRISTIAN TERWIESCH

Transcript of CONNECTED STRATEGY...2020/10/06  · Instacart, BigBasket Tesco Homeplus Amazon Go JD stores ef New...

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CONNECTED STRATEGY

BUILDING CONTINUOUS CUSTOMER

RELATIONSHIPS FOR

COMPETITIVE ADVANTAGE

BY NICOLAJ SIGGELKOW AND CHRISTIAN

TERWIESCH

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Contents

FIGURE 1-1 4

FIGURE 2-1 4

FIGURE 2-2 5

FIGURE 2-3 5

TABLE 2-1 6

TABLE 2-2 6

WORKSHEET 3-1 7

WORKSHEET 3-2 8

FIGURE 4-1 9

FIGURE 4-2 10

FIGURE 4-3 11

FIGURE 4-4 12

FIGURE 4-5 13

TABLE 4-1 14

TABLE 4-2 15

FIGURE 5-1 16

FIGURE 5-2 16

FIGURE 5-3 16

FIGURE 5-4 17

TABLE 5-1 17

FIGURE 5-5 18

WORKSHEET 6-1 19

WORKSHEET 6-2 20

WORKSHEET 6-3 21

WORKSHEET 6-4 22

WORKSHEET 6-5 23

WORKSHEET 6-6 24

FIGURE 7-1 25

FIGURE 7-2 25

FIGURE 7-3 26

FIGURE 7-4 26

FIGURE 7-5 27

FIGURE 7-6 28

TABLE 9-1 29

FIGURE 9-1 31

TABLE 9-2 32

WORKSHEET 10-1 33

WORKSHEET 10-2 34

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WORKSHEET 10-3 35

WORKSHEET 10-4 36

WORKSHEET 10-5 37

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Connected customer relationship Connected delivery model

Recognize Request Respond Connection architecture

Technology infrastructure

Revenue model

Repeat

FIGURE 1-1

The connected strategy

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High

High Low

Low

Will

ingn

ess-

to-p

ay

Fulfillment costs

Farmers’market

Tesco

Aldi

Efr

ficiencyrf ontie

FIGURE 2-1

Efficiency frontier

4

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High

High Low

Low

Will

ingn

ess-

to-p

ay

Fulfillment costs

Farmers’market

Tesco

Aldi

Blue Apron

New efficiency

frontier

Old efficiencyfrontier

FIGURE 2-2

Pushing out the efficiency frontier

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High

High Low

Low

Will

ingn

ess-

to-p

ay

Fulfillment costs

Farmers’market

Tesco

Aldi

Blue Apron

Alibaba Hema

Instacart, BigBasketTesco Homeplus

Amazon GoJD stores

efNew

rficiencyf ontier

efOld

rficiency

f ontier

FIGURE 2-3

New efficiency frontier in the grocery industry

5

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TABLE 2-1

Benefits of creating deeper connections

Connection Status quo cab “Connected cab”

Passenger to vehicle Flagging, dispatcher, taxi stand

App

Payment Cash, credit card Automated in- app purchase

Vehicle to vehicle Dispatcher, two- way radio GPS tracking, fleet management system

<rsp>3</rsp> Improvements <rsp>3</rsp> • More con ve nient ordering• No wasted time for payment• Better routing

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TABLE 2-2

Benefits of creating new connections

Connection Status quo Ride hailing

Passenger to vehicle

Payment

Vehicle to vehicle

Vehicle to vehicle outside the fleet

Idle drivers and unused vehicles

Passenger to passenger

Driver to driver

Flagging, dispatcher, taxi stand

Cash, credit card

Dispatcher, two- way radio

App

Automated in- app purchase

GPS tracking, fleet management system

Connects all vehicles on the platform

Connects to drivers who are pres-ently not driving

Crowdsource driver reputations

Passenger ratings leading to driver safety

Improvements rsp>— • Higher vehicle utilization• No medallion needed• No wasted time for driver to

pick up and drop off car at thebeginning and end of shift

6

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Co

nsum

pti

on

utili

ty: H

owha

pp

y is

the

cus

tom

er w

ith t

hep

rod

uct

or s

ervi

ce?

Per

form

ance

Fit

Usa

ge c

osts

ove

rp

rod

uct

life

Mai

nten

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cos

tsov

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rod

uct

life

Loca

tion

Tim

ing

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st o

f o

wne

rshi

p: H

ow m

uch

doe

sit

cost

the

cus

tom

er t

o us

e an

d m

aint

ain

the

pro

duc

t?

Acc

essi

bili

ty: H

ow e

asy

is it

for

the

cust

omer

to

get

the

pro

duc

t or

ser

vice

?

WO

RK

SH

EE

T 3

-1

Iden

tify

will

ing

nes

s- to

- pay

dri

vers

of

you

r cu

sto

mer

s

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7

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High

High Low

Low

Will

ingn

ess-

to-p

ay

Fulfillment costs

WORKSHEET 3-2

The efficiency frontier for your industry

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Rec

og

nize

the

cus

tom

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eed

Late

ntne

ed

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inte

ract

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w d

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cust

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go

abou

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, ord

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esire

d p

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t p

rod

ucts

and

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vice

s ar

ep

rovi

ded

to

the

cust

omer

?

Aw

aren

ess

of n

eed

Sea

rch

for

optio

ns t

ofu

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the

need

Dec

ide

onfa

vorit

eop

tion

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ceor

der

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eive

good

/se

rvic

e

Exp

erie

nce

good

/se

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e

Pos

t-p

urch

ase

exp

erie

nce

Req

uest

the

des

ired

op

tion

Res

po

nd a

nd p

rovi

de

the

des

ired

op

tion

FIG

UR

E 4

-1

Th

e th

ree

ph

ases

of

the

cust

om

er jo

urn

ey

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Cus

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need

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E 4

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sto

mer

exp

erie

nce

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Cus

tom

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ien

ce

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FIGURE 4-4

The coach be hav ior connected customer experience

Customer

Firm

Behaviorchange

Decidewhich

action totake

Post-behavior

experience

SupportRecommend

a set ofactions

Awarenessof need

Analyzewhat isknown

about need

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12

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Cus

tom

er

Fir

m

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aren

ess

of

need

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lyze

wha

t is

kno

wn

abo

ut n

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TABLE 4-1

Information flow dimensions for dif fer ent customer experiences

Buy- what- we- have

Respond- to- desire

Curated offering

Coach be hav ior

Automatic execution

Trigger of information flow

Customer Customer Customer Firm Firm

Frequency of information flow

Episodic Episodic Increased Continuous Continuous

Richness of information flow

Low Low Medium High High

Customer effort to send information

High Reduced Reduced None None

Information pro cessing to find preferences

All prefer-ences expressed explic itly by the customer

All prefer-ences expressed explic itly by the customer

Firm makes recommen-dations to the customer

Firm at-tempts to drive very specific customer action

Firm autono-mously takes action for the customer

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TABLE 4-2

Domains of application for the four connected customer experiences

Type of connected customer experience Description

Key capability

Works best when

Works best for

Respond- to- desire

Customer ex-presses what she wants and when

Fast and effi-cient response to the incoming orders

Customers are knowledgeable

Customers who don’t want to share too much data and want to be in control

Curated offering

Firm offers a tailored menu of options to the customer; final choice rests with the customer

Making good recommenda-tions

The set of op-tions is large, potentially overwhelming for the customer

Customers who are fine sharing some data but still want to have final say in decisions

Coach be hav ior

Firm nudges customer to adjust her im-mediate pref-erences, either to obtain some larger goal or to reduce ful-fillment costs

Understanding latent customer needs and how they are (not) related to the immediate actions

Customers have inertia and other bi-ases keeping them from achieving what is best for them

Customers who do not mind sharing personal data and an en-vironment that influences their be hav ior

Automatic execution

Firm monitors, then executes the fulfillment pro cess with-out action from customer

