Articles

Written by: Alec Hudnut, CEO, Evolution Robotics Retail

Creation and invention happen two ways: the harder way and the easier way.

The harder way involves insight, contemplation, analysis, inspiration, and or the luck of the universe. Like Sir Alexander Fleming figuring out that dirty, unclean, dangerous mold could in fact, if the penicillin mold was grown for its antibiotic properties, be a wonder drug. Or like, Sir Isaac Newton, who sat under a tree, and when an apple fell on his head, realized that what was missing in the current understanding of the universe, was gravity. These "harder way" innovations are important, but unpredictable and infrequent. To be celebrated, but not expected or anticipated in any sort of short term time frame.

So what's an industry to do? We in Retail need innovation. We need technical breakthroughs. We need to find ways to improve the customer experience, to decrease our costs, to improve our position as brands. How can we innovate when much innovation is hard-to-come by and infrequent? Well, we can copy. We can borrow. We can look to other industries and take what they have innovated, and bring it to retail.

This is a common practice in the world, and one that we can embrace. When Innocenzo Manzetti spent years building his own talking, flute playing mannequin, he did so for the parlor games in Italy. He did so, to impress his friends and make up for his stern demeanor. But the technology he prototyped didn't sit in an Italian parlor for long. We Americans borrowed his ideas and made the telephone. And we know how that innovation in consumer products has changed our lives.

Or let's take a look at DARPA, the Defense Advanced Research Project Administration. If you have ever been there, it is a non-descript building in DC. Other than the black windowed Chevy Suburban SUVs with highly armed security in them outside the building, you wouldn't think much of it. But $10 billion per year in military research can produce a some useful things. For example, the Internet.

If you have been in the military or played multi player online games, you know that communication and sharing of information is key. If every node knows what every other node knows, you are more likely to win. It's hard to do this with a phone. The communication is static and not stored, not saved, not sortable. Welcome to ARPANet, the first bulletin board style implementation of the Internet. A virtual place where all information could be stored. A node could log in and see what all other nodes knew and add and update with comments and edits. Warfare got a lot better for America when the communications infrastructure improved.

The Internet borrowed the basic concepts of ARPANet, and one of the largest consumer innovations was born.

The phone and the Internet, not invented by the consumer sector, but copied from other inventions. Borrowed.

How can we apply that concept and idea to retail? What are the innovations and inventions out there today that can radically transform retail?

There are three innovations, outside of our retail industry, that could be game changers for retail: 3G cell phone telephony, cloud computing, and robotic software. Let's take a look at each.

In Japan and Korea, the government and Telcos invested heavily in mobile network infrastructure. Now, much more can be done on your phone. There are fewer iPods in Japan and Korea than in the US: people there listen to music on their cell phones. There are fewer personal computers in Japan and Korea: people do email, surf the web, and correct spreadsheets on their cell phones. There are fewer TVs in Japan and Korea: people watch TV and play video games on their phones on the train ride home.

What is going to happen to the US retail market when G3 cell phone telephony becomes common in the US? You will be able to pay for products with your phone. You will be able to take a picture of the product and get nutrition or consumer reports or comparative pricing information on the product. You will get coupons scanned from your phone. And, small retailers won't use POS anymore. They will scan items with the phone's imager and send data offsite to be stored and processed. Pretty radical. Likely 5-15 years out. How can we plan today for how these innovations in cell phone telephony will impact our customers? Do we want to be a shaper of these innovations in our industry? Or will someone else take advantage of them and offer a new retail paradigm and compete with us?

Another innovation that will makes its way to retail is cloud computing.
It feels like déjà vu all over again. I remember my first day of work in the corporate world after college in 1987. I went to my cubicle and there was a keyboard and a monitor, no computer. We logged into a mini, a Vax, and all the computing was done centrally. Lower cost, less likely to introduce bugs, fewer software licenses, ensured commonality and interoperability of application use. A centralized computing model. That was the way in 1987. What is the cloud? The cloud is the same thing as the old mini-Vax set up, but without the wires. Cloud computing is using the computing power of the big guys (Google, Yahoo, Microsoft) to run your applications. Processing power and application software is pushed to the servers. You can have a $199 laptop with very little software and run everything by logging in to the Internet and doing your applications online. Cloud computing rolls back distributed computing. The heavy lifting is done centrally, and controlled by someone else's hardware.

What does cloud computing mean for retail? Remote POS? Remote payments processing? Remote coupon processing? Semi dumb in the store, and all the smarts of the system at HQ? The ultimate thin client, where the muscle is centralized? Yes, all these things are likely. The cloud makes changing things easier. It drops cost out of the system. And it will increase complexity, too. Redundancy will be harder. A virus will be more difficult to localize if it happens in the heart instead of on the tip of the tentacle. But the cloud will come to retail. The cloud will cast its shadow on our industry, so let's be ready.

The last innovation is robotic software.
Let's step back for a minute and think about the human race. Homo erectus emerged about 1 million years ago. Homo sapiens about 200,000 years ago. In that 800,000 year period, humans learned to walk upright better, communicate with a larger vocabulary, and form tighter social groups for survival and happiness. As frightening as it sounds, in the past 50 years, the robot has made as much progress as humans did in our first 800,000 years. Robots can build cars better than humans (just go to a Mercedes factory in Germany. Only a few humans around). Robots can fly (Unmanned Arial Vehicles). We send them to places that we can't get to yet (Mars). And most importantly, going back to our previous discussion on Arpanet, a robot is plugged in to the network. A robot is an online creature. What one network robot knows, all networked robots know. Imagine if you as a human knew all the knowledge of all the other humans? If you as a human could see and hear what all other humans could see and hear? Unfortunately, the robots are coming and they will transform humanity in some dramatic way.

But first, what will they do to retail? One of the most impressive developments in the past 10 years in robotics is the work that has gone into teaching robots to see. Robots can now be put in a room, and with their Visual Simultaneous Localization And Mapping software, figure out where they are plus or minus 5 centimeters. Robots can now recognize objects from a distance, at different angles, even when the objects are partially blocked. What this means for retail is that the UPC will begin to fade away. Packaged goods can be recognized by robotic software by their packaging alone, no UPC required. Packaged goods can be recognized from 50 feet away. Amazing. Scanning will change at the front end as more automation, less human involvement is possible at the front end. Shelf compliance will change, as shelves can be monitored for OOS and sweeps from a distance, automatically. And shrink will go down. If cameras can recognize packaged goods from a distance then fewer items will leave the store on the bottom of the basket. Sweethearting will be a thing of the past. Didn't scan it? That's OK. We scanned it for you from the ceiling 20 feet away with a camera. Amazing. But possible, and coming soon to a retailer near you.

So let's think about innovation. The "hard way" will happen in retail. Look at all the great inventions we invented: the barcode, the Point of Sale system, the format of retail itself. But the "easy way" will impact retail faster. Invention from other sectors will migrate to ours. Let's be ready. And let's take advantage of that invention and shape a more customer focused, brand conscious, lower cost experience for our customers.

Alec Hudnut is Chief Executive Officer of Evolution Robotics Retail, a world leader in item level recognition through software. Prior to founding Evolution Robotics Retail, Alec was CEO of Evolution Robotics. Both companies specialize in developing advanced visual pattern recognition software. Before joining Evolution Robotics, Alec was a Managing Director at Idealab, an innovative, high tech incubator, where he launched and supported a number of software companies. Alec has over 20 years of high technology, consulting and corporate finance experience from previous roles as CEO of educational software company Quisic, as a consultant at McKinsey & Co., and as an investment banker at Goldman Sachs & Co. Alec holds an MBA from Harvard Business School and a BA from the University of North Carolina at Chapel Hill, where he was a Morehead Scholar. Alec enjoys pick-up basketball games and playing competitive soccer. All potential applicants who can improve the quality of the company soccer team are encouraged to apply to Evolution Robotics Retail.