THE EXPECTATION REVOLUTION

FUTURE OF CONNECTED LIVING / STARCOM FUTURES

CONTENTS

ACCELERATEDRETURNS

VOICE ANDSHOPPING

03DESIGNFICTION

05EMOTIONALLYSMART LIVING

07

11VERBAL

AVAILABILITY

12HYPER

SERVICE

THEEXPECTATIONREVOLUTION

06

13PLATFORMS

BUILT ON TRUST

14FURTHERINSIGHTS

10

VOICE ISDIFFERENT

09

3

THE LAW OF ACCELERATED RETURNSChange is the only constant in today’s media landscape: society is not changing from one thing to another: it is rather that change is a permanent state. In forecasting the impact of change over a given period, we must start by contextualising the drivers of change.

Our forebears expected the future to be pretty much like their present, which had been pretty much like their past. Although exponential trends did exist a thousand years ago, they were at that very early stage where an exponential trend is so flat that it looks like no trend at all. So their lack of expectations was largelyfulfilled. Today, in accordance with the common wisdom, everyone expects continuous technological progress and the social repercussions that follow. But the future will be far more surprising than most observers realize: few have truly internalized the implications of the fact that the rate of change itself is accelerating

(excerpt from The Law of Accelerating Returns)

SUCCEEDING IN THE THIRD CONNECTED AGEIn 2019 we are at the start of the 3rd Connected Age. All of the platform businesses such as Netflix, Uber and Airbnb that have caused such creative disruption over the last 5 years are built on the 2nd Connected Age, the revolution in human experience caused by mass adoption of people connected across social graphs and smartphones. We are yet to see the impact of platforms built on the blend of AI, IOT and voice technology that will power the 3rd age.

Credit Ray Kurzweil/Kurzweil Technologies

1st

2nd

3rd

WEBSITES CONNECTED BY COMPUTERS

PEOPLE CONNECTED BY SMARTPHONES

SMART DEVICES CONNECTED BY INTELLIGENT AGENCY

FUTURE OF CONNECTED LIVING / STARCOM FUTURES

The only companies that will exist in 10 years’ time are those that create and nurture human experiences.World Economic Forum Annual Report 2019

Starcom Futures has tracked the growth of the customer experience industry in Australia over the last 4 years, and found that while 90% of businesses see their CX capabilities as advanced, less than half that number of their customers rate their experience as Great. Customer expectations are changing faster than businesses can keep up with, and according to Kurzweil’s Law of Accelerating Returns, they are just about to start speeding up.

Behaviour is a combination of motivation (what we want to do) and opportunity (what we can do). Opportunity to connect, to interact differently, is what technology is changing faster each year.

On the other hand, what humans want to do is hardwired into our species over generations and millennia. Our subconscious motivations and desires are don’t change. And if we seek to understand what people want to do, we’ll have a much better chance of understanding how they will use technology, than if we just studied the technology.

10xUplift in brand preference

when creating great customer experiences

81%

of ‘very relevant’experiences are‘very positive’

106%

Businesses score their CX higher than their

customers score them

= MOTIVATION + OPPORTUNITY

WHAT WE WANT TO DO

WHAT WE CAN DO

WHAT WE DO

5

REPORTINGFROM THE FUTURE

In order to predict how behaviour will change as the Expectation Revolution develops,. we have focused on studying real people in their own homes, equipped with the smartest and most advanced connected technology available.

DESIGNFICTIONIn a world-first ethnographic study, Starcom Futures and The Practice Insights turned four Sydney households into some of the smartest and most connected homes in existence. We have worked with the inhabitants of

these houses over six weeks of in-depth research to understand what changed in this design fiction of the future, and substantiated the findings with focus groups from a broad cross section of the population.

Transform existing homes into truly connected smart homes

Creating design fiction scenarios for future family living

Natural habitats for ongoing study of human, lived experiences

FUTURE HOPES &

EXPECTATIONS36 household

qualitative panel

C O N N E CT E D LIVING

HOTHOUSE4 households, 6 week ethnographic study

RE P O RT IN G FROM

THE FUTURE36 household

qualitative panel

LONG TERM C O N N E CT E D

LIVINGOngoing study with 4 hothouse households

The accelerating pace of technological change means traditional research methods are less and less likely to predict with accuracy. To understand how people will live, laugh and shop differently in 2023, we had to go there, and see what happened.

THEEXPECTATIONREVOLUTION

Each of the three connected ages represents a revolution in the way that humans interact and connect using technology. The 3rd revolution will have far greater impact than the previous two: changing how we interact with our physical surroundings.

We found that when our participant houses connected to the most innovative technology currently available, they not only interacted with their homes in new ways, but they also felt very differently about the way that they lived. This meant that they were able to think about what they would want from products, brands and services through the lens of life in 2023-24.

And their expectations after only 6 weeks of living in this environment had advanced so far from today that we are confident in calling the 3rd Connected Age an Expectation Revolution.

Voice is how people know that a device is smart. A home controlled by an intuitive agent means we will expect the menial decisions to be taken care of for us.

We believe that this also has a fundamental impact on the ways we approach customer experience. So much of our data today is based on transactional views of customers. Evidence from this study shows the value in broadening our insight to focus on Human Experience as well as Customer Experience. Only by understanding what people really want from brands, services and future living, will we stay ahead of the expectation revolution in our customers’ lives. It is how we will build brands that are verbally available, on the tip of millions of tongues. It is how we will create partnerships and design services that add genuine value to what each home’s agent can already do.

People will share more in order to get more value – to look for more data to share that will make the agent smarter. And once the agent is smarter it can begin to provide the better living benefits of the 3rd connected age: emotionally smarter as much as rationally smarter living.

ACCELERATED EXPECTATIONS

SMART HOMES CHANGE HOW WE FEEL

SHARE MORE TO GAIN MORE

FROM CX TO HX

FUTURE OF CONNECTED LIVING / STARCOM FUTURES

THE WHOLE IS DIFFERENT TO THE SUM OF ITS PARTSThe most fundamental change occurs in moving to multiple connected devices. Many connected devices and sensors informing an intelligent agent change our view of the home. A little smartness dramatically increases the expectations of what technology should be able to do. Voice interactionwith a smart environment changes perception from talking to Amazon/Google to talking to my home. Expectations are dramatically higher, as your home already knows you.

THE HOME AS AN INTUITIVE AGENTWhen our households went from one or two connected devices to 30 to 40 in the space of a weekend, the change is dramatic. Neither the voice or the intelligence are seen as part of the speaker. They are part of the fabric of the home. After just 6 weeks’ experience of smart connectivity expectations of what your house SHOULD be able to do for you accelerated dramatically. After all, it is YOUR home. It should know what YOU want.

CONNECTIONS COUNTThe first Internet of Things devices in most households are smart speakers. Initially, they make it quicker tofind out the weather and put music on. It is the volume of devices: the sensors, lightbulbs, speakers, cameras, and doorbells, that makes a fundamental difference. A lot of devices, all a little bit smart, make the NETWORK exponentially more capable.

EQ SMARTSmart will not just mean knowledge and entertainment.It will mean EQ, emotional intelligence as much as rational, IQ intelligence; affecting health, familyrelationships, life organisation, amount of and quality of free time.

The limits of Design Fiction: Living in a smart environment gives us real insight into the profound changes in expectations that will take place over the coming years. Remember that over this time the intelligent agents themselves will also become exponentially more capable.

Fridge, TV, Vacuum, lights, home. There’s 5 of us here already, and we’ve added 5 more personalities to the household.

Would be great if the house could respond to your mood as signalled by your watch or fitbit…

7

EMOTIONALLYSMARTER LIVING

COMFORTThe result of installing so many connected devices in households was therefore primarily one of comfort. Helping people to ‘feel’ better at home in a range of small but significant ways. Smart fridges take chargeof the freshness and expiry dates of food, and suggest ways to use things in time. Aircare systems monitor air quality. Sensors automate lights and air conditioning without the need to even use a voice command.

TOGETHER TIMEParticipant households with children reported actually spending more time together as a family. In some cases due to household chores being outsourced to technology. But an unexpectedly large range of new activities around a screen. Shared gaming may be attributable to a larger TV, but not family meal planningand collective grocery shopping around the smart fridge screen

ROBOVACEach household named their robot vacuum, which is midway between a part of the smart environment, and a useful pet. The time saving in family households, with increased perception of cleaner healthier living, makes this a standout EQ device.

LIGHTINGLighting influences and enhances mood. A common desire is for smart environment to ask or predict mood, and react accordingly. Where mood is dictated by media choice (movie or gaming) this function offers huge potential for in home entertainment.

