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Embracing digitalization’s limits: The future is hybrid

by Thomas Bosshard

Are robots slowly but surely taking over the world, leaving only people who can develop algorithms in employment? At least in areas where face-to-face interaction is still essential, the added value of AI lies in a hybrid approach.

Amazon recently made big headlines with its new store Amazon Go, which dumps cash registers (and cashiers) in favor of an app and vast amounts of surveillance cameras that register everything a shopper puts into his or her shopping bag, thus making shoplifting almost impossible. While for some this may be a fascinating glimpse into the future, for others it’s scary, not the least for cashiers whose jobs are once again being threatened by technology.

According to an article in the New York Times, Amazon made no indication whether it would open more stores in the future or even sell the technology to other supermarket chains or retail companies. This does seem likely to some degree or other, and the potential areas of application are considerable.

High-tech retail no longer just online sales

Whether Amazon’s high-tech, cashier-free store is going to be “the store of the future”, remains to be seen. Until now, the technology behind it, of which not more is known other than it being “sophisticated computer vision and machine learning software”, is still more expensive to run than people. It does, however, promise to make the “retail experience”, especially daily grocery shopping, more convenient by helping shoppers save time and avoid waiting in line. And as opposed to online shopping, customers do not have to hold out until their products are shipped or delivered to them. They can leave the store with their purchases in hand and thus get instant gratification.

So, may this new technology almost have the potential to reverse the much-discussed demise of the brick-and-mortar retail shop? Interestingly, the convenience argument on the customer side along with the potential of saving the costs for labor on the operational side were the very arguments that allegedly forced many brick-and-mortar stores out of business – unless they introduced additional direct sales channels online (also dubbed “click-and-mortar stores”). Many well-known retail companies had no other choice than to adapt their business models to this technology-driven revolution to remain competitive.

A richer experience

Highly publicized technological innovations brought to you by the likes of Amazon, Uber or Spotify are often seen as further proof of how automation, technology and artificial intelligence are killing jobs over time. For many businesses, the cost-saving and streamlining opportunities it offers is just too tempting to let pass. If these innovations also add value for the customer, for example by making the customer experience richer or more convenient, and even solve some problems on the way (like shoplifting), a new technology may well have the potential to revolutionize a whole industry.

The “richer experience” that people are looking for is personalized. In the online world, personalization has become easier with recommendation engines and machine-learning algorithms. Users are profiled according to their online behavior, thus revealing their interests, tastes and preferences as well as their demographic data—provided they are willing to share this data with companies like Amazon or Google. They are then “targeted” with content that is tailored to their specific “profile” and presumably their specific needs.

This may already be working quite well in the online retail industry where transactions are short and simple, but what about the more labor-intensive trades, e.g. in the fields of finance, medicine, or law? The prospect of saving the immense costs associated with employing financial, legal or medical advisory professionals by replacing them with robots has led to interesting new business models and fearsome-sounding neologisms such as “Robo-Investor” or even “Robo-Doctor”. However, if asked whether they want to be treated by a robot or a real nurse or doctor, most people will still opt for the human being. This is hardly going to change unless we learn to trust robots more than we do people.

“Creepy” robot that is programmed to look into people’s faces (Copyright Jeena Paradise, FlickR)
“Creepy” robot that is programmed to look into people’s faces (Copyright Jeena Paradise, FlickR)

The human factor

Advisory processes nevertheless include a certain amount of rudimentary procedures that can be automatized. For example, instead of a doctor or nurse, software can be used to record a patient’s basic data and create a “risk profile”. But these automatized processes are still rather error-prone.

Furthermore, depending on the setting, being profiled is not exactly customer-centric. On the contrary—it can be a bit like being on the receiving end of a stereotype. People don’t like being categorized according a few “pre-defined” criteria such as gender or age. In fact, more often than not they want to be seen as unique individuals and expect of their advisors to do the same. With good reason. In certain professions (e.g. physicians, psychotherapists, police, financial advisors), it is considered an important skill to achieve a differentiated understanding of a person by asking a lot of questions or getting down to the information a person may be hiding, perhaps even against his or her own good. These tasks are executed by highly trained individuals that have learned to effectively interact with clients or patients through lots of experience (e.g. in interpreting non-verbal signals). Machine-learning algorithms still have to prove they can accomplish this feat.

Interaction in these professions is highly personalized, socially complex and dynamic. Communication evolves as client and client advisor interact with each other. Doctors, lawyers or therapists have to constantly reassess and revise their preconceived image of the person they are dealing with. These are the professionals that will not be out of work so fast because their unique skill that cannot be that easily replaced is communication.   

Interaction with cashiers also involves communication but follows a well-known and much-replicated script most of us have already internalized for a long time now, and thus has become rather automatic. We interact with the “role” the cashiers are playing, not with the cashiers themselves as persons. Therefore, checking out with an app may not be so different.

Hybrid advisory

In the field of wealth management and planning, hybrid advisory models are currently gaining a lot of attention. According to the consulting company Capgemini’s World Wealth Report 2017, hybrid advice is “the future of wealth management”. This approach combines digital tools with some level of human interaction, especially at the initial stages of the client relationship when financial goals and risk tolerance levels are being established. But most wealth managers and financial institutions still have to roll out effective hybrid solutions, the report concludes, while financial advisors will have to get used to handing over some of their responsibilities to analytics or CRM systems.

Retail is experiencing a similar shift towards hybrid models. Online and offline shopping are by no means mutually exclusive business models. In fact, the hybrid model seems to be thriving already. A few years after digitalization took over the industry, some of the most successful digital retailers are beginning to open physical stores, such as Vistaprint in the U.S. or the eye-wear upstart Warby Parker, who even conceded that their brick-and-mortar stores are “accelerating our ecommerce sales”.

This is not further surprising if you think about it – or refuse to believe the bleak forecasts of “experts” on AI and digital transformation. According to a recent consumer survey by Retail Dive, only 7% of respondents would solely choose an online sales channel to make purchases. When asked to choose between click and brick, almost half of respondents claimed they still want to “see, feel, touch and smell” as well as take home items immediately. So if physical stores can evolve to create a richer, more satisfying in-store experience, then the mutually beneficial click-and-brick-hybrid model may be the real future of retail as well.

The first Amazon Go store in Seattle still offers a unique customer experience. However, the long lines of people currently queuing up to get into the shop may wane over time, after the experience is no longer unique but becomes quite ordinary.

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