Accenture outlook how big data can fuel bigger growth strategy
This article originally appeared in the 2011, No. 3, issue of The journal of high-performance businessStrategy Growth IIHow Big Datacan fuel bigger growthBy Sumit Banerjee, John D. Bolze, James M. McNamara and Kathleen T. O’ReillyIn the right hands and handled strategically, the massive amountsof information companies collect today can become a valuable newasset. Players seeking additional organic revenue streams shouldconsider tapping their data trove to power a new informationservices growth engine.
Strong growth remains a hallmark of a serious player in the new infor- corporate success. But how do CEOs mation game. move the needle on their already huge, multibillion-dollar companies? Take the auto industry. Since many vehicles now feature GPS and Mergers and acquisitions can telematics systems, some car manu- quickly add big chunks of value facturers have been able to collect to an organization, but in many and monetize a wealth of data on industries, attractive targets have customer driving habits. become scarce. For mature industries, untapped geographies and markets General Motors Co.’s OnStar telematics are similarly hard to find. Using system, for example, not only traditional cross-selling and provides vehicle security, information up-selling strategies to generate base- and diagnostics services to drivers, line growth? Been there, done that. it also captures telemetry data. In 2007, OnStar and GMAC Insurance Instead, the answer may lie in one partnered to create an opt-in program of the most valuable but underused that uses the telemetry data to offer assets a company already has: its lower insurance premiums to custom- customer information. ers who drive fewer miles. Thanks to the program, consumers can save Call it Big Data. With the rise of significantly on car insurance, which digitization, established enterprises boosts GM’s customer satisfaction in industries ranging from telecom performance. This, in turn, helps GM and media to healthcare and finan- attract new OnStar paying customers. cial services have amassed terabytes of information about their legions In another example, in 2009, of customers. This digital treasure American Express Co. launched an trove, already highly valued as a way analytics and consulting business to help meet the evolving needs of that draws on the purchasing be- customers and spot trends, can help havior of its 90 million credit card companies create new products and holders across 127 countries. This services, and perhaps even spawn organization, American Express entirely new businesses. Moreover, Business Insights, hopes to attract a significant number of consumer- direct marketers by using proprietary facing organizations have natural data to enhance customer acquisition advantages in this area; for them, and retention programs. leveraging Big Data represents a particularly lucrative opportunity. Companies sitting on large amounts of customer data—including insur- Untapped value ance carriers, retailers, transporta- Overall US demand for information tion companies and communications services is expected to exceed providers—have a unique opportunity $600 billion by 2015. to make this type of information services play. With their direct rela- As data-driven insights become tionships with millions of customers, an increasingly critical competitive they typically have the most accurate differentiator, companies will use and complete information on large them to drive and optimize business sets of consumers. By contrast, decisions across industries. In the competitors such as third-party past, this market was largely limited information providers must rely on to traditional market research and publicly available or purchased data. data specialists, but today, virtually2Outlook 2011 any company with a large customer Better yet, the cost to obtain theNumber 3 database can potentially become raw data contained in these compre-
hensive and often unique data sets revenues could be worth $1.7 billion is virtually nonexistent, since the annually for card issuers by 2015, up company’s core organization collects from roughly $100 million in 2010. it in the course of doing business. Likewise, third-party data aggregators Using information services to and information services providers drive growth requires a thorough such as Experian Information Solu- understanding of what kinds of tions, Acxiom and Blue Kai collect raw data exist in the organization. raw consumer and business purchas- Armed with that insight, compa- ing information on tens of millions of nies can then decide which tier consumers from a variety of sources, of information value they should including websites, loyalty programs, aspire to provide. self-reported sources, public records and retail point-of-sale data. They We use the Accenture Information then provide data, analysis and more Value Pyramid to illustrate various to marketers looking to boost the information service strategies. effectiveness of their advertising The pyramid has three levels—raw and promotional campaigns. Other data, insights and transactions. The customer data intermediaries existIn some cases, govern- potential value and profitability in the catalog and specialty retailingment agencies have been of an information services business industry, where firms such as Abacus depends in large part on the condi- Direct Corp. and I-Behavior collectahead of the curve in tion of the data the enterprise owns. transactional data to provide directrecognizing the value of The base of the pyramid features raw, less differentiated and thus marketing services to members.the raw data they hold. less valuable data. Moving up the In some cases, government agencies pyramid creates larger revenue have been ahead of the curve in opportunities, although these tend recognizing the value of the raw data to be more difficult to execute (see they hold. The United States Postal chart, page 4). Service, for one, sells a variety of licenses, for up to $175,000 annually, Providing raw data requires minimal giving organizations access to its effort and calls for the least strategic National Change of Address database. differentiation. It is the most common At the state level, Ohio, Illinois and strategy but generates the least many others have collected millions amount of revenue. As a strategy, of dollars over the years by selling raw data makes sense in industries records containing personal informa- with fragmented information and tion, such as that found on driver’s where the sharing of information does licenses and driving records, to a not put your business model at risk. variety of companies. Since 2005, Ohio, for example, has sold nearly A number of major US banks and 1.4 billion individual records—names, credit card issuers have begun to sell addresses, dates of birth, driver’s raw data about their customers’ debit license numbers and vehicle title and credit card shopping habits— information—for more than $40 mil- spending behaviors, the stores they lion. While Ohio is compelled to sell frequent and what they buy—through this data at cost, other states such as intermediaries such as Cardlytics. Oklahoma and Tennessee charge sig- Retailers use the data to offer targeted nificantly more. At least one national discounts via text messages or email, licensing agency in Europe made and pay commissions that range from several million dollars selling driver 10 percent to 15 percent for each information during the same period. customer who takes advantage of the3Outlook 2011 discounts. A report by Aite Group Privacy is a paramount concern forNumber 3 projects these types of card-related these government data vendors. The
What’s your data worth? Companies hoping to drive information services growth need to understand what kinds of raw data exist in the organization and then decide which tier of information value they should aspire to provide. We use the Accenture Information Value Pyramid to illustrate various information services strategies. The pyramid has three levels: raw data, insights and transactions. The potential value and profitability of an information services business depends in large part on the condition of the data an enterprise owns. The base of the pyramid features raw, less differentiated and thus less valuable data. Moving up the pyramid creates larger revenue opportunities, but these tend to be more difficult to execute. Transactions Transactions drive the completion of end-to-end business processes. For example, while insights might reveal the best target-marketing approach, transactions show how to execute a full-fledged marketing campaign. Increasing Insights value of data Firms perform value-added predictive and descriptive analytics to extract key market and consumer insights from the data. Raw data Companies sell source data not yet in an easily consumable form. This requires the least effort but offers the lowest amount of strategic differentiation and revenue. Source: Accenture analysis Ohio Bureau of Motor Vehicles, into Google Flu Trends, the company for example, operates as an infor- has been able to change the game mation vendor under strict rules regarding disease prevention. US set out by the federal Driver’s public health organizations such Privacy Protection Act. as the Department of Health and Human Services can now act more Providing “insights” requires more quickly to combat outbreaks through effort and more strategic differentia- early detection. Beyond the United tion, but also generates more revenue States, Google uses search patterns than simply selling raw data. In the on dengue fever among users in United Kingdom, supermarket giant countries such as Brazil, India and Tesco sells data on the shopping Indonesia to alert health organiza- behavior of its Clubcard users to tions to potential outbreaks. retailers and big manufacturers through a majority-owned shopper Data at the “transactions” level information company—which in enables companies to execute their 2010 earned £53 million in profits. end-to-end processes better, and could help improve point-of-sale Several years ago, Google, taking retail transactions, marketing a more altruistic tack, discovered campaign rollouts or fraud detec- that an uptick in searches concern- tion. In some cases, a company’s ing flu-like symptoms could be an data may be so differentiated and4Outlook 2011 early indicator of flu outbreaks. By applicable to another industry thatNumber 3 externalizing this search insight it inspires the company to venture
into a new industry and compete framework: promote consumer effectively there. privacy throughout your organiza- tion; simplify consumer choices; American Express provides trans- and increase the transparency of action-level value by running your data practices. The FTC also marketing campaigns on behalf of provides best-practice examples merchants, for example, and Google’s regarding the collection, storage business model is based on its ability and use of consumer data. to use search data to connect adver- tisers effectively with potentially Companies, too, are looking for the interested consumers. A number of responsible use of consumer data. major US retailers infuse their brands For instance, Microsoft has called with new competitive strength for cloud computing data security through transaction-level data standards. analysis. Working with proprietary analytics platforms, these retailers New privacy legislation is pending can externalize descriptive analytics in the United States, while other in an easy-to-use interface. With countries have or are also creating access to such data, brands can drive laws and regulations that address targeted in-store campaigns more these issues. The United Kingdom, for effectively, boosting sales. example, passed the Data Protection Act of 1998, which outlines the legal On average, as companies move up obligations that companies must the information value pyramid adhere to when handling an indi- from data seller to insight provider vidual’s personal information. to transaction enabler, the value they receive jumps significantly. In 2003, Japan passed the Act on the Protection of Personal Information More and more data-rich companies in response to consumer and social are crafting strategies to climb the pressure to protect individual privacy pyramid. As data storage costs drop in commerce. Full understanding of and digital convergence provides new and com-pliance with the evolving data collection sources, companies scope and details of such laws and are using these technologies to gain regulations in response to the rise a more complete picture of their of Big Data must become part of any customers—a few of them seeking go-to-market strategy. a level of omniscience that makes some observers uncomfortable. Some companies are investigating ways to compensate customers for Consumer protection their data. In 2009, for example, At the same time, government agen- Bank of America Corp. applied for cies, consumer advocates and some a patent on the monetization of companies have raised concerns personal information in an infor- about the unethical sale of consumer mation bank that not only provides data, exemplified by the GPS device customers control over their informa- maker that recently apologized for tion but also enables them to receive selling customers’ driving data to value in exchange for it. local and regional governments in the Netherlands that the police then This process can be configured in used to set speed traps. a variety of ways. One version relies on mobile devices and other technolo- One approach to protecting con- gies along with a concierge service sumer privacy proposed by the US to enable users to monetize their5Outlook 2011 Federal Trade Commission offers information, which could includeNumber 3 organizations a simple three-phase their personal recommendations
regarding products, services and the ability to take your own informa- entertainment choices, for example, tion, combine it with other data and as well as transaction data. Users can make it uniquely valuable via robust adjust the device’s privacy settings analytics will be critical to success.) to release their personal information incrementally to others as desired. Concrete action Once these questions are answered, Differentiation through data companies can take concrete actions This data-driven opportunity is to assess whether the opportunity causing some players to consider bold is real or not and if pursuing it strategic moves that can set them makes sense. apart from the competition and provide vital new revenue streams. First, a company needs to assess the industry applications for which The value of a company’s information its data would be relevant. These hinges on its ability to differentiate typically span the decision sciences itself in the marketplace in terms of and could include marketing, risk information scale and data scarcity, management, and research and and on its capacity to combine development. But some types of differentiated elements with tradi- data could also help to drive better tional sources of information using operational effectiveness and data management and analytics manufacturing performance. capabilities. So before launching a new information business, leaders Having chosen the appropriate need to address three fundamental applications, a company should considerations by answering the methodologically analyze the following questions. attractiveness of its information compared with that offered by Information scale. Do we have current incumbents. Knowing how enough information to differentiate your information could drive cost, ourselves in the marketplace? (Having quality or responsiveness benefits a customer base in the hundreds of in a market can provide insights thousands is not enough in an age into whether your offering will where some companies count heads fit in with or disrupt the existing in the tens of millions.) information value chain. Data scarcity. Do we have data One effective tactic involves vali- elements that are difficult to dating your information services replicate in the marketplace? strategy by discreetly contacting (Leaders should determine if the potential strategic customers. In company’s core business creates addition to providing possible price effective barriers to third-party points for various data products, data collection and whether other this contact can help the organiza- businesses can collect alternative tion build its credibility in what are data that would serve as a substi- probably new markets. tute of comparable value.) The next step involves understanding Data blending and analytics. Can capability gaps. Companies often we combine our data with infor- lack important capabilities or assets mation from others and then use they will need to win business in sophisticated data analysis to create the information services arena. As differentiated products? (No single a result, even an organization well organization has all of the data it positioned with a uniquely valuable6Outlook 2011 needs to meet the demand for infor- information-based offering has toNumber 3 mation services products; as a result, recognize that it may not have the
For further reading skills, resources and systems in place launching these products. Because it needs to collect, store, analyze or the information services business“How to turn data into a strategic monetize the data. is evolving rapidly, winners areasset,” Outlook 2010, No. 2. usually those that are fastest Additionally, companies must assess to market. Leveraging an agileFor this and other articles, please visit the legal, privacy and policy impli- prototyping process will not onlyaccenture.com/Outlook. cations of monetizing information improve a company’s speed to assets. One suggestion: Look to market, it will also enable it to other information services entrants align with the potential strategic and industry bodies for best practices customers identified earlier. These on how to comply with regulatory customers can provide invaluable requirements and provide trans- help in shaping the product, tailor- parency to customers. ing it to meet the exact business challenges targeted customers face Yet another consideration involves and boosting the odds of market the go-to-market approach. Do you adoption upon product launch. assemble the data for off-the-shelf catalog sales, establish a dedicated Executives often find it difficult sales team, develop a key account to value opportunities within the management approach—or all three? information services landscape due The choice will depend on the to the intangible nature of pricing number and types of customers products that primarily aid deci- interested in purchasing your data, sion-making activities. While raw its assessed value and the amount data, insights and transaction-level of value-added you plan to offer on information provide the rootstock top of the raw numbers. Ultimately, onto which companies graft their companies need to decide whether strategic visions, assessing the the Big Data prize is big enough value of these assets can be a chal- to warrant the creation of specific lenge, since the “product” often sales capabilities. offers different levels of value to different organizations. As a result, Finally, companies should follow companies should experiment with an accelerated product design value-based pricing techniques to and prototyping approach when arrive at equitable terms. While other competitive “essentials” fall in and out of fashion, growth remains the defining measure of business success—it’s how markets assess companies and leaders gauge their performance against peers. But achieving adequate growth in today’s often-difficult competitive environment means everyone and everything in an organization needs to work harder than ever. Companies endowed with massive amounts of customer information can use it to supercharge their growth engines, potentially making Big Data a very big deal indeed.7Outlook 2011Number 3