Monitoring the customer and translating incoming data into action

Customer be-hav ior is very predictable and costs of mistakes are small

Customers who do not mind sharing personal data and having firms making de-cisions for them

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High

High Low

Low

Will

ingn

ess-

to-p

ay

Fulfillment costs

Personaltutor

Regularclassroom

Lecturehall

Efficiencyfrontier

FIGURE 5-1

The traditional efficiency frontier in education

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Recognize Request Respond

Repeat

FIGURE 5-2

Learning at the level of the individual customer

Recognize Request Respond

Repeat

FIGURE 5-3

Population- level learning

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FIGURE 5-4

The why- how ladder for cardiology prob lems

In the eyes of the customer, the purpose of the relationship with our firm is to . . .

Why

How

. . . obtainaccess to acardiologist

. . . receivesupport forsticking tomedication

regimen

. . . beencouraged

and supportedto live anactive life

. . . stay healthy

. . . avoidfrustrations in

schedulingvisits

. . . receiveguidance froma cardiologistat convenient

location

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TABLE 5-1

The four levels of customization created by the repeat dimension

Level Impact on willingness- to- pay Impact on cost

Level 1: Create unified customer experiences across episodes

Level 2: Improve cus-tomization based on past interactions

Level 3: Learn at the population level to enhance product offerings

Level 4: Become a trusted partner to the customer

Customer is treated as one person across channels and transactions

Ability to identify offerings that ad-dress the willingness- to- pay drivers most impor tant to the par tic u lar customer

Higher- valued offerings based on i nferring customer needs

Addressing more fundamental needs allows for alternative solu-tions and early interventions

Avoids manual weaving together of experiences

Avoids costly itera-tions in case of fail-ure to fulfill the need

Data- driven approach to innovation

More efficient use of resources, as solution space is broadened

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WO

RK

SH

EE

T 6

-1

Cu

sto

mer

jou

rney

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doe

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e cu

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ract

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des

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uct?

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d se

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perie

nce

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WO

RK

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EE

T 6

-2

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nes

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vers

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d c

ust

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ain

po

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at

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sta

ge

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cust

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urn

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inte

ract

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WO

RK

SH

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ract

ion?

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o ab

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ent

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s

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WORKSHEET 6-4

The why- how ladder

In the eyes of the customer, the purpose of the relationship with our firm is to . . .

Why

How

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WO

RK

SH

EE

T 6

-5

Res

po

nse

s to

pai

n p

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nd

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form

atio

n

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chbe

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orC

urat

ed o

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Auto

mat

ed e

xecu

tion

Res

pond

-to-

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Late

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eed

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Expe

rienc

e 1

Cus

tom

izat

ion

impr

ovem

ents

Opt

imiz

atio

n of

pro

duct

and

ser

vice

offe

ring

Cre

atio

n of

new

pro

duct

s an

d se

rvic

es

Effic

ienc

y im

prov

emen

ts

Expe

rienc

e 2

Expe

rienc

e 3

Expe

rienc

e 4

Fulfi

llmen

t of d

eepe

rcu

stom

er n

eeds

WO

RK

SH

EE

T 6

-6

Lea

rnin

g f

rom

rep

eate

d c

ust

om

er e

xper

ien

ces

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24

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Connected producer Customers

Information

Product,service

Individuals (B2C)

Firms (B2B)

FIGURE 7-1

Connection architecture for a connected producer

588-77183_ch01_3P.indd 149 02/28/19 2:24 PM

Suppliers Connected retailer Customers

Information

Product,service

Individuals (B2C)

Firms (B2B)

FIGURE 7-2

Connection architecture for a connected retailer

25

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Customers

Connected market maker

Suppliers

Product, service

Referral Information

Individuals (B2C)

Firms (B2B)

FIGURE 7-3

Connection architecture for a connected market maker

588-77183_ch01_3P.indd 158 02/28/19 2:24 PM

Customers

Crowd orchestrator

Suppliers

Product, service

Referral Information

Individuals (B2C)

Firms (B2B)

