He Who Holds The Data…
The saying, “Knowledge is power,” is probably as old as the ancient scripts. Yet it seems that we have never witnessed translation of knowledge to power in such a scale and extent as we do today.
In an increasingly digitized world, data becomes both the fuel and the footprint of our decisions, actions and behaviors. And in a digital business reality — in which the incremental cost of duplicating a product/service approaches zero, delivery is borderless, and instant and mass customization offers an infinite number of personalized experiences — traditional competitive levers such as brand heritage, wide supply chain and operational excellence fade in front of the advantage that smart utilization of data can create.
Smart utilization of data is the ability to translate data into value and into a superior customer experience. Uber has flipped the effort of finding a taxi on its head, shifting the onus to taxi drivers, who need to compete on finding passengers, who in turn become visible on their screens. Citymapper leveraged their knowledge of popular commuting routes, as learned from commuters’ queries, into new shuttle lines, competing with municipal public transport.
But value is created not only by introducing a new offering — it’s also created by ensuring that the user experience will improve over time. A brand’s ability to increase the value of the product by introducing new features that reflect user behaviors, providing personalized experiences (based on deep understanding of each and every user) and connecting with other products to offer frictionless experiences, results in greater usage, loyalty and advocacy.
As implied by the above, to create value out of data takes more than understanding data. It requires understanding people.
Best In Class
Three companies that excel in understanding people’s data and translating it into value are Facebook, Google and Netflix.
Facebook’s News Feed is arguably the most addictive tool ever created, with people spending over 40 minutes a day on it. The amount of actions Facebook’s 1.5 billion users perform on it enables Facebook to profile and analyze people better than they know themselves. It is claimed that based on 300 Likes, Facebook can know a person better than their spouse. Facebook’s ability to instantly tailor and load News Feeds that are customized, based on the content preference of each of its users, is unprecedent. And by connecting with platforms such as Instagram, Messenger and WhatsApp (all of which Facebook owns), it’s increasingly able to drive customization of these platforms based on the accumulated data it has.
Google probably taps on even more valuable data than Facebook: The type of data that its users share ‘confidentially’, believing that no one else is watching. Google has positioned itself as the ultimate source of knowledge. It answers some 3.5 billion search queries a day, out of which 15% have never been seen before. The more information given to Google, the greater value a user can derive from it. Google Translate is a great example of how to utilize data fed into the system to create new value. Connecting Google to users’ calendars turns it into the ultimate personal assistant. Adding to the platform smart home appliances (such as the Nest thermostat), and it takes over household management. Google manages to acquire more user data because it excels in translating this into value.
Similarly to the numerous personalized versions of Facebook’s News Feed, there are 33 million claimed different versions of Netflix. The video streaming giant understands what content viewers want to watch more than anyone else. By analyzing viewing habits, it can identify when a series will become a hit. In fact, it can predict the next hit based on past viewing data. Unlike most traditional TV production houses, Netflix doesn’t use pilots to determine the probability of success. It leverages its understanding of viewers’ interests and viewing habits to create content that people want to watch. In comparison to the 35% success rate that most production houses have, Netflix boasts a success rate of 70%. Currently used mostly to increase its presence in households across the globe, Netflix will surely find new ways to monetize its data in the near future.
Using Data To Drive Transformation
The utilization of data isn’t restricted to companies born in the digital age (Netflix, by the way, started its business as a mail-based DVD rental service). Increased application of digital platforms and touchpoints that yield data cuts across all business sectors and units. This data should serve not only as an enabler but a driver for innovation, be it sustainable or disruptive.
Telco companies like Telefónica use data visualization to offer new value to third parties such as media agencies (who are interested to learn of the volume and times of human traffic, as well as the time spent in various locations) and city planners (who wish to understand where to invest in better infrastructure or plan a new development). Leading media agencies, such as WPP’s GroupM, have swapped network buying power with data management platforms — which enable them to better profile audiences and target them on the most cost-effective platforms — as their value proposition. Insurance companies are introducing new technologies like image recognition to simplify the claim process and reduce effort for both customers and assessors. The ability to better understand and utilize data can be translated into a competitive advantage in an industry that is not known for its user experience. Furthermore, connecting with third parties’ data — such as Apple (via its Watch) or smart cars — offers insurance companies the opportunity to transform their products and sell new plans and premiums that reward a healthier lifestyle and risk-averse behaviors.
Translating data into value cuts across all industries and all parts of the value chain.
B2C and B2B brands can use data to add value to customers…
· Nike uses data visualization to offer runners performance analysis and route inspiration,
· Rolls-Royce offers not only repair and maintenance but a range of aftermarket services based on the data generated by its connected engines,
…or to optimize operations:
· Rolls-Royce uses data from its engines not just to improve value for customers but also to increase manufacturing efficiency,
· Singtel uses data to track cell tower performance and optimize maintenance and investment efforts.
The art and science of designing businesses using data ultimately relies on the ability to harvest the right sets of data, synthesize and translate them into value and find a commercial model to monetize it. Ultimately, designing business with data relies on being obsessively customer- (and/or end-user-) focused. One must have a clear understanding of the user’s Jobs To Be Done in order to understand which data should be used, and how to best structure and deliver it.
Quid Pro Quo
Digital platforms may have created an abundance of data flow. But as consumers and regulators become more aware of the data they produce and the ways it’s being used, that flow may soon decrease.
In 2014, the EU ordered Google to allow users to remove search results that relate to them and which they don’t want to appear in public. As of February 2018, Google reported more than 650,000 requests to exercise the right to be forgotten. Earlier this year, Facebook and Cambridge Analytica were accused of enabling the use of users’ data to influence a variety of political campaigns — an event that raised public awareness of the danger of misusing personal data. And in May, the European Union introduced the General Data Protection Regulation (GDPR), which restricts the use and share of personal data and increases consumers’ ability to decide who can use their data and for what.
Given these and similar events, a plausible future scenario could see personal data becoming a commodity traded in return for value. While people’s attitude towards personal data and the data they are sharing may differ from market to market, the more they recognize their data has value, the more they will ask in return. Brands will therefore have to think creatively how to source the data they require — from consumers, customers and partners — and what value they offer in return. The need for customer centricity will only increase.
The table below offers a method to view such tradeoff between data and value.
So, is your data strategy customer-focused? Are you leveraging data to improve your value chain and value to your customers by understanding the tasks data can help solve? And are you offering a good tradeoff for your partners’ and customers’ data, or risking to be cut off?
MING Labs is a leading digital business builder located in Berlin, Munich, New York City, Shanghai and Singapore. We guide clients in designing their businesses for the future, ensuring they are leaders in the field of innovation.