The Coming Intelligent Digital Assistant Era and Its Impact on Online Platforms

1. The Coming Intelligent Digital Assistant Era and Its Impact on Online Platforms As digital agents increasingly represent their human owners, online platform providers must upgrade their technology infrastructure to accommodate new ways of product search and discovery as well as rethink their business models to stay relevant in the impending autonomous business era. Executive Summary John’s personal assistant reminded him about his dad’s upcoming birthday. He then asked his assistant for a suggestion on a gift. Knowing the family and his father’s preferences, likes and dislikes, John’s assistant recommended a fitness band. John asked his assistant to order it right away from his usual e-commerce platform. His assistant then reminded him of a recent bad experience with product delivery and customer service, and suggested another site. John agreed instantly, prompting the assistant to place the order to be delivered on his Dad’s birthday at 10 am. John’s helper in this fictional scenario is a sophis- ticated, powerful and intelligent digital assistant (IDA) that resides on his handheld/wearable device. More than just delivering a reminder, the IDA scans partner websites/apps, product catalogs, seller/product reviews and patterns to curate a small list of gifts. To perform this task, John’s IDA maintains records on personal preferences, researches multiple websites/apps and sifts through thousands of products and reviews. As farfetched as the above scenario may seem, in reality this type of IDA will be commonplace in the near future. According to Gartner’s 2016 strategic predictions report,1 “by year-end 2018, customer digital assistants will recognize indi- viduals by face and voice across channels and partners.” The rise of IDAs will impact the way businesses plan and operate, as well as how consumers interact with personal and enterprise technologies. Many consumer-facing companies across industries such as Royal Dutch Shell2 are piloting cognitive digital assistants that manage customer queries with minimal manual interventions. The meteoric rise of IDAs is being fueled by advances in technologies such as natural language processing (NLP), artificial intelligence (AI) and machine learning, supported by high-speed Internet connectivity and cloud computing. The IDA movement is expected to accelerate as tech giants such as Google and Microsoft, and new-age start-ups like Viv and X.ai, convert their formidable R&D into minimally viable products – or more. cognizant 20-20 insights | february 2017 • Cognizant 20-20 Insights

2. cognizant 20-20 insights 2 While research enables the requisite technology development, the IDA’s ability to combine information from multiple sources (websites and apps), and connect the dots adds real value for consumers. A single IDA can eliminate a consumer’s need to visit multiple websites/apps/ services (fulfilling similar requirements). As a result, we foresee a huge change in the way users will interact with online platforms. This white paper emphasizes the urgency for online platform providers to act now to stay relevant in this emergent IDA era. IDAs: From the Beginning The digital assistant dates back to the late 1990s, with the Microsoft Clippy3 being one of the originals. These nascent IDAs provided basic assistance by leveraging linear search capabilities, but were limited by the technology of the time. They could not do much other than resolve user queries, and often were more of a nuisance than a boon. Most opted not to use the Clippy. Since then, the technology has evolved from being primarily transactional to intelligent and focused on providing far better outcomes. The technology computes thousands of situational parameters and delivers options best suited for a search query. For example, Siri, Google Now, Cortana and Viv are examples of assistants that are not only intelligent but also are gradually moving toward being cognitive (i.e., able to understand human behavior in ways that enable these IDAs to provide customized responses based on the needs of an individual). By staying ahead of the IDA adoption curve, online platform providers can better address the needs of users who depend heavily on such environments for everything from shopping and hiring a taxi to renting a room. Moreover, as IDAs become mainstream, more and more interactions between users and online platforms will be assumed by the intelligent devices. This holds promise for solving key challenges that exist in today’s virtual world, such as: • User intent is not leveraged for search results. Search technology on the Internet is unintuitive and represents an unnatural way for humans to interact with online platforms, requiring user literacy and keyword knowledge. One often overlooked fact is that while over 55% of Internet content is in English, that is a first language for less than 5% of the world’s population, with only 21% of the planet’s people estimated to have some level of understanding.4 Moreover, most users are more comfortable talking to each other to solve problems rather than writing queries. Powered by strong NLP 1 John’s personal assistant reminds him about his dad’s birthday in the coming week. 2 John asks his assistant for a suggestion for a gift. 3 Knowing the family and their preferences, the personal assistant shares all available gift options. 6 John agrees, and his assistant places the order to be delivered on dad’s birthday at 10 am. 5 His assistant reminds him of bad experience with poor customer service last time, and goes on to suggest another online platform for fulfilling the order. 4 John asks for a gift to be ordered right away from his regular online platform. Any suggestion How IDAs Enhance Customer Journeys Figure 1

3. cognizant 20-20 insights 3 programs and intent recognition algorithms combined with speech-to-text software, IDAs will use inferred intent and not merely words to get the right results or perform tasks. • Information overload is problematic. There are over four million apps available on Google Playstore, Apple iTunes and over a billion websites worldwide. For music, for example, users must navigate and consume an immense amount of information manually before even getting to select their musical choice. User time is spent locating rather than analyzing/ consuming the information. IDAs will be powered to discover the right informational source according to user preferences and needs. • An inordinate amount of time and effort is required for basic task management. Current approaches force people to perform authen- tication (and penalizes them for forgetting passwords), search a long product list (not remotely related to user preferences) and process a payment (often after multiple failed attempts). All this is followed by numerous check-ins (until delivery), and often leads to long calls with customer care for after-sales support. IDAs can eliminate these unnecessary and avoidable user touchpoints. As IDAs evolve and address these challenges, adoption is also expected to increase. Tractica research forecasts that unique active consumer IDA users will grow to 1.8 billion worldwide by the end of 2021.5 This pace of adoption will be propelled by two factors: • Cross-device reach: Wider reach and access to multiple devices connected to the Internet of Things (IoT), including smart wearables, smart homes and smart automobiles, make IDAs more comprehensive for daily use and hence increase the likelihood of adoption. E-commerce Website Mobile Applications Web Applications (Maps, Calendar) Banking Platform Users Digital Solutions – Transactional E-commerce Website Mobile Applications Web Applications (Maps, Calendar) Banking Platform Users Digital Assistant – Intelligent Not Personalized E-commerce Website Mobile Applications Web Applications (Maps, Calendar) Banking Platform Intelligent Digital Assistant – Behavioral Emotionally Connected with a Single User Single User Digital Assistant 1 Digital Assistant 2 Digital Assistant 3 One Technology to Rule All Intelligent Digital Assistant Three Categories of Human-IDA Interaction Figure 2

4. cognizant 20-20 insights 4 • Affordability: Advancement in technologies such as high-speed Internet availability, cloud computing, NLP, AI and analytics should make IDAs more cost-effective and hence affordable to the masses. As noted, IDAs appear poised to be transformed into a true multichannel virtual agent, featuring the ability to simultaneously handle numerous user engagement touchpoints. IDA evolution and theadoptionofIDAswillchangehowusersinteract IDA Enabled Touchpoints (Automated and Personalized) Existing Touchpoints (Manual and Non Personalized) • IDA manages personalized event reminders shared with users. • IDA enabled by smart UI/UX engages in a conversation with customer. • IDA shares information like gifting options while considering a friend’s buying preferences and the customer’s budget. • Active use of analytics and social media to understand user preferences and/or to create reminders. E.g., contextualization of information reminding user in advance about close friends or relatives. Discovery Need for a specific good or service is triggered by specific events. • Manually set event reminders, or pull from social/public domain. • Basic notification/alarm exists with limited personalized information. • Automated scanning of multiple websites/apps to recommend product based on past purchase, social media feeds and preferences. • Automated product quality analysis based on product feedback available universally. • Dynamic product catalog display. Research Search for best available good or service. • Toggle between multiple websites and sources to find a right product. • Manual product search to select items within the website/app. • Review user feedback and other content to pick most preferred product list and range of reliable providers. • IDA orchestrated order placement, payment & delivery tracking. • Minimal user intervention needed. • Analytics used to assess and select – “payment mode” based on user’s past preference, available account balance, minimum transaction cost and best available discount. Purchase Product purchase transaction and related activities. • Manual process for product selection-to-order placement and delivery. • High demand for users’ interventions at all steps. • Search constrained by human bandwidth, abilities and memory. • Automated follow-ups and updates to users. • Automatic warranty management with periodic service updates. After-Sales After-sales product warranty and returns. • Manual initiation of product return process. • Lack of warranty management system in place. The Art of the Possible: Digital Persona-IDA Interactions Figure 3 with online platforms. To adapt to impending change, online businesses must foresee how new customer touchpoints will re-map business processes and technology infrastructure in order to anticipate such revised user needs. IDAs Drive Changes in User Behavior Figure 2 (see previous page) illustrates the three meaningful ways we believe users will interact with IDAs.

5. cognizant 20-20 insights 5 In the transactional phase, a user accesses an individual application to perform a task, whereas in the intelligent phase, the IDA can address multiple (but limited) tasks (e.g., a chat bot that can handle a financial transaction and also book a taxi for a user). In the future, the IDA will be more like a genie who handles all tasks like a true personal assistant with limited touchpoints. This touchpoint can be voice-enabled or might use a simple user interface (UI). Figure 3 (see previous page) illustrates user interactions with online platforms, and evaluates each touchpoint in detail to show how it will evolve over the next few years. Delving into this depiction, we see that in the future IDA interactions will occur via a powerful digital persona that constructs context from past user experiences to arrive at a product/service/ location suggestion. Under such circumstances, online platforms must evolve with the increased intelligence and visibility of the IDA. To keep pace with IDAs, we suggest a few key steps online platform providers should take right now. Online Platforms: Brace for Change For online platform providers, technological change is accelerating faster than ever; moreover, IDA evolution is expected to outpace foundational platform changes. It is therefore critical for online platform providers to reimagine their business models and make necessary changes at the user management, platform architecture and partner management levels to remain competitive. We recommend that platform providers adapt by undertaking the following key strategic steps. • Technology: Figure 4 illustrates the future technology architecture required to support IDAs. Two key platform attributes that are expected to change drastically are: FIREWALL How Platforms Can Embrace IDA Evolution Cognitive Layer Speech to TextText to Speech User Interface UILayerIntegrationLayer Analytics Data on Demand Social Media IoT Geo Location Mobile POS Partner WebCloud Providers Users Patterns/Intent Recognition Natural Language Processing Artificial Intelligence Analytics API Management Framework (API Management, API Analytics, API Health) Figure 4 In the coming IDA era, there will be a greater need for online platforms to harness data, captured at different touchpoints, such as tracking user journeys, vendor management quality, etc.

6. cognizant 20-20 insights 6 >> User interactivity: With IDAs, requiring userstoknowkeywordsinaspecificlanguage to search for a product can be injurious to business health. Platform providers will need more natural ways to support user interactions such as voice-enabled applications with multilingual capabilities. Text-to- speech and speech-to-text converters will be needed to form the core of the UI as they will enable human-to-machine interactions. In fact, according to comScore, 50% of all searches will be voice searches by 2020.6 Moreover, with the increase in voice searches, content would also need to be search engine optimized (SEO) with a conversational tone. This is in stark contrast from current optimizations where SEO primarily focuses on keywords. Portals that employ a conversational tone would perform better than other portals. >> Cognitive layer based on analytics, machine learning and AI: In the coming IDA era, there will be a greater need for online platforms to harness data, captured at different touchpoints, such as tracking user journeys, vendor management quality, etc. Data could be used across the value chain to learn patterns and take preventive measures. For example, AI could be applied during consumer/IDA interactions where the algorithm will make it easier for the consumer/IDA to access product/service information. AI could also be used in other functions such as customer care, where bots could provide automated answers — which would reduce costs and enhance responsiveness. AI could also be applied on the supply side of a marketplace (e.g., vendor management), where data could be analyzed to reward vendors with high compliance and higher margins, etc. Overall, optimum utilization of data would lead to greater customer experiences with lower costs. • API management framework (i.e., the “API’fication” of features and services): As IDAs assume interactions across the user journey, online platforms must expose more of their offerings and services through a set of standardized APIs. Building the technology infrastructure around reusable and standardized APIs will have multiple benefits: >> It will promote information transparency, thus making it easier for an IDA to interact and get required information without manual interventions. >> APIs would bring more agility to the tech development and make the entire process of introducing a new feature faster and more reliable. • Managing changes in the ecosystem: Apart from the technical and security related changes, online platform providers will also need to embrace ecosystem change. The ecosystem comprises five major participants, and will require a specific focus to manage each: users, IDA platforms, competitors, partners and developers. >> Users and IDA platforms: As IDAs replace manual interactions between humans and online platforms, the line between a user and IDA will blur. Since IDAs will be capable of computing thousands of data points to make decisions, the best (and hopefully only) strategy for sustenance for an online platform would be to provide the best quality products/services at competitive prices. Any lag in the service or product fulfillment would lead to loss of business opportunity. >> Competitors: The boundaries of competition will also blur. We foresee that competition among online platforms will not only be from other platforms but also from other non-partner IDAs. Under such circumstances, forging a strong partnership with all major IDAs will be critical, and is strongly recommended. >> Partners: Collaboration between two different sets of stakeholders will be critical in the IDA era. One of the key partnerships would focus on building a strong ecosystem with vendors/resellers and suppliers. The other necessary partnership will be with IDAs that focus on transparency of information and technical integrations. »» Partnership with existing resellers/ vendors/suppliers, etc.: The goal of online platforms and their partners would be tightly coupled to make the supply side As IDAs replace manual interactions between humans and online platforms, the line between a user and IDA will blur.

7. cognizant 20-20 insights 7 of ecosystems work to their advantage. Technology enablement and deep integrations based on an IDA framework will help smaller vendors scale as business grows and would also aid in improving stickiness with the online platform. »» Partnership with IDAs: The goal of online platforms would be to build a long-term partnership with an IDA built on trust, transparency and quality of service, thus enabling the demand side of the ecosystem. Two key aspects that must be considered: 1. Partnership rules: The norms of engagement with IDAs would require clear terms of services and an emphasis on sharing information with sufficient security. Also, since online platforms will enable IDAs and at the same time compete with them, one strategy to control the monopoly of IDAs would be to partner with multiple IDAs. 2. Technical configurations: Online platform providers must ensure that their internal systems are robust and standardized so they can respond to requests from IDAs without any manual interventions. In return, online platform providers can expect to gain access to customer insights (from the persona the IDA represents), which can help such platforms to optimize operations and further enhance their user experience. >> Developers: Whether it is in-house developers who build and maintain technology platforms or external developers who provide niche products/services, they will need new skill sets. In the IDA era, we predict the dependency on UI/UX will decline significantly, and there will be an increased need for core skills that involve building scalable architectures, designing with universal APIs and working with data analytics. • Governance, security and risk: Secure the code and make interaction risk-free. In the recommendations above, we advocated policies of openness, information transparency and coexistence. Hence, it will be an interesting challenge to build systems that allow all of the above and yet remain strong enough to secure the data and systems from hackers, competitors and even malicious code in the IDA itself. To accomplish this, a strong and secure authentica- tion mechanism, an effective security policy and compliance to global standards must be clearly embedded in the business logic. Following are a few recommendations that could be considered while information exchange takes place with IDAs: • Channel encryption: All exchanged information would need to be encrypted, and only the partner IDA would be able to decrypt the information. • Rules for data handling and storage: Monitoring the data being consumed and stored can help in detecting misuse of information. Moreover, policies on what data can be stored on IDAs and what needs to be called through APIs on the fly need to be established. Drilling further down, if data is being stored, how it is being used, and who has access to it must be published, and this information should be accessible to all key stakeholders. • Fraudulence: A process would also be required for continuous monitoring to prevent fraudulent activities on an ongoing basis. The Way Forward “By year-end 2018, 25% of customer service and support operations will integrate virtual customer assistant technology across engagement channels,” according to a recent Gartner report.8 But this represents just the beginning of an era. IDAs place greater demands on existing processes and technology, and as a result online platform companies must take a holistic approach to upgrade and extend existing business technologies. Generally, companies have chosen the incremental approach to improve their IT infrastructure; however, the exponentially rising threat represented by IDAs is creating an urgent need for online platform companies to holistically upgrade their IT infrastructure to remain business In the IDA era, we predict the dependency on UI/UX will decline significantly, and there will be an increased need for core skills that involve building scalable architectures, designing with universal APIs and working with data analytics.

8. cognizant 20-20 insights 8 relevant. The mantra for winning in the IDA era pivots around the following three key tenets (see Figure 5). • Address technological changes. An extensible IT infrastructure needs to be put in place today to support IDAs’ accelerating requirements. Online developers should start with key initiatives such as API-based development, focusing on conversational commerce and developing skillsets around core capabilities such as analytics, scalable infrastructures, etc. Since there are no shortcuts for developing these capabilities (they all take time to build Footnotes 1. Heather Pemberton Levy, “Gartner Predicts Our Digital Future,” Oct. 6, 2015, Smarter With Gartner, www.gartner.com/smarterwithgartner/gartner-predicts-our-digital-future. 2. Joanna Goodman, “Digital Assistants: A New Brand Platform,” January 2016, The Guardian, www.the- guardian.com/media-network/2016/jan/29/virtual-assistants-brand-platform. 3. en.wikipedia.org/wiki/Office_Assistant. 4. “Unlocking relevant Web content for the next 4 billion people”, November 2014, GSMA & Mozilla whitepaper, wiki.gsmaintelligence.com/gsma_kb/images/5/5f/Mozilla_GSMA_LocalCon- tentSmartphones.pdf. 5. Virtual Digital Assistants, 3Q 2016, Tractica Research, www.tractica.com/research/virtual-digital-assistants. 6. Christi Olson, “Just say it: The future of search is voice and personal digital assistants”, April 2016, Campaign, www.campaignlive.co.uk/article/1392459/just-say-it-future-search-voice-personal-digital- assistants. 