#24 Moving towards personalization in IoT

KRISTINA PODNAR, HOST: Jon, welcome to the Power of Digital Policy. I appreciate you taking the time to share your insights and experience with us today. Before we just kind of hop on in, why don't you maybe tell us a little bit about your background? I think you have a unique background and slightly different to most of my guests. So maybe you can give us just a little bit of insights into who you are, what you do, and how you got here?

‍JONATHAN MELNICK, GUEST: Shure and first of all, thank you so much for inviting me to the show. So my background, I work at Lux research, which is a technology consultancy which helps primarily corporate innovation functions, help understand how to grow their business using emerging technologies and my current role within Lux research is as a research director within our digital transformation of the oil industries program and specializing in how people are using, how companies are using Internet of Things (IoT) technology and artificial intelligence technologies to personalize their products and services and with this emphasis on health and wellness in particular as we've seen a lot of companies trying to figure out what these emerging technology spaces mean for them and then really how to capture value out of them.

‍KRISTINA: Well, you and your team at Lux are helping like you said a lot of organizations understand the impact and the use cases of digital technologies in their industry. Is there any industry or organization that you see today that is not in need of digital evolution?

‍JONATHAN: No, I mean, all of them are using it in some way or at least planning to use it in some way, and what we see is a lot of companies, they don't want to be the first, and they really don't want to be the last and how to find out you know how fast to move it along as well as this can be a really overwhelming space for a lot of companies to really develop a roadmap in because it's so outside of their traditional field, but they understand that they need to move it forward. So there's a lot of different competing forces, were to make that, how fast and how far to go and when to do them.

‍KRISTINA: So what makes an organization ready to adopt a new technology when you're looking at working with a company, you know, who are the typical drivers inside of the organization that are looking for that competitive advantage or they're looking for that digital change inside of the organization, who's usually the individual who's the driving force behind the desire to change?

‍JONATHAN: Really depend on the organization on that and the culture, initially what we see is a lot of people in maybe innovation roles or new product development roles get really excited about these things. So you'll have some kind of mid-level folks that are starting to experiment or getting excited and what often happens there is you might run a pilot project or two, but you really can't get it off the ground because these kinds of projects are so cross-functional. And eventually, you have to get this kind of C level board-level type of support for this to really start to drive it and scale it in a meaningful way. So depending on the organization, we see a lot of folks who are really getting gonna stuck in that in that pilot scale, and then eventually we'll see these huge investments and sort of this top-down corporate strategy around these types of technology, and that's when they really start to move forward.

‍KRISTINA: Do you advise that most organizations start with a pilot or do you really could have come in and helped people understand the wider scale implementation possibilities?

‍JONATHAN: I think you need both. I think you need to understand where you want to go because you need to design the right pilot to take out the lessons that you really want to learn, to understand how this fits into this longer-term roadmap because what we see is, of course, you need a pilot to start you need to work out the kinks one more small, but we also see companies that are running 40-50 pilots, and then none of them are really going anywhere. They just kind of get stuck in with called pilot purgatory. And then you also need this cross-organizational you because if a pilot gets stuck in Innovation or an innovation function or a smaller part of the organization, it never really gets that breath; it's needed to really make these kinds of changes. So that's why I really need this wide lens and this longer-term roadmap.

‍KRISTINA: As part of the roadmap, I'm kind of thinking that maybe we need to also have some organizational risks as well as the opportunities. I like to focus on risk and opportunity really that comes from digital, whether it's IoT or something else, and I was thinking about this morning before we hopped on, you know, for example, injectables for healthcare are great. But companies need to consider security and data privacy and maintenance. Do you see organizations think about those risks as well as the opportunities or how do you frame those for folks?

‍JONATHAN:  Absolutely. I mean there's a lot of risks, and that's where we work with a lot of clients and just understanding where other projects that fail to the, for example, an IoT as you're probably familiar IoT security has its own features that are different than sort of more traditional cybersecurity, and we've seen for example when Target had their big hack a few years ago. It was actually an IoT device that provided entry. So you need these whole the strategy around if you if and when you launch things, how did you know not to step in it in the process. Another area, we see companies really struggling with his battery technology, for example, because they can catch fire and one fire means you're probably not doing this again for a very long time. The risk that we see most people not talking about though is the risk of not doing it. So what winds up often happening as people get stuck in all the things that could go wrong and you certainly want to take reasonable precautions to make sure that these things don't go wrong, but there is a risk of not moving at all, and that's a risk that we see interestingly more companies are willing to make because eventually, the risk is of doing something is going to fall on a champion for a group and that personal risk is hard to absorb for somebody's career for example, but organizationally the risk of not doing anything can be just as big.

‍KRISTINA: And that makes me question the role of the board of directors because you mentioned them a few minutes ago. How often are you seeing boards that are truly versed in IoT that are versed in sort of emerging technologies, in reality the champions for that change, you know, are they ready you think to take this kind of change on and advocate for it?

‍JONATHAN:  Well, at least it depends on the industry. So in the CPG space, for example, we don't see a lot of at that level people talking about. Hey, this is the technology strategy we need, but what we hear more of is then saying we need to know artificial intelligence, and then it gets delegated down. But at least there's kind of a broader vision as part of the strategic roadmap. These types of emerging digital technologies are going to be part of it. In other areas, it can become, it can really start at the top. So, for example, one area in terms of operational IoT types of technology that's really far ahead is the oil and gas industry. And the reason that they're so far ahead is that oil prices crashed several years ago. And if you're not here on the top line, you better grow the bottom line, and they really invested in a lot of IoT technologies for operational efficiency. The other place you see it as well as in the pharmaceutical industry, because of the past the cost of bringing a drug to market, the fact that if you're not first and don't get the patent in two trials first you are left behind and shrinking R&D budgets in pharmaceuticals, we saw a lot of investment in these types of emerging technologies for drug discovery, for example, so what we've seen is different areas prioritize different parts of an IoT, but again within those industries, the companies that are successful are starting quite high in the organization.

‍KRISTINA: Recently, your colleague, Jarrold Wang said that personalization is very important when it comes to products, especially, but including those such as Pepsi SodaStream Professional. Can you tell us a little bit more about the role of personalization in consumer products since you mentioned that as an example industry?

‍JONATHAN:  Yeah, absolutely. And it depends on the product we're talking about, but this idea of how do you use it at digital overlay to help personalize a product is becoming more and more prevalent in the consumer space. And the area we actually see it coming out and is the most advanced is actually within the skin and personal care. So it's a lot of emerging solutions were people are using different types of ways to really understand the consumer first, it all starts with understanding the consumer and who's standing in front of you ranges from a sort of things like the genetics microbiome type of things that don't change that often. I can get into things like seasonal and daily changes, so like a lot of humidity sensors, things like that. A lot of ways where people are doing things like computer vision on cell phone photos to analyze acne and wrinkles and then being able to then deliver up of a personalized or semi personalized experience to that consumer. So Shiseido, for example, in Japan, is quite out front with some connected devices that will personalize skin treatments and hazardous IoT dispensers based on some of this sensing feedback. P&G has a really interesting product where they're actually analyzing and doing computer vision on individuals' skin pigments and inkjet printing only a specific location, so you get a smoother skin. So what we see is actually looks at skincare being really out front in this, and now we see a lot of this rolling into other CPG areas like food and beverage. We're part of it is around personalizing around taste and preference, and that's where we're Pepsi's initial launch here was really focused around, the longer-term, what we're seeing is more of this starting to also move into more of a health and wellness event. So, companies like a startup company called Maxit, which will be personalized based on health data, right? So how hydrated are you? What's your different nutrient levels and actually uses health it off your phone to then provide more personalized formulation out of the device.

‍KRISTINA:  From the consumer perspective. I see a lot of IoT devices that aren't necessarily supported yet. It's always like that last mile. So what does that really look like for the reality of IoT and personalization these days?

‍JONATHAN: Well, there's always a user experience and usability. I mean, it's as a pandemic is it taught us that even using a zoom call can be challenging at times? So yeah, it can seem a little bit overwhelming to talk about what happens as we link these up to consumer products. But we also look at these use of IoT and health devices, and that can be a little bit terrifying. But to answer your question, what we're seeing is actually a lot more of the complementary and support technologies coming out that are going to really underpin that. One of the challenges is it a lot of the early IoT devices there were really gadgety, right? So and didn't provide a lot of value actually back to the consumer, and they were quite silent. Right? So would have an app, and then you have a device and would really be siloed from the rest of your life. So what we see now is much more of an aggregation right where you'd use something like an Apple health kit. So to organize an aggregate health data across a number of different streams, whether it's sleep, exercise etc., etc. And then have a more holistic view and then have these platforms that can get in that can then engage with something like that. So we actually see a lot of the supporting technologies coming out to support that. We're also seeing other complementary technologies, like 5G and being able to actually directly upload data across many more devices being able to support this. So I agree with you that the history of these things looks a little bit ugly, but that's always happening with some of the initial products that get launched. Some of them are always a little bit too soon. But like I said, what we're seeing is actually some of the technology able to really support the as a consumer found a way.

‍KRISTINA: And how has COVID changed the landscape of this. I'm curious because it seems like it's either an opportunity or a threat, and I'm not sure which way we're going. What are you seeing, and is COVID changing the world and the landscape?

‍JONATHAN:  Well, I think COVID changing everything, right? The question that people are struggling with is exactly how and who wins and who loses, and that's where we see a lot of this coming from now from the more from the sort of health side as opposed to the wellness or even sort of more the worried well side which was driving some of the markets before, so now we see much more of a prevalence of some of the telehealth solutions right? Which roll down into, you know, really making informed product decisions related to health and really trying to minimize that contact of going into the specialist. We're seeing things like in again beauty and personal care where you're actually able to do more of a digital assistant or digital beauty consult drive. So whether it's using augmented reality or some of the computer vision to not need to go into a store and actually have somebody engage with you and actually make product recommendations. Or you so we're seeing a lot of these technologies now supporting the way that people are more hesitant to use experts or go in and do things in person, and you're still looking for that personalized and customized experience in new technologies that they're really good filled out gap.

‍KRISTINA: Are you seeing maybe a difference regionally in terms of the adoptions of personalization around IoT? I'm thinking specifically, you know things like, let's say telehealth solutions. Well, doctors are licensed specific states. Um, you know, we're certainly a difference between the E.U. with its General data protection requirements. And then the United States what are sort of the global trends versus the regional and geographic transit you're seeing?

‍JONATHAN:  Well, there's a lot there. I mean, once you start talking about healthcare, it gets really complicated, really fast, but I agree with you that the U.S. does have some regulations that do get away in terms of where we're providers are licensed and doing crossed a type of things. However, some of those regulations are starting to come down. The other thing we're seeing is there some regions where telehealth solutions are exceptionally compelling right so good so and about their like areas like Indonesia and other areas that have a lot of different islands, right? So actually getting to a provider is such a high cost and high barrier. So we see at some of it like people focus on the U.S. because of the high cost of health care here, but also in some of these other geographies where like the getting to a provider can be really overwhelming. The other part was seeing is people starting to overlay more of that intelligence. Particularly when there are less trained doctors so as a way of optimizing workflow there, they're so not just to do a virtual consultation. But also to add a layer of being able to actually do some analytics on the patient as a way to help either prioritize them, give them some immediate advice or to help give specialty advice to the doctor so they can make a more customized recommendation. If you have, for example, a general practitioner that has a much wider range of patients with their treatment.

‍KRISTINA: It how does that start to in? You know, at least with a companies that you're working with right now? What kind of trade-offs are you seeing between the ability to use IoT and a lot of the personalization aspects for the benefit of the individual of society versus the data in the privacy that individuals and society on the whole are having to give up is their conversation around that happening?

‍JONATHAN:  Absolutely, and of course once you get at the health data people get really concerned so, and it also depends on how people are really treating it whether it is more of a consumer device and dealing more with traditional sort of consumer to data privacy or if you're getting into more like in the U.S. HIPAA compliance and sort of really health data and those are really treated quite separately. But the other thing we're seeing is data sort of reason you're talking about before about regional issues right around different hosting requirements, for example, if you now have a database of tens of thousands of images the actual hosting environments in China are different than the U.S. and what you're able to use to host them. So you do run into a number of different challenges as you try to scale these solutions and data security and data privacy is always front of mine because the customer risk and brand risks of doing that poorly is really a challenge for a lot of companies in particular ones that are less comfortable and have a don't have quite the history and doing that.

‍KRISTINA: So thinking about that; actually, there's a lot of first-mover advantages there. I'm wondering what you see really with the first movers because you mentioned that a lot of enterprises don't want to be the first they don't want to be the last they sort of want to be the middle, but somebody always has to go first. So who is going first? What kind of companies is going first? And what do you see as really the opportunities that they're able to harness as a result of being the first movers?

‍JONATHAN:  Yeah, absolutely. And this is where you see some of that even some of the companies trying to figure out their strategy again. So what we see, for example, if we're talking about in skincare before is all the major skincare companies were starting to launch these types of products and a few years ago. And for example, not space L'Oreal was one of the first instances we've seen since then we've seen for example PNG and to say to a number of others want competing products, but the advantage for L'Oreal now they're on their gen three devices here, and their strategy is a little bit different, but it's helped them to really kind of make take their early lessons, and it did it in a relatively low-risk way. We're was really about providing advice about when to reapply sunscreen to providing some customized U.V. exposure data to help provide a natural complement as they develop that started getting more into actually developing the room wearable devices around this skin health area. Today, we have really been able to sort of move forward with them with a much more tailored vision.

‍KRISTINA: So that assumes that there's pretty high customer awareness, I'm assuming or that they're trying to raise a customer profile in terms of the need for the product because it sounds very relevant. You know, what is the go-to-market strategy for a lot of these companies like L'Oreal, for instance. Are they looking to pilot still, or are they looking to just kind of go mass scale because they've already done some minor piloting in specific markets? What does that look like, or is there even a typical rollout process?

‍JONATHAN:  Well, most of them, of course, do start relatively small, and sometimes it is very specific to certain geographies. But there are a lot more decisions before that even in product development that are less typical for these types of companies. So, for example, figuring out the business model is critically important and is when you're traditionally selling cosmetics; for example, the business models have been the same for a very long time, and now we see the introduction of new business models here. Also, what kind of device and how connected do you want it to be, so often people have this vision of having this highly connected device, which L'Oreal now is has with their with their third one. But the first one didn't even have connectivity with something that you use your smartphone to the connector. So there's this sort of product development side, and then, you right, them, then they get into the sort of specific test market and specific partners to help for distribution. Typically, they're starting relatively small.

‍KRISTINA: What are they doing in terms of localization? I mean everybody today is talking about the fact that you know where the global marketplace, which is true. But as we've seen for example, with Sephora and Korea, you know, localized tastes are very important. And so when organizations are looking at IoT and personalization, there is such an opportunity there from a personalization perspective. Are you seeing the marketplaces sort of being you know an opportunity for everybody, or are their struggles with localization for some of these companies?

‍JONATHAN:  Yeah, I mean that issue of localization and personalization versus trying to get the economies of scale, which is really driven a lot of these companies for a long time. That is the balance that people are trying to bridge, and that's where that digital layer can really help the bridge that right where you have some level of mass production. But then you use the digital era to then provide that customization within things like personalized product recommendation. The other part in personalization that doesn't get enough attention is as people are developing these types of algorithms and particularly the comes to health and wellness areas, the biases that go into them. I mean, a lot of them are trained on certain demographics and not others. So that localization is a big part of it and part of the localization of the personalization but then making sure that they're actually doing that is a really separate challenge because like I said, they can work in some areas and not in others based on how they were trained and that's another place. We've seen some companies really trip up.

‍KRISTINA: Do you help organizations figure that part out is that part of their roadmap then ensuring the integrity of the algorithms, ensuring that whatever A.I. machine learning they're deploying has integrity?

‍JONATHAN:  We help them, absolutely, with figuring out, you know, really where the people have fallen down in some of these other areas or some of their competitors, ones who've gone the gone first and some of those failures they really have to have to watch out for and some of that bias and how supervised you want the A.I. to be is a big part of that.

‍KRISTINA: It's right now, everybody I think at least a feels like everybody's racing from an A.I. perspective, you know to get to the finish line first, whatever that finish line might be per industry. Is it best you think for people to kind of slow things down from an ethics perspective or do you feel like we're paying enough attention to ethics, are folks factoring that into their roadmap? Do they need to?

‍JONATHAN:  They absolutely need to because when they go sideways it can really be a bad look even if it was well-intentioned in the first place and what we see is really it depends on how you want to build up your capabilities, right? So eventually, we see a lot of organizations that they've been doing this for a number of years. They hire a team of the data scientist. I have dozens of them right work on their projects, and they're really able to get quite sophisticated in this, but it's usually not a good place to start to bring it all in house. So often, when clients are starting it is really doing much more of open innovation or an external part main type of strategy and letting some of the partners own some of the technical risks there and bring some of their technical expertise to the table and really in a thoughtful collaboration. And then I said like a thing as companies get more mature they get some of these initial pilots under their belt they'll start to invest more and more and bring more of that expertise inhouse.

‍KRISTINA: Are there partners that you feel are readily available because, you know, what are the big things that I see is partner selection out there. So is that an area that you see organization struggling with or is that something that you help them with?

‍JONATHAN:  That's one of the core things we help them with because it is exceptionally challenging and especially in this space because space is moving so fast, so there's literally hundreds if not, sometimes thousands of developers to be choosing from between, you know, really early stage. If they can have disruptive technology all the way through the tech majors, so you have to decide what kind of company you want to want to work with who actually has the right technology. I mean one of the big challenges and evaluating A.I. partnerships, for example, is a lot of them don't even actually use A.I. so actually getting under the covers of like, what are you actually working with and what are they doing? So that can be a huge challenge and then the other issue that a lot of our clients faces now, they're actually susceptible because this can scale so quickly, you know. Where a chemical company, for example, is used to the innovation cycle of a polymer automotive maker used to using these six to eight-year innovation cycles digital moves on the order of weeks and months so they can actually now get threats from areas that are that are really non-traditional. So now I actually have to be looking in areas. For example, we see a lot of CPD clients looking at healthcare for clinical-grade devices and clinical-grade technology that can then be scaled down into their constable.

‍KRISTINA: That's interesting because, again, I everything to me comes back to this risk opportunity aspect that I mentioned a while ago and obviously a lot of opportunities but also a lot of risks, I'm wondering how do organizations that you see today adopt A.I. given the fact that we don't really have to govern our regulatory frameworks. We have a lot of suggestions, a lot of proposals. We certainly have defined ethical guardrails perhaps around A.I., but there's really not a lot of regulation or legal aspects yet that we have. Is that something that you see as an organization should get ahead of should organizations be part of that conversation. Should they be leery, should they get it sounds like maybe some of the risks can be offset with a partner, but what should organizations really do to manage those risks?

‍JONATHAN:  Well, it depends on what risk you're trying to guard against right, whether it is some of this implicit bias, whether it is just or whether it's more like brand risk and having, for example, a recommendation engine that doesn't recommend the right thing. So really depends on there are a lot of risks as you mentioned if companies are waiting for governance though. They're going to be waiting way too long and be right, and that's where it really sort of hottest a sort of maintaining the brand but not fall behind. And is the fundamental challenge where a lot of this is the wild west right now.

‍KRISTINA: So I'm thinking Jon as you look in and glazed into this crystal ball that I believe that you have. I'm not sure if that's true or not. But as you look ahead for the next 18 months, you know, what do you see happening for organizations on the whole? And then is there a specific industry that you see with particular opportunities? You know, what should organizations be really be looking for. Is there anybody that's going to be getting a head start or that you think should take advantage of a head start here.

‍JONATHAN:  Yeah, absolutely. So I mean the major shift we've seen of course in the last few months is health care, of course, which was so slow. I mean there was so much technology out there that could really move the needle for healthcare get adopted in the matter weeks, right? We saw really ten years of technology adopted and in ten weeks and that was really some of those underpinning kind of foundational type of technology for healthcare, there just wasn't there before like we're talking about some of the foundational technologies that happen in the CPG states over the last few years, but now it's really starting to be adopted at scale and healthcare, so health and wellness is this area that's really has been stuck and had a lot of technology push but just didn't have the traction because you couldn't really tie it into healthcare and in the sort of a proper way as opposed to health care like having steps, but really tailoring it into more and more sophisticated health care solutions, so we see that really really moving quickly now and being how people then adopted that whether it be CPGs adopting, you know product selection or otherwise, but how people are really managing and treating and being thoughtful about their health care is changing quite rapidly.

‍KRISTINA: In CPGs, when we talk about A.I. or IoT devices and personalization, certainly a lot of opportunities, you've mentioned telehealth and medicine several times; it's like we're talking about very large enterprises. Is there space for small or medium enterprises to kind of come into this space as well should small businesses be looking to take advantage of IoT in any special way?

‍JONATHAN:  So small businesses and it depends of course what you mean by small, of course, there's a ton of startups that are out there doing this and the challenges that were scaling these things are exceptionally expensive which is why some of these really small companies are actually much better off partnering with some of the larger ones, the challenge of the larger ones, of course, is they tend to be as we're talking about before risk avoidance and just don't move forward. So often we see this combination of large companies working with smaller companies actually a great way to get this off the ground when we see some of the solutions being adopted by some of the mid-sized companies. Typically that's trickling down more from the larger companies. So it's really a mix in the strategy really needs to depend on the device and whether you're actually using an IoT solution if you actually need to develop the device yourself, which can be an exceptionally expensive endeavor and how you plan to actually bring to market.

‍KRISTINA: Great. Well, thanks, Jon, for giving us an overview. There's so much here to still go into and deep dive on, but we appreciate the overview, and hopefully, you'll come back and speak with us again and tell us how things are going.