2nd Connected Era / IQSmart DevicesIndividual intelligence Freedom of Choice

3rd Connected Era / EQSmart EnvironmentCollective intelligence Prediction of Choice

KNOWLEDGE

ENTERTAINMENT

ORGANISATION

WORK / LIFE BALANCE

FAMILY & RELATIONSHIPS

HEALTH & WELLBEING

FUTURE OF CONNECTED LIVING / STARCOM FUTURES

VOICEIS DIFFERENTVoice changes the way that we interact with our surroundings – typing, searching and swiping are rational, attentive decision processes – conscious thinking.

MORE HUMANVoice is a far more natural way to interact. Our participants all have varying levels of tech competency, but within hours all were defaulting to interactingwith their house by voice. We had given their homes a personality, and from that personality developed a much deeper relationship with their surroundings.

These voices were quickly addressed as they were people. Participants found themselves being ‘polite’ to these devices even using customary ‘please’. Families encouraged their children keep up their manners when speaking to the house in order to keep up moral standards. Voice control allows a personal relationship to develop with residents, increasing forgiveness and understanding for the (still basic) intelligence andconversational ability in the intelligent agents – because we relate and adapt to conversation far quicker than other ‘less human’ forms of interaction.

VOICE AND CHOICEIf we are having a conversation, all of our experience and education makes us thing that we are interacting with another human. This has profound implications for the way that we interact with our surroundings, and more importantly for the way that our brains deal with the information and decisions that come from these conversations. Humans are hard wired to respond emotionally to a voice – as much to its tone as to what it says. Households treated voice results as human recommendations. This was a subconscious instinctive trust, rather than a function of technology.

HUMAN TRUST VOICES MORE THAN OTHER INTERFACESWhen marketers have focused on the power of word of mouth, we may have missed that the ‘words’ are as trusted than the ‘mouth’.

We do use voice 80% of the time in the house. It is fun when you are about to go to bed to just get up and then walk into your bedroom then say Alexa, turn the tv off, and Alexa turn house off.

I can’t imagine life without online shopping using voice.

9

SMARTERSHOPPING

TELL AND SHOWHigher involvement purchases, with longer and more attentive decision journeys, are not currently seenas natural territory for conversational commerce. Inshopping tasks for buying clothes or researching aholiday, we found that voice was still very much thepreferred method of interaction. However makinga purchase decision was impossible without visual references.

A screen (fridge, TV or smartscreen) was vital, but the control of the screen remained voice-led.

VOICE AND VISUALDesigning user experience for this Tell and Show approach to shopping blends the natural human interface of voice with the more attentive rational decision mode required for higher risk purchases. Growth in the smart screen category will increase the range of categories for which voice commerce becomes preferred.

VIRTUAL AISLESAs retail and search skills and apps become smarter and more personalised, screen-based retail can react more to individual choice and past preference. Our participants created ‘virtual aisles’ within the Samsung Woolworths app, allowing them to select grocery purchase according to health, discount, premium,in-season and a range of other benefits.

FAMILY SHOPPINGThe screen in the kitchen makes meal planning, healthychoices and shared cooking experiences a central focusof family time.

The app is designed for shopping, but the experience it creates is the opposite of taking the kids up and down aisles – shopping becomes a collaborative learning experience.

I don’t know how you’d research something or buy something you can’t see or visualise…. I’d want it to tell me, and connect to the TV to show me.

This experience definitely made me change brands, because I searched by what was on special, and it was easier to choose where to spend more.

For a fridge to inspire my kids to both cook and eat something new…. that’s not something I expected a fridge could do.

FUTURE OF CONNECTED LIVING / STARCOM FUTURES

VERBALAVAILABILITY

There has never been a more important time to represent your category. Brand Fame is already the marketing objective most correlated to large profit gains. It is likely to become the primary defense against Private Label 2.0.

Intelligent agents act as gatekeepers to the shopping list. Repeat purchase or promotional purchase become the defaults, with use of virtual aisles through search filters shopping bynutritional benefit, recipe ingredient, in-season, on promotion, or premium.

Test a range of distribution channels - native skills,content integrations into retailers’ voice commerceplatforms, subscription and direct to consumer.

MENTALAVAILABILITY

PHYSICALAVAILABILITY

Easy to see

CONVERGENCE OF COMMERCEAs the the moment of need for a product and the moment of purchase of that product reduce to zero in a voice-activated home, we expect less reliance on visual cues to make regular or replacement purchases.

