Pre-amble : A message from our team https://medium.com/@demystdata/a-message-from-the-demyst-team-d9806797bc5a
We are facing a major exogenous shock in COVID-19. Short term our first thoughts are of near term public health and safety, everyone’s wellness, and our frontline healthcare workers and everyone looking for treatment and a cure.
But what about the long term? Will this be “V shaped” and soon, “this too shall pass” and we’ll return to normal? Will this be like modern day financial crises which exacerbated the economic cycle and caused recessions but, arguably, didn’t fundamentally take it off course? No, this is different.
We believe this will be a truly plastic deformation to the operations of practically every enterprise, that will result in a shift to a reliance on external data.
And we believe enterprises need to act now to adapt to the new normal. We have assembled a dedicated task force to analyse our underlying data around specific problem domains that are affected by the crisis, ranging from banks looking into counterparty risk, insurers need to originate online, governments trying to understand when and how to ease restrictions, and corporations managing supply chain risk to name a few. We will publish what we learn at no cost.
In summary, we see two major mega trends related to external data that affect nearly all verticals.
Digital first, forever
Shifts to online customer engagement, sales, and delivery have been steady, slow, and transformative to every industry — at different rates by industry. For example, complex insurance products are still primarily distributed by agency channels and networks. We hope we are wrong, but it seems the virus will last long enough that we go through a full cycle of everyone needing to understand how to buy these complex products online. Some enterprises are ready now, others will rapidly get ready. Once consumers are educated and the fundamental cost structure is lowered, the market will never turn back.
Delivering digitally requires a streamlined workflow. Which means knowing a lot about customers and prospects, without asking for anything except consent. That’s an external data problem, across everything from customer acquisition to targeting the right product, customizing experiences, pre-filling applications, and assessing risk and originating. What does this mean for products like life insurance, commercial lines insurance, or mortgages?
This is not the incrementalism of the last 20 years, but a step change requirement. In many industries digital is still just “another channel” that supports the business. It is now “the channel”. Many companies we are talking to have merely weeks to get some workflows online and certainly don’t have time or bandwidth for drawn-out exploration and purchasing cycles.
Risk management, back to square one
Credit, fraud, verification, and even human resources risks have changed rapidly and all at once. Consumer behaviour has changed. Unemployment and related fraud risk is rising. Businesses are failing. Supply chains are affected in unknown ways. Most things have to be rebuilt. What’s more, everyone will also be future-proofing against the next unknown shock.
At the same time internal data is slow to accumulate and decays during times of change, not to mention is incredibly expensive to ingest, clean and manage. For almost everyone, there is far richer customer data in the external data ecosystem than internal. External data is now more expansive, has more outcome observations to train to within a shorter window, and — because players like us clean it once rather than once per client — it’s a far greater ROI to harness. This hasn’t always been the case. The TCO of external data, including all end-to-end management of it, has only recently fallen precipitously.
Most processes typically iterate and add rules and complexity on top of existing algorithms to manage risk. The past largely predicts the future. And external data is a supplement to internal. Until the world shifts on its axis. Enterprises have to start from square one. For example we are harnessing full files of every small business in the multiple countries to understand how they and their trading partners are affected, which can help enterprises over-serve and manage risk. This is one of a huge list of use cases we’ve heard our clients discuss in the last few weeks. And they all depend on data outside their four walls.
As this crisis abates, we expect this shift to a world of external data dependence to be permanent and for the public good.
Demyst is here for clients, partners, and anyone else who wants help demystifying the external data ecosystem. Please don’t hesitate to reach out through email, chat, or for a zoom, we are digital first too : help@demystdata.com
By Mark Hookey, CEO, Demyst Data
