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Rise of the Machines: Two Factors Driving Automation

automation
Archives, Global Logistics, Global Trade Daily

Rise of the Machines: Two Factors Driving Automation

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Today I want to talk a little about automation. I’ve talked earlier about the future of work, and there are some obvious trends like remote work and digital transformation. But automation is a significantly growing field, especially in retail markets. Trends in the industry respond to market pressures that affect the supply of and demand for labor. When human labor is cheap, automation will be used less. When human labor is scarce or expensive, automation will be used more. Today, I want to focus on two key market pressures that are driving demand for more automation.

First, declining birth rates are signaling potential labor shortages in the future. According to the CDC, in 2020, the total fertility rate (TFR) for the U.S. dropped to 1637.5 births per 1000 women, a decline of 4% compared to 2019. While some might blame the pandemic for the decrease, the 2020 number follows a downward trend that started in the 1970s. With fertility below the replacement rate of 2100 births per 1000 women, the U.S. labor force may be starting to decline. With an aging population and fewer workers, companies will likely be forced to increase automation or increase pay to attract and retain employees.

Second, rising labor costs are already encouraging companies to experiment with more automation. Depending on which pundit you ask, you will get very different answers as to why labor costs are rising now, but whatever the reason, businesses are grappling with higher personnel costs. As an article in Forbes recently noted, “The law of supply and demand says this scarcity makes existing workers more valuable, letting them insist on higher pay and better conditions.” As a result, some companies are turning to automation.  Fast-food chains are experimenting with automated fry cooks. The drive-thru is also poised to see more automation. Other experiments include cashier-less grocery stores and last-mile delivery.

Retail automation, therefore, seems poised for growth, but automation likely will not be a good fit for every job. Peanut the robot, for example, demonstrates that automation cannot effectively replace wait staff yet, but you may have noticed an increase in self-checkout lines in many stores. Kiosk ordering at restaurants has also been rising in popularity over the last few years, and as noted above, fast-food restaurants are experimenting with highly automated systems. In many cases, automation has the advantage of driving down operating costs. Robotic systems, for example, may have high capital costs, but they do not tire or want health benefits like human workers. Therefore, robotic systems can reduce long-term costs and save companies money.

All of these automation systems build on technology trends that have been growing for years: voice recognition, touchscreen interfaces, online shopping, and robotics, to name a few. Companies investing in these spaces will likely do well once retail automation really takes off. Some may worry that automation will eliminate jobs, but that likely will not become a serious problem. Throughout history, automation has eliminated some jobs while creating others.  I recommend worrying less about the jobs that automation will eliminate and instead focusing on what new kinds of jobs will be enabled by the new technologies.

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Louis Lehot is an emerging growth company, venture capital, and M&A lawyer at Foley & Lardner in Silicon Valley. Louis spends his time providing entrepreneurs, innovative companies, and investors with practical and commercial legal strategies and solutions at all stages of growth, from the garage to global.

consent
Archives, Global Trade Daily, Software

When Determining the Right Preference and Consent Provider, Know the Differences in Capabilities

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Thousands of companies today, large and small, are realizing the importance of building trust and giving customers a voice through functions such as customer consent and preference management. Regulations such as GDPR and CCPA, as well as customer backlash related to poor customer experiences, has forced much of this shifting environment for brands today.  

Why is consent and preference management becoming more important? 

Customer consent is important because it grants permission for brands to provide marketing or service communications with prospects and customers. Preference management is also important. We all sign up for newsletters, product information, promotions as well as lifestyle preferences related to things such as travel. Therefore, it is important for all customer-facing departments (e.g. marketing, sales, and customer service) within a business to make it very easy for customers to indicate and change their preferences as their interests evolve over time. 

Companies today are spending millions on marketing technologies that enable seamless customer consent and preference management. Research firm Markets and Markets1 estimates that the consent management industry will represent $765 million by 2025, up from $317 million in 2020.  

Not all preference and consent providers are equal  

While many businesses are realizing they need these critical technologies to enhance, refine and preserve the overall customer experience, they should do their homework when selecting the right preference and consent management technology provider to work with – as not all are created equal. 

All-in-one may not mean the best solution 

At first glance, there are a handful of enterprise-level technology providers that do everything from customer relationship management to marketing automation to preference management. These cloud-based software companies have the look and feel of a “Big Box” provider and offer a suite of applications that help companies manage all aspects of their business.   

The allure of working with a provider such as this is the single vendor, “all-in-one” solution where there are often no additional costs or integration required for a core platform. However, what they gain in their single-stop allure, they often fall short in truly satisfying the unique, holistic, and cross-platform solutions needed for preference and consent management requirements for each individual company. 

Specialty vendors can build custom solutions 

On the other hand, specialty and boutique providers that focus on preference management and consent solutions offer a more holistic approach that includes strategy, best practices, process, and governance in addition to technology. They often start by interviewing their customer’s customer to understand what’s truly important to the consumer. With this insight in hand, they are able to design a holistic solution that meets both the consumer’s and organization’s needs. With this roadmap in place, they are ready to manage the deployment process and help gain adoption. This greater internal and external adoption leads to increased customer engagement, improved marketing ROI, and higher revenue potential.  

Along with internal adoption comes the ability to help integrate preferences for consumers across the entire organization and its many departments – a critical function that can be missed by “big box” providers whose offerings aren’t designed to meet this unique set of needs. As a result, this leads to a single view of the customer, greater customer trust, and assurance of regulatory compliance.  

On the surface, listening to customers and honoring their preferences is not only obvious, it’s also a must in today’s customer-driven business climate. Every business today must listen to their customers and the outcomes are immediate and apparent. As digital environments grow increasingly more complex – along with the penalties introduced for non-compliance – businesses of every size, and in every region must rely on the right solutions. It is up to each individual business to determine the right provider to work with for the right set of unique solutions. 

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Editor’s Note: Tom Fricano is the Practice Director of Strategy and Consulting at PossibleNOW. With more than 25 years of experience, Tom assists clients with customer experience, preference management and consent initiatives through advisory and strategic consulting, technology expertise and project to product to implementation roadmaps.

Learn more at: https://www.possiblenow.com/preference-management 

1: https://www.marketsandmarkets.com/Market-Reports/consent-management-market-68100621.html 

transforming logistics
Archives, Global Logistics, Warehousing

How Start-Ups are Transforming Logistics

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It’s hard to imagine life in a world as globalized and interconnected as ours without logistics. Logistics ensures that all materials and products get from the point of origin to the point of consumption, which could be on the other side of the world. So it’s fair to say that the logistics business is not going away any time soon. However, it may be changing. Young innovators and entrepreneurs are coming up with new and modern solutions to some of the industry’s most significant issues. And the ways in which start-ups are transforming logistics may make the industry better in the future.

Start-ups are transforming logistics by introducing new modes of transportation

For decades, the logistics industry has relied on traditional modes of transportation. And there are certainly benefits to maritime shipping, long-haul trucking, and speedy air freight, but there are also serious downsides. It’s becoming increasingly clear that the way logistics operates today is not sustainable in the long run. Start-ups are here to change that.

