Podcast: Living in a Real-Time World (TKR)

Podcast Transcript

Intro: The following is a special presentation of Tony Kurre Radio with Dr. Alex Heublein and Dr. Josh Klapow. This is Adapt or Perish.

Josh Klapow:
I’m here with Dr. Alex Heublein, President of Adaptigent. I’m Dr. Josh Klapow. And today, we are talking about living in a real time world. I think this is a great topic, Alex, because as we were talking about before we started this show, as technology advances, we are expecting everything quicker and quicker and quicker and quicker, and I think a lot of us just assume that what we’re going to get in our interactions are going to be in real time. And I think for the consumer anyway, we don’t really know or care what’s happening on the backend. That’s our expectation.

And I know that in my company, we deal a lot with insurance companies where there is a delay in claims processing. And one of the challenges we ran into with customers and participants in our programs were explaining to them that, frankly, it wasn’t our technology that was slowing it down. It was the lag time of the insurance company filing the claim to get to our technology. And so it becomes like we have said, it’s this huge issue of what the consumer expects and then what’s going on in the backside. So let’s get into it. I know this is something that Adaptigent does. We can start with … Let’s do this. Start with this whole idea of as a consumer, we’re expecting real time. What does that actually mean on the backside from a technological standpoint?

Alex Heublein:
Yeah. It’s really interesting. I mean, when you take a look back, I mean I remember when I was a kid, and even up through college and even after college, very little was real time. It was really before the IT industry had really taken off the way it has today. You couldn’t do anything online. If you wanted to get a driver’s license renewed, you had to go stand in line at the DMV. I mean, it was all really, really inefficient, and it was really, really slow. So the idea though with the way technology has evolved, particularly consumer technology, now instead of going to the video rental store, I can stream everything on Netflix, or Hulu, or whatever. So we’ve become accustomed as consumers in a lot of different areas of consumption, like media consumption, so on and so forth, to things being available in real time, things being available on demand.

The challenge that you see today though is that a lot of big companies, they’re not able to keep pace with that level of expectation. The expectation is I want it now, I have a very short attention span these days, and I need to get things done very, very quickly because like we’ve talked about in previous shows, the world is getting more complicated and the world is moving faster. And so the ability to deliver real time results, real time information, real time transactions to consumers out there, and to other businesses as well, that’s become more and more and more of a topic of discussion. Right?

But the challenge is that a lot of the systems that a lot of big companies depend on, insurance companies, banks, airlines, whatever, these companies built their systems in an age where real time wasn’t expected. It wasn’t that expectation that things are going to happen in real time. And so now what we’re seeing is kind of an evolution of that. And a lot of companies struggle with, okay, I’ve got these great systems. They run my business. They’re very reliable. They’re very secure. They’re very scalable. But a lot of elements of them aren’t real time. And so a lot of people are struggling with: How do I make that evolve? How do I take these systems, make them evolve into something where I can deliver real time results to consumers that demand much, much, much faster updates and information just based on what’s happened in the overall consumer world?

Josh Klapow:
So help us understand. I mean, again, on the surface, real time means I as a consumer interact, and whatever my interaction is, I’m getting back in real time whatever the transaction is. And again, I think from the consumer standpoint, not only do we assume it, we don’t think it’s that difficult, whether it’s a call center, whether it’s an insurance claim, whether it’s a bank, I put my card it, it should be processed. But what is it on the backend that actually sort of has to happen that makes it difficult for these companies that maybe have been around for a long time doing what they do well, to move from non-real time to real time?

Alex Heublein:
Yeah. Well, I think a good example of that is just writing a check, which I don’t do very often anymore. I have a checkbook. I don’t write checks very often. But if you look at an example of something that really isn’t anywhere close to real time, it’s writing a check to your power company, or to your friend, or whatever, the whole set of processes and systems behind that are really what we call batch mode systems. Banks collect all these checks. They process them in one big batch once a night, or once a week, or whatever it is. And then money transfers and the checks clear, and so on and so forth.

And when you think about it, that is pretty archaic. So what we see a lot of companies doing is moving into things like real time payments. Right? So I can send you money directly in real time. But again, the challenge with that is the amount of information and the systems were designed in an era where that wasn’t important. So from the backend, we’re seeing a lot of migration from what we call batch mode or asynchronous systems into real time synchronous systems. But to be able to do that, you’ve got to back and potentially do some re engineering, not only of your technology, but you’ve also got to take a hard look at your business processes as well because sometimes it isn’t, like you said before, it isn’t necessarily just the technology behind it that’s causing the challenge, but the technology was built around business processes that weren’t real time.

So not only do you have to go in and really take a hard look at the technology and be able to put some things in place, integration technologies, technologies that allow you to actually communicate in real time, but you’ll also have to take a look at: What are the business processes that are behind this? And how do I need to adapt those business processes so that I can move into more of a real time world. And that’s a big challenge for companies. Right? Changing technology is hard, but changing an organization, a culture, a bunch of business process, I would argue that’s even more difficult than the technology piece itself.

Josh Klapow:
So okay, so that is super interesting because if I’m a bank, or an insurance company, or a call center, and obviously, chime in with more examples, I want to be there. Right? My customers are demanding it. The market is … My competitors are doing it. Why wouldn’t I, from a business process person part? What would hold me back from just signing up? Of course, let’s shift to real time. I mean, what are the inherent business or perceived business risks, or culture changes, or whatever? It’s funny because I’m the psychologist. But that’s interesting to me because I would’ve never thought that would be a barrier.

Alex Heublein:
Oh, yeah, huge barrier. And when you look at the, I mean, it goes back to the concept of organizational inertia. Right?

Josh Klapow:

Alex Heublein:
When you’re moving in one direction, it’s one of those Newtonian physics laws. Right? Things that are in motion tend to stay in motion. Things that are at rest tend to stay at rest. And so once you’ve got momentum behind the way you do business and the way that you do things, both from a business process standpoint, from a people standpoint, from a technology standpoint, those things are hard to change. Right? It’s like you’re changing the direction of a big container ship. Those things don’t speed up or slow down very fast. They don’t turn on a dime. They take a long time to make the transition. So one of the big inhibitors that we see to the whole process is cost, being able to go back and spend the money to do a lot of this, because it requires a lot. Right?

It’s not just about changing the technology. Right? That can be very, very costly to change out technology that you’ve had for a long time. But there’s also cultural changes. You’ve got to go back and retrain your employees. You’ve got to set the right expectations with them. So a big factor that we see is just the sheer cost of doing it. And then of course, any time there’s change, there’s always some perceived risk. And so the question is: How do you de-risk that whole process? How do you get closer and closer to real time without making radical changes to what you’re doing? Because any time you make really big changes, I don’t care what you’re doing, there’s always an element that it won’t work or it will, more importantly and more commonly, it will break something else. And that’s a big fear that we see with a lot of the big companies that we work with is, yeah, they know they have to do this, but they look at the cost, they look at the benefits of it. They look at the scope of what they’re doing.

And sometimes this doesn’t make it to the top of the priority list for some customers. If you look at insurance companies, for instance, claims processing is a huge factor. And some insurance companies are doing it really, really well. Just in the last few years, we’ve seen this move towards almost self done claims. Right? For instance, I had a big water leak in my house last year and flooded the basement, so on and so forth. And the really interesting part of it was we were able to do the vast majority of the claims process through our mobile phones. We took pictures of the damage, sent them off via their app. It was just a great experience. I mean, it was really, really amazing how quickly that happened.

Now to use a counter example to that, I have one of those home warranty kind of insurance we’ll if a refrigerator breaks or whatever, they’ll come out and fix it. Now I’ve got a standalone ice maker because I have an old refrigerator and it doesn’t have an ice maker built into it. And that thing is broken, and it’s been broken for five months. And the claims process around that has been a nightmare. None of it is online. They send a technician out. They look at it. They say, “We’ve got to order the parts.” Well, the parts aren’t in. I’ve literally been buying bags of ice for my ice maker for four or five months now and dumping them in. Right?