7. IBID. 8. community.dynamics.com/b/msftdynamicsblog/archive/2016/02/19/16-statistics-shaping-the-future- of-customer-service. and mature), early movers will seize the high ground. • Build trust and loyalty through partnerships and information availability. Partnerships with vendors/sellers on one hand and with IDA developers on the other must be balanced. While the former would help in building a strong supply side ecosystem, the latter would ensure a strong demand side ecosystem. Both must happen simultaneously. • Build robust security and governance. Part- nerships and the exchange of information over the Web requires strong security and governance mechanisms to protect data and customer privacy. This would require not only robust technology but also a set of fair rules that define terms of service and relationships between IDAs and online platforms. Given the pace of change in the IDA space, we strongly recommend online platform providers to act now. They should reevaluate their strategy, modify platform rules and revamp their architecture to accommodate impending requirements from customers (both human users and IDAs). The companies that do not act swiftly may become less favored options for IDAs and even- tuallyend up losing customers and subsequently market share to the platforms that fully embrace the IDA era. Partnership Technology Security & Risk Underlying Principles and Governance Structure Keys to IDA Success Figure 5

9. World Headquarters 500 Frank W. Burr Blvd. Teaneck, NJ 07666 USA Phone: +1 201 801 0233 Fax: +1 201 801 0243 Toll Free: +1 888 937 3277 Email: inquiry@cognizant.com European Headquarters 1 Kingdom Street Paddington Central London W2 6BD Phone: +44 (0) 20 7297 7600 Fax: +44 (0) 20 7121 0102 Email: infouk@cognizant.com India Operations Headquarters #5/535, Old Mahabalipuram Road Okkiyam Pettai, Thoraipakkam Chennai, 600 096 India Phone: +91 (0) 44 4209 6000 Fax: +91 (0) 44 4209 6060 Email: inquiryindia@cognizant.com © Copyright 2017, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is subject to change without notice. All other trademarks mentioned herein are the property of their respective owners. Codex 2447 About Cognizant Cognizant (NASDAQ-100: CTSH) is one of the world’s leading professional services companies, transforming clients’business,operatingandtechnologymodelsforthedigitalera.Ouruniqueindustry-based,consultative approach helps clients envision, build and run more innovative and efficient businesses. Headquartered in the U.S., Cognizant is ranked 230 on the Fortune 500 and is consistently listed among the most admired companies in the world. Learn how Cognizant helps clients lead with digital at www.cognizant.com or follow us @Cognizant. About the Authors Raghu Ramamurthy is a Practice Leader within Cognizant Business Consulting. He is a technology and manufacturing thought leader with 20 years of business consulting experience across several industry verticals — technology, manufacturing and retail. Raghu’s functional expertise spans supply chain management, global information systems (GIS) and digital transformation. He holds an M.B.A. from Indian Institute of Management, Lucknow. Raghu can be reached at Raghu.Ramamurthy@cognizant.com. Amit Morya is a Senior Manager within Cognizant Business Consulting’s Communications and Technology Practice. He is a Certified Project Management Professional and Agile Certified Practitioner, with 12 years of strong consulting experience in the areas of product and program management, digital transformation and IT strategy. Amit holds an M.B.A. from the Indian Institute of Foreign Trade, Delhi, and a B.Tech. from Indian Institute of Technology (BHU), Varanasi. He can be reached at Amit.Morya@cognizant.com | https://www.linkedin.com/in/amit-morya-2463041. Lekha Karthik is a Manager within Cognizant Business Consulting’s Strategy and Transformation Practice. She has over 10 years of extensive consulting and IT transformation experience. Lekha has advised and consulted with clients across a variety of domains and geographies and has rich experience in organiza- tion change and program management, and digital strategy. She holds an M.B.A. from Indian School of Business, Hyderabad, and a B.Tech. from National Institute of Technology (NIT), Jaipur. Lekha can be reached at Lekha.Ojha@cognizant.com | https://au.linkedin.com/in/lekha-karthik-628635b. Mohit Vijay is a Senior Consultant within Cognizant Business Consulting’s Analytics and Informa- tion Management Practice. He has seven-plus years of consulting and product/program management experience in providing BI, data strategy and business analytics advisory to clients across domains including retail, hospitality and technology. Mohit holds an M.B.A. from SP Jain, Mumbai, and a B.Tech. from Rajasthan University. He can be reached at Mohit.Vijay@cognizant.com | https://in.linkedin.com/in/ mohit-vijay-57510b6. Anurup Gupta is a Senior Consultant within Cognizant Business Consulting’s Communications and Technology Practice. He has over seven years of consulting experience in areas of retail marketing digital transformation, and product and program management. Anurup holds an M.B.A. from MDI, Gurgaon, and a B.Tech. from Guru Gobind Singh Indraprastha University, Delhi. He can be reached at Anurup.Gupta@ cognizant.com | https://in.linkedin.com/in/anurup1.