The beta blog

< The beta blog | Oct 22, 2014

Big Data: Big Danger?

On Sunday 19 October I took part in the Institute of Ideas' annual Battle of Ideas at the Barbican which aims to encourage free-thinking and open-ended public discussion on a range of topical subjects. PwC is a proud sponsor of this yearly event.

The other panellists for the ‘Big Data: Big Danger?’ session were Sheila Bird from the Cambridge Institute of Public Health, Marion Oswald from the University of Winchester, and Sandy Starr from the Progress Educational Trust. The session was chaired by Timandra Harkness.

The session looked at the danger and opportunities of Big Data. I focused on 4 topics: Definitions; Decisions; Next step; A new Data Deal.


Let’s start by the definition of Big Data, which is assumed often to be understood, but seems to mean different things to different people. There is no right or wrong definition. To me, big data is the ability to use lots of data to support decisions.

That begs 3 questions:

First question: What kind of data? Let’s start with where I live (GPS), who lives with me or next to me, what I read and buy on the internet (cookies), how I use my phone & iPad, my car (GPS), what I buy (credit cards), what we watch on TV (Set Top Box) or listen on radio (DAB), what our neighbours are like (post code socio demographic and behavioural data). And of course a very thorough picture of my health profile. There is one thing which isn’t known (or should not be known), it is my name, as it will have been taken out of the data and replaced by a number. Marion Oswald talked briefly about getting the right law and regulation. There was a great article in the Evening Standard developing these points.

Second and third questions: Data to do what? And for whom? We can use big data to improve health, to improve security and detect frauds. In which cases, the beneficiary overall is “society” – and that’s all of us. Big data can also be used to help me get a cheaper car insurance. It requires me fitting a “black box” monitor that allows my insurance company to know how I drive, which presumably will demonstrate with real time data that I respect speed limits and do not drive erratically. In that case, I benefit and the car insurance company too (and the manufacturer of the black boxes, and those employed to build them).

Automatic Decisions

Big data has also come to imply that decisions are made by computer programmes, or with Artificial Intelligence, automatically. For some, alarm bells start ringing. Let’s look at two examples and check the benefits and the dangers:

Many organisations are already equipped with software that processes invoices automatically. The software checks: “Is this invoice matching a contract we have? Has the invoice been authorised by an approved person? Is the amount within the authorised payment bands? Do we have enough funds to pay now?” That saves the organisation time and improves accuracy, which means suppliers can be paid in a timely manner. When these software packages are well tuned, the entire payment process is more efficient and effective. That seems to be a good thing.

But some would say that isn’t really big data, but simply automation of repetitive, standardised tasks. That’s true. Big data comes in the next step: using all these payment transactions, over a few years, to help organisations manage the overall picture of what they spend, with whom and when. Big data can help describe what has been spent, then it can help predict where the spend will be. It can help detect “abnormal” payments. It can help predict whether there is too much risk concentrated into a few suppliers. Think Fukushima and the problems caused indirectly to Apple and its super-efficient but perhaps too concentrated supply chain.

The second example builds on my car insurance example. What happens if somebody in my family starts driving the same car with the black box, but starts speeding regularly, and has a few “erratic” driving episodes? The insurance company may reserve the right to terminate its coverage of my car. Not great – but at least I should have known.

Extending further to the health sector: What happens if personal health conditions are used to impact eligibility to jobs, promotions, healthcare coverage?

It is easy to predict that big data applications to automate decisions to improve efficiency and effectiveness will continue to grow. For example, one could imagine that IBM’s Watson computer will soon lead to create better call centres through the application of excellent Natural Language Processing proprietary software.

Next step: Bring individuals truly in

Will there be more big data applications where the stakes are more personal? It depends if the public and organisations can work together to improve Awareness and Choices and build Trust.

First, Awareness:

Do we know what data about us is stored by what organisation? I found that of the 20 or so respondents to an informal survey in the PwC Data Analytics community, about 50% felt there were at least 50 organisations holding some of their sensitive data. Personally I stopped the exercise at around 35, knowing full well that the total is probably north of 150.

