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In 2016 General Electric (GE) sold its domestic appliances division to Haier from China. The American company reached a dismal situation wherein it needs to repay a large debt and streamline its businesses. Selling the consumer-oriented business may have seemed to the management, led at the time by previous CEO Jeff Immelt, as a means to relieve the company from a business that is out-of-line with its other mostly industry-oriented business areas. However, that division was an asset whose value could not be measured just in financial terms — it was more than a capital asset. It provided a valuable support to the brand of General Electric, together with the lighting business. The incoming CEO John Flannery is planning even more drastic changes to the company’s composition, but removing the appliances division might turn out as an obstacle to his mission. The industry brand of GE could benefit from its long appraised consumer brand.

General Electric is engaged in a range of business areas. In some of them the company has obtained or enhanced its capabilities through acquisitions during the tenures of CEOs Jack Welch (1981-2001) and Jeff Immelt (2001-2017). The businesses of GE feature: (1)  Additive –advanced manufacturing technologies (e.g., 3D printing); (2) Aviation — engines, components and electric systems for jets, and avionics (e.g., innovative digital pilot dash-boards); (3) Power, including gas, steam and nuclear power; (4) Industrial Connections, including electrification, grid and control; (5) Healthcare — medical technologies such as ultrasound, MRI  & CT, digital integrated care (i.e., data sharing and management), patient monitoring, surgical imaging and more; (6) Renewable Energy, including wind, solar and hydro, and innovative hybrid solutions; (7) Transportation — digital automation and industrial Internet-of-Things (IoT) solutions for  locomotives, marine (drilling) and mining.  The businesses of GE today are directed largely to industrial, commercial, and public clients. The last business that targets consumers at least in part is Lighting, offering advanced LED bulbs (e.g., smart IoT-controlled, HD-quality), linear fluorescents, and other products.

Noteworthy, digital transformation is omnipresent through most of the businesses of the company, entailing advanced computer-based digital systems, interfaces, and mobile applications (e.g., IoT apps developed in co-operation with leading hi-tech companies). Much of the digital activity seems to be originated, planned and developed at the Digital division or unit of the company (e.g., industrial apps serving IoT products, Predix — the online platform applying IoT data and predictive analytics, manufacturing software, as well as cybersecurity). Internet-of-Things functionality applies also to lighting products for consumers; it was supposed to be implemented as well in their domestic appliances. In practice, the appliances may still be reliant on GE for IoT technology even after the transition.

For many years the Appliances of GE were commonly associated by consumers with quality and durability — having a refrigerator carrying the art-graphic logo sign of GE in the kitchen was taken as a symbol of social status. In 2015 the appliances division generated revenues of $6.34bn, 7.1% of GE’s total revenues. The combined revenues of GE from appliances and lighting, as reported by the company, stood at $8.8bn (an increase of 4.8% from the previous year). Combined profits were $700m, a margin of 7.7% as percentage of revenues (GE 2015 report on financial results, Segment Operations: Appliances and Lighting). GE overall reported a loss in 2015 (see Chart 2). The company first tried to sell its appliances to Electrolux but the deal was objected by the American Department of Justice. A new process for selling the division started with Qingdao Haier, and after six months of negotiations a deal was closed in June 2016 at a price of $5.6bn. The range of appliances in their new ‘home’ includes refrigeration, cleaning (dishwashers), cooking, laundry (washing machines), accessories such as water filters, and air-conditioning.

The division of appliances is now identified as ‘GE Appliances: A Haier Company’. This company is in an interim period of transition, alas outwards its status creates a bit of confusion about who is really in charge. The company’s website is resident at a domain titled ‘geappliances.com’ and the company retains the brand identity of GE. The association with Haier does not seem too committing. For example, whom consumers should expect to be responsible for their appliances? Or, how to distinguish between appliances that originate from GE or from Haier? The headquarters of GE Appliances remains for the time being in US territory in Louisville, Kentucky, under American executive leadership. Recently, the new company announced the creation of appliance connectivity — operation command by voice and through mobile apps (IoT). Yet the technology is reasonably a direct extension of GE’s development of capabilities of Artificial Intelligence and IoT in their businesses for industry.

Haier has thereof received a strategic foothold on US soil, in hope to strengthen its position in the country and establish a long sought market share in the American market; American consumers have refrained from buying appliances of Haier. The Chinese manufacturer rose from a failing refrigerator factory in Qingdao of thirty years ago by instilling over time quality standards that were much higher than those accustomed in China. Zhang Ruimin, leading the transformation, succeeded remarkably in turning the company into a major national appliances manufacturer in China with global extensions. However, the quality standards at Haier remain behind those of developed countries and therefore the company’s efforts to sell in the ‘West’ have been lingering (1). Haier still has a challenge of closing a gap in quality and credibility, which the acquisition from GE is expected to help overcome.  Many consumers in the US as well as in other Western countries will probably remain concerned by ambiguity about the source of their appliances, being of GE (United States) or Haier (China). Haier also gained important American technological know-how (e.g., in AI) from the American company. General Electric apparently gained a financial relief, but one that may be only for a short-term, and the company may have to pay for it in the future.

The new CEO of GE, John Flannery, revealed in an annual ‘Investor Day’ meeting last month (Nov. ’17) the company’s plan to focus on three business areas: power, aviation, and healthcare. It will exit completely some of its existing business operations (e.g., transportation, lighting, industrial solutions, electrification) while reducing its effort and involvement in others. For example, the company will retain its digital unit or division to develop and sell apps to customers for operating and monitoring equipment reliant on Predix platform, yet with a smaller budget. Flannery was less clear on the future of some areas such as renewable energy where the company is not completely willing to leave and some other arrangement may have to be found. Strategically, the plan is to reduce the span of businesses the company engages. In addition, the CEO informed analysts that the company will have to cut in half its dividends.

The share of GE climbed from a level of $25 to $30+ in late 2015 and held its price as high through 2016 with small fluctuations. Then, the price started to slip down continually through 2017. So much for the effect of selling GE Appliances on equity. By August 2017 the share price already came back to $25. Since Flannery entered the CEO office, and subsequently following the announcement of his plan and the harsh cut in dividends, the share price steeply fell to about $18, as low as the band of $15-20 in which the share fluctuated in 2009-2011.

Chart 1 GE Share Price

Analysts were left unsatisfied and critical about the turnaround plan at GE. They complain for instance that the company is too expansive, and that it must increase efficiency and reduce duplicate costs across the organization (Reuters, 13 Nov. ’17). Others express concern in particular about the debt at GE, and that the plan includes insufficient measures to fix problems with the company’s businesses (CNBC.com, 14 Nov. 2017 — also noted, GE share underperformed S&P 500). Part of the cure will have to include exit from some businesses (e.g., where GE entered by acquiring another company or where it did not build a substantial advantage). Nevertheless, increasing efficiency and reducing duplicate costs can be achieved also by merging some associated areas and consolidating them into a new division, though perhaps narrowing the scope of operation in each field. One example for doing so may be in the area of energy: sources, production or distribution (i.e., power, renewable energy, connections). Another area to consider is ‘digital’ — balancing between development of original technologies and solutions in a central unit, and their implementation for specific systems and equipment in the various business divisions. Letting go of the appliances business could be seen as a logical way to free resources for advancing industry-related areas of expertise that remain. But solving problems of over-expansion and inefficiency in the industry-oriented businesses did not have to come at the expense of the consumer-oriented business in which the company developed product and brand advantages over decades.

The company has to come to terms now with damages from excessive expansion-by-acquisition, a strategy led by Welch and followed by Immelt. The ‘elephant in the room’ for the company is GE Capital, the investment bank of General Electric, whose troubles particularly since 2009 inflict on the whole company. Now the company under Flannery plans to heal by letting go of some more of its genuine businesses such as transportation and lighting (Matt Egan, CNNMoney.com, 20 Nov. ’17), that is, in addition to the appliances already shed by Immelt. The company has built an expertise in transportation, especially locomotives, during the past hundred years. Lighting can be regarded as a founder’s asset of the company (i.e., attributed to Thomas Edison); as described by Egan, lighting “symbolizes the company’s history of innovation”. General Electric could find it very difficult to continue after removing parts of its heart and soul.

The intensive occupation of the company with allocation of capital was initiated and developed by Welch but it spiralled out of control under the leadership of Immelt. The latter quadrupled the amount of capital invested in the company (from $42bn in 2001 to $163bn in 2009) which involved a significant increase in borrowing. By 2011 it was recognised as a major problem with the management of Immelt. Geoff Colvin of Fortune described how Immelt as CEO remade the portfolio of GE, for instance by entering new “future industries”  (e.g., healthcare, green energy). However, his aggressive expansion came at a high cost. While the CEO already tried to unburden the company from some businesses (e.g., NBC and Universal Studios), it was seen by analysts as insufficient. The real issue at GE, as Colvin noted, was capital allocation, and it became more so critical at GE Capital (2). The decision to quit the involvement of GE in TV broadcasting and online media (NBC) as well as cinema productions (Universal) sounds very reasonable. Conversely, the claim supported also by Colvin that Immelt was waiting too long to unload appliances (executed only in 2016) and lighting (never completed to-date) from GE should be much less applauded because these business areas made-up a distinct branch at GE with deep roots, and were also carriers of its consumer brand, a valued non-tangible asset.

In a highly critical opinion column in the Financial Times, John Gapper argues that focusing management on capital allocation could kill GE as an industrial company. It would make GE operate more like an equity fund. The company needs to shift because it may no longer be sustainable to run a manufacturing conglomerate as in the 1980s. However, it does not require to treat the business units as equity holdings for capital optimization: “Once efficient allocation becomes the priority, it is hard avoid this cycle.” It cannot be surprising for Flannery to continue this path, following the leadership of Welch and Immelt, considering his long career at GE Capital, up to the latest post he held as head of that division. Culture and a style of management have kept the units of GE stick together like a glue for many years. Without them, Gapper wonders how longer GE can hold together (FT.com 15 Nov. ’17).