FIGURE 7-4

Connection architecture for a crowd orchestrator

26

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P2P network creator

Information

Third parties—e.g.,

advertisers,potential

employers

Complementaryproducts and

services owned byP2P network

creator

Product, service

Individuals

FIGURE 7-5

Connection architecture for a P2P network creator

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27

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FIG

UR

E 7

-6

Co

nn

ecte

d s

trat

egy

mat

rix

Con

nect

edpr

oduc

er

Res

pond

-to-

desi

re

Cur

ated

offe

ring

Coa

chbe

havi

or

Auto

mat

icex

ecut

ion

Con

nect

edre

taile

rC

onne

cted

mar

ket m

aker

Cro

wd

orch

estr

ator

P2P

netw

ork

crea

tor

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28

Page 29: CONNECTED STRATEGY...2020/10/06  · Instacart, BigBasket Tesco Homeplus Amazon Go JD stores ef New r ficiency ontier ef Old r ficiency ontier FIGURE 2-3 New efficiency frontier in

TAB

LE

 9-1

Two

dim

ensi

on

s fo

r d

eco

nst

ruct

ing

a c

on

nec

ted

str

ateg

y

Rec

og

nize

Req

ues

tR

esp

on

dR

epea

tC

on

nec

tio

n ar

chit

ectu

reR

even

ue

mo

del

Be

co

me

awa

re o

f th

e n

ee

d

Sea

rch

an

d d

ec

ide

on

op

tio

n

Ord

er

Pay

Re

ce

ive

Exp

erie

nce

Aft

er

sale

Lea

rn a

nd

im

pro

veC

on

ne

ct

pa

rtie

s in

e

co

syst

em

Mo

net

ize

cu

sto

me

r re

lati

on

ship

Se

nse

No

tice

the

amo

unt

of

coff

ee le

ft

in t

he

pan

try

Rec

eive

in-

form

atio

n ab

out

cu

rren

t co

f-fe

e p

rice

s fr

om

nea

rby

reta

ilers

Mak

e su

re t

he

des

ired

ite

m is

av

aila

ble

Che

ck c

ur-

rent

cas

h b

alan

ce in

b

ank

acco

unt

No

tice

arri

val o

f d

eliv

ery

No

tice

hom

e ow

ner

ap-

pro

achi

ng

the

fro

nt

do

or

Mea

sure

ch

ang

e o

f he

art

rate

an

d p

upil

dila

tion

a fte

r fir

st

sip

of

coff

ee

Iden

tify

the

user

whe

neve

r sh

e d

rink

s co

f-fe

e, r

egar

dle

ss

of l

oca

tion

Sen

se o

rder

-in

g ne

eds

of

near

by

hom

es

Che

ck t

he

func

tiona

lity

of t

he

coff

eem

aker

Tra

nsm

itS

end

qua

n-tit

y in

form

a-tio

n to

co

mp

utin

g sy

stem

Get

tho

se

pri

ces

ont

o th

e ce

ntra

l sy

stem

Sen

d o

rder

to

ret

aile

rC

om

bin

e ac

coun

t st

atus

with

p

roje

cted

g

roce

ry

ord

ers

Sen

d id

en-

tity

info

r-m

atio

n to

ce

ntra

l sy

stem

Sen

d a

rriv

al

info

rmat

ion

fro

m d

oo

r to

ser

ver

Sen

d in

-fo

rmat

ion

to e

dg

e co

mp

utin

g sy

stem

Sen

d id

entit

y an

d p

refe

renc

e in

form

atio

n to

ce

ntra

l sys

tem

Po

ol n

eig

h-b

orh

oo

d in

-fo

rmat

ion

to

one

ser

ver

Sen

d s

tatu

s re

po

rt a

bo

ut

coff

eem

aker

to

ser

vice

p

rovi

der

588-77183_ch01_3P.indd 202 02/28/19 2:24 PM

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TAB

LE

 9-1

(c

on

tin

ue

d)