So yeah, there’s a lot that you can do. There’s companies that are really out on the leading edge of this. And they’ve put the systems and they’ve put the processes into place to deliver those real time results. And there’s companies that are still on that journey. But I think the important thing as well, delivering real time results can also be much, much more efficient in the long run. So yeah, you have to make some investments upfront in the technology, in the retraining of people, changing your business processes.

But at the end of the day, it can be much, much more efficient and much less costly for an insurance company, for instance, to process a claim than it was when they had to send out an adjuster every single time, and they had to schedule that, and so on and so forth. This real time notion isn’t just about being consumer friendly, or business to business friendly. It’s also about improving the process efficiency of your existing processes. And it’s a great time to go back and look at those processes and say, “You know what, not only do we need to look at the technology, but we need to re-engineer some of this as well, so that we get a more streamlined process,” so on and so forth.

So I’ll give you a really good example of that. We worked with a big insurance company in their call center. And people would call into their call center, and let’s say you got married and you wanted to change your last name. That was a painful process for a consumer because the person on the other end of the line, the customer service rep, had to go in and make that change in about a dozen different places, which is crazy when you think about it. Right? So they had that person on hold, on the phone, or whatever, going through, typing in the same exact information in a dozen different systems, a dozen different screens. So really, really frustrating for the customer, but also really, really inefficient from a customer call center agent perspective. These people were having to spend 20 or 30 minutes on the phone with the consumer. But it as also very error prone. Right?

You have to type the same information into 12 different screens. Guess how often you’re going to mess that up. You’re going to fat finger one of the keys, and then you’re going to be like, “Oh, man. I messed it up.” So the systems don’t connect, so it’s really, really inefficient for them to do it. So they came in, we built some process automation technology for them, implemented some of our products. And now instead of taking 30 minutes, they can make the change one time, and they can make that change in about 30 seconds. And so that’s huge for the consumer. It’s huge for the company because those customer call center agents can go talk and service other customers. And it also reduces the amount of errors involved. So it’s a win, win, win type of scenario. I think the trick is figuring out: How do you implement the right type of technology to give you those business results?

Josh Klapow:
Talk a little bit about risk because I know that there’s the perceived risk. But I was thinking in particular banking, health, particularly banking, but health as well, this idea that when there’s lag time, there’s opportunity for something to be checked, or double checked, or evaluated. When something’s happening in real time, one wrong push of the button and. I mean, is there a reality to that? By speeding things up to be real time, do we potentially insert more risk for minor errors or minor mishaps because people, things are transacting to quickly? Or is it exactly the opposite, to use the example you just did, because we only have to put the name in once?
Alex Heublein:
No, I think it’s very dependent on the circumstance and the industry. But let’s take banking for example. There can be a huge amount of risk in moving to real time and moving to technologies like that if you implement them in the wrong way. If you do it right, you can do it very, very effectively. You do it wrong, it can cost you a lot of money. So there was a news article, I think it was earlier this year, maybe late last year. It was a bank, I think up in New York, they sent a loan amount to I think it was a retailer. And they were supposed to send them $40 million, I think, and they ended up sending them one extra zero, so they ended up sending them $400 million.

And so the bank said, “Whoops, we messed up. Can we have the 360 extra million that we sent to you back?” And the retailer said, “No.” And so it went to court. And the judge ruled that, no, you’re not getting your money back. You guys messed up and the money’s going to stay with them. So that was a $360 million mistake. Right? So this idea of moving to real time certainly has risks and it certainly has challenges to it. But I think it’s really all about thinking it through, making sure you’ve got the right people and the right processes in place. And then you’ve got the right technology to, as you say, go do those checks automatically. So instead of having a human go do a check like that, you build in intelligence into your business process, automation flows, your integration workflows, so that you’re doing those double checks, or triple checks, but you’re doing them in a way where they’re automated. And think that’s really critical.

So for instance, we worked with a bank in France that wanted to do real time payments. And our product was able to accomplish that. Their core banking system is on an IBM mainframe, and they were able to call out to a real time payment clearinghouse outside of the organization. And because we generate all the code that’s already been tested, it’s been tested for years, they were able to go from proof of concept to production on real time payments, moving real money around, that they can’t get back if they mess it up. They were able to do that in under two months.

So I think there’s a big trend right now towards trying to take as much of the human error element out of these types of things. So you really can move to real time. You can do it safely, but you’ve got to have the right processes and you’ve got to have the right technology foundation to help you mitigate any risk that you may have.
Josh Klapow:
Do you have any thoughts about … And again, so the wave is to real time. The consumer’s focused on, I want everything in real time, or at the very least, at the very least, the thing is, I don’t want to have to wait a long time. I think your outsource insurance company situation, or extended warranty, is a great example. I’m in the same boat, because it is this sort of, you call one number. They’re processing it. They’re sending a technician out. The technician and everybody’s got technology. The technician’s got a handheld thing that he or she is using to process it. But then they’ve got to order a part. The part is … Everything that you just described. But are there industries where for whatever reason, and you educate me on this, we shouldn’t be in real time, we don’t need to be in real time? It’s a nice to have, but it’s not a must to have. What are your thoughts about that?
Alex Heublein:
I think it’s less sort of industry focused and more sort of business process focused. I mean, I think there’s something business processes that make a ton of sense to automate and to move into a real time environment. But there are some frankly that it just isn’t nearly as important to the consumers or the users of those systems and those companies to do things in real time. Lots of really good examples of areas that organizations can do things in real time. But yeah, for sure, I think there are examples where you probably want to go a little bit slower. And a lot of times, there are also, to your point, there are regulatory requirements that slow everything down. Right?

So our recommendation on things to our customers is, let’s take a look at all the different use cases and business processes you have. And then let’s focus in on the ones that make the most sense, where you’re going to derive the highest amount of value from moving those from a batch sort of asynchronous mode into a real time mode. It’s all about prioritization. Right? And I think that’s the big difference. A lot of companies, they get different demands from different constituents. But I’ll give you a good example of another one that going to real time. We’re working with a distributor. And the distributor has parts and tools and whatnot that they distribute to various retailers.

Problem was is that their inventory system and their ordering system weren’t connected. So every night, the inventory system would send the inventory over to the ordering system, and then when somebody says, “Hey, I want to buy 5000 of these,” the ordering system would say, “All right. Well, do we have 5000 of these?” Someone would say, “Oh, look. Yeah, we do.” Problem was the inventory levels could change at any time, literally, so huge problem, huge disconnect between ordering and inventory. And that was causing massive customer satisfaction problems for them, particularly given a lot of the supply chain disruptions that we’re seeing today.

Josh Klapow:
Sure, sure.

Alex Heublein:
It’s hugely important that you have your ordering system and your inventory system talking to one another in real time, so that’s a great example of an area where you really want to do it. I think industries that are heavily regulated, so look at healthcare for instance, in some cases, there are insurance processes and banking processes that you’re just going to have to go through, and they’re very, very difficult to make real time. But I find that those are really the exception. I mean, I would say those represent 10% of the use cases. The other 90% of the use cases that we see are things that make a lot of sense to move to real time, but the trick is: How do put them in the right order and the right order of priority, so that I’m getting the biggest return on my investment, and I’m also increasing my levels of customer satisfaction in the process? So that’s a process everyone needs to go through.

Josh Klapow:
Let me throw one at you that … This is what I love about this show. I’m going to just throw stuff at you. I know you’re an expert. And if you don’t know the details of it, we’ll go to something else. But a lot of us have seen the documentary about Wal Mart, and their sort of ability to know that in any given place in the country, if I’m buying a pair of shoes at one store, in this documentary, we’re showing that it’s being tracked all the way back to the supply center, down to central command. And literally, they can tell that I’ve bought this shoe in this store, in this town.