The financial figures of GE in 2015 and 2016, as published in the Fortune 500 ranking, show little so far in favour of the impact of exiting from some business activities such as Appliances, measures taken by Immelt to heal the company in his last years in office: The revenues have fallen, but moreover the return on revenues has also decreased from a level of 8%-10% in 2011-2014 to 7% in 2016, after recovering from a loss in 2015 (Chart 2 below). It should be noted nonetheless that the value of assets has already shrunk by 50% between 2011 ($717bn) and 2016 ($365bn).

Chart 2 GE Revenues and Profits

  • General Electric descended from former 6th-9th positions in the ranking of Fortune 500 (US) to 11th place in 2015 and 13th in 2016.

The products of GE for consumers, both appliances and lighting devices, were the ‘face’ of the company to the wide public and a closer form of connection with consumers. Their contribution is in providing stability and longevity to the GE brand, identified by name, logo, and other associated elements. Above all, the brand was represented in products, equipment and devices, in millions of homes, to be useful in the everyday lives of the consumers and make their lives more comfortable. The domestic products also were a channel to implement some of the technological progress and innovation of the company and demonstrate them to a wider public audience. Consequently, exposing consumers (who also happen to be small investors) to GE could help to increase public confidence in the company, especially in turbulent times.

General Electric did not depend on the appliances and may do well without that business. The same may be true for the lighting business. But removing them will not bring the cure either– the selling of GE Appliances apparently has gone wasted so far. Instead, keeping the consumer products would have enhanced the corporate brand. The management could perhaps have gained some peace of mind while reforming their industry-related businesses. In the medium term, making reforms could be a little harder for Flannery and his top-management team to push through. In the longer term, leaving consumer products out of the company — as already happened with the appliances and is expected to repeat with lighting — may remain as a wound, something amiss, in the reputation and brand image of General Electric.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) “Zhang Ruimin’s Haier Power”, Michael Schuman, Time (Europe), 14 April 2014 (183 (14)).

(2) “Grading Jeff Immelt”, Geoff Colvin, Fortune (Europe), 28 February 2011 (163 (3)).

 

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Transparency; reliability; trust: These key terms are rehearsed and highlighted many times in textbooks and business books, academic and trade articles about managing customer relationships. Holding up to them is based, for example, on being honest, truthful and fair when making product or service offers to customers and in any other dealings between a company and its customers. However, those concepts that are good in managerial and marketing theory are too often lost when it comes to practice.

In addition, experts, technology consultants and other advocates of digital marketing are praising the capacity gained by companies to know so much about the behaviour and personal characteristics of their customers. One of the great benefits of this customer knowledge is in enabling companies to construct offers that will closely fit the needs, preferences and consumption or usage habits of their customers. Again, a gap emerges between what companies are supposedly capable to do with digital technologies available to them, including information and tools, and what they actually do. More accurately,  oftentimes companies are not doing enough in utilising those technologies to the intended purpose of creating better fitting offerings and messages.

The present post is based on a true story of a troubling journey to acquire an iPhone from a mobile telecom service provider (it will be called here ‘WM’). But this post is not just about the case of a particular company. Similar forms of problematic conduct are likely to be encountered at competing mobile service providers as well as other telecom service companies such as TV (cable and satellite), telephony (voice and data) and Internet providers. Moreover, at least some of these types of flawed conduct will be familiar to the reader from interaction with service providers in other domains (e.g., banking and finance, credit cards, insurance, healthcare, travel and tourism). In essence, this conduct refers most typically to providers of contractual services, and particularly when services extend over months and years.

An upgrade of a customer’s mobile phone is often accompanied by a modification of his or her service package; it is justified especially when a large generation gap exists between the previous and the new model. Two-part and three-part tariff schemes have been common in mobile communication for many years, splitting the price of service between fixed and variable components. Usage possibilities and patterns have changed, however, with smartphones, pertaining in particular to the online flow of data and the use of mobile applications (‘apps’). Service packages more frequently combine bundles of included (‘pre-paid’) units — minutes (voice), messages (SMS), and data MBs/GBs (mobile websites and apps); the weight of variable cost (i.e., based on price per unit), drops vis-à-vis a fixed cost component.

Subscribed customers are encouraged to pre-commit to ever larger bundles or unit quotas, some of them could constantly be left unspent each month. At least in one category it is sensible for mobile service providers to ‘give away’ a large quantity of messages amid the expanded messaging by customers via free chatting apps (e.g., WhatsApp, Facebook’s Messenger). The marginal cost per unit of any kind could be much lower now for the mobile network companies to make it economic for them to offer larger bundles, and thus attract customers to their ‘great value’ plans (i.e., the customer gets lots of ‘free’ units). Albeit, if customers do not utilise large enough portions of their quotas, they could end up paying for units they never get to benefit from.

A service plan was offered with the new phone purchased, including 10GBs of data, 5000 minutes and 5000 messages per month. This volume signalled a dramatic increase from my previous consumption levels. No doubt the new smartphone could support a huge data volume not possible with the previous semi-smartphone model, but also a volume hard to imagine how it may be used. Nor was it perceivable how to use anything near 5000 SMS. That is the magic of large numbers — they can be fascinating and captivating, yet meaningless at least in a short to medium term. The sales representative at the store and service centre of WM promised that it will save up to 45% of my bill so far. With the service package I get also ‘marvellous high-fidelity’ wireless-Bluetooth earphones, supposedly as a bonus or gift. No other plan was suggested. The relation of the earphones to the discount was not explained. Protesting that I do not really need those earphones did not help. It was awkward, but then it seemed that the enlarged traffic volume, that one might learn how to take advantage of, with a reduction in monthly cost could be worth it. The value of the earphones was negligible to me (but apparently not to WM). That is probably where System 1 got the hold of me. When not feeling on solid ground, swapped with documentation, and distracted, one may fail to pose difficult, intelligent questions;  System 2 remains dormant or blocked. It was a combination of desire to believe the offer is good for me, and to trust the company that it will treat me fairly.

The secret behind the earphones was revealed in the next monthly bill. If paid in cash, their price was about $150 vis-à-vis $900 for the iPhone. I agreed to pay for the iPhone in 12 credit installments (adding  5% in cost). However, the additional and unexpected payment for the earphones was set to be spread over 36 months (+65%! added to price in cash). The discount on service was for 12 months. The payments for the earphones would “eat” much of the discount during the first year. Furthermore, they will drag for another 24 months while the cost of service package returns to its previous level, though of course with a much greater usage allowance. Lesson: Beware of ‘free gifts’ and make sure to get all the details (see more in the section below on contracts).

This has brought me promptly back to the service centre — the staff refused to take their earphones back and gave me another nice demonstration of their performance. However, with the help of a kind supervisor we agreed that payments for both iPhone and earphones will be changed to 6 instalments with no interest (see more in the section on execution).

The Bluetooth earphones may well be a good product and the representatives were right to offer it, but it is wrong to impose the earphones as a ‘bonus’ or incentive if the customer is not interested and declines the offer. Furthermore, at least one other package option should have been recommended that would be more aligned with previous usage in recent months. A smart system should know how to use past behaviour of the customer as a benchmark and propose a reasonable expansion of usage levels of minutes, messages and data. First, it would make the customer feel that the company knows him or her (e.g., needs and usage patterns) and is trying in accordance to provide the most suitable personalised solutions. Second, when the quota of units posits a sensible ‘ceiling’ to the customer it may serve as a goal or an aspiration level to gradually increase his or her usage towards it, and then upgrade the service plan. Otherwise, the customer may be just lost, having no appreciative reference for scaling one’s personal usage levels (perhaps that is the objective, to let customers with less self-control carry away, but that is beyond the scope of this story).

Signing contracts to purchase products or receive services is frequently a sensitive matter and a host of potential pain points. This happens because customers usually cannot fully or even adequately read the contract and comprehend it at the time of transaction, and they are not sufficiently encouraged to spend the time reading and asking questions. The contract for my smartphone included, for example, the terms of payment, basic support, terms of usage,  liability and warranty, etc.. On each desk at the store and service centre of WM stands a tablet in portrait position. Regularly, it displays ads for services and products. However, WM saves on paperwork and employs the screen also to display contracts that can be signed digitally (later sent by e-mail). Reading the contract from the screen is not very convenient and the customer also cannot control the display to the pace of his or her reading. One is quickly brought to the place for signing. The contract for the earphones was separate in origin from the iPhone’s (later corrected); when the representative came to it, he jumped to the signature position which incidentally fell at the top of the screen. When asked to see what comes before, he said this is simply to confirm that I accept the earphones. At that point I wanted to trust him and WM. This turned out to be a mistake. Lesson: Never agree to sign a contract on a screen without seeing the previous screen pages (as you should not do when signing a paper contract). The tablet screen may appear informal and friendly but the contract is binding.

  • In fact, by returning to the issue of service plans, the tablet already on the desk can be used cleverly for displaying service options to a customer while taking into account his or her personal usage patterns. That is, the company can show the customer what would be the cost implication of a proposed service plan given current usage levels, and how it may change if usage levels increase by X%.

On top of all, bad execution of proceedings can temper even actions taken in good faith. It may happen as a result of neglect, lacking proficiency by the staff (e.g., how to use the computer system), or flaws in computer software (e.g., poor execution of instructions). Here are two examples — no attempt is made to guess what has caused them:

As told above, the payment arrangement was changed with special managerial consent to six instalments with no interest, as an option in the contract allows, for both the iPhone and earphones. Unfortunately, a notice from the bank as well as the credit card monthly bill soon revealed that the whole amount was charged in a single payment. The trap is apparently in the phrasing of the contract (translated): “The sum of $$$ that will be charged in one payment (or up to six payments to the choice of the customer at the time of acquisition)”. The phrase ambiguously does not specify in how many (equal) payments, up to six, that (cash) price will be charged. This ambiguity has led to practically ignoring the content in parentheses and what was agreed accordingly. It is noted that a statement on an option of payment in instalments with interest explicitly indicates the number of payments and amount of each one. The phrasing of the first statement must similarly be fixed for that option to have any validity.

In the second case, the company left in place a monthly charge (~$6) for a quota of 70 SMS from my previous service package. Obviously, this number is negligible relative to the new allowance of 5000 SMS a month in the new service plan with the iPhone. They should have automatically removed this obsolete component together with other components from the older plan. The customer service representative at the call centre argued that I should have asked it to be cancelled. That is, instead of apologising for an honest mistake, and possibly reimbursing me for the past month, she made it look as if I may have wanted a non-significant addition of 70 SMS to 5000 SMS (>70:1 ratio). That was already infuriating because it made no sense at all. Lesson: Always check your bills carefully.

The customer journey to purchase an iPhone evolved into a kind of chain of pitfalls, acts of malpractice, and errors of unknown source or cause. It must be emphasised that the troubles are concerned with the envelope of services that enable using the iPhone and not the device itself. It is a story of failure of sales and service representatives to listen, a tendency to repeat answers regardless of the customer’s response (i.e., lack of sensitivity or rigidity forced from above), and possibly a skill problem in retrieving information and instructing their computer systems correctly. Where supervisors or managers do try to fix things, organisational and technological pitfalls may stand in their way. Nonetheless, the more disturbing moments of the experience surface when a customer feels an attempt to manipulate has been made (e.g., by diverting attention or hiding information). Being manipulated generally feels uneasy, because among other things it infringes on a consumer’s autonomy to make a decision in one’s own good, but it is all the more damaging when done just to serve the manipulator’s interest (e.g., make a sale)[*].

Companies and customers alike can help in minimising negative encounters that can spoil customer journeys. Consumers can be more vigilant, pay more attention to details, and ask questions when offers do not sound or look right. Yet in the real world consumers cannot avoid being off guard, erring in judgement, or being complacent — much of the time humans are driven by the intuitive and instinctive System 1 mode of thinking. Companies can make greater effort to ensure customers have the relevant information and comprehend it; be attentive to what customers ask or argue; and overall show respect to customers and refrain from egregiously exploiting their cognitive vulnerabilities — perhaps naïve, but not illegitimate to expect.

Ron Ventura, Ph.D. (Marketing)

 

[*] Further reading: “Fifty Shades of Manipulation”; Cass R. Sunstein , 2016; Journal of Marketing Behavior, 1 (3-4), pp. 213-244.

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The digital transformation of customer service in retail banking is changing the depth and form of relationships of banks with their customers. The increasing shift to direct digital self-service channels re-shapes how consumers interact with retail banks. As explained in the first part of this article, the effects of this transformation can be seen and felt at physical bank branches and away from the branches through remote online channels (including web-based service platforms and mobile apps). Furthermore, ‘customer service’ practically entails the customers’ operations of regular account maintenance but also their acquisition of various banking services and financial products (e.g., deposits, loans, equity and bonds). Hence the digital transformation is affecting broadly and simultaneously retail banking service as well as marketing to customers.

The focus of the first part of the article was a review of the ways in which the five main banks in Israel approach the digital transformation in the domain of retail banking, and especially how the banks choose to balance between the digital and human modes of interaction and service in their relations with customers. It considered the observed forms and methods of implementing their approaches and discussed their implications regarding the digital-human balance. Particular attention was awarded nonetheless to the effects that digital channels of interaction may have on the premises of retail bank branches — their organisation, interior design, and functions.

The approach taken by Bank Mizrahi-Tefahot may be seen as surprising to digital advocates because it is ‘going against the stream’, yet it is tapping on some sensitive nerves of  consumers. The advertising campaign of the bank — carrying the title “On the things really important, there is no substitute to humanity” — commits not to sacrifice contact with human bank representatives in the sake of digital self-service. This is a promise of reassurance for many bank customers who still do not feel comfortable and confident with over reliance on supposedly self-sufficient digital channels. But a question remains to address: Does the campaign stand on a solid strategic ground? One would want to know if there is substantive managerial commitment behind the campaign and a plan to execute it.

A declaration of the bank on its latest strategic plan offers an affirmative answer. According to a press release published by Bank Mizrahi-Tefahot in November 2016, the strategic plan for the years  2017-2021 stands on three legs: (a) intensifying the focus on business sectors and expanding activities directed to them; (b) sustaining and solidifying the bank’s stature as a leader in the retail domain; and (c) being a central operator of financial assets in banking (22 Nov. ’16, origin in Hebrew). Regarding the second goal on retail that is of our interest here, the bank specifically qualifies its goal as “providing personal and human service supported by innovative technology”. In this statement the bank emphasises the order of priority between ‘personal and human service’ and technology, whereof the role of the latter is to facilitate and enhance customer service. As explained by Bank Mizrahi-Tefahot, the strategy is on the one hand service-driven and on the other hand aimed at reducing prices by applying a unique and advanced technological platform (i.e., the platform’s purpose is increasing efficiency in operating and delivering customer service).

The strategic statement clarifies that the bank is not about to put its technologies ahead of its customers, how it treats and serves them. It maintains that the role of the digital technologies is to increase efficiencies (e.g., saving time, facilitating processes) and not to replace human service. Bank Mizrahi-Tefahot is not shy on utilising customer-facing digital tools and facilities for interface and information processing, but it does so as a supplement to human service. Already six years ago the bank initiated a ‘hybrid banking’ programme designed to smooth communication between a customer and his or her ‘personal banker’ at the branch via phone, e-mail or SMS services (they called it ‘an ideal combination between personal and digital’). Lately the bank has recognized a need to highlight the connection between ‘personal’ and ‘human’ as contra to the increasing reliance on digital service channels in other banks. The intention declared by the bank to increase its number of branches also asserts that it does not intend to make itself more distant from customers and less physically accessible to them. It is perhaps not a ground-breaking attitude yet it offers stability, credibility, and confidence in bankers to be there in person for the customers.

However, there are still certain aspects the bank can further develop: For instance, applying digital technology is not just about efficiencies and prices, especially when utilised in direct customer-facing services; how customers experience the digital service is highly important (e.g., it should be visually fluent, easy-to-use, effective). Digital self-service should not claim to improve customer service overall by replacing human service, but it can contribute to improved customer service as a whole. The strategy statement is not clear about the experience of customers when applying digital technologies. Bank Mizrahi-Tefahot should also clarify how web-based and mobile app elements of its platform are integrated in its overall view of personal-human and digital customer service (e.g., enabling chats with human bank assistants and not with virtual assistants [chatbots]). Additionally, as suggested in Part 1, the bank can develop its own service model for combining digital self-service stations with human assistance and guidance within a branch.

Let us now take a brief look at the strategy in other Israeli banks:

Bank HaPoalim is seeking to reflect flexibility in its balance between human and digital banking. The bank’s Head of Retail Division said in October 2016: “we are not requiring the customers to choose between human and technological, instead providing them with a right combination between the two” (press release, 26 Oct. ’16, origin in Hebrew). The declared strategy of the bank is offering human, personal and technological banking. However, other expressions used by the bank suggest that the balance is weighed more heavily to the side of technology. For example, the bank uses  ambiguous terminology such as “more advanced and human technology“; its real priority or emphasis is revealed in the impressive expression “digital empowerment of the customers”. The new services the bank is taking special pride in, as presented in the press release, are a ‘virtual branch’ in a mobile app and human guidance in its new ‘Poalim Digital’ branches on how to use an iPad for banking services.

The senior bank executive is not insensitive to consumer concerns about the use of advanced technologies — he recognises that some customers perceive them as threatening, creating an emotional distance, and lacking in personal touch. Yet the bank appears to be pushing too hard to impose technologies that many customers may not be ready for yet, and implicitly pushes its human bankers to the sideline. Bank HaPoalim is trying to strike a difficult balance between the technological (digital) and human factors by attempting to be ‘human as well as personal as well as technological’ altogether.

In Bank Leumi digital banking (‘Leumi Digital’) is put at the centre, as manifest in its website-based platform, information ‘kiosks’ in physical branches, and its mobile app. More recently the bank added its ‘virtual assistant’ chat utility for customers to seek assistance in using the online and mobile account applications. In its strategy statement, Bank Leumi refers to “organizational and technological capabilities, efficient and innovative” (origin in Hebrew). It also commits to upgrading its service model and value propositions as part of a customer-centered culture. However. the bank does not make specific reference to integration between ‘technological’ and ‘human’ in its relations with (domestic) customers. As commented in Part 1, the mix between digital and human modes of service seems to be incomplete, as if working in separate compartments (‘silos’) of service.

The vision of Bank Leumi is accordingly to “lead initiating and innovative banking for the customer”. Overall, the key words most salient in the vision and strategy statements of the bank are technology, efficiency and innovation. There is no specific mentioning of the human factor. Bank Leumi must be credited for its consistent and prolonged support for providing banking services through direct channels that free customers from arriving to the branches. In the late 1990s this bank was a pioneer in Israel in establishing a ‘direct bank’ based on its telephony call centre. Later on a website was added. Whereas the initial entity was cancelled, the foundation was laid out, tried and proven for further development and assimilation in the main service operations of the bank. Advanced digital technologies, as they are better known these days, could come only natural to this bank. The next challenge of Bank Leumi would be to streamline its connections between human and digital modes of interaction and service to customers both in physical and virtual/remote domains. Admittedly, the suggestion made here may be contrary to the leading view at the bank; however, customer service should feel seamless and unified, not  like living in two different worlds of ‘digital banking’ and ‘human banking’.

Bank Discount is actually delivering a very clear message about the place it reserves for ‘humanity’ in its approach to customer service. Its actions on transition to digital banking seem to be more mild compared with the two leading banks. The strategic plan of the bank for 2015-2019 states: “We at Bank Discount have set before our eyes the experience of personal, human and professional service for all our customers. We believe that we should integrate humanity with professionalism, and to that aim we direct our actions every day” (launched in 2014, origin in Hebrew). The words are very positive: the bank is truly seeing the customer at the centre, not the technology, and the way to serve customers better is to do it professionally (possibly the bank’s sought competitive advantage).

Bank Discount is doing whatever is necessary to utilise up-to-date technologies in banking but not as proactively and forcefully as in Bank HaPoalim or Bank Leumi. Its direct banking operations include the TeleBank call centre, a web-based platform and a mobile app for account management; it also offers a personalised information app My Finance (providing market data etc.) and has recently introduced a ‘virtual assistant’ utility. Bank Discount may still be required to be more explicit about its view on the digital front, but foremost it can further clarify its approach to integrating digital and human modes of service and balancing between them.

Bank Benleumi is going along, combining traditional and digital banking facilities and utilities. Unfortunately, however, the bank does not disclose much information about its strategic plans, views or priorities. Hence it is difficult to tell where the bank is heading in implementing digital banking services nor how they would be balanced vis-à-vis human banking modes of interaction and service.

In its profile (Hebrew) Bank Benleumi states that it is “acting to increase its hold in the retail sector” with reference to its acquisitions of two smaller banks (and their branch networks) aimed at particular segments, and completing the merger of an upscale private banking business as a division within the bank. It also lists the general types of banking services and advanced digital channels that are seen as vital to strengthening its hold in the retail sector. As other banks it delivers direct digital banking services through a web-based platform and a mobile app, information ‘kiosks’ and a SMS update service; Bank Benleumi was early to launch a ‘virtual assistant’ utility (named ‘Fibi’ after the ‘mother’ holding company). Yet the bank remains vague about the nature of customer experience one can expect in future at the bank in its branches and in virtual digital domains, and specifically what place a digital-human balance will take in customer relationships.

Banks need to plan and configure carefully how to tie together the different advisory and operational (transactional) services they provide to their customers in human and digital modes of interaction, especially so when performed in the premises of a physical branch. These modes should not be just combined but integrated and complementary. It should be done both cleverly and sensitively.

A digital-reliant branch should prove what advantages it avails customers to patron such a branch as opposed to conducting their operations on the website or a mobile app: for example, it could be more convenient to work on devices and screens at the digital branch, offer value-added functionalities, be easier to find information or to complete successfully the required banking tasks. Nevertheless, a mixed human-digital branch can provide an important additional advantage: a customer who has just finished to search independently for product information on a work-station or watch an instructional video at the branch, can right away turn to one of the professional (human) advisors to clarify remaining issues and perform relevant actions with the help of the banker-advisor. That is an essential implication of a ‘digical’ (digital + physical) approach to retail banking (Baxter and Rigby, 2014).

It is not suggested in any way that branches of the future in every bank should look and function all alike. However, each retail bank can use a core model of a ‘mixed’ digital-and-human branch and adjust its design in every aspect according to a degree of balance its management sees fit and desirable between the digital and human modes of interaction and service, assigning more weight to the digital factor or the human factor. Moreover, a bank may choose its preferred balance in a typical branch, balance the human and digital factors across a few branch formats, and not least co-ordinate between services provided in a branch and away from the branch. Banks will undoubtedly find they have a lot of flexibility and room for creativity in setting the appropriate and differentiated strategy for each of them.

Ron Ventura, Ph.D. (Marketing)

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The digital transformation of retail banking is clearly apparent by now. The way consumers manage their banking accounts (e.g., deposits, savings, investments) and run their finances keeps changing by relying on digital channels and tools to perform more and more account operations.  Most dramatically in recent years, the organisation, design and function of retail bank branches is going through re-conception and change.

Two fundamental dimensions of this transformation may be detected:

(A) Away from a branch: Account operations are shifted to digital channels of direct banking detached from bank branches. That is, banking operations are performed more frequently without requiring customers to visit a branch (e.g., using an online web-based account-management platform or a mobile app), and furthermore without interacting with human bank representatives (e.g.,  talking by phone with a representative at a bank’s call centre).

(B) At a branch: The physical environment of a bank’s retail branch is transforming by re-allocating space, facilities and human versus digital resources at the branch between banking activities. This means distinguishing between banking activities that are performed in self-service by the customers using digital working-stations or ‘kiosks’, and activities that involve human bank professionals. The transformation is affecting the site of a branch all around, within the branch and areas next to it. A salient implication of this process is the elimination of human tellers within a branch; many of the ordinary account operations will be performed with minimal or no interaction with a bank representative within a branch or in adjacent areas. Interaction with human bank professionals will be mostly reserved to consultation and for purchasing more complicated bank services (e.g., loans) or financial products (e.g., investments).

Obviously those changes are not wholly new — customers are familiar with and use various self-service, direct digital channels, as they add-up, for different lengths of time (e.g., ATMs, enhanced digital information kiosks , websites, mobile apps). The current change is in acceleration and extent of utilisation of digital technologies: the frequency in which customers are using them; the degree of customers’ freedom in choosing between digital and human modes of service for any particular activity; the types of services or products that will be diverted to digital platforms (e.g., certain loans will be arranged without meeting a bank advisor in person, perhaps by video conference); and re-shaping the environment and activity in banks’ branches.

The article explores the digital transformation by reference to the five main banks in Israel. It will especially discuss how banks balance between the human and digital factors in serving their customers. Some additional aspects of the transformation will be explained in the course of this review.

To remove any doubt, it must be emphasised that all five banks are engaged in implementing digital self-service platforms and facilities in serving their customers and offering them financial products (in addition to the now ‘classic’ direct banking by call centres). They differ, however, in how they propose and plan to balance between their digital and human channels and modes of service.

The two leading banks in Israel (Bank HaPoalim [‘workers’] and Bank Leumi [‘national’]) seem to take the transition to digital banking the most seriously and most extensively. These banks compete neck and neck for many years, swapping between them the first and second market positions occasionally, yet both are distinctively greater in scale and market dominance than the three other main banks. Both banks appear to follow more closely on the vision of digital banking transformation conveyed last year by Dr. Hedva Ber, Banking Supervisor at the central Bank of Israel, and her projection of how this ‘digital revolution’ should proceed. Nonetheless, these two banks differ on some issues in their approach to implementing the transformation.

Bank HaPoalim is advancing an initiative to establish digital-reliant branches — five branches already exist, two of them in the Tel-Aviv area. Customers utilise tablets (iPads) or larger screens on table-tops to perform their needed operations in self-service in principle; they may ask, however, for assistance from a bank representative in the branch. There are no visible desks for personal meetings with banking advisors for consultation. The branch in northern Tel-Aviv, for example, is one large open space with long white desks in the centre, a large screen on the wall, and a sitting area with personal ‘working stations’ on the left side of the branch. It has a look resembling an Apple store, elegant and flashy. One cannot find in this space the traditional partitions where customers can sit for more private and intimate consultations with banking professional advisors. This digital branch is built on site of the old-model branch.

This is a rather radical move that may precede too early the formation of mixed branches recommended and applied in other countries as the core model. Indeed most of the bank’s branches (more than 260 in total) are still more traditional; the bank plans to reduce the number of its branches and replace some of those traditional branches with new digital ones. Yet by doing so the bank could miss an important stage of preparing the public for the change.

Bank Leumi is going in a somewhat different direction, encouraging its customers to utilise mostly its direct channels that do not involve coming to one of its branches. At the branches, the bank is in major progress to eliminate all its counters of human tellers; customers are referred to enhanced information kiosks (‘Leumi Digital’) that also allow for some account operations, and to ATM machines. These stations are located in a separate interim lobby area before entering the main hall of the branch, which is dedicated only to personal sittings with banking advisors. The bank is working overall to reduce the number of its branches (currently about 250).

The bank is taking a positive move in the right direction, and yet it is not complete because the bank does not truly mix digital with human service resources in the branch. What Bank Leumi is doing is more of a re-arrangement than genuine re-modelling. Indeed it eliminates the function of human tellers, but it does not integrate the digital and human modes of service in a hybrid model and design.

Many bank branches in the country have three ‘service areas’: (a) A couple of ATMs and digital kiosks outside the branch (i.e., on street front); (b) A few ATMs and digital kiosks in a protected lobby area that customers may enter and use also outside working hours of the branch; (c) A main hall of the branch where customers can receive service or consult more privately with bank representatives and professional advisors. Some branches may have a ground floor for assistance usually with the more basic functions and a second floor for consulting on more complex issues. Bank HaPoalim created a new branch version primarily reliant on advanced digital facilities; Bank Leumi eliminated human service for basic teller functions but keeps the digital facilities outside the branch per se — it does not welcome customers using those stations to enter inside the branch.

However, the intention of a new model being developed for bank branches is to entail a combination of digital and human modes of service working next to each other. In a common hall customers can use one of the digital working stations or sit with an advisor on any specific issue more complex and financially significant. A customer may use the digital station while standing or sitting on a couch, read materials on products and perform operations. He or she may also watch instructive videos on a large screen. It should be a much more convenient and pleasant setting than using the information kiosk machine. A bank representative should be available for guidance and assistance with the digital self-service stations. But when more serious consultation becomes necessary the customer can approach one of the expert advisors sitting in partitioned meeting corners. Digital and human channels are thus in immediate access close to each other.

  • Best examples of layout, design and organisation of the new form of bank branches around the world can be found in the website of The Financial Brand: Branch Design (also see their latest Design Showcase from Fall 2016). Give special notice to the mixture of self-service stations and private zones for consultation with bank experts-advisors within the branch.

Banks may build in addition to mixed primary branches also secondary smaller digital branches (e.g., in shopping malls) to provide a convenient, quiet and pleasant place for customers to work on their bank accounts vis-à-vis using a bank’s app on their smartphones. Being similar to the model of the new “Poalim Digital” branches, they are not supposed to come in place of a cross-mode primary branch. Likewise, offering working stations in a lobby, to be used almost any hour, adjacent to the branch is not supposed to be in place of a self-service digital zone within the branch with a human assistant  (formerly a teller) ready to guide if needed. Bank Leumi should not confuse the two types of self-service by digital means. Moreover, the bank must have a digital zone integrated in the overall design of the branch that will be welcoming, visually pleasant, convenient and friendly.

Two of the smaller main banks (Bank Discount and Bank Benleumi [‘international’]) maintain at large the traditional branch format and offer in parallel a variety of digital channels with their facilities (e.g., information  kiosks) and applications (e.g., website, mobile app). They do not make yet any clear or particular stand on the balance they see fit between the digital and human modes of service. Hence, while they make sure to be up-to-date on the technological front of digital direct banking services, there is no apparent major move beyond that which would reflect a more strategic approach to a desirable human-digital balance.

But then there is Bank Mizrahi-Tefahot that has chosen to take a more distinct approach to the digital-human balance by assigning greater weight to the human factor — more precisely, committing not to sacrifice human interaction in favour of digital channels. The bank may have thus found an important dimension to differentiate its brand from the competing banks.

The bank is aiming to solidify its position as the third largest bank in Israel, climbing one position up by pushing back Bank Discount. Bank Mizrahi-Tefahot currently operates about 150 branches, and contrary to the leading banks it plans to increase this number towards 200 branches. In September 2016 the bank launched an advertising campaign, emphasising human touch, with a tagline (translated from Hebrew):

  • “On the things really important, there is no substitute to humanity.”

It purports to persuade prospect banking customers (as well as its own current customers), who still seek and prefer human interaction, that at this bank customers will continue to be able to find a human representative to talk to. Billboard ad posters, displayed until recently, proposed that the bank will cater to consumers’ concerns as they complain to their banks as follows (exemplar statements translated from Hebrew):

  • “Is it no longer possible to talk with a human in this bank?”
  • “Enough with apps, give me a human” [to talk to] — the ad “answers” that if you want to talk to a human, call a specific number.
  • “You closed the branch on [X] street. Is only the ATM left now? What is happening with you?” (the original Hebrew phrase plays on dual meaning in using the word ‘closed’)

The bank implicitly commits to maintain human reference for customers on banking issues that matter more or less. Indeed the bank does not fall behind in offering a variety of digital facilities, applications and tools for customers to manage their accounts. Yet the bank steps forward to assure customers that addressing a human representative at the bank will not be sacrificed in favour of the digital direct channels. For instance, the bank offers customers the possibility to talk by phone not only with a human representative at the call centre but also with one’s personal banker (account manager) or advisor at the branch where the account is held, reached through a direct (seamless) phone extension.

Without undermining their commitment for human reference, Bank Mizrahi-Tefahot may still modify the way it delivers certain services (e.g., teller-type) with human assistance at a branch. A new model may involve a zone equipped with digital self-service stations but supported with stronger human presence or qualifications of bank assistants for customers than what may be offered in other banks. The human resources dedicated to fulfill these positions and the tasks assigned to them should be planned anew.

Of course promises have to be tested in the reality of customer service at the bank. The bank has to prove it can deliver on its commitment to make human representatives available to customers when necessary. A critical reason banking customers turn to direct digital channels is being dissatisfied with either the long time customers feel they have to wait to reach a human representative or the level of assistance they get (e.g., professional, efficient, courteous). Nevertheless, there always remain the more complex and significant issues in which customers may need more serious consultation and human guidance in making a decision and completing a procedure (and sometimes being able to negotiate terms), help they cannot receive adequately through a self-service digital channel. Trust in customer-bank relationships is also dependent on that.

With regard to the advertising campaign of Bank Mizrahi-Tefahot, an imminent question arises: Is the message delivered in this campaign backed by a more profound vision and strategic plan? In other words, one would want to know that the campaign stands on solid ground and is not only a marketing communication idea hanging-in-the-air. A second part of this article, soon to come, will address this question, and will also examine what strategic position and attitude take the other four banks on balancing between digital and human resources and modes of service.

Ron Ventura, Ph.D. (Marketing)

 

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Tremors continue to shake ground in the field of television viewing since the start of this decade,  especially with respect to how televised content is consumed. It is possible to say that the concept of television is being transformed. The move of Netflix away from rental of DVDs, delivered by mail, towards online streaming, seems to have signaled the start of this transformation which is affecting the consumers and the media industry together. Netflix is of course not doing it alone, changing how televised video content is made available to consumers — other digital services include Hulu, Amazon Prime, and YouTube, as better known examples. Many consumers, most of all Millennials, are attracted to having better control and discretion of what, how and when they watch video programming content of the kind we are used to associate with TV.

Two primary shifts in TV viewing need to be considered: (1) watching less TV programmes in real-time; but more important and characteristic of the changes in the past decade: (2) watching less TV on the screen of a TV set in favour of screens of personal computers, tablets and smartphones. The first shift is not so new — watching a programme not at the time of its scheduled broadcast can be traced to at least thirty-five years ago thanks to the VCR (Video Cassette Recorder); later on came the DVD, but most DVD sets used by households were non-recorders.

The popularity of watching TV content in shifted-time has increased somewhat more with the introduction of new devices and services, namely Digital Video Recorder (DVR) and Video-on-Demand (VOD). The VOD service has actually created new options for viewers to access a special video library and watch programmes or films that are not available on broadcast channels (not available at all or not at that period).

The second shift noted is more closely associated with the Internet availability of video content, including TV programmes, that is not dependent on traditional broadcasters (networks, but also cable and satellite TV services). Whether the application for watching the content is web-based or a mobile app is less crucial to our matter. Streaming potentially breaks the tie between the televised content and the physical TV set (but that is an option, not a necessity). It is not surprising that new-age digital media companies that offer video content by streaming have been followed by the TV networks worldwide that now allow consumers to view their programmes online (viewing may be free or by paid subscription).

As we look into greater details of various possibilities of viewing televised content, we may find that defining TV viewing is not clear-cut. For instance, if one is streaming the content of a programme (e.g., a comedy episode) ordered from Netflix to a laptop that is connected to a TV set (or streaming directly to a Smart TV), is he or she watching TV? Apparently, 79% of US streamers primarily stream the video content to their TV sets! (CSG International, Insights Blog, 8 Sept. 2016). Vice versa, if one is watching a programme (e.g., evening news) at the time of its broadcast but on a laptop by live streaming, is he or she not watching TV? It can be confusing. Consumers stream TV content of the type of TV series episodes (e.g., comedy, drama, crime), documentaries, news editions, as well as cinema films. The key to achieve greater coherence and consistency may be to define ‘TV’ by the kind of its programming content, not by the technology of devices or distribution platforms (BARB’s Annual Viewing Report: UK’s Viewing Habits, April 2016, pp. 6-7, also see pp. 8-9).

Many consumers, mostly the younger ones (under 35), are turning away from fixed timetable TV programming. They are more selective in regard to the programmes they wish to watch at the time convenient to them. The choice of more savvy TV viewers is getting more in a form of cherry-picking. They may receive recommendations what programmes to watch from friends who have similar tastes or from the online content provider based on their stated preferences and past viewing behaviour (possibly adding what similar-in-kind programmes others are viewing). Consumers may choose to watch, for example, legacy TV series or programmes of a particular genre, as well as new selections of TV-type programmes produced independently by video content providers such as Netflix, exclusive to their subscribers.

For consumers who have less leisure time it may also become a matter of efficiency in allocating their limited TV viewing time to the programmes they really want to watch, thus not being constrained by the programmes scheduled for those hours. People watch only a small portion of the channels available to them in their TV cable or satellite packages, and are less comfortable with their inflexible programming plans. TV viewers wander to other channels such as a VOD service of their regular provider or by streaming from online video content providers.

When looking at ‘traditional TV viewing’, which includes live TV (aka real-time or linear) and adjunct time-shifted services like DVR and VOD(†), the number of weekly hours US young persons ages 18-24 spend watching TV has decreased across all quarters from a level of 23-26 hours in 2011 to a level of 15-18 hours in 2015, and further to 14-16 hours in 2016 (excluding Q4). In addition, when comparing between age groups, it can be seen that the 12-17 years (teenagers) and 18-24 years age groups are most similar to each other in the number of their TV watching hour(decreasing between Q1/2011 and  Q3/2016) and are now even closer to each other than five years ago. There is a decline in number of weekly TV watching hours also in the 25-34 age group, and though more modest a decline, also among those ages 35-49, but there is no discernible trend in age group 35-64 and even a small increase among seniors 65 years old and above (based on data from Nielsen, visualised by MarketingCharts.com). Note that the band of weekly hours mounts as the age rises. Another chart summarises those differences more sharply: the number of hours spent watching TV per week decreased in the younger age groups (12-17 & 18-24) by 37%-40% in five years, 28% still in age group 25-34, and only ~11% among ages 35-49 (weekly hours increased 7% among 65+).

  • Note: The original figures by Nielsen indicate that most traditional TV viewing time is still ‘live’ or linear, accounting for 85%-90% of time, and the rest goes to viewing programmes by DVR or VOD (figures of BARB for the UK indicate a similar ratio).
  • † Clarification: ‘Live’ TV includes of course live programmes or events that are taking place and filmed as they are broadcast or transmitted, but ‘live’ refers here more generally to programmes that are viewed at the time scheduled by a TV company for broadcasting, to be distinguised from programmes watched at a time chosen by a viewer. One possible development is that the concept of VOD will be expanded dramatically.
  • Statistics about streaming usage are still difficult to obtain. Figures brought by MarketingCharts from a less familiar source (‘SSRS’ online and mobile survey company) suggest that the number of hours Millennials spend weekly watching streamed content through various modes increased gradually and almost continuously in 2013-2015, though the overall level is still modest (~1.5 hours in 2013, rising up from 3.3 to  4.5 hours during 2014 until standing on a plateau of 5.5-5.7 hours in 2015).

Research of the British Broadcasters’ Audience Research Board (BARB) notably shows that, other than the TV screen, personal computers (desktop/laptop) and tablets are the  more frequently used for watching TV content on their screens, usually in the evening, while smartphones remain much less popular — smartphones are probably less accepted for TV viewing because their screens are too small to enjoy the images and are not convenient to watch for an extended time. Furthermore, with no evidence showing otherwise, it seems a greater part of time spent viewing not on a TV screen in the UK is still done at home (BARB’s Annual Viewing Report, April 2016, pp. 10-11).

The more traditional TV networks and service providers (cable and satellite) have to acknowledge that the rules of the game in the TV domain have changed: “As both traditional service providers and streaming services alike are looking to engage viewing audiences and hold on to subscribers, catering to the individual needs of each viewer is increasingly paramount” (CSG International: Insights Blog, see their infographic of global content viewing trends). Indeed we can see that TV networks and service providers try to adapt at different levels of extent and pace to changes in the competitive environment and shifts thereof in viewing patterns of consumers. Networks are getting more deeply into the Internet space, availing at least some of their content to viewers by streaming on their websites or through mobile apps, and even greater programming content may be offered to customers by subscription (e.g., BBC iPlayer). Especially in the area of news, we see news websites inserting more video content into their reports, including live coverage. The cable and satellite service providers are working to enhance their channels and VOD libraries to bring content that viewers may be seeking by streaming (e.g., HBO) and thus dissuade customers from churning to other services.

The media industry, most broadly speaking, sees a lot of movement in recent years. It seems that media companies, mainly the larger corporations, are trying to get into each other’s territory — TV (broadcast, streaming), digital media content (Internet & mobile), telecom infrastructure, TV and cinema production, etc. The new business and technology mixtures are created through mergers and acquisitions, accompanied by integration of different functions (horizontal and vertical) that will enable companies greater capabilities along the wider spectrum of the production and transmission of video content to consumers. Notably, there is emphasis on delivery of digital content through various platforms in combined modes (e.g., text, still images, video and audio). Content characteristic of TV programmes is just part of the media ‘basket’ companies are planning to offer their customers. A further implication is that content of different domains in Internet and TV formats will be increasingly blended on the same screen — from news information and education to entertainment and shopping.

In a highly remarkable merger in sight, AT&T is planned to acquire Time Warner for $85 billion. The deal between the parties is already agreed, but approval by the American antitrust authority is still in question (peculiarly, a political matter is also involved because of the bitter dispute between President Trump and CNN owned by Time Warner). This merger would combine the competencies of Time Warner mainly in content (including production and broadcasting) with the telecommunication infrastructure and services of AT&T in Internet and wireless (‘mobile’) communication. It should allow the integrated corporation to reach a wider audience with a richer and greatly varied content on screens of TV sets, personal computers and mobile devices.

Time Warner holds a broad and impressive portfolio of TV channels, production units and digital services for delivering their content. The most famous brand is probably CNN which includes its American and International channels. But Time Warner also owns HBO for TV programmes and Cinemax for cinema films, both available to subscribers by streaming. In fact, Time Warner also owned in the past the AOL Internet company. In 2015 AOL moved hands to Verizon telecom company, and just within months Verizon also acquired the troubled Internet company Yahoo. The expansion of Verizon is yet another example of an integration of telecom infrastructure and services with digital  content capabilities, but it does not have yet a strong TV presence.

  • Time Warner spun off its print arm of magazines in 2014, identified now as the independent company Time Inc.. Some of its better known magazine brands include the Time magazine of current affairs and Fortune magazine of business affairs, but overall the company publishes magazines in various areas of interest (e.g., entertainment, fashion & beauty, photography, home and design, as well as politics, business and technology).

The TV business is reshaping. Frahad Manjoo of the New-York Times (October 2016 [1]) foresees a future of TV “built on lots of bold, possibly speculative experiments”. Advanced digital technology companies (information, Internet & mobile) of the kind of Google, Amazon, Facebook and Netflix may readily disrupt efforts of the large telecom and “old-guard” media companies. When TV viewing habits also are fluctuating and reforming, business decisions involve much “educated guessing”.  In another article, Barnes and Steel [2] consider repercussions of the AT&T-Time Warner deal on other media and telecom companies. While some of those companies declare their objection and intent to fight the merger, they may follow a similar trail.  The cases of four companies are reviewed:

  1. The Walt Disney Company insists on its market position as a predator and not as a prey to technology companies. Its current objective is to bring more premium TV channels directly to consumers by streaming; that may entail the purchase of desired brands (e.g., Pixar, Marvel, ESPN).
  2. Comcast, a telecom company (cable [TV] and broadband), is also the owner of TV networks or channels  (e.g., NBC and MSNBC), as well as film and TV studios. It may not sit idle and may try to take over another telecom company to complement its coverage (e.g., extending to wireless).
  3. 21st Century Fox (cable TV, films) is claiming to have no plans of expansion and entering into new areas. It previously failed to acquire Time Warner (2014). But the recent AT&T-Time Warner deal may change their plans. (The Murdoch family is currently aiming to take full control of UK-based Sky satellite TV).
  4. CBS and Viacom engage together in TV broadcasting, a cable TV service, and TV and cinema productions. The controlling owner (Redstone family) may now be encouraged to unite the sister companies (once again) into a single corporation.

We should not rush to assume that watching TV programmes on a TV set or watching programmes in real-time are about to end anytime soon. Traditional live TV viewing and digital video viewing are complementary, possibly preferred on different devices at different times and in differing circumstances (eMarketer, 14 March 2016).

There may be personal but also social benefits or incentives to watching programmes or films in the ‘old-fashioned’ way. First, enjoyment and visual comfort, particularly for certain types of video content, are expected to be greater when viewed on a large screen (37” and above). Second, there is real value in watching a programme such as an episode of a popular TV series at the same time with others so that one can share impressions and discuss it with acquaintances the next day or right after the show. A similar argument can be made for watching live a sports contest, on top of the thrill of watching the event as it unfolds. Third, there is still pleasure and enjoyment in watching TV together with family or friends on a large TV set at one’s home (and in some cases in a pub or bar).

The new technological developments in distributing and displaying video content in high quality, offer opportunities for consumers to improve and enrich in several ways their experience of viewing TV programing and other types of video content. Consumers would be given more freedom of choice and flexibility to watch TV as they truly like. Companies in the wide spectrum of media, telecom and Internet may also find new business possibilities to enhance their services to customers, including in particular TV-like content. But it will take more time to see how the TV domain shapes-up.

Ron Ventura, Ph.D. (Marketing)

Notes:

In New-York Times (International Edition), 26 October 2016:

[1]  “A Risky Bid With the TV Industry Up for Grabs”, Farhad Manjoo,

[2] “A Chilly Reaction to AT&T Deal”, Brooks Barnes and Emily Steel

 

 

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Touch-screens are becoming the norm of display and interaction on mobile devices, from smartphones to tablets — devices with screen sizes in the range of 4” to 10”. Maximal area of the device’s face is dedicated to the screen, leaving a thin surrounding frame with enough space primarily for the physical ‘On’ button (e.g., awakening the screen, returning to the ‘Home’ display). Most controls for operating a smartphone or tablet and their applications are now virtual, represented as visual icons, symbols and keystrokes on the screen. Users can interact with the device (even for dialing a phone number) by pointing, swiping and similar hand (finger) gestures applied to the screen’s display. It all sounds and feels great, and mostly functions alright, but not all is bright — there is still much room for improvement and better fine-tuning.

The focal devices of this article are smartphones with screens normally between 4” and 5.4” and tablets that carry mostly screens in size of 7” to 10” (extra-size smartphones, also-known-as ‘phablets’, embody a screen larger than 5.4”). They essentially enlarge the real-estate of the screen by doing away with physical controls on the device (buttons and keypads). Operation of the device and interaction with its applications is delegated almost wholly to the touch of virtual controls and other finger-gestures.

This new form of handheld computer-type devices provides a highly advanced class of viewing verbal and pictorial content and interacting with them through manual gestures. Touch-screens were available already in the turn of the century with Personal Digital Assistants (PDAs). The touch-screens of smartphones and tablets are yet empowered in several important aspects: (1) they can be operated with the touch of fingers without need for a pen or stylus; (2) the screens are larger; and (3) the images are in much higher quality. The differences do not end here, if only to mention the communication abilities of the more recent mobile devices. Smartphones in particular can be said to converge a phone and a PDA in a single device, but with some additional capabilities that neither mobile phones nor PDAs have had in earlier times.

The first critical problem to address with touch-screen mobile devices concerns writing. A user is likely to encounter difficulties frequently when writing text with a virtual keyboard — it is rather easy to miss target character keystrokes. The difficulty is not simply in typing text but in getting the words spelled correctly, and overall avoiding character typing errors. The difficulty to produce a text without errors is likely to turn out more acute and agitating with smartphones and the smaller tablets (i.e., 7-8”). It may also cause users to leave spaces in the wrong places, and inversely to concatenate words. Correcting errors can be furthermore annoying when the user cannot find the direction arrows or point his or her finger to stand at the right position of correction; going backspace is not useful if one already moved to another line when the earlier error is noticed or any other correction of text is demanded.

Mobile devices foster writing correspondence texts (e.g., e-mails, chatting, social media updates and comments) even faster than with other modes, specially when users are in motion.  People tend to write correspondence as such more quickly and haphazardly, taking less care to avoid mistakes, and textproofing before sending is usually not in high priority or time-affordable. The result is that producing a well-thought and error-free text message on a touch-screen with a virtual keyboard may be an irritating mission (e.g., either abort message or send it with some errors).

  • Writing alphanumeric text with a 12-key physical pad is hardly convenient, and is usually time-consuming. In that sense QWERTY-type keyboards, physical or virtual, are better. There is yet an important difference to notice: The keys on a physical keyboard (e.g.,  Nokia E5 that followed on the original Blackberry phones) can be quite small but they feel like separated bumpers (i.e., giving the user a tactile feedback where the finger rests) whereas a virtual keyboard is completely flat and smooth. The cost of the physical keyboard is of course the smaller screen.

Mistyping is mostly associated with failure to accurately ‘hit’ the intended character keystroke with one’s index finger, and often enough with the thumb (e.g., when in motion and only one hand is free to hold the device and write). That is because virtual character keys tend to be too small for our fingers used for texting (less so on 10” tablet screens). The kind of errors that may result are typing the wrong character, typing the same character inadvertently twice, or  not typing the designated character. Apparently, failing to execute selected actions also occurs with images, such as when having to press virtual buttons or activating icon and text hyperlinks. These controls could be related to the device and its utilities or embedded in websites and imported apps. These issues are well-explained by Steven Hoober in an article in UXMatters (“Common Misconceptions About Touch”, 18 March 2013). Hoober makes an important distinction between seeing clearly text and icon targets and touching them effectively, and he recommends target sizes for them (in measures of points and millimeters).

Hoober refers to an additional sensitive and critical consideration in preventing users from taking accidentally the wrong action: he calls this ‘preventing interference errors’. He clearly suggests to avoid placing controls for actions with opposite consequences too near each other lest trying to touch-press one control could result in adversely activating the other unwanted control. This applies especially to actions associated with catastrophic results or outcomes that are difficult to undo. For instance, he recommends separating sufficiently the locations of controls for Send and Delete actions (Hoober recommends a distance of at least 8mms and preferably 10mms between centres of the controls [the target point of finger contact]).

Touch-screen devices benefit indeed from a larger screen real-estate for image display. But there is nonetheless competition on that real-estate for the content of display, and competition can be quite tough especially on devices with screens smaller than 7” in size. The competition is prominently between images of controls and the content of device utilities, webpages and apps. It applies primarily to the interface of a virtual keyboard that requires a relatively large space (in some cases up to 50% of screen area). However, there could be other controls needed for operating the device and specific utilities, websites or apps (e.g., designers may have to give up on some pictorial imagery in order to allow enough space for action controls like “Add to Basket”).

Focusing on the virtual keyboard: when called-upon to write, it pops-up and hides  other content of the display (e.g., e-mail message, shopping webpage) in the lower part of the screen. It may hide content that the user actually needs to see while proceeding in composing a message or responding to content in a website. The smaller the screen, on one hand a larger part of the underlying display is hidden, on the other hand the keystrokes have to be smaller. Unlike with a physical keyboard, the virtual one can at least be dropped out when not in use and called again when needed for writing. But it can be disturbing if every few moments one has to drop out the keyboard and surface it again to resume writing. With larger screens there should still be enough space for text in the e-mail message editor that one can scroll; with screens 7” or less one may be able to see only up to four lines at a time and even that in small type difficult to read (changing zoom may help but also cause trouble — more below).

Virtual keyboards on mobile devices are split into two or three displays due to space limitations (e.g., Latin letters as for English or German [but with some order variations], numeric figures and symbols, and an extra keyboard for non-Latin alphabets as Hebrew, Arabic, Cyrillic). But in any particular set of keyboard display, some character keys or controls may have to be forsaken for space limitations. As suggested above, it is most annoying when the direction arrows are eliminated (e.g., on a Samsung 7” tablet) because it makes it more difficult to go back and forth across a text while composing and editing it.

Relying on gestures can save space for screen real-estate and help in making interactions fluid and efficient, but working with a touch-screen has limitations. Raluca Budiu of Nielsen & Norman Group (user experience research and usability experts, 19 April 2015) lists some of the main problems that may arise for users: (1) The leading problem concerns typing, and particularly the need to continuously divide attention between the content written and the keypad area; (2) Poor tactile feedback, small keypads and crowded keys make the typing experience more troublesome; (3) The target size of controls or keys has to be considerably larger with touch interface to optimize reaching time and minimise errors compared with a mouse; (4) Since there can be many target areas on a touch-screen (especially of smartphones), it is easy to make accidental touch errors (see Hoober’s ‘interference error’) — some errors can “leave the user disoriented and unsure of what happened”. Budiu notes that respecting the Undo usability heuristic is furthermore important with mobile devices.

References to those main problems could be found in the earlier paragraphs of this article. Two more issues are addressed below:

Scrolling over a touch-screen — Mobile devices do not apply a scrolling bar — the user can scroll by swiping the index finger in a swoosh movement up or down over the touch-screen. The smaller the screen, and if one is in a landscape mode, more scrolling may be needed (shifting left and right is also possible). Trouble may start when the window display is populated by ‘clickable’ tiles or pictures: if the user does not swipe the finger quickly and lightly enough over the image, he or she may activate the underlying link rather than scroll across the window. When that happens, the user may arrive to a different window display, and one has to find the way back. More disturbing, when the content is online and connectivity can be slow on occasion, the user may remain stuck for a long time before being able to return to the desired location of content and resume work.

Zooming and automatic change of size —  Since type on touch-screens of mobile devices can be small and uneasy to read, one can zoom-in to enlarge the display appearance and the text in it. This is usually done by swiping the index and thumb fingers away from each other over the screen (conversely, one can zoom-out to reduce size but see more content by bringing the fingers closer together). But caution: one has to be accurate, and this does not always work so well. One may accidentally “blow” a picture image over the whole screen, for instance. When writing an e-mail message zooming can be helpful as one toggles between writing and reading the composed text. Yet, these devices are smart and sometimes they try to adjust the size for you according to the identified mode of use; sometimes it is appropriate but on occasion it causes trouble and nuisance. In more drastic cases, whilst trying to enlarge the type on a webpage, the system may lock in a loop and continue zooming-in until the user can see nothing coherent and has to start over again.

  • Note that the scrolling and size problems were encountered much more frequently on a Samsung tablet, either 7” or 10”, than on an Apple’s 10” iPad .

People may discover at times that although they were sure they could see exactly where their hand should reach and act, it somehow missed the target. That may happen because perception augmented by cognitive conception and processes of location and action are not the same in the human brain. These processes are connected (i.e., they share and pass information between them) but are nonetheless distinct. Visual information flows and is processed in two pathways: (a) perceptual but non-conceptual information is passed through the ventral stream to the temporal lobe where percepts are interpreted into meaningful images of scenes and objects; (b) visuospatial (location) and visuomotor (action) signals are transferred through the dorsal stream to the parietal lobe to guide, for instance, our manual movements. The ventral-temporal (semantic) visual system allows to identify a target for action yet the dorsal-parietal (pragmatic) visual system is responsible in parallel for determining where the target is and how to act upon it. Furthermore, action requires only a subset of information from percepts, including size, shape and orientation of a target object to complete a task, much less than what we perceive and even recognize as seeing. The conceptual identity of the target is mostly not required.

Jacob and Jeannerod (2003), distinguishing between Semantic and Pragmatic vision as cited above, argue that pragmatic vision processed in the parietal lobe is more complex and multi-layered than has been theorised and described in literature on vision. Humans may believe they act on whatever they perceive (as an image) but in fact they usually act on the nonconscious signals that arrive directly to the parietal lobe. Recognising and identifying clearly the target and understanding what to do with it are therefore not enough — the target should be designed in a form that permits (affords) the visuomotor system to perform the action correctly and efficiently. The semantic and pragmatic processes occur simultaneously. In some instances the semantic system may assist the pragmatic system but usually deliberate intervention is not needed. A user should not have to tilt the tablet, for example, while trying to accurately and slowly direct his finger to touch the small backward or forward arrows of the browser on the touch-screen. This is an example of an effortful action users should not be driven to.

Using mobile devices with touch-screens has advantages and can be a gratifying experience. But there is also a lot that can be done to improve that experience, moreover if the aspiration is that consumers will use these devices much more frequently for performing more tasks, and especially that they will use tablets more than desktop and laptop computers in the future. Although the touch-screen mobile devices promote to use fingers, they should support the use of a pen or stylus and perhaps even encourage it with smaller screen devices (for typing and not just for drawing). It is also helpful to enlarge the images of keystrokes, icons and symbols as one approaches to touch any of these controls. These are just hints and there are probably many more ways interaction designers can create to improve mobile users’ experiences, making them more effective and enjoyable.

Ron Ventura, Ph.D. (Marketing)

Reference:

Ways of Seeing: The Scope and Limits of Visual Cognition; Pierre Jacob and Marc Jeannerod, 2003; Oxford University Press.

Additional recommended reading:

Mobile Computing; Jesper Kjeldskov; In Encyclopedia of Human-Computer Interaction (2nd edition, Chapter 9); Interaction Design Foundation.

 

 

 

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A new film this year, “Sully”, tells the story of US Airways Flight 1549 that landed safely onto the water surface of the Hudson River on 15 January 2009 following a drastic damage to the plane’s two engines. This article is specifically about the decision process of the captain Chesley (Sully) Sullenberger with the backing of his co-pilot (first officer) Jeff Skiles; the film helps to highlight some instructive and interesting aspects of human judgement and decision-making in an acute crisis situation. Furthermore, the film shows how those cognitive processes contrast with computer algorithms and simulations and why the ‘human factor’ must not be ignored.

There were altogether 155 people on board of the Airbus A320 aircraft in its flight 1549 from New-York to North Carolina: 150 passengers and five crew members. The story unfolds whilst following Sully in the aftermath of the incident during the investigation of the US National Transportation Safety Board (NTSB) which he was facing together with Skiles. The film (directed by Clint Eastwood, featuring Tom Hanks as Sully and Aaron Ackhart as Skiles, 2016) is based on Sullenberger’s autobiographic book “Highest Duty: My Search for What Really Matters” (2009). Additional resources such as interviews and documentaries were also used in preparation of this article.

  • The film is excellent, recommended for its way of delivering the drama of the story during and after the flight, and for the acting of the leading actors. A caution to those who have not seen the film: the article includes some ‘spoilers’. On the other hand, facts of this flight and the investigation that followed were essentially known before the film.

This article is not explicitly about consumers, although the passengers, as customers, were obviously directly affected by the conduct of the pilots as it saved their lives. The focus, as presented above, is on the decision process of the captain Sullenberger. We may expect that such an extraordinary positive outcome of the flight, rescued from a dangerous circumstance, would have a favourable impact on the image of the airline US Airways that employs such talented flight crew members. But improving corporate image or customer service and relationships were not the relevant considerations during the flight, just saving lives.

Incident Schedule: Less than 2 minutes after take-off (at ~15:27) a flock of birds (Canada geese) clashed into both engines of the aircraft. It is vital to realise that from that moment, the flight lasted less than four minutes! The captain took control of the plane from his co-pilot immediately after impact with the birds, and then had between 30 seconds to one minute to make a decision where to land.  Next, just 151 seconds passed from impact with the birds and until the plane was approaching right above the Hudson river for landing on the water. Finally, impact with water occurred 208 seconds after impact with the birds (at ~15:30).

Using Heuristics: The investigators of NTSB told Sully (Hanks) about flight calculations performed in their computer simulations, and argued that according to the simulation results it had not been inevitable to land on the Hudson river, a highly risky type of crash-land. In response, Sully said that it had been impossible for himself and Skiles to perform all those detailed calculations during the four minutes of the flight after the impact of the birds with the aircraft’s engines; he was relying instead on what he saw with his eyes in front of him — the course of the plane and the terrain below them as the plane was gliding with no engine power.

The visual guidance Sully describes as using to navigate the plane resembles a type of ‘gaze heuristic’ identified by professor Gerd Gigerenzer (1). In the example given by Gigerenzer, a player who tries to catch a ball flying in the air does not have time to calculate the trajectory of the ball, considering its initial position, speed and angle of projection. Moreover, the player should also take into account wind, air resistance and ball spin. The ball would be on the ground by the time the player makes the necessary estimations and computation. An alternative intuitive strategy (heuristic) is to ‘fix gaze on the ball, start running, and adjust one’s speed so that the angle of gaze remains constant’. The situation of the aircraft flight is of course different, more complex and perilous, but a similar logic seems to hold: navigating the plane in air safely towards the terrain surface (land or water) when there is no time for any advanced computation (the pilot’s gaze would have to be fixed on the terrain beneath towards a prospect landing ‘runway’). Winter winds in New-York City on that frozen day have probably made the landing task even more complicated.  But in those few minutes available to Sully, he found this type of ‘gaze’ or eyesight guiding rule the most practical and helpful.

Relying on Senses: Sullenberger made extensive use of his senses (visual, auditory, olfactory) to collect every information he could get from his surrounding environment. To start with, the pilots could see the birds coming in front of them right before some of them were clashing into the engines — this evidence was crucial to identifying instantly the cause of the problem though they still needed some time to assess the extent of damage. In an interview to CBS’s programme 60 Minutes (with Katie Couric, February 2009), Sully says that he saw the smoke coming out from both engines, smelled the burned flesh of the birds, and subsequently heard a hushing noise from the engines (i.e., made by the remaining blades). He could also feel the trembling of the broken engines. This multi-modal sensory information contributed to convincing him that the engines were lost (i.e., unable to produce thrust) in addition to failure to restart them. Sully also utilised all that time information from the various meters or clocks in the cockpit dashboard in front of him (while Skiles was reading to him from the manuals). The captain was thus attentive to multiple visual stimuli (including and beyond using a visual guidance heuristic) in his decision process, from early judgement to action on his decision to land onto the water of the Hudson river.

Computer algorithms can ‘pick-up’ and process all the technical information of the aircraft displayed to the pilots in the cockpit. The algorithms may also apply in the computations additional measurements (e.g., climate conditions) and perhaps data from sensors installed in the aircraft. But the computer algorithms cannot ‘experience’ the flight event like the pilots. Sully could ‘feel the aircraft’, almost simultaneously and rapidly perceive the sensory stimuli he received in the cockpit, within and outside the cabin, and respond to them (e.g., make judgement). Information available to him seconds after impact with the birds gave him indications about the condition of the engines that algorithms as used in the simulations could not receive. That point was made clear in the dispute that emerged between Sully and the investigating committee with regard to the condition of one of the engines. The investigators claimed that early tests and simulations suggested one of the engines was still functioning and could allow the pilots to bring the plane to land in one of the nearby airports (returning to La Guardia or reverting to Teterboro in New-Jersey). Sully (Hanks) disagreed and argued that his indications were clear that the second engine referred to was badly damaged and non-functional — both engines had no thrust. Sully was proven right — the committee eventually updated that missing parts of the disputed engine were found and showed that the engine was indeed non-functional, disproving the early tests.

Timing and the Human Factor: The captain Sullenberger had furthermore a strong argument with the investigating committee of NTSB about their simulations in attempt to re-construct or replicate the sequence of events during the flight. The committee argued that pilots in a flight simulator ‘virtually’ made a successful landing in both La Guardia and Teterboro airports when the simulator computer was given the data of the flight. Sully (Hanks) found a problem with those live but virtual simulations. The flight simulation was flawed because it made the assumption the pilots could immediately know where it was possible to land, and they were instructed to do so. Sully and Skiles indeed knew immediately the cause of damage but still needed time to assess the extent of damage before Sully could decide how to react. Therefore, they could not actually turn the plane towards one of those airports right after bird impact as the simulating pilots did. The committee ignored the human factor, as argued by Sully, that had required him up to one minute to realise the extent of damage and his decision options.

The conversation of Sully with air controllers demonstrates his assessments step-by-step in real-time that he could not make it to La Guardia or alternatively to Teterboro — both were effectively considered — before concluding that the aircraft may find itself in the water of the Hudson. Then the captain directed the plane straight above the river in approach to crash-landing. One may also note how brief were his response statements to the air controller.  Sully was confident that landing on the Hudson was “the only viable alternative”. He told so in his interview to CBS. In the film, Sully (Hanks) told Skiles (Ackhart) during a recuperating break outside the committee hall that he had no question left in his mind that they have done the right thing.

Given the strong resistance of Sully, the committee ordered additional flight simulations where the pilots were “held” waiting for 35 seconds to account for the time needed to assess the damage before attempting to land anywhere. Following this minimum delay the simulating pilots failed to land safely neither at La Guardia nor at Teterboro. It was evident that those missing seconds were critical to arriving in time to land in those airports. Worse than that, the committee had to admit (as shown in the film) that the pilots made multiple attempts (17) in their simulations before ‘landing’ successfully in those airports. The human factor of evaluation before making a sound decision in this kind of emergency situation must not be ignored.

Delving a little deeper into the event helps to realise how difficult the situation was.  The pilots were trying to execute a three-part checklist of instructions. They were not told, however, that those instructions were made to match a situation of loss of both engines at a much higher altitude than they were at just after completing take-off. The NTSB’s report (AAR-10-03) finds that the dual engine failure at a low altitude was critical — it allowed the pilots too little time to fulfill the existing three-part checklist. In an interview to Newsweek in 2015, Sullenberger said on that challenge: “We were given a three-page checklist to go through, and we only made it through the first page, so I had to intuitively know what to do.”  The NTSB committee further accepts in its report that landing at La Guardia could succeed only if started right after the bird strike, but as explained earlier, that was unrealistic; importantly, they note the realisation made by Sullenberger that an attempt to land at La Guardia “would have been an irrevocable choice, eliminating all other options”.

The NTSB also commends Sullenberger in its report for operating the Auxiliary Power Unit (APU). The captain asked Skiles to try operating the APU after their failed attempt to restart the engines. Sully decided to take this action before they could reach the article on the APU in the checklist. The operation of the APU was most beneficial according to NTSB to allow electricity on board.

Notwithstanding the judgement and decision-making capabilities of Sully, his decision to land on waters of the Hudson river could have ended-up miserably without his experience and skills as a pilot to execute it rightly. He has had 30 years of experience as a commercial pilot in civil aviation since 1980 (with US Airways and its predecessors), and before that had served in the US Air Force in the 1970s as a pilot of military jets (Phantom F-4). The danger in landing on water is that the plane would swindle and not reach in parallel to the water surface, thus one of the wings might hit water, break-up and cause the whole plane to capsize and break-up into the water (as happened in a flight in 1996). That Sully succeeded to safely “ditch” on water surface is not obvious.

The performance of Sullenberger from decision-making to execution seems extraordinary. His judgement and decision capacity in these flight conditions may be exceptional; it is unclear if other pilots could perform as well as he has done. Human judgement is not infallible; it may be subject to biases and errors and succumb to information overload. It is not too difficult to think of examples of people making bad judgements and decisions (e.g., in finance, health etc.). Yet Sully has demonstrated that high capacity of human judgement and sound decision-making exists, and we can be optimistic about that.

It is hard, and not straightforward, to extend conclusions from flying airplanes to other areas of activity. In one aspect, however, there can be some helpful lessons to learn from this episode in thinking more deeply and critically about the replacement of human judgement and decision-making with computer algorithms, machine learning and robotics. Such algorithms work best in familiar and repeated events or situations. But in new and less familiar situations and in less ordinary and more dynamic conditions humans are able to perform more promptly and appropriately. Computer algorithms can often be very helpful but they are not always and necessarily superior to human thinking.

This kind of discussion is needed, for example, in respect to self-driving cars. It is a very active field in industry these days, connecting automakers with technology companies for installing autonomous computer driving systems in cars. Google is planning on creating ‘driverless’ cars without a steering wheel or pedals; their logic is that humans should not be involved anymore in driving: “Requiring a licensed driver be able to take over from the computer actually increases the likelihood of an accident because people aren’t that reliable” (2). This claim is excessive and questionable. We have to carefully distinguish between computer aid to humans and replacing human judgement and decision-making with computer algorithms.

Chesley (Sully) Sullenberger has allowed himself as the flight captain to be guided by his experience, intuition and common sense to land the plane safely and save the lives of all passengers and crew on board. He was wholly focused on “solving this problem” as he told CBS, the task of landing the plane without casualties. He recruited his best personal resources and skills to this task, and in his success he might give everyone hope and strength in belief in human capacity.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) “Gut Feelings: The Intelligence of the Unconscious”, Gerd Gigerenzer, 2007, Allen Lane (Pinguin Books).

(2) “Some Assembly Required”, Erin Griffith, Fortune (Europe Edition), 1 July 2016.

 

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