With today’s commercial world changing at a ridiculous pace, anyone making a claim as to the future of business is a brave being. Here are a couple of my favorite predictions:
"I think there is a world market for maybe five computers." -- Thomas Watson, chairman of IBM, 1943
"There is no reason anyone would want a computer in their home” – Ken Olsen, founder of Digital Equipment Corp, 1977
"The subscription model of buying music is bankrupt. I think you could make available the Second Coming in a subscription model, and it might not be successful." -- Steve Jobs, in Rolling Stone, December 3, 2003
Advances in technology have afforded a greater number of businesses to make decisions and set strategy based on data and insights. It allows them to judge the impact of decisions and to explore their business using analytics to exploit opportunities or adjust to mitigate risk.
The financial services industry has been a founding member of the insights-based decision club. For many years, they have been examining data about clients and would-be clients to make a core decision: “Should I lend this person/business money, and if so, at what rate?”
Similarly, insurance companies use data from its applicants to determine if they will take on the risk in question (the insurance policy) and at what price (premium). The difference between the premium and the modeled risk being the expected profit.
Looking outside of financial services, we have my favorite: store loyalty cards. Here, the consumer provides the store with a convenient link between their full demographic profile and shopping habits in return for a toaster or golf balls every four years or so. These insights for the business can be used for advanced segmentation, promotional campaigns, and increasingly to price your level of risk for insurance and other related products. The toaster/golf balls look quite expensive suddenly...
The consumers, who are often data poor, accept the price/offer and go about their lives while increasing the data/insight pool of the supplier and widening the information asymmetry.
Just as Bob Dylan said, “times they are a changin”. With shed loads of information and insights available to consumers, they are now more informed when engaging with businesses. When paired with disruptive businesses like peer-to-peer lending, the tide of decision power is shifting away from big business, back to the consumer. Recently in Australia, a free credit rating website backed by Credit One, a peer-to-peer lender, crashed, after hundreds of thousands of users rushed to the website for a transparent view of their credit score.
The answer to the emergence of the informed buyer is sitting in the very data collected by business. Today the data and insights for consumer cross selling, up-selling and retention all essentially look to milk more dollars from each consumer. Tomorrow's consumer may not be as excited by a free toaster, but will offer loyalty to the organization that rewards them with insights to help them improve, grow and enrich their lives.
For example, I’d love to see analytics around my store spending habits, where I could set budgeting goals and improve habits around the purchase of fresh produce and healthy options. I’d like to understand that based on my payment history and credit card spend; I will be in a position to place a down-payment on a home within the next 18 months. As an insurance policy holder, I’d like to understand my key controllable risk factors, and the impact on pricing should I commit to improvements.
Now this will be value-added analytics, and this is my prediction for how businesses will compete for my loyalty. Toasters will be toast, and insights will have their time in the sun.
Photo credit: JeepersMedia / Foter / CC BY