But when I think about Wal Mart, Wal Mart’s been around for a long, long time. It’s not a brand new chain. I don’t know if you have any detailed information about that. But even if it was hypothetical, how does a company like a Wal Mart go from before this technology existed to now the technology exists, how does a company like that become that sophisticated in their distribution of products? And let me throw in one more part. Sorry. And then Wal Mart getting involved with whole mail order, online purchasing, in addition to everything in their store. How does a company that big, that’s been around for that long of a time, move from what I would assume at some point were legacy older systems that weren’t capable of doing this, to what we see now?

Alex Heublein:
Yeah. Wal Mart’s a really neat example when you look at it. You’re right, company’s been around for a long, long time. They had very, very clear ways of doing things. They went in and tried to compete or price with everyone. And what’s interesting about Wal Mart is they were one of the exceptions in the retail industry that were really able to be what we call a fast follower. They weren’t the original innovator of things like eCommerce and sort of real time purchasing. But they followed along I think very nicely as they saw Amazon and other organizations coming up that had the potential to really take a lot of business away from them. They moved very rapidly.

I think they were able to do so because they’re, A, they’re a big company, which sometimes can be a challenge. But you’ve also got the resources to be able to throw at a problem like that. Right? You’ve got a lot of money you can throw at a problem like real time tracking, real time processing, that’s going to give you a lot of advantages out there in the marketplace. Right? But they weren’t sort of the original innovator. They didn’t sort of make that market, but they were able to follow along fairly quickly, whereas a lot of retailers really had a problem there. And I think Wal Mart’s focus on … They have a meticulous focus on their supply chain, on inventory levels, on looking at what their consumers are doing.

A lot of those processes existed before a lot of the new technology came into place. So I think they were in a unique position. Right? They had a huge amount of brick and mortar stores, which are great because if you order something online, you can return it to the brick and mortar store. That’s a nice advantage that they have. They had a great brand out there in the marketplace. And they had the business processes and that kind of culture of thinking about doing things as quickly as possible, doing things in real time. So I suspect, I don’t know, but I suspect the technology transition was pretty difficult, but having that kind of culture and that laser focus on making sure that we’re getting the right things to the right people at the right time, at the lowest cost, that was already embodied in their culture. And I think that cultural element, again, sometimes can be the biggest inhibitor to doing things like moving to real time. These big changes, it’s all about your cultural perspective on things, rather than just purely the technology.

Josh Klapow:
Okay. So we’ve got a company like Adaptigent. This is in part what you do. Talk, and maybe help me understand a little bit about how it actually works, going from non real time to real time, and also to your point on the Wal Mart part, the potential client who says, “I think I need to do this, or it would be nice to do this, but I don’t know what I’m about to get into.” How does this process work? Because I know you all are going to work with the IT departments, but at some point, there’s going to be a CFO et cetera, who may not have the deep knowledge. What do you all do? And how do you explain it to potential clients?

Alex Heublein:
I think there’s really two big parts of it. There’s this notion of being able to integrate things together in real time. So systems and technologies that have never really spoken to one another, so to speak, getting those systems integrated very carefully and very well is one part of the challenge. So going back to that distribution example, making sure that your inventory system can talk to your ordering system and vice versa, if you don’t have the ability for those systems to talk to one another, you’ll never get to real time. Right? There’s no good way of doing it unless I can integrate those systems together. So that’s one of the big aspects that we focus on is: How do we help our customers go out there and integrate previously un-integrated technologies so that they can see, they can have visibility and real time input and real time processing across the entire business process?

We walk into a lot of customers that say, “Oh, yeah. You know what, we do real time this, real time that.” And we actually go in and look, it’s not real time because these systems only talk once a day. Looks like it’s real time to the consumer, but in reality, causes a lot of problems on the backend. So the first step in doing a lot of these things is making sure that all of the systems and processes in this workflows are connected to one another, so that’s table stakes for doing this sort of thing. Right? If you can’t do that, it’s very hard to move to a real time world.

The second piece of it is really around automation. I mean it’s great that these systems can talk. But how do I automate some of these business processes so I don’t have to insert a human being into the process? Now there’s plenty of processes where it’s a really good thing to have a human involved, and there’s some processes where it’s really not a good thing to have a human involved because humans tend to slow things down. Computers move very, very quickly. They can process billions of transactions a day, so on and so forth. So a lot of times, you see the limiting factor being the people that are inserted into these processes.

How can we automate some of those repetitive, redundant, error prone tasks that are in the process to get us closer to real time? So I really think it’s a combination of integration and automation, and then really taking a hard look at your business process and making sure that they’re actually optimized for what you’re trying to do as a business. So that’s really what we do with our customers, integration, automation, and making sure that the processes behind these things are done in a way that will line up with the real time notion of process.

Josh Klapow:
All right, so last question for you, which should’ve been the first question. But it just came to me now what you said. The whole idea of what actually is real time because, and you just brought it up, and I’ve heard this before and I’ve seen this in some of the companies that I’ve worked with, where they’re saying that they’re real time, the consumer believes that they’re real time. The consumer thinks they’re getting real time. But it’s not real time. Can you maybe just describe what real time is from a definition standpoint? And what is this other thing that consumers think is real time, but it’s not really real time?

Alex Heublein:
That’s a really interesting question. Right? So I’ll give you a really good example of something that consumers think is real time, or at least it was as of last year, but actually isn’t real time. So you’ve seen a lot of services out there that do real time payments between consumers, sort of personal to person real time payments, the Venmos of the world, so on and so forth. Well, some of those providers make it look like it’s real time. The money gets debited from one account and it shows up in your account, and all looks good there.

In reality though, a lot of those guys actually only clear their transactions a couple of times a day, so that’s a great example of something that appears to the consumer to be real time. And for 99% of the time, it effectively is real time, but on the backend, the processing is not happening in real time. It’s actually happening in a lot of cases still in a batch mode. The batch mode may be more frequent, but in reality, it’s not real time, so that’s one fairly good example. But there are real time payment processors that really do actually do it in real time. Now that requires a lot more expense, a lot more processing power, a lot better thinking about your business processes and automating them and so on and so forth.

But yeah, so the definition of real time, I think it all comes down to: Who are you asking? If you’re asking the consumer, there are things that appear to happen in real time that maybe don’t on the backend, but functionally from their perspective, it doesn’t really matter. And then I think there are things that are truly real time, and the IT organization would consider them to be real time, and the business would consider them to be real time, and the consumer would consider them to be real time. So I think you’ve got a big mix out there of sort of this pseudo real time and true real time.

Back to your earlier question about: What are the use cases where it doesn’t actually have to be real time? I was working years ago with a restaurant chain. And they said, “Well, we need point of sale data coming back into corporate in real time.” And I said, “Well, what if we could do it every 10 minutes?” No, no 10 minutes is unacceptable. It has to be real time. But we actually started talking to these guys. And I said, “Well, what are you going to use this real time data for?” Well, to make decisions. And do you think your decisions are going to change every second, every minute? And they were like, “No.”

So there are use cases where even the business thinks it needs to be real time, but in reality, it doesn’t. You can do close to real time and still achieve the same business objectives that you would with true real time, and you can do it at a much lower cost. So it’s really all about looking at those specific processes, making good decisions, and then determining the level of whatever you want to call it, real time-ness, that you need to accomplish your goals.

Josh Klapow:
No, I like that. I like that, Dr. Alex. All right. We’re out of time. I do like what you’ve talked about today. And you’ve mentioned this in all the shows that we have done, this whole idea of integration or the intersection between business processes and business needs and technology, and really having those two mesh up. And I would anticipate that those things will continue as we move forward in further shows. I want to thank everybody for joining us today for Adapt or Perish. Stay tuned to Tony Kurre Radio for the next episode of Adapt or Perish.