FROM TOP OF MINDTIP OF TONGUE

BECOMING EASY TO SAYAs the replacement of an item becomes as simple as a word to the home, which quickly begins to learn and pre-empt how often items need to be replaced, the traditional model of mental and physical availability itself is threatened. The specific threat is in the lack of visual cues: brands are based on distinctive visual assets that are easy to think of in relation to categoryuses, and easy to recall in purchase situations. The gap between thinking about a category requirement and purchasing it disappears, and can be accomplished without reference to visual shortcuts. In order to hack this converged decision process, brands will succeed by moving from top of mind to tip of tongue, and being the strongest association to key category entry points.

Supermarketaisle + eyes

Top of mind

TV screen+ brain

11

HYPERSERVICEHUMAN SERVICE BY INTELLIGENT AGENTSThe fact that the home itself can act as an agent with shopping, admin, finance, and transport servicessuggests that the next connected age will move back to a culture of Service. Travel used to have travel agents, banks used to have relationship managers, grocers used to offer personal service. The internet created a self-service world, of online banking, travel aggregators and eCommerce. The next level of connection will return us to a world of service, but intermediated by intelligent agents rather than humans

SELF PERCEPTIONGiving voice commands to the home in order to accomplish tasks increased our participants’ feeling of control over their environment. Use of words like:Butler / EA / Assistant / Servantdefines the sense of increased social status in a smart home. Service providers seeking access

to the IA gatekeepers should focus on the sense of accomplishment and status that the intuitiveautomation of their services can provide to the human experience in the home

How did your category operate before the it was disintermediated by the internet? How can you design services that enable an intelligent agent to replicate that human experience?It’s Mother’s Day tomorrow,

and Woolies should be reminding me to get breakfast for my wife.

The house has turned into something new for us. It’s become like our butler.

SERVICE CULTURE

SELF-SERVICE

HYPER-SERVICE

Dependence Independence Interdependence

13

PLATFORMSBUILT ON TRUSTPRIVACYAll of our participant households were as privacy and data literate as we would expect in 2019. But all of them repeatedly found opportunities in which they would be happy to share more data with the network, in return for more personalised and intuitive results.

THE RISE OF THE MICRO-PLATFORMIn the second connected age, people gained value by connection to platforms: Uber, Facebook, etc. Platforms gained proportionally more value in the data created by those connections. The use of intelligent agents as gatekeepers creates opportunities for new platforms that balance value more in favour of households.

As expectations accelerate about what our homes should be able to do, trust and security become increasingly integral. The home agent itself will become a semi-autonomous micro-platform managing interaction with external platforms

VALUE AND INTERDEPENDENCEThrough living in households in which the possibilities had expanded so rapidly, participants found it very easy to suggest opportunities where their preferences and previous choices should be used by the home.Setting financial goals that should automatically populate service provider selection, or health goals that automatically limited the choices visible in a grocery shop.

I WILL SHARE MORE TO GET MOREConvenienceValueIntuition

I WILL ONLY SHARE DATA ONCE- smart technology will take it from there

I know Facebook is listening through the mic, because you mention that we need something and next minute you’re scrolling and there’s the ad on your phone….

You get ease, simplicity, convenience, and the data bit doesn’t really phase me, it’s just the way things are.

PREFERENCES INTUITION

CONTROL

BANK GYM

RETAILER TELCO

TRANS-PORT

FUTURE OF CONNECTED LIVING / STARCOM FUTURES

INSIGHTSDETAILS

MO TI VATIONS

Expanding Horizons

CU LTURAL

BEH AVIOURAL

OPPOR TUNITIES EXPE CTATIONS

Freedom of Choice

Self Expression

Balanced Life

Relationships

Changing the Way We Live

Social Capital

Maximising Comfort

Health & Wellbeing

Shopping & Paying from Home

Organisation & Efficiency

Entertainment

Family Life

Knowledge & Education

Voice & Visual

Homes with Personality

Immersive Technology

Convenience Choice Seamless Connectivity

Trust & Privacy

Personalisation

The Future of Connected Living project is live until April 2020 For further information and opportunities contact:

Graeme Woodgraeme.wood@starcomww.com

Nicole Conroynicole.conroy@starcomww.com www.starcomfutures.com.au

Ethnographic Research Specialists

Commercial Partners

Product Partners

Smart Home Installation and Support Partner

Gaming Hardware Provider