Rec

og

nize

Req

ues

tR

esp

on

dR

epea

tC

on

nec

tio

n ar

chit

ectu

reR

even

ue

mo

del

Be

co

me

awa

re o

f th

e n

ee

d

Sea

rch

an

d d

ec

ide

on

op

tio

n

Ord

er

Pay

Re

ce

ive

Exp

erie

nce

Aft

er

sale

Lea

rn a

nd

im

pro

veC

on

ne

ct

pa

rtie

s in

e

co

syst

em

Mo

net

ize

cu

sto

me

r re

lati

on

ship

An

aly

zeC

om

par

e w

ith t

arg

et

qua

ntiti

es

Loo

k at

p

rice

s an

d

volu

me

dis

-co

unts

, po

-te

ntia

lly

fact

ori

ng in

tr

avel

pla

ns

If d

esire

d

item

is n

ot

avai

lab

le

fro

m p

re-

ferr

ed

sour

ce,

find

bes

t al

tern

ativ

e

Loo

k fo

r p

ote

ntia

l ac

coun

t ov

erru

ns

and

po

s si-

ble

loya

lty

rew

ard

s

Mak

e su

re

that

del

iv-

ery

has

bee

n au

tho

rize

d

Iden

tify

the

per

son

in

fro

nt o

f the

d

oo

r

Ass

ess

del

ight

of

user

with

co

ffee

b

rand

us

ing

phy

sio

log

-ic

al

mea

sure

-m

ents

Ana

lyze

co

ffee

p

refe

renc

es—

e.g.

, dep

end

-in

g o

n tim

e o

fd

ay

Eva

luat

e el

igi-

bili

ty fo

r g

roup

d

isco

unts

Mak

e d

eci-

sio

n w

hen

to

send

co

ffee

-m

aker

re

pla

cem

ent

Rea

ct

Dec

ide

it is

tim

e to

sta

rt

the

req

uest

m

od

ule

for

reo

rder

ing

Act

ivat

e o

rder

m

od

ule

Pla

ce

ord

er fo

r a

par

t ic u l

ar

item

and

p

rovi

de

ship

pin

g ad

dre

ss

Exe

cute

p

aym

ent

Pro

vid

e ac

-ce

ss t

o p

antr

y o

r co

ffee

m

achi

ne

Op

en t

he

do

or

and

ac

tivat

e co

ffee

b

rew

ing

Feed

re-

sults

into

re

pea

t m

od

ule

Feed

res

ults

in

to r

eque

st

mo

dul

e an

d

help

co

ffee

ro

aste

rs t

o im

-p

rove

the

ir p

rod

uct

Neg

otia

te

spec

ial p

rice

w

ith r

etai

ler

Sen

d c

off

ee

mac

hine

re-

pla

cem

ent

whe

n ne

cess

ary

Not

e: E

ach

cell

corr

esp

ond

s to

a s

pec

ific

sub

func

tion

in t

he c

off

ee- b

rew

ing

scen

ario

. The

tab

le is

bes

t re

ad c

olu

mn

by

colu

mn.

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FIG

UR

E 9

-1

Cla

ssifi

cati

on

tree

fo

r th

e su

bfu

nct

ion

“id

enti

fy a

per

son”

Actio

n of

use

rre

quire

d

Mac

hine

Actio

n of

use

rno

t req

uire

d

On-

site

Rem

ote

Pers

onon

-site

Rem

ote

door

man

Bas

ed o

not

her

Com

bina

tion

of g

ait

and

pers

onal

bod

yod

or

3-D

face

reco

gniti

on

2-D

face

reco

gniti

on

Sens

e pr

oxim

ityvi

a B

luet

ooth

Sens

e pr

oxim

ityvi

a ne

ar-f

ield

com

mun

icat

ion

Bas

ed o

nim

age

Key

card

Ente

r pin

cod

e

Eye

scan

Fing

erpr

int

With

IDde

vice

With

out I

Dde

vice

Hum

an

How

to id

entif

ya

pers

on?

Activ

ebi

omet

ric

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TABLE 9-2

Se lection of alternatives for “identify person” subfunction

Technology Con ve nienceSafety/reliability Cost Applied in . . . Comments

Human at door ++ ++ – – Hotels

Human remote + + – Building access

Key card – ++ + Hospitals

Enter pin code – – ++ Gym

Fingerprint – ++ + Phone

Eye scan – – ++ – Global borderentry

Sense device proximity using near- field communication

++ + + Car keys

Sense device proximity using Bluetooth

++ + + Wawa

2- D face recognition ++ + + Hotels

3- D face recognition ++ ++ + High- end phone

Combination of step pattern and smell

++ ? – – Security dog Technically not yet feasible

Notes: ++ = very good; + = good; – = poor; – – = very poor; ? = unknown.

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WO

RK

SH

EE

T 1

0-1

Th

e co

nn

ecte

d s

trat

egy

mat

rix:

Inve

nto

ry o

f yo

ur

and

yo

ur

com

pet

ito

rs’ a

ctio

ns

Con

nect

edpr

oduc

er

Res

pond

-to-

desi

re

Cur

ated

offe

ring

Coa

chbe

havi

or

Auto

mat

icex

ecut

ion

Con

nect

edre

taile

rC

onne

cted

mar

ket m

aker

Cro

wd

orch

estr

ator

P2P

netw

ork

crea

tor

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Con

nect

edpr

oduc

er

Res

pond

-to-

desi

re

Cur

ated

offe

ring

Coa

chbe

havi

or

Auto

mat

icex

ecut

ion

Con

nect

edre

taile

rC

onne

cted

mar

ket m

aker

Cro

wd

orch

estr

ator

P2P

netw

ork

crea

tor

WO

RK

SH

EE

T 1

0-2

Th

e co

nn

ecte

d s

trat

egy

mat

rix:

Imag

ine

you

r co

m p

any

in e

ach

cell

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WO

RK

SH

EE

T 1

0-3

Dec

on

stru

ct y

ou

r co

nn

ecte

d s

trat

egy

into

su

bfu

nct

ion

s

Rec

ogni

ze

Beco

me

awar

e of

the

need

Sear

ch a

ndde

cide

on

optio

n

Ord

erPa

yRe

ceiv

eEx

perie

nce

Afte

r sal

eLe

arn

and

impr

ove

Con

nect

parti

es in

ecos

yste

m

Mon

etize

cust

omer

rela

tions

hip

Sens

e

Tran

smit

Anal

yze

Rea

ct

Res

pond

Req

uest

Rep

eat

Con

nect

ion

arch

itect

ure

Rev

enue

mod

el

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WO

RK

SH

EE

T 1

0-4

Po

s si b

le t

ech

no

log

ical

so

luti

on

s fo

r ea

ch s

ub

fun

ctio

n

Rec

ogni

ze

Beco

me

awar

e of

the

need

Sear

ch a

ndde

cide

on

optio

n

Ord

erPa

yRe

ceiv

eEx

perie

nce

Afte

r sal

eLe

arn

and

impr

ove

Con

nect

parti

es in

ecos

yste

m

Mon

etize

cust

omer

rela

tions

hip

Sens

e

Tran

smit

Anal

yze

Rea

ct

Res

pond

Req

uest

Rep

eat

Con

nect

ion

arch

itect

ure

Rev

enue

mod

el

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WO

RK

SH

EE

T 1

0-5

New

tec

hn

olo

gic

al s

olu

tio

ns

that

wo

uld

en

able

a n

ew c

on

nec

ted

str

ateg

y

Rec

ogni

ze

Beco

me

awar

e of

the

need

Sear

ch a

ndde

cide

on

optio

n

Ord

erPa

yRe

ceiv

eEx

perie

nce

Afte

r sal

eLe

arn

and

impr

ove

Con

nect

parti

es in

ecos

yste

m

Mon

etize

cust

omer

rela

tions

hip

Sens

e

Tran

smit

Anal

yze

Rea

ct

Res

pond

Req

uest

Rep

eat

Con

nect

ion

arch

itect

ure

Rev

enue

mod

el

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37