When organisations become waste factories
This is one of a series of blogs exploring Hidden in Plain Sight: The Surprising Economics of Personal Data, the subject of Mydex CIC’s latest White Paper.
There’s an old joke told by economists that if you see a £€$100 note on the ground, ignore it because it must be a scam. If it wasn’t a scam, someone else would have picked it up already.
It’s a joke about the supposed infallibility of markets, which are supposed to discover and fill every new opportunity as soon as it arises. But in this blog series we’re arguing the exact opposite.
There’s some wisdom in the old economists’ joke. When somebody says “Look! There’s an opportunity here that’s just waiting to be had!”, it’s a healthy instinct to think “Hang on a minute! If the opportunity is so great, why hasn’t someone else picked it up before?” It’s one of the reasons people are so sceptical about productivity, the ‘P’ word that no-one wants to talk about.
But in this case, this healthy instinct is wrong. There are millions of such £€$100 notes hanging around, just waiting to be picked up. Why? Because there is so much waste (friction, effort, risks and costs) built into how organisations currently operate — waste that is just waiting to be eliminated. The purpose of this blog is to persuade you how and why.
A structural logjam
Opportunities for improvement start mounting when, for one reason or another, a system gets stuck in a mode that’s no longer fit for purpose. That is what has happened with data. Especially personal data.
For decades the best, most efficient, most productive way of getting value from data was for the organisation wanting to use that data to collect it, store it and process it for itself. Who else was there to do it?
But the more data-driven our economy has become, the more restrictive and suffocating this old approach becomes. One, unique characteristic of data is that it doesn’t get used up when used, which means the same piece of data can be used many times over by many different people for many different purposes. But for that to happen, the data needs to be shared. And the siloed, proprietary organisation-centric database, upon which our entire economic system is currently based, is designed NOT to share data.
What was once the best possible way of collecting and using data has turned into its opposite: an all-pervading, deeply embedded source of waste: of unnecessary friction, effort, risk and cost.
An untapped opportunity
But seen from the opposite angle, it is a huge untapped opportunity. Like that £€$100 note lying on the ground in front of you. If the right sort of data sharing was enabled — where citizens can collect, store, use and share their own data under their own control using their own personal data store — we are saying it is now possible to reduce the costs of providing services by between 45% and 90%, especially and initially in the public sector.
To see how, let’s take a topical example. Right now, lots of people can’t afford to heat their homes. There are schemes, such as the warm home discount, that are supposed to help those who need it most. But often they do the opposite, punishing them for being poor by embroiling them in a frustrating, humiliating, anxiety producing administrative nightmare — and operating as a modern waste creation scheme.
To prove you are eligible for a warm home discount you have to present your energy provider with a huge amount of information: information about any earnings you have from employment, or from benefits or carers allowances, from pensions or savings, and any other sources of income. You also have to provide information about your housing costs — and when we say ‘provide information’, that means provide documentary proof, in the form that the energy company requires, for every item.
This is a mountain of work in its own right. But having completed it, you are then in for a shock, because if you have a partner you also have to find, present and prove all the same information for them too.
Then, once the energy provider receives this information, they have to check every piece of information to make sure you are not a fraudster. The whole process, from application form to final decision, can take months to complete, with processing costs of between £150 and £200 per application (and that’s ignoring all the costs incurred by the individuals themselves). In short, the warm home discount is a waste factory.
Yet in a high proportion of cases, virtually all this work could be avoided by one simple thing: a verified attribute. A verified attribute is a piece of information about an individual that has been checked to accepted levels of reliability by a competent, responsible organisation such as a government department or bank. It is cryptographically secure so it cannot be tampered with. Examples of verified attributes include confirmation that the individual has passed an exam or test, that they have this blood type of that vaccination, or that they have an income of X and a credit score of Y.
In this case, if the individual could get hold of a verified attribute confirming that they are eligible for universal credit, their ability to share this one piece of information could short-circuit all the above work, turning months into minutes and hundreds of pounds into pennies. It would eliminate mountains of friction, effort, risk and cost for both the individual and the service provider.
The enormous scale of the opportunity
The warm home discount is just one tiny example of something that is happening every day, millions of times over. The savings that could be made by changing the way we do warm home discounts could apply millions of times over, to some degree or other. Like covering the ground with £€$100 notes which are just waiting to be picked up.
Figure 1 below highlights the endless layers of waste currently created by poor data logistics. In doing so it highlights where the cost saving opportunities lie.
Official Government figures provide one way of seeing just how big the problem Research by the UK Government Digital Service (GDS) back in 2103 identified 1.54 billion transactions dealing with individuals a year, covering 772 services. For example, there were 1.8 million applications for job seekers allowance with each application costing £71 to process, creating total costs of £219 million, and 870,000 applications for employment and support allowances. These cost £223 per application to process, creating total costs of £194m.
GDS’s commentary on these processes highlight the friction, effort, risk and cost that is endemic within them. On employment and support allowances, it says:
“New claims involve several interactions with the applicant and third parties,such as medical professionals, to, for example, arrange and undertake medicals, assemble evidence to validate identity and eligibility in line with benefit regulations and fraud avoidance strategies, issue NI numbers if the applicant does not have one, and deal with any appeals against the decisions made.”
Maintaining a service can be as expensive as delivering a new one. The GDS comment on job seekers’ allowance says:
“Maintaining claims involves many interactions, including contacts about changes of circumstances or compliance checks that could affect eligibility, the investigation of potential fraud and error, and appeals against decisions made. It also includes the making of payments and any queries about non-receipt.”
GDS estimated that the total costs of completing these transactions was £6.7bn. It also knew this was a massive underestimate given that it could only obtain cost data on one-fifth of transactions (so the real costs could have been five times higher than this). Its figures also ignore all costs incurred by citizens when making applications (as almost every cost measring exercise does).
And remember, GDS was only talking about central government. The same costs are being generated across every other sector including local government, health and social care, the third sector, financial services including banking and insurance, education, retail, transport, media and entertainment, and leisure.
Millions of £€$100 notes just waiting to be picked up
By enabling the sharing of the right information at the right times, personal data logistics infrastructure like that built by Mydex enables warm home discount-style levels of waste to be eliminated from thousands of different services serving tens of millions of different people. It reveals millions of £€$100 notes just waiting to be picked up.
Yet so far Governments have taken the economists’ joke seriously and ignored them, spending years and billions chasing the rainbows of ‘Big Data’ and artificial (i.e. fake) intelligence instead.
Elimination of waste and FERC (friction, effort, risk and cost) reduction via better data logistics is now a system-wide productivity revolution that’s just waiting to be unleashed. But this revolution is just the beginning of the economic opportunities opened up by the humble personal data store. It does something else too: transform the way service delivery is organised . That’s the subject of our next blog.
Other blogs in this series are:
- The Great Data Delusion 19th century doctors thought bloodletting would cure most diseases. Today’s prevailing theories of personal data are little better.
- Why is personal data so valuable? Because of two things that are rarely discussed: reliability and surprise
- Is it a bird? Is it a plane? No! It’s Super…! With personal data, what sort of a problem are we dealing with?
- The vital issue people don’t avoid talking about Productivity is key to prosperity. But nobody wants to talk about it? Why?