Use of drones

Although drones likely won’t replace standard delivery methods just yet, more and more companies use them as an alternative way to reach their customers quickly and easily. They are convenient for local and last-mile deliveries, but as drone technology evolves, they will undoubtedly be used elsewhere as well. There’s some speculation about their suitability for warehouse inventory sorting, for example.

Software, digital platforms, and online solutions

Specialized software can do wonders for logistics. It can make relevant information easier to gather and interpret, reveal underlying problems you aren’t aware of, encourage better communication, and streamline efficiency. What is more, digital solutions can easily evolve with the business. As the needs of the business evolve, the software can be updated to meet them. This makes it a flexible solution that works in the long run too.

Anticipatory logistics

Any business that has worked with a start-up marketing agency has seen first-hand how important it is to anticipate the customers’ needs if you want to please them. The same principle can be applied in logistics itself. The idea is to predict demand before it occurs.

This way, logistics companies become more proactive and less reactive. By analyzing market trends and anticipating their customers’ needs, logistics providers can transport and deliver goods to distribution hubs early. By the time the consumer orders something, the only thing left is last-mile delivery. Anticipatory logistics like this could cut delivery times significantly. It would also be more cost-effective as fewer vehicles would be traveling empty on their way back. Instead, they’d carry the goods expected to be needed by the time they get back.

Automation and robotics

Although automation and robotics are frequent topics in sci-fi dystopias, they’re not something to be afraid of. In fact, automation could significantly improve the logistics industry. It could eliminate human error, speed up packing and sorting, and improve workplace safety. And with recent strides in machine learning, a world in which robots man warehouses and trucks may not even be that far.

Start-ups are transforming logistics by raising the standards

One of the most remarkable ways start-ups are transforming logistics is by simply doing better than industry giants. A business that has just started out must offer quality service and novel solutions to attract customers, and start-ups are doing that. They are finding ways to spend less money, be more efficient, keep their customers happy, and even be better for the environment. In doing so, they are setting the standard for everyone in the business. By being better, they are inspiring others to be better too. And that benefits the entire industry and everyone who relies on it.

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Emily Peterson is a software developer who specializes in digital marketing for small businesses and start-ups. Her interest in global logistics stems from her work with businesses in the industry during which she witnessed first-hand some of the issues that logistics companies face today.

return on experience
Archives, Banking, Global Trade Daily

Uncover New Opportunities from a Return on Experience

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The pandemic, though terrible, has given us much-needed time to pause, reflect, and perhaps make some changes to the way we live our lives. We have a chance to reevaluate what is really important to us. What brings us happiness? What drains our energy? What experiences add meaning to our days? Which ones take it away? We have an opportunity to face this challenge in a way that makes us better people.

Businesses are on a parallel path. With the diminishing of old norms comes the possibility of reimagining our old processes. That has brought about an acceleration of technology adoption across virtually every industry. Still, there’s another storyline emerging as well—the rise of what Heather E. McGowan calls The Human Capital Era. McGowan believes that the workforce has exhibited incredible resilience and creativity during the pandemic. They’re “an asset to develop rather than a cost to contain.”

I’m all for it.

Everyone knows the term “return on investment”—or “ROI”—meaning you get more monetary value out of something than what you put into it. But money is not the only measure of value. As we take stock of our business and personal lives, I think we should re-establish a lesser-recognized concept: return on experience.

Return on experience is significantly more objective than a return on investment since the measurement varies by opinion rather than hard numbers.

For example, we all have gone out to have dinner and found that the bill was more expensive than expected. Maybe the food was just so-so, you had a long wait time, or the server was brusque. Whatever the reason, it just wasn’t a great experience. But you might gladly pay twice as much for dinner where the food is delicious, or the service is kind and attentive. That’s what I think of as return on experience—getting value beyond what money can buy.

We embrace this concept more easily in our personal lives, where there’s less accountability for how we spend our money. For example, pre-COVID, I enjoyed traveling with my wife and two kids. Those trips were expensive, even after accounting for the hotel points and airline miles I’d collected. But the memories will stay with us forever, long after the cost has been absorbed and forgotten.

When you think about your business and your accounts payable team, what is the return on experience from antiquated methods like processing checks? What is the opportunity for growth? One person can’t cut or sign checks much better than another. There’s a limit to the impact you can have by stuffing checks in envelopes every week. It’s the opposite of a good experience.

Incorporating automation in your back office is a good way to tackle ROI and ROE simultaneously. When you have removed mindless tasks from your AP team’s plates, they are free to spend their energy on more interesting, strategic, and valuable tasks. I think that’s an initiative that’s well-aligned with the Human Capital Era.

As we re-examine our lives and our businesses, let’s remember what it means to evaluate something in the first place: to judge or calculate the quality, importance, amount, or value of something. And in that calculation, consider the return on experience in terms of your business, beyond money. It’s about setting yourself and your employees up to live and work in a high-quality environment—one that encourages personal and professional development.

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Derek Halpern is Senior Vice President of Sales for Nvoicepay, a FLEETCOR Company. He has over 20 years of technology sales and leadership experience, including 16 years in the fintech and payments space. 

information technology
Archives, Executive Education, Global Trade Daily

In The Digital Age, Leadership Is More Important Than Ever

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There are some executives that like to look at academic journals but unfortunately, the crossover literature has not reached them enough. I attempt to blend scholarly concepts with real-world applications. For the executive’s corner, I place a great deal of emphasis on the literature of leadership and information technology as two significant indicators for financial performance. This article adds to a relatively small body of literature but pays homage to the scholarly contributions. I highlight the direct impact of leadership on financial performance, and also simultaneously portray the indirect contribution of leadership in improving organizational outcomes by implementing information technology as another important component of organizational performance. This article actually investigates the crossover potential of scholarly research and how it can be applied in the organizational boardroom.

Executives will also see that cultivating effective technological initiatives requires developing leadership within companies—not only at the higher echelons of the company but at every level. In light of the increased pressures of the global workplace that inspires executives to exert effective change at the organizational level, this article points out the vital importance of leadership in reshaping and, in some cases, manipulating a company’s internal resources to have access to higher performing technology within companies.

The focus of this article is based upon the critical role of leadership which allows a rich basis for understanding the mechanisms by which knowledge integration and financial performance are influenced. Scholars repeatedly uncovered leadership impacts on knowledge integration and financial performance. This article articulates a different approach. I simply extended the current literature by showing how executives can contribute to knowledge integration and financial performance by fostering effective technological platforms. These two factors coupled with leadership are presented as a new approach for executive implementation.

I also suggest that executives embrace leadership. Leadership influences some of the spans of control of executive responsibility. My primary focus is on one factor (i.e. information technology) but there are many more important components of the managerial function that can be enhanced when leadership is embraced. The key here is that there are positive effects of information technology, knowledge integration, and financial performance.

Executives will also see that I expand upon the subject matter of a company’s internal resources. Through articulating the impacts of leadership on information technology, I add to the current and extant literature. Insufficient consideration of the impact of leadership on the companies’ internal resources has been exposed and I attempt to address this concern for the first time. For executives, this article can portray a more detailed picture of the effects of leadership on information technology, knowledge integration, and financial performance that have been mentioned but not placed in a model in the past.

Leadership and Information Technology

The only thing we know is technological change is on the rise. With the inception of new technology and services quickly becoming obsolete, executives are staid with managing the future that is somewhat evasive.

Executives can develop relationships and interactions within companies, set desired expectations, and inspire employees to identify further opportunities in their business environment. When executives view information technology as a vital important organizational resource that facilitates organizational communications and improves the search for knowledge, they begin to see opportunities for successful business ventures.

Executives also spend a great deal of time conceptualizing strategic endeavors, and scholars affirm that the strategic role of leadership is enhanced when the implementation of information technology successfully occurs at the right time and place. Thus, executives raise the levels of awareness on the importance of technology and empower employees to improve the effectiveness of information technology implementation within companies. Therefore, executives can positively affect information technology implementation within companies. Executives must understand that leadership can highly support information technology to improve knowledge integration and financial performance and, therefore, remain competitive.

Leadership and Financial Performance

Executives develop organizational communications aimed at providing valuable resources for all employees. Thus, executives can enhance knowledge sharing among employees and stipulate knowledge to be shared around the company. Sharing the best practices and experiences could positively impact aspects of organizational performance such as innovation and providing learning and growth opportunities for employees. Empowered employees can also enable a company to actively respond to environmental changes and collective-interests. The key idea is to identify employee’s needs and show concern for both organizational needs and employee’s interests concurrently.

When executives show concern for the employee’s individual needs, individuals begin to contribute more commitment and they become more inspired to put extra effort into their work. This extra effort improves the quality of services, customer satisfaction, and impacts the return on assets, sales, shareholder value, and improves operational risk management.

Executives can also inspire employees by setting highly desired expectations. A higher level of follower expectation can enhance productivity and perhaps decrease organizational costs. Scholars agree that executives positively affect financial performance through improving the price of stock, decreasing costs, increasing sales, improving innovation, increasing the rate of responses to environmental changes, improving the quality of services, along with a stronger customer focus and developing learning opportunities for employees. Thus, leadership is positively associated with companies’ financial performance.

Information Technology and Financial Performance

Information technology significantly contributes to company financial performance. Scholars acknowledge that information technology is an important enabler to effectively implement organizational processes. Communication technologies can, in fact, reduce paper-based transactions for companies that can potentially decrease costs and subsequently improve profitability for companies. Furthermore, it can be seen that communication technologies contribute to companies to effectively identify opportunities in the business environment that leads to identifying the best opportunities for investment in the industry that potentially leads to improve financial performance for companies in terms of return on investment (ROI).

Decision-aid technologies as another kind of information technology can also help companies to effectively create more innovative solutions for their organizational problems. Executives can, therefore, build a high-performance company through implementing information technology.

Information Technology and Knowledge Integration

Information Technology is the new competitive advantage and the companies that embrace it will survive while those that do not will find their companies facing possible acquisition. Information technology is a resource for knowledge integration. With knowledge integration, executives can sustain current operations while preparing future endeavors. Information technology, as a competitive resource, encourages employees to embark on technological facilities such as shared electronic workspaces to provide new ideas and possible solutions for solving problems. Problems that may leave a company to debunk and less competitive.

Scholars found that the lack of innovative workplaces adversely impacts the company’s capability to integrate knowledge, and they suggest that companies use information technology to successfully facilitate knowledge integration. Information technology, therefore, plays a critical role in integrating knowledge by executives and is also aligned with the knowledge-based view of the firm which not only builds upon the dissemination of information but also how it is restored and retrieved.

Some Lessons for Executives

This article theorizes that leadership has significant effects on information technology. It follows that cultivating effective impacts on information technology is assisted by developing leadership within companies. The practical contribution of this article lies in explaining how executives influence information technology.

This article suggests that information technology constitutes the foundation of a supportive framework to improve knowledge integration and financial performance. In fact, it can be argued that if information technology is not completely supportive of knowledge integration, companies cannot expect to benefit fully from knowledge management projects.

Both in theory and in practice, information technology is depicted as an important enabler for knowledge integration and financial performance. Scholars noted that a strong alignment exists between the success of knowledge management projects and information technology implementation and found that knowledge management projects are more likely to succeed when companies develop and use broader technological infrastructures. This article goes further and provides elaborative insights for executives by modeling how information technology mediates the relationship between leadership, knowledge integration, and financial performance.

This article reveals that executives actively deploy this organizational resource (i.e. information technology) to improve knowledge integration, and it is quite understandable that leaders are better suited to enable knowledge management projects within companies through channeling knowledge management efforts into employing supportive information technology. Therefore, this article suggests that it is critical that executives understand that leadership supports information technology implementation to effectively manage knowledge management projects.

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Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to business publications and his work has been featured in top-flight business publications.

digital wallet
Archives, Banking, Global Trade Daily

Digital Wallet Usage Soars in a Post-Pandemic World: Big deals in Venture Capital, IPOs and M&A are Following the Digits

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In the wake of the global pandemic, alternative payment methods have been required to transact business at nearly all levels of the economy. The market for alternative payments was already going through a natural transition before social distancing and lockdown dramatically accelerated growth in the digital sphere.

Over the last decade, digital wallets have grown from a niche payment option to a global phenomenon – with 22 percent of point-of-sale spend globally in 2019. Asian consumers and American millennials are used to seamless payments for daily transactions – with increasing expectations for simple, secure ways to make payments. Today, Asia leads the world in digital wallet adoption, and Chinese leader Ant Financial is on the precipice of what will perhaps be the largest IPO in the history of the world. But eye-popping financial results at PayPal and Square, fueled by Venmo and Cash App, are proof that digital payments are gaining traction with mainstream American consumers.  Investors have taken note.

Big deals in venture capital, IPOs and M&A transactions are following the money, as digital payments are becoming ubiquitous in both new and emerging markets. Smart investors will be well advised to beware of the lurking regulatory and legal issues faced by digital payments businesses before transacting.

What are digital wallets?

Digital wallets, also known as mobile wallets, are consumer-focused apps that facilitate payments, typically via smartphone. Mobile banking apps tend to accrue fees or recycle money into loans, but digital wallets don’t. In the late 1990s, commercial versions of digital wallets became popular, with PayPal as one of the first well-known examples. Soon after, the technology reached mainstream once smartphones came into our lives. In the U.S., companies like Zelle and Venmo have gained momentum by creating simple peer-to-peer mobile payments. Big tech companies are betting big on digital payments, evidenced by Apple Pay, Google Pay, SamsungPay, WhatsApp Pay, and more.

Digital wallets in Asia – a duopoly

Today, Asia is the hub for digital wallet innovation. While the trend is speeding up in many parts of the world, digital wallet adoption in Asia is unparalleled. In fact, in China, digital wallets account for 48 percent of payment volume and seven percent of e-commerce spend. Mobile wallets have been successful in Asia because they provide a solution that is better than cash.

The innovation in Asia has coincided with the rise of smartphones and super apps use, which helped the area get ahead. Additionally, digital wallets in APAC countries make up 58 percent of regional e-commerce payments and have surpassed cash at point-of-sale. But, their ubiquity in Asia presents a barrier to startup opportunity, as tech giants dominate certain countries in the region. For instance, Ant Group’s Alipay and rival Tencent’s WeChat Pay maintain a mobile payments “duopoly.” According to The Economist, in Asia, Alipay and WeChat Pay account for 54 percent and 39 percent of the country’s mobile payments market by value, respectively. These companies are processing trillions of dollars in transactions each year, while in economies like Japan and South Korea, credit cards are still the most popular form of payment. In other regions like South Asia and Southeast Asia appear to offer more room for startup growth. Meanwhile, India is home to 34 percent of digital wallet deals, followed by Singapore at 19 percent.

Digital wallets in the United States – opportunities and challenges

Digital wallet adoption is now accounting for 24 percent of e-commerce spend in the U.S., according to data from Worldpay. Digital wallets are going up against an engrained credit-card dominated system that uses rewards and travel programs to stick to customers over the long term. While QR codes have been a powerful lever for mobile wallets in Asia, the trend is just beginning to arrive in the U.S.  Key retailers like Starbucks and Walmart have added QR codes to the register option, and their use in the U.S. during the pandemic has enjoyed the substantial benefit. For example, QR codes are being implemented by restaurants to allow customers to order and pay for meals on a contactless basis, enabling safety and cost reductions from disposable menus and less waitstaff.

Attacking the U.S. market for digital wallets involves special challenges:

-Looking beyond the initial transaction to compete with sticky loyalty programs, and indeed, find ways to incentivize customers.

-Higher transaction volumes between the different value chain players require interoperability and centralized infrastructure.

-Security and compliance costs to secure the highest quality, lowest risk and great number of customers.

Venture capital investment

So far in 2020, digital payments companies Checkout.com, Stripe, and Adyen raised giant piles of cash from venture capital and other investors. Leading digital payments investors include Coatue, Insight Partners, DST Global, Blossom Capital, and numerous sovereign wealth funds. While the amount of capital that venture capital firms deployed into emerging growth companies declined 11% on a year-over-year aggregate basis in Q3 2020, fintech deals were up, with digital payments leading the surge. Payments solutions embedded in the end-user experience for non-financial businesses are gaining traction, together with data collectors and infrastructure players.

Accelerating M&A in digital payments

While the eye-popping venture capital financings of unicorns like Stripe’s $600M Series G preferred stock capital raise (at an estimated enterprise value of $36B) made headlines, digital payments solutions also drove significant M&A volumes in 2020.  This was evidenced by three acquisitions by the U.S.’s largest credit card networks American Express, Mastercard, and Visa. In January of 2020, Visa transacted to acquire Plaid for a total potential value in excess of $5B. In June of 2020, Mastercard transacted to acquire Finicity, a financial data aggregator, for a deal value in excess of $1B.  In August of 2020, American Express announced its acquisition of fintech lender Kabbage, aiming squarely at the small business market with a broader set of payments products.

In the digital wallet world, the ability to collaborate with other value chain players – and even new industry entrants – could be one of the most unique and innovative features of a successful company. This phenomenon was evident in Visa’s announced acquisition of VC-backed Plaid. Depending on how they leverage the network effects, industry leaders can find a way to capitalize on the massive amount of data that exists along the value chain. This data will help create and own standards and to design platforms for improved overall customer experience.

Regulatory issues with digital wallets

Due to regulations, digital wallet players are very regionalized. For example, Apple Pay is a big player in the U.S. but has zero presence in India. Additionally, Facebook’s WhatsApp Pay roll out in India has been held up by countless regulatory issues. Specifically, Asia’s fragmented regional regulatory landscape comes with an array of legal challenges. For example, licensing procedures may vary across geographic markets – without more consistency, and the different local regulatory requirements may result in increased costs and the amount of time required for companies to expand their digital wallet footprint.

In the United States, compliance with federal and state money transmitter laws is a byzantine enterprise, and often just the tip of the iceberg in terms of regulatory compliance.  In addition, digital payments businesses must comply with:

-The Consumer Financial Protection Bureau and its prepaid rule, which requires a regulated entity to provide a consumer with two disclosures prior to acquiring a prepaid account. Legal challenges to the prepaid rule are gaining steam, but in the meantime, compliance should be architected into the business model.

-Anti-money laundering rules issued by the Financial Crimes Enforcement Network (or FinCEN) if the business provides “money services.”

-Banks and bank affiliates must also comply with the Bank Holding Company Act.

-The Office of the Comptroller of the Currency, or OCC, can provide a further layer of regulation on top of embedded functionalities. A federal regulatory movement is afoot to combine the byzantine layers of regulation between the federal government and the various state and local agencies into a single federal system.  State regulators are pushing for a passport system like Europe where regulation by one state would suffice for all states “opting in”.

During the pandemic, some non-U.S. and U.S. federal and state regulators have implemented regulatory sandboxes, where requirements are temporarily relaxed to provide spaces for new platforms to test new technologies.  Policies should support access, rather than raise barriers to adoption.  The smartest startups are engaging with regulators, while architecting compliance into the product roadmap, to ensure regulatory compliance.

Meanwhile, investors should do their due diligence prior to committing capital, as in addition to all of the regulatory compliance issues, digital payments companies are vulnerable to a data breach, cyber-attack and theft, and are often built with software containing lines of code with open source.

The future of digital payments looks green.

Good advisors can help navigate key business, regulatory, and legal issues at the formation stage, in the scaling phase, and then to achieve optimal exits from digital payments’ businesses.

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Louis Lehot is the founder of L2 Counsel. Louis is a corporate, securities and M & A lawyer, and he helps his clients, whether they be public or private companies, financial sponsors, venture capitalists, investors or investment banks, in forming, financing, governing, buying, and selling companies. He is formerly the co-managing partner of DLA Piper’s Silicon Valley office and co-chair of its leading venture capital and emerging growth company team. 

L2 Counsel, P.C. is an elite boutique law firm based in Silicon Valley designed to serve entrepreneurs, innovative companies, and investors with sound legal strategies and solutions. 

blockchain
Archives, Global Logistics, Global Trade Daily, Software, Special Reports

Blockchain: The Next Big Tech Paradigm Shift

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While most of blockchain’s success over the past decade has been linked to bitcoin, Ethereum, and other cryptocurrencies, distributed ledger technology is now poised to move into mainstream applications and launch new opportunities in multiple markets.

Technological change has followed a predictable path over the past fifty or so years. Chips and devices got smaller, more processes were automated, and life became more convenient. Since the beginning of 2020, we have seen a rapid uptake in the pace, not to mention the massive adoption of technologies into our everyday lives. As we adapt to a long-term period of social distancing, the paradigm in which technology evolves has been upended, and every member of society has had to quickly find new technology-based solutions to accomplish tasks previously taken for granted. In the coming decade, technology will shift from automating and replacing manual labor to replacing routine cognitive work, and blockchain is poised to be a key driver of the “fourth industrial revolution.”

The paradigm shift into the “fourth industrial revolution” was first postulated by Klaus Schwab in a 2015 article published by Foreign Affairs, and refers to the evolution in the way we live, work and relate to one another, enabled by extraordinary technology advances. According to Schwab, these advances are merging the physical, digital and biological worlds. The social distancing measures required to respond to the global pandemic has put this fourth industrial revolution into overdrive.

What is blockchain, and why will it ascend over the next decade?

Blockchain’s influence will affect all aspects of your life, including how you work and purchase goods from clothes to groceries to houses. Everything.

Simply put, blockchain involves recording information in a way that creates trust in the data recorded. Blockchain is proof that you own something digital—whether it is a bitcoin or your personal health records. Blockchain proves you are the owner of whatever digital information you have on the distributed, decentralized public ledger.

Initially, blockchain was created along with bitcoin to give power back to the people. Since its creation, it has expanded well beyond cryptocurrencies and is growing exponentially. Estimates suggest that blockchain technology has been adopted by more than one-third of the world’s companies.

 

 

We already live in a digital universe. We no longer visit Blockbuster to rent movies, and very few of us have DVDs. Instead, we use Netflix, Hulu, and Amazon Prime to watch our shows and movies. We order all manner of products online. Blockchain has become essential because it allows us to own our digital goods, assets, and data.

A blockchain can be trusted as a source of truth. Suppose certain information (data) was included in the blockchain sometime in the past, but the data may not be correct. Records on the blockchain are immutable and provide an unalterable trail. A mistake can only be corrected by adding another block to the chain with consent from all participants. A blockchain records tangible and intangible assets among a network of peers that use the same software, algorithms, and cryptography to maintain the records.

Currently, there are two types of blockchain: permissionless (public) and permissioned (private). Participants use pseudonyms to protect their identity with permissionless blockchains, and there is no identification of participants. On the other hand, permissioned blockchains are protected by access privileges. Participants are authenticated, and a super-user may control the network. Permissionless blockchains are considered more reliable because of the consensus principle.

Blockchain currently enables many uses, including Tokenization to protect sensitive data, unalterable timestamping, the transfer of assets through a payment channel, and the facilitation of smart contracts. To date, blockchain has been used to make more processes more efficient by replacing components or by providing an entirely new blockchain service. The most well-known example of blockchain’s usage is cryptocurrency, but its possible applications are still being explored across many industries.

Why companies are integrating blockchain solutions

By 2023, the global blockchain market is set to reach $20+ billion, indicating how quickly businesses are expected to adopt blockchain solutions. The most prominent and influential companies worldwide have all turned their attention toward blockchain. Tech giants like Apple, Microsoft, Google, Amazon, and Facebook are investing billions in powerful technology. And, Wall Street wants in, too. What makes blockchain so attractive to business?

First and foremost, it reduces operational costs by obviating the need for a centralized authority. Removing intermediaries is crucial for business because it reduces costs and points of contact, improving company efficiency and growth. What could be better in the eyes of a business leader? Estimates suggest the adoption of blockchain technology will save than $100-$150 billion by the year 2025. Blockchain’s adoption will reduce the costs of personnel, support, operations, IT, data breaches, and much more.

In addition to blockchain’s efficiencies and security, it allows for the completion of transactions in seconds rather than days. Transaction speed is especially important in international interchanges.

We previously survey the investment environment for blockchain-based businesses here.

Despite blockchain’s many advantages, it is imperative that we understand the legal implications, risks, and opportunities its use presents.

Legal issues to watch for

Stakeholders in blockchain solutions will need to ensure that their products comply with a legal and regulatory framework that was not conceived with this technology in mind. From a commercial law standpoint, smart contracts must be contemplated for negotiation, execution and administration on a blockchain, and in a legal and compliant fashion. Liability, first and foremost, needs to be addressed. What if the contract has been miscoded? What if it does not achieve the parties’ intent? The parties must also agree on applicable law, jurisdiction, proper governance, dispute resolution, privacy, and more.

There are public policy concerns that should be taken into account in shaping new laws, rules and regulations. For example, permissionless blockchains can be used for illegal purposes such as money-laundering or circumventing competition laws. Also, participants may be exposed to irresponsible actions on the part of the “miners” who create new blocks. Unfortunately, there aren’t any current legal remedies for addressing corrupt miners.

Potential solutions

As lawyers and technologists ponder these issues, several solutions are being bandied about. One possible remedy involves a hybrid of permissioned and permissionless blockchains. Some transactions require intervention by a responsible party, such as when Know Your Client regulations are in play. All participants in blockchains and smart contracts where data is exchanged are data controllers. This means participants must comply with all data protection requirements.

Another consideration is what goes on the chain or what, instead, goes in the smart contract and off-chain. While it is possible to include provisions regarding liability, jurisdiction, and other legal aspects in the smart contract, this allows no room for interpretation because it is based on conditions. A better solution may be to have a real contract stored off the chain, but linked to it with a hash-secure value, for added confidence.

The ongoing regulatory push for more data with trends like controlled free trade, increased border security, and accreditation of economic operators, leads to higher compliance costs. This means that parties trading globally need higher supply chain visibility and security. Data that is both high quality and secure and trade compliance systems that can cope with the electronic exchange of data, are requirements.

Global trade involves many parties beyond the buyer and seller, such as customs and regulatory authorities, financial institutions, shippers, brokers, and insurers. There are multiple exchanges of data among those participants, presenting opportunities for implementing a blockchain to trigger and record invoices, bills of lading, and customs compliance.

Welcome to the future

As blockchain technology matures, global trade supply chains will increasingly use the technology, with the authorities monitoring transactions and compliance with customs declarations, duty payments, and sanctions rules. Further, combining blockchain with the Internet of Things will give manufacturers the ability to track products, manage risk in distribution networks and demonstrate good corporate governance.

While no one can predict how the future will unravel, it seems clear that blockchain will play an important role.

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Louis Lehot is the founder of L2 Counsel. Louis is a corporate, securities and M & A lawyer, and he helps his clients, whether they be public or private companies, financial sponsors, venture capitalists, investors or investment banks, in forming, financing, governing, buying and selling companies. He is formerly the co-managing partner of DLA Piper’s Silicon Valley office and co-chair of its leading venture capital and emerging growth company team. 

L2 Counsel, P.C. is an elite boutique law firm based in Silicon Valley designed to serve entrepreneurs, innovative companies and investors with sound legal strategies and solutions.

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Archives, Global Logistics, Global Trade Daily

AI is Transforming the Manufacturing Industry: Pros and Cons

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The expansion of the global economy continuously triggers the use of new technologies across sectors. There’s no doubt that the manufacturing industry headlines the application of artificial intelligence technology. From product design, production, supply chain, and logistics, manufacturers are using AI software.

The use of these AI analytics and data has helped improve product quality and efficiency. It has also improved the safety of employees and delivery processes.

However, the AI-powered industrial revolution is not without criticisms. Thus in this post, we’ll consider the pros and cons of AI in transforming the manufacturing industry.

Pros of AI transformation of the Manufacturing Industry 

Generally, AI’s beneficial to the various aspects of manufacturing and product distribution. Here are the positives of artificial intelligence:

Predictive Analytics for Increased Production Output

AI manufacturing systems make use of predictive analytics and machine learning algorithms. Since the manufacturing sectors have a large volume of data, the AI predictive analytics is powered from this data. Data are kept in the cloud for analysis and monitoring of any process or equipment disruption.

With this predictive setup, companies can now easily apply a predict-and-fix maintenance model. The guesswork regarding what is wrong with the equipment or process is eliminated. Rather than stop the whole production to detect-and-fix the problem, AI predictions pinpoint anomalies more quickly. It likewise suggests tools and solutions to correct the problem.

Furthermore, manufacturers can also sync production schedules to enhance production output. A report from Mickensey says that an AI predictive maintenance model can increase productivity by 20%. And it can decrease maintenance costs by as much as 10%

Better Generative-Design Process

Another AI advantage is that manufacturers can create better ways of designing their products. With generative-designs, the designer can input product details. Such details include the type of material, appropriate production methods, budget, and time. The designer is also able to input all possible constraints. Using an AI algorithm, the details can be processed to meet a list of possible product options.

The appropriate solution is then tested to suit manufacturing conditions. What makes the generative-design stand out is it eliminating human bias design options. And then it proposes more suitable performance demands.

Improved Process Quality 

Artificial intelligence technology enables a more innovative production process and better product quality. It ensures that products meet the required quality standards and regulations. Manufacturers can achieve this by using equipment that operates with AI technologies like ML and big data.

For instance, tracking sensors could be used in logistics and haulage. It will help to monitor location, take stock, freight charges, and more. According to reports, automation of inventory improves process services by 16%. At the same time, inventory turnovers are likewise increased by 25%.

Such inventory data is used to check for any impending faults that may affect the product delivery service. Thus the company can attain a higher level of specialization. It also eliminates process downtime and increases productivity.

Ever-changing Market Adaptability 

Besides production, there are other significant aspects of manufacturing where AI is pivotal. These include distribution and supply chains, monitoring, customer behavior, and change patterns. Therefore, AI in manufacturing ensures that companies can predict possible market changes. With this, they can go ahead to strategize towards better production and other cost management processes.

Additionally, manufacturers can use AI algorithms to estimate market demands. Such estimates are possible because AI uses the information gathered from different sources. Such as consumer behavior, inventory of raw materials, and other manufacturing processes.

Optimizing Supply Change

When AI technology is adopted in the supply chain process, there’s transparency and increased data. It’s used to enhance manufacturing processes and customer service further. Data from multiple devices are collected and analyzed in real-time to get a more in-depth insight like a possible challenge. Manufacturers are then able to make informed industry-related decisions. AI helps minimize cost and time that may be incurred on warehousing and shipping in the event of any mishap.

AI tools and solutions also help schedule factory activities, demand and supply gaps, and avoid over or under production. Mckinsey estimates that AI technology-based supply chain management enables businesses to cut down forecasting errors by 20-50%.

 

 

 

Furthermore, AI chatbots enable taking care of client inquiries using human-type interactions. In turn, it helps to free up human resources. Such technology allows manufacturers to address clients’ requests and enquires quickly. For instance, a custom writing review service like Online Writers Rating may need to go through thousands of papers daily. And, at the same time, they’ll have to address customer inquiries. But with chatbots, AI provides the necessary customer support, while employees focus on the papers.

Cons of AI in the Manufacturing Industry

As earlier stated, AI in manufacturing is not without criticisms. These are contained in the following artificial intelligence cons:

It’s on the Pricey Side

Artificial intelligence implementation and maintenance costs are on the high side. The budget is one that is often too pricey for small companies and start-ups. Although AI cuts manufacturing labor costs, it still requires installation and maintenance fees. You also don’t want any cyberattacks on your systems, so you’ll also need to consider the cost of cyber threat protection.

Scarcity of Experts and Skills Persons 

Because AI tech is a continually evolving field, thus AI experts with the requisite skills are usually few. Since these tools need regular sophisticated programming, it’s essential to consider expert availability. And also, because they are in high demand, the cost of employing such hands will be on the high side.

Open to Vulnerabilities

Another artificial intelligence con is its vulnerability to cyber-attacks. A recent World Economic Forum report shows that cyber-attacks are among the top five global stability risks. Such information can be pretty scary for any manufacturer using AI software. As AI becomes powerful and wide-spread, cybercriminals are working hard to device new hacking methods. One minor breach can disrupt or fully shutdown a manufacturing business.

Conclusion

AI goes a long way in sustaining your manufacturing business, even amid constant change. It provides predictive analysis that can help manufacturers make more informed decisions. From the product design down to customer management, there’re several positives of artificial intelligence. These include an improvement in process quality, optimized supply chain, adaptability, etc.

However, AI technology isn’t without its cons. Such as expensive budgets and vulnerability to cyber-attacks. Yet the pros of AI outweigh these cons. Therefore, the manufacturing industry can only improve by leveraging AI applications.

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Frank Hamilton has been working as an editor at essay review service Best Writers Online. He is a professional writing expert in such topics as blogging, digital marketing and self-education. He also loves traveling and speaks Spanish, French, German and English.

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Archives, Banking, Global Trade Daily, Stories

AI and Cryptocurrency – How They Can Work Together Effectively

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There will soon come a time when artificial intelligence will be running on top of cryptocurrency systems like Blockchains with its capability to increase machine learning capacity and create new financial products. It will take the technology leaps and bounds further in making it one of the mainstream emerging technologies.

According to the research being conducted about the future of AI, the market is estimated to grow to a whopping $190 billion worth of industry by 2025. Considering how much the market is expected to grow, Blockchain and AI convergence are inevitable.

Both the emerging technologies have been around for a decade now and deal with data and value. Where Blockchain enables a secure storage and sharing path of data, AI analyzes and generates significant insights from data to create value.

Having such similarities, there is no doubt that both the technological realms can be merged to create a more advanced and efficient machine learning blockchain system to benefit the masses. Let’s have a look at how Blockchain and AI are a perfect match.

How Blockchain and AI Is the Perfect Match

The following are some key pointers and examples that evidently showcase how combining Blockchain and AI is a consequent step forward in the right direction for increased efficiency and profitability.

Blockchain connecting with the AI basics

Firstly, it is essential to know that most of the hype surrounding startups integrating Blockchain with artificial intelligence is exactly just that, hype. Such companies are far too young and inexperienced in the industry to be talking about a big game. With few clients and less commercialization, it is understandably not possible to carry out such advance convergence.

The majority of such companies have raised money through the initial coin offering or the ICO. This means that the solutions they offer are as thoroughly evaluated as they would have been had the company raised a significant amount of venture capital money.

However, it is quite so possible that these companies may become successful in the future, but until then, they just create useless hype about the advancements in this technology.

Many people limit the usage of Blockchain technology and associate it with just cryptocurrency transactions. As a digital ledger that can record economic transactions, Blockchain can be expanded to virtually record almost anything of value.

There can be both public and private blockchains. Where the public ones are open to the public, the private or ‘Permissioned’ blockchains are restricted for usage by ‘invitation-only’ and mainly used in the corporate environment. This also makes them faster than public forums as the users are mainly trusted and verified personnel making the transactions verifiable faster.

One of Blockchain’s more important features is that it allows even the unrelated parties to carry out a transaction and share data through a mutual ledger. As cryptography validates the transactions, it makes it more efficient for participants not to rely on third-party evaluators to carry out a transaction. Deploying cryptography ensures that data transactions are secure, incorruptible, and irreversible once recorded.

Artificial Intelligence is not a term making rounds for a decade now. It very much comprises of every new technology that has near-human intelligence to carry out a task. AI models are used to assess, understand, classify, and predict using relevant data sets. Machine learning then cleanses the data as it gathers insights creating better useful data sets for use.

As it is evident, data is the central component to AI and Blockchain that allows a secure and collaborative effort towards data sharing. Both Blockchain and AI ensure the trustworthiness of data and extract valuable insights from it.

How Microsoft is Improving Machine Learning for Blockchain

According to the research conducted at Microsoft, the company is working on finding out ways to design efficient collaborative machine learning models hosted on public blockchains. The incentive behind this effort is to make AI decentralized and a more collaborative forum using Blockchain.

While there is no doubt that advances are being made in machine learning, the benefits that are being created as the results of these efforts are not as openly available. The masses have limited resources and cannot always access cutting-edge technology such as machine learning systems.

Such systems are highly centralized and used as the proprietary datasets. Not only are they costly to recreate, but even the best models can become outdated if not consistently refreshed with new data.

The idea is to allow advanced AI models and bigger datasets to be easily accessible, sharable, updated and retrained to increase the adoption, acceptance, and overall effectiveness of AI. People will soon be able to adopt this easy and cost-effective method to run and access advanced machine learning models through regular devices such as laptops and smartphone browsers and collectively participate in improving data sets and models.

Therefore, Microsoft is keen on developing what they call a Decentralized & Collaborative AI on the Blockchain framework. It will significantly increase AI community collaborations to retrain such models with valuable datasets on public blockchains. The machine learning models would be made free for public use as they would know the code they are interacting with.

Some applications that Microsoft is looking forward to integrating are virtual assistants and recommender systems like used by Netflix to recommend shows to its audience. Considering such models, Blockchain makes sense because of the increased security and how trustworthy it is for the participants.

The well-established nature of the blockchain system and the associate smart contracts ensure that the models will always perform up to the specific requirement. As the models are consistently updated on the Blockchain used unhinged by the user’s local device, every user gets to see the one genuine version of the model.

Hence, even though Microsoft’s framework isn’t favorable for operating at large scale for now, but sooner or later, it will be the norm. There is little to no doubt that organizations like Microsoft are doing advanced research and practical work to converge AI and cryptosystems like Blockchain. There is no doubt that cryptocurrency is the future of money. So it is in the best interests of the organization to start working on merging Blockchain and AI for improved benefits.

How can an organization merge Blockchain and AI?

Just as Microsoft, more advancement is made for combining Blockchain and AI for fulfilling specific usage requirements. Such cases will depend on the company’s specific needs, but the core preference would be related to data. This will allow companies to improve their digital and data capabilities by developing a combination of AI and Blockchain solution to fit their operations.

The very first step needs to be taken by the executives to identify the specific business needs and whether creating an AI and Blockchain system would address that need. This can become easier if the organization has already worked on AI and taken initiatives in other operations because now you can integrate Blockchain to improve them.

Similarly, if the company owns valuable data, they can monetize by converging a blockchain environment and sharing the data with AI model creators. For instance, a progressive car company like Tesla probably has a good collection of valuable data collected by its cars. They can put it on a blockchain system as their self-driving cars will continue to collect huge amounts of data that they can use to improve the neural networks powering self-driving operations and functions.

With a trusted name as Tesla, the public would not be too complacent about maintaining their privacy. Blockchain would allow the company to make the driver information anonymous to ensure privacy while collecting data to improve neural nets in use.

The company can even share anonymous data with car insurance companies. It would allow the insurers to price their insurance packages for self-driving cars more efficiently and with an educated mind, given how the risk profile of a self-driving car is different from that of a regular car.

The whole packaged win-win situation here is that where the company would improve its cars, the public would get advanced transportation, complete privacy, and the right insurance for the right price without getting exploited.

Using Digital Investment Assets for Trading through Blockchain

You must be already aware of how Blockchain is already a ready-made, and good-to-go digital ledger used to store and trade financial instruments such as cryptocurrencies and cryptographic tokens. However, Blockchain is still a nascent technology, been only around for a few years. Where cryptocurrency has definitely taken the world by storm, cryptographic tokens are comparatively more nascent.

Hence, it is evident that there is no probable activity and enough data yet to apply AI to financial products like a cryptocurrency that are traded through Blockchain. However, the upgrading technology and data sets show a promising future for AI taking insights from these data sets to create financial products and trade them autonomously.

How can an organization merge Blockchain and AI?

The convergence of artificial intelligence and Blockchain would be a huge step forward, and the process will cover four distinct yet inter-linked stages.

Stage I: Proof of concepts

Stage II: Asset tokenization

Stage III: Digital Investment Assets DIA

Stage IV: AI agents trading DIA

The four stages will represent how Blockchain is proof of concepts initially. On the second stage, assets are tokenized and traded. Tokens can represent underlying security methods, physical assets, cash flows, and utilities. This reduces the alleged transaction cost and decreases the time taken for settlement to improve audit accountability.

AI and Blockchain Applications

There is no denying that a decade back if someone would have presented us with an idea of magical internet money called crypto in the future, we would have laughed and made fun of the person for coming up with Superman and Kryptonite theories. Fast forward to ten years down the line, and cryptocurrency not only exists, but there are real-world integrations of its blockchain system with AI.

Smart computing power

Think of a machine learning code that would upgrade and retrain when given the right data. That is exactly what AI affords the users to tackle tasks more efficiently and intelligently.

Diverse data sets

The combination of Blockchain and AI can create smarter and decentralized networks to host various data sets. Creating a blockchain API would enable the intercommunication of AI agents resulting in diverse codes and algorithms to be built upon diver data sets, ensuring development.

Data protection

It doesn’t matter if data is medical or financial. Certain data types are too sensitive to be handled by a single company and their coding system. Storing such data on a blockchain and accessed through AI would give its users a huge advantage of personalized recommendations, suggestions, and notifications while securely storing data.

Data monetization

Data monetization would make both AI and advance Blockchain easily accessible to smaller companies. As of now, developing and growing AI is costly for organizations, especially those who do not own data sets. A decentralized market would create space such companies for which it is otherwise too expensive.

Trusting AI for decision making

AI is growing smarter with time. Through the use of blockchain systems like crypto, transactions will become smarter, making the process easier to audit.

Conclusion

All in all, the collaborative effort of blockchain technology and AI is still majorly an undiscovered territory. One of the main reasons why we still have yet to see a commercialized joint adoption of the Blockchain system and artificial intelligence is that the upscale implementation of their convergence is quite challenging.

Many businesses, although having ventured on with AI, are skeptical when it comes to conjoining Blockchain. They are in their early stages for testing the waters for AI and Blockchain coming together in isolation. As they continue to figure it out for appropriate public distribution, the convergence of the two technologies has had its fair share of scholarly attention as well. Yet still, projects solely developed to promote the groundbreaking match are still primarily not catered to.

There is no doubt that the potential of this combination is clearly there and developing, but how it will play out for future public use can be anybody’s call.

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Claudia Jeffrey is currently working as a Junior Finance advisor at Crowd Writer, an excellent platform to get assignment help UK. She is a self-proclaimed crypto-influencer. She has gained significant expertise and knowledge in this regard over the years and likes to share it with an interested audience.

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Archives, Global Trade Daily, Special Reports

Remote Innovation Is More Than Possible: Six Tips From a Tech and Digital Revolutionary

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A few years ago, Centric Consulting team member Carmen Fontana launched her first Artificial Intelligence project. The goal? Craft machine learning to predict and manage human resources conundrums, such as project staffing. The initiative involved a new-to-Carmen technology, a dual-shore team and a healthy dose of ambiguity. We funded her anyway.

Carmen was participating in Centric’s newly minted innovation incubator which allows any employee to conceive and share product and process improvement ideas. Her idea was stellar, even if the roadmap was sketchy at best.

Carmen thought if companies like Netflix, Amazon and Spotify could observe, record and learn user behavior, allowing them to continually fine-tune their recommendation algorithms far beyond the scope of a traditional Boolean (and/or) statement, then HR could do the same with staffing.

Although much about this innovation journey may sound familiar — from the ambiguity of methods to the lofty (but vision-packed) goals — there’s one core element that most likely does not:

The entire project took place remotely. And we were even able to use it to guide our weekly staffing calls.

Since its inception 20 years ago, Centric has had a thriving “office-optional” workforce, which has grown from just a handful of people to more than 1,000 employees in 13 cities in the U.S. and India.

At a time when everyone is struggling to transition to remote work while innovating, we’ve won an award while doing just that. This year, we were included in Fast Company’s list of “100 Best Workplaces for Innovators.”

As we all hunker down in our separate home offices, physically apart, the stakes around innovation are only increasing. Innovation will remain a key differentiator in the market today and tomorrow. And there’s no turning back from the changes the pandemic has brought to the workplace.

Luckily, remote innovation is something that can be planned for, managed and grown, much like every other aspect of remote work. Below is our blueprint for keeping the creative wheels turning and amping up innovation when employees aren’t always working side-by-side:

Make Extemporaneous Encounters Intentional

The right collaboration tools can create the same sort of opportune encounters that Apple and Pixar champion while also facilitating remote collaboration. Microsoft Teams and Slack, for example, provide an online space for people to talk about new ideas and track progress on innovation projects.

While working on a recent Healthcare VR project, for instance we managed all of our interactions through a Microsoft Teams space — including meetings, brainstorming chats, project management and the collection of all of our teams’ output and materials.

Start a Problems-to-Be-Solved Repository

Nothing triggers innovation like having a problem you’re itching to solve. That’s where a remote repository of problems comes in handy. The more people contribute to the repository, the better: Innovation requires a lot of ideas coming in from a variety of people.

Although you do want to collect as many ideas as possible, you also want to provide some guidelines to make sure those ideas align in some way to larger company goals or to real client or industry challenges.  A repository can be a great tool for vetting which new ideas fit the bill.

A repository can also connect a firm’s natural innovators with employees who may not have an idea to offer but are strong problem-solvers and creative thinkers. Successful innovation efforts engage both types of people.

Hold Sessions Geared Towards Innovation-Generation

Whether in-person or remote, innovation-focused sessions for gathering and testing the latest thinking, ideas and problems are key. Employees usually leave these sessions energized and excited to be part of something new.

One recent example is Expedition: Data, an in-person event to encourage and develop machine learning and data science talent. Early this spring, Centric employees worked with Microsoft and RevLocal, a national digital marketing company, to come up with innovative ways to use Microsoft’s Azure Suite and other tools to improve RevLocal’s employee and customer retention. The winning team got bragging rights and $100 Amazon gift cards.

Institute A Virtual Innovation Lab

Too many organizations focus only on getting ideas, neglecting what comes next. If one of your employees has a concept they want to explore, do they know how to go about developing it?

Centric created its Virtual Innovation Lab to guide innovators as they explore their idea and see if it has legs. The lab acts as a collaboration portal and provides tools and resources for remote teams to work through the innovation lifecycle, helping them overcome major hurdles as they mature their concept and get it to the minimum viable product (MVP) stage.

Our virtual lab essentially provides a blueprint for rapid prototyping using agile development and human experience design principles, among other innovation frameworks. The goal is to help innovators quickly assess proof of concept and proof of value. This is important. If something works, that’s great, but is it feasible from an operational standpoint? Does it actually provide value to the end users or customers? Does it solve a real problem? If the answer is no to any of these questions, your innovator either needs to pivot or kill the project.

Be Deliberate About Forming Teams

Our virtual innovation process relies on agile development, which in its purest form requires teams to be together every day. So how do we get around that as a remote company? We’re very intentional about how we put teams together.

While self-forming teams can work and come together easily when you’re in an office setting, in a virtual environment, team formation needs to be more deliberate. To do this, get to know your internal network and who has what skills, capabilities and passions. Use that knowledge to build teams that will mesh well and play off one another’s strengths. The goal is to virtually replicate the relationships and collaborative spirit that happen effortlessly in an office.

Make Transparency Your Mission

As with any effort in your organization, communication plays a critical role. And in a virtual environment, it’s easy to forget to share information or see what your teammates are doing. That’s why we’ve made transparency a key focus for our virtual innovation lab.

Transparency is not only vital for networking and team building, but it’s also necessary for defining the success metrics that matter. Innovation isn’t easy — and intentionally prioritizing transparency forces learning and greater understanding. Perfection and polish are not required (at least not until the idea is commercialized). Drive the difficult conversations now, and always try to operate in the light.

Treat Failure As Additive, Not Subtractive

Many companies are failure-phobic, and in the interest of profits, many penalize employees and divisions for losing money. But innovation only succeeds through trial and error.

To innovate, you have to embrace failure and help your teams do the same. Give them the tools and the space to test new ideas or processes. Celebrate their efforts regardless of the outcome. Organize sessions – remote or in-person –  where they share stories about their failures. We have, and it has served us well.