And it is not easy to find out what is held about each of us, as it seems one needs to ask each organisation that has some of your date what they hold. Those organisations in the EU are legally bound to give you an answer.

Second, Choices:

Are we truly given a choice to let our data being collected (and how much), stored (where), aggregated (with what other data, from what sources), passed on /sold on (to whom and for what purpose)? My view is that organisations probably need to become more customer centric and much more explicit about what they do with “our” data … which they seem often to consider “their” data.

Third, Trust:

I have three adult children, all quite digital. And the debate has been raging. Should we or not be bothered about sharing our “data” and trusting organisations to use our data ethically? The traditional line is “if you don’t have anything to hide, why would you worry.” That seems to be generation dependent. I don’t believe I have much to hide. I am sure I don’t want to share all of my life with every organisation.

We all have organisations we trust more than others. Personally, I will tend to be more trusting of organisations with a public-interest purpose. For example, the BBC, the British Library and the British Museum have missions to expose people to old and new content. Would I trust them to help me achieve a goal (e.g., learn more about French Modern History)? If getting a BBC/BL/BM recommendation of books to read, shows to watch or listen to, and exhibitions to visit requires me to share my goals, my reading list and habits, my diary, my viewing and listening habits, then I would.

A new data deal

Alex Pentland at MIT talks about the need for a new data deal. My colleague, Carlo Gagliardi, talks about putting the customer in charge of their data in a blog for the Management Consultancies Association. Working on raising Awareness, increasing Choices and building Trust – or ACT as a simple acronym to remember our next steps – is today’s challenge for organisations wanting to take advantage of enormous opportunities with big data. Without active promotion of Awareness, Choices and Trust it will much more difficult to realise the phenomenal potential of big data, as it will be seen by many to present more danger than benefits.

One final observation if I may. When we stop exercising, our muscles become weaker. I wonder if each of us relies too much on big data to make decisions for us, we will lose the opportunity to “practice” making simple decisions, and thus lose some of our sharpness in making choices. Remember being able to read a map?

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< The beta blog | Oct 15, 2014

A new way of funding visionaries?

The technology sector has had its ups and downs. With every boom there has been a bust. But tech is still the VC darling. Why?

It’s an important why. Because many chattering techies have been questioning whether the current tech boom/bubble is sustainable.

Tech is having a crisis because the current valuation hike seems to be sustained – to some extent at least - by mega IPOs or trade sales that cause huge ripples right down to seed funding. In short, mega-deal IPOs (like Facebook and Twitter) also result in mega-deal acquisitions, like the eye-watering WhatsApp valuation of £19Bn (by Facebook). In short, the value placed on businesses (that have some desirable IP) by mega-rich corporations, is very different to the valuations we might see in a more normal market. So people are beginning to ask if the market is about to normalise.

The other feature of the current tech market is a relative lack of real innovation – akin to the types of innovation we saw after the launch of various flavours of micro-computer in the 1980s. The three decades after Bill Gates did his DOS-deal with IBM created a phenomenal increase in computing power, a transformation of data storage, the creation of the World Wide Web and the arrival of true, pervasive connected computing with the dawning of the smart phone. The organisations and individuals behind these innovations focused on very difficult tech – requiring new methods of computing, electronics and data transmission. The companies that grew fastest during this period were extraordinarily innovative – companies like Intel, IBM, and Seagate – as evidenced by patent filings and PhDs employed.

However the current big valuation wave is dominated by companies that have, by comparison, less obviously ‘difficult’ intellectual property – companies like Facebook, Twitter, and WhatsApp. Indeed some would argue that these companies’ fixations on user generated content results in companies that are little more than aggregators of trivia. Moreover, they have inspired a sub-generation of entrepreneurs dazzled more by the valuations associated with these firms than by the underlying tech that drives them. Hence we’re seeing absurd valuations again for firms that create ever more niche social networks or ‘communities’. In short, it’s beginning to feel a bit like how it felt before the dot-com bust.

There’s another consequence arising from the current strange valuation wave. The expectation, on the part of some VCs, for quick win exits, has also created a phenomenon known as the A-round crunch. Many of the most prominent Sand Hill Road VCs are more likely, these days, to invest at the seed round rather than at later rounds. There’s an expectation that if a company hasn’t developed a community of tens of millions of users within months of seed-round there’s little hope of a valuable exit. Big social networks need to augment their communities more than they need tech. This mind-set potentially stifles the types of businesses that take time to develop game-changing technologies.

Hence we’re seeing the emergence of a new breed of entrepreneur that relies less on venture capital than on innovation. Indeed, historically, some of the world’s most successful tech companies were boot-strapped – companies like Microsoft and Qualcomm.

In the UK we’re seeing significant growth in alternative funding sources that support these types of entrepreneur who may, indeed, be more technically brilliant, and more focused on creating compelling and sustainable businesses based on intellectual property. PwC works with Funding Circle – a new type of funding market for businesses (and not just technology businesses) that need money but have chosen to take a route other than venture capital. To date, Funding Circle has helped more than 5,500 businesses borrow £370 million through its marketplace. Funding Circle is now the sixth largest net lender to small businesses in the UK. PwC’s My Financepartner will refer small business clients seeking alternative sources of finance to Funding Circle.

These and other alternative funding sources show that venture capital is not the only way. For many business owners the alternatives also represent a means of financing the business that also creates more self-reliance and a greater sense of independence. These are two things that some of the most visionary entrepreneurs need to retain.

This article was written by Suzanne Houghton of My Financepartner – PwC’s new accounting service for growing private companies.

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< The beta blog | Oct 9, 2014

In a world that's in beta, are new consumer risks looming just around the corner?

As the volume of digital interactions between people & businesses continues to grow, so does the amount of data created and available to those businesses. The challenge of analysing that data for commercial gain is becoming ever more urgent and apparent, as organisations seek ways to derive value from this expanding asset.

But insight from data has the potential to do more than just result in commercial gain. It can also help regulated businesses ensure compliance, drive better customer outcomes, and build more trust in their brand. We are seeing increased activity and interest in these areas from Financial Services organisations in particular. Aggregated and integrated data about customer transactions is now being routinely collected by many FS organisation. It should be relatively easy for a bank, for example, to avoid selling a product or service to a customer when it’s clear from that customer’s transactional history that such a product would be inappropriate.

Data can and is being collected about employee behaviour as well as customer behaviour. For example web-based tools can help organisations understand how employees behave when faced with key dilemma's and trade-off's. It is how people behave in these moments that can give a real insight in to the culture of the organisation, which is something regulatory bodies around the world are putting an increasing focus on. These same tools can then translate these behaviours into a level of "Conduct Risk" for the organisation which can in turn be correlated with customer outcome data.

The amalgamation of this data is now enabling many FS organisations to take pro-active measures to change employee behaviours in service of better customer outcomes, regulatory compliance and, ultimately, more sustainable profits.

We have developed our own tool which we've called Conduct First which is a scenario based survey tool that organisations use with their employees to understand what actions they would take when faced with a difficult dilemma or trade-off. It enables the organisations to understand the conduct related risk associated with their actions and predict future risk based on the behavioural norms of the organisation.

The solution has been designed for service-based organisations that want to ensure that poor service standards, mis-selling activities and customer complaints are minimised. Find out more about it on the PwC UK website here.

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< The beta blog | Oct 7, 2014

CCO Questions #5: Will transparency harm the trust customers have in you?

“The true test of a man’s character is what he does when no one is watching.”

So said John Wooden, pretty much the most successful US basketball coach of all time and a double hall of fame inductee. Wooden had a knack for simple quotable statements that inspired his players on the court but most were great life lessons too. So what do Wooden’s words mean for us in business in the digital age?

Providing value to customers and a great return to shareholders shouldn’t be in conflict but in the short term, cut and thrust of day-to-day business, it can be hard to square that circle. You might even argue that creating long term customer value requires some short term compromises along the way.

In the modern digital environment this attitude just isn’t fit for purpose. Almost everything a firm does can be seen and shared in seconds. The belief that decisions and discussions can be made behind closed doors is an actively dangerous one. You have to assume that everybody is watