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    Published on: June 15, 2016



    Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

    This week's topic: Technology, Innovation And The Nature Of Good & Evil.

    And now, the Conversation continues...


    KC: It's been interesting to me that automation and robotics have become trending topics, for lack of a better phrase, on MNB lately, with some people advocating it as where the future is, and some real pushback from folks who seem to believe that these innovations only push us closer to the kind of technology-controlled world portrayed in the Terminator movies.

    I guess that I have several reactions to this.  One, it is progress, and much as some would like to, you can't stop progress.  Two, that the people who think this is all driven by indolent millennials who don't want to get off the couch and don't want to interact with people, forget that it was baby boomers who created TV remote controls, ATM machines and drive-up windows.  And third, that technology cannot be inherently evil, as some would suggest … it is how people and companies innovate through the use of technology that is either good or evil (though I'm not wild about the use of those terms within the context of this conversation).  I guess I'm wondering how you see this through the eyes of someone highly involved in the whole world of technological innovation, and if your sense is that your community of innovators is aware of this good vs. evil conversation.

    Tom Furphy:
    Great question. I’m not so sure that innovators in the tech business generally consider the good vs. evil aspect of progress. At least not as a leading consideration.

    Good innovators think about the potential user of the technology. They think about problems in that user’s life and ways that technology can solve those problems. They think about opportunities to provide better experiences for users. Ideally, richer experiences than they are getting today. And then, ultimately, they think about the underlying business model to allow the solution to be monetized in a way that recognizes the value created.

    That said, we often find ourselves challenging whether a certain solution may go too far. For example, are we gathering too much personal information? Are we personalizing an experience so deeply that it becomes creepy? These are always important questions. And, frankly, the answers change over time as people become more comfortable with technology.

    Ultimately, if new technologies are making people’s lives better – saving them money, helping them engage more deeply with people, entertaining them more or, perhaps most importantly, freeing up time – then I’d have to think they fall on the “good” side of the debate. I don’t think technology encourages people to sit on the couch. People that want to sit on the couch will sit on the couch. Heck, Fitbits and apps that track and publish activity have been somewhat effective at getting people moving. I’d like to think that technology that opens up minutes or hours in a person’s day will allow them to pursue more valuable and fulfilling activities. It is technology assistance that allows more time and flexibility to do the things we love and, hopefully, allows us to be better humans.

    KC: I think it is fair to describe the US as a nation deeply divided in lots of ways, and I'm beginning to think that - especially because many people tend to think and act in terms of absolutes - there might actually be a kind of mass Luddite movement developing in the US at some point, just because some folks are going to get tired of it all.  I was actually doing some research into this, and saw that the guy who ran the Human Genome Project predicted more than a dozen years ago that "major anti-technology movements will be active in the U.S. and elsewhere by 2030."  Somehow, that doesn't seem so far off to me … and I wonder about the degree to which this is or should be factored into innovators' business models.

    TF:
    If innovators were worried about cultural acceptance of their outcomes, they could never innovate. As I said earlier, the best innovators think about their audience and are focused on solving their problems and/or improving their lives. They may push it too far in the lab or in a limited test. At that point, perhaps, they would opt to hold back the release of the technology until the market was more prepared for it.

    Innovators constantly ask themselves “can we do this?” Once they answer that with a new capability, they then can ask “should we do this?” I haven’t seen the second question answered “no”, but I have seen product releases held back over time to allow the market to more readily accept an innovation. But I’m focused on e-commerce. It’s not like we’re messing with the human genome. I’d have to think there’s a lot more consideration in areas like that.

    KC: Finally, as I ponder this subject, I find myself thinking that one of the places where real innovation has to take place is in education - in making more of it accessible to more people, in relevant subjects that embrace technological innovation as opposed to looking backwards.  The example I used the other day was that at some point in history, the short-sighted buggy whip manufacturers moaned and groaned about the advent of the automobile … the smart ones taught their whip-makers how to be car mechanics.  Your kids are even younger than mine,  which means that when they get out of college, they'll be facing perhaps an even more daunting set of career challenges than mine are.  What's your sense of where we need to be doing in this area?

    TF:
    Nothing will ever replicate the spark of that personal connection between teacher and student, where the connection inspires the student to reach more deeply inside or reach further outside themselves than ever before. I can’t see any mobile app, software or virtual reality mask enabling that. So there still will be plenty of need for humans in education. But I do see plenty of opportunity for technology to improve the rote processes of education.

    Conveying basic information, interactively facilitating the absorption of that information and testing retention and mastery. Most of that can be automated, which would enable education to reach more students at scale, possibly requiring fewer teachers per student. Or, better, allowing teachers to spend more quality one-to-one or small-group time with students.

    Also, mobile technologies can prompt students to take their learning process into physical environments, such as museums, landmarks, the workplace, hospitals or anywhere. It again comes back to the notion of technology assistance that we discussed earlier. Use the power of the technology to assist the human through absorption of information, then use it to guide them into physical experiences where the technology can teach and test them along the way. This will set them up for success much better than staying inside the classroom or participating in some sort of unstructured internship.

    Ultimately, using technology in expanding ways to drive the educational process keeps technology at the forefront of the student’s world and gives students real-time exposure to the power that technology enables. It shows them how technology can support what is a very human endeavor. It shows them that technology can, and should, be used to improve our lives and our work. It inspires them to constantly ask “How can technology support this experience. How can it make it better, more effective, more efficient, richer or more gratifying”?

    We need to teach and inspire students to ask the questions. Technology innovation is not about the answers, it’s about the questions. If we can inspire students to ask the right questions, they will be prepared to take on any challenges they may face as they enter and navigate the workplace.

    KC: Good point. I remember hearing a teacher once say to his class, "This isn't baggage claim. It's the departure lounge." That's certainly what I try to do when I'm in the classroom, which I will be in just a few weeks when I start my summer adjunctivity at Portland State University in Oregon ... I think it is m ore important to consider the possibilities than to reach concrete conclusions.

    And the Innovation Conversation will continue...

    KC's View:

    Published on: June 15, 2016

    by Kevin Coupe

    Normally, Chick fil A is closed on Sundays. Always has been. It is a key corporate value, reflecting founder Truett Cathy's belief that employees should have one day a week to spend with family and worship, if they chose to do so.

    But not last Sunday. Not in Orlando, Florida.

    Orlando, of course, was the site of last Sunday's mass shooting at a gay nightclub in which 49 people were killed and dozens were injured, at the hands of a lone gunman. USA Today reports that a Chick fil A nearby opened up on Sunday to provide food for first responders and the hundreds of people who showed up to give blood. The store wasn't open to the general public, but rather focused its attentions and donations on people affected by the largest mass shooting in the history of the country.

    Chick fil A didn't announce the decision with a press release. It just did it. And people noticed.

    It is, the paper writes, "another sign of how far the company has come in re-crafting its image after CEO Dan Cathy incited customers when he spoke out against gay marriage in 2012, leading to protests at stores." Subsequently, Cathy walked back those statements, saying that he would leave it to others to discuss social policy.

    It also, to my way of thinking, is a demonstration of basic human kindness and generosity ... demonstrating that in hard times, most people will do the right thing, regardless of what they believe or what they look like or who they happen to love.

    It was and is an Eye-Opener. Good for them.
    KC's View:

    Published on: June 15, 2016

    CNBC reports that the US Food and Drug Administration (FDA) has "slapped" Whole Foods with a letter warning the retailer that its food preparation facility in Massachusetts has been found to have "serious violations" of federal food safety regulations that must be addressed immediately.

    According to the story, "FDA inspectors reportedly found various food products, including mushroom quesadillas, chives, beets and couscous that were exposed in areas where condensate was leaking from ceiling joints, doorways, pipes and fans. In addition, the FDA cited that Whole Foods employees failed to sanitize food prep stations, did not change gloves or wash hands between tasks and did not take caution to prevent cleaning supply fluid from touching ready-to-eat products."

    The FDA apparently did an initial inspection last March but subsequently found Whole Foods' response to its findings to be "unacceptable."

    "Your response includes retraining of employees as a corrective action for most of the observed violations but you failed to mention adequate supervision over your specialized food processing operations and how retraining will ensure sustained compliance," the FDA wrote in the new warning letter. "We do not consider your response acceptable because you failed to provide documentation for our review, which demonstrates that all your noted corrective actions have been effectively implemented."

    The story notes that Whole Foods "has faced backlash in recent years due to concerns about slowing sales, health scares and accusations that the grocery chain was overcharging customers." Meanwhile, other chains have encroached on its prepared foods business, eroding whatever market share advantage sit may have had.

    Whole Foods reportedly has not commented on the FDA accusations.
    KC's View:
    Hard to imagine that Whole Foods would take its eye off the ball to this extent, allowing such an important part of its image to fall into such disrepair. Granted, it has other things on its mind, like the launching of its 365 chain. But not paying close attention to fundamental building blocks of its business model, and making sure that things are not just up to code, but beyond reproach, would be a serious mistake that new store formats will not be able to fix.

    Published on: June 15, 2016

    The Wall Street Journal reports on a rift that seems to be developing between Procter & Gamble and Walmart, its largest customer as the world’s largest retailer and the world’s biggest consumer-goods company "are increasingly butting heads as both try to wring more revenue out of their slow-growing businesses.

    "Their efforts, which at times have come at the expense of the other, risk straining a partnership that has been lucrative for both sides and a foundation of their businesses. Both companies are now headed by new chief executives who, under pressure from investors, are relying on aggressive managers to outdo the other."

    Walmart, which is investing in technology and higher wages, is trying to preserve profitability by "pressuring suppliers to reduce the price of bestsellers as it tries to keep pace with Amazon.com Inc. and a slate of discount chains," an effort that has led it "to close stores, shrink inventory and push suppliers, including P&G, for concessions."

    But P&G, the story notes, has different priorities - it wants Walmart "to accelerate sales of its products, preserve higher prices on some items and provide more space on shelves. It has shed dozens of products, including CoverGirl makeup and Duracell batteries, to focus on premium brands such as Gillette and Tide."
    KC's View:
    It doesn't help things when Walmart decides not just to stock Persil, a European competitor to Tide, in its US stores, right next to Tide - essentially letting P&G know who is boss, and not to forget it.

    To be clear, Walmart isn't singling out P&G as it shifts gears; the story makes the point that Wal-Mart has upset a number of suppliers - including Mondelez, for example - "by cutting back on promotional display areas in stores and adding more of its own store brands. To reassure them, Wal-Mart executives have said less-cluttered stores draw more shoppers and that store-brand products drive customer loyalty and traffic."

    Published on: June 15, 2016

    The Los Angeles Times reports that "more than a decade after launching the longest major supermarket strike in the nation’s history, union representatives for Southern California grocery store workers are back at the bargaining table." This time, the story notes, there is something very specific on their minds - a $15 minimum wage.

    According to the story, "California’s schedule of steady increases to the wage floor, which will boost that wage to $15 an hour by 2022, is doing some of the work for the seven unions as they seek their fourth contract with the Ralphs and Albertsons chains since the epic 143-day strike that brought the region’s supermarkets to their knees in 2003-2004. 

    But the two big chains, which include Safeway, Vons and Pavilions stores, are looking to offset rising pay in other ways. That is likely to be the basis for any new confrontation."

    For example, the chains are likely to look for concessions such as lower holiday pay and a longer runway to higher pay grades. The unions - as much as there probably is very little appetite among their members for a new work stoppage - are not likely to want to cooperate.

    The immediate deadline: "On June 20, 47,000 clerks, meatcutters, and merchandise stockers will have the chance to vote on whether to authorize a strike."
    KC's View:
    MNB fave Burt Flickinger tells the Times that the chains don't want a repeat of the labor strife than ended up eroding their market shares in 2003-2004 ... there are even more alternatives to traditional shopping experiences (like, say, Amazon) today than there were then, and the last thing they want to do is send shoppers into the arms of competition.

    I totally agree with that. The chains have to control costs even as they wrestle with California's new minimum wage laws ... but they can't afford to do anything that hurts their images even more.

    Published on: June 15, 2016

    CNBC reports that Martha Stewart "is teaming up with meal-kit delivery service Marley Spoon to develop recipes and send them along with the pre-measured ingredients, directly to your doorstep.

    "The partnership, called Martha & Marley Spoon, puts Martha directly in competition with start-ups Blue Apron, Plated, Munchery and others. These services look to provide consumers with an easier way to get dinner onto the table."

    The kits, available on the Marley Spoon site, will cost between $8.70 and $12. and can all be cooked in less than 40 minutes. The recipes are based on the thousands of recipes in the Martha Stewart archive.

    The deal is said to be the first made by Martha Stewart under its new ownership by Sequential Brands.
    KC's View:
    The cool thing is that every Martha Stewart meal kit comes with a bonus slice of cake with a file baked into it. Just in case.

    Published on: June 15, 2016

    • The Cincinnati Business Courier reports that Kroger has been ranked 45th "on Computerworld’s just-released Top 100 Best Places to Work in IT for 2016," the first time it has made that list. The listing is seen as an indication of the degree to which Kroger is embracing the challenge of e-commerce and rolling out its ClickList click-and-collect service to its various divisions.


    Multichannel Merchant reports that Staples "has rolled out a same-day delivery service in three major metro areas, with five more to follow shortly, for a $14.99 fee, which the company says is subject to change as the offering is in beta ... The initial cities covered by Staples Rush are parts of Boston, Dallas and Manhattan, with service to come in Chicago, Houston, Los Angeles, San Francisco and Seattle. It will eventually roll out to contract customers of Staples Business Advantage, its business-to-business division."

    The move comes as Staples figures how to deal with the decision by a federal court blocking its proposed acquisition of Office Depot, which it hoped would better position it to do battle with Amazon. However, federal regulators and the courts said that such a merger would hurt competition in the segment.
    KC's View:

    Published on: June 15, 2016

    Bloomberg reports that Walmart " is working with a robotics company to develop a shopping cart that helps customers find items on their lists and saves them from pushing a heavy cart through a sprawling store and parking lot."

    The story says that such carts are seen as "an emerging opportunity for robotics companies as brick-and-mortar stores look for innovative ways to match the convenience of Amazon.com Inc. and other online retailers," according to Wendy Roberts, founder/CEO of Five Elements Robotics, a company that in 2014 introduced a "personal robot that can follow its user around inside and outdoors and carry things." That robot cost $1400 and was seen as particularly useful to people with disabilities.

    Walmart did not comment specifically on the cart, but it has been investing heavily in technology initiatives designed to address whatever advantages Amazon is perceived as having in terms of logistics and supply chain.
    KC's View:

    Published on: June 15, 2016

    • The Portland Business Journal reports that Western Family Foods "has reached a deal with Topco Associates LLC to take over sourcing, distribution and management of its three primary grocery brands: Western Family, Shurfine and Natural Directions," a move that it says "will providing pricing benefits to the independent retailers and consumers that buy its products."

    Once the deal has been completed later this year, the story says, "Western Family will close its corporate office and lay off its entire 58-person workforce," leaving it to the much larger Topco to serve the independent retailers that Western Family has been serving for a half-century.


    • In New Hampshire, the Union-Leader reports that Hannaford Supermarkets will open a "new design concept" store this weekend in Bedford, a 68,000 square foot store that the company says will be "a learning laboratory to figure out just how effective certain services are when put together and offered in a large store."

    The story says that at the new store, "customers can buy made-to-order food to eat at the store or take out, do their food shopping online and pick up at the store as well as get customized cutting of fruits and vegetables." It also "will offer a brew room with more than 230 kinds of craft beer as well as an extensive wine selection."

    The story suggests that the new concept is positioned to compete more effectively with a new Whole Foods and Walmart, as well as an about-to-open Aldi.
    KC's View:

    Published on: June 15, 2016

    • Kroger yesterday announced that Dennis Gibson, who has been serving as president of its QFC division in Seattle, has been named the new president of its Denver-based King Soopers division. he succeeds the retiring Russ Dispense in the role.
    KC's View:

    Published on: June 15, 2016

    We had an email the other day from an MNB user who complained about Netflix download times, and who was turning to - you guessed it - Amazon Prime "because Netflix is so frustrating."

    MNB reader Will Weller responded:

    I thought it was my provider, Cox.  But we did the same as Terry and his family because of the connectivity issues.  I spoke with my son-in-law (a network guy) and he believes it’s not Cox, but Netflix.  I’m glad I’m not just old and cranky – OK, I’m old and cranky but my Netflix still doesn’t work as well as Amazon Prime.




    On another subject, the about-to-be-imposed soft drink tax in Philadelphia, an MNB user wrote:

    You will be happy to know that I just finished a conversation with a good friend of mine in the Philadelphia area. He just acquired two store locations across the line from the City of Philadelphia. One in Bala Cynwyd and the other in Melrose Park. These two properties will offer discount pricing on soda since it will not be taxed at the rate of the city. He will mark it up .20 to make a higher profit and still be cheaper than Philadelphia. Capitalism at work.

    Good for him. I'm a capitalist, and I think that it is heartening when other capitalists figure out how to make a buck. (Of course, I prefer if they do it without exploiting workers and abusing consumers ... but that doesn't sound like it is the issue here.)



    Regarding our story about churches using technological aids to help attendees give more easily, one MNB user wrote:

    I suspect more than one church has a text code for giving as the church I attended in Wichita, KS has several options for giving that include both on-line and traditional and they are not known for being cutting edge. It is a new generation and as you are fond of saving you either figure it out or get out of the way. While churches aren’t established as businesses, there is the business of church and bills still need to be paid including employee salaries.




    And, on another subject, MNB reader Jim Mahern wrote:

    Your comment earlier this week - "not that the country isn't going to hell in a hand basket" was surprising to me.

    You are usually positive in comments about our country and such things as Amazon, Alexa, Millennials and those businesses like Kroger who continue to adapt and grow even in difficult times. Perhaps we all need to look at America in the words of John Steinbeck in  "America and Americans".

    "We have failed sometimes, taken wrong paths, paused for renewal, filled our bellies, and licked our wounds, but we have never slipped back. Never".

    We do not need to "make America great again". We just need to continue striving for  "E Pluribus Unum".


    I guess I've been watching too much cable news. Not a good thing for the spirit or the soul.

    Makes me think that we are in rats’ alley where the dead men lost their bones.
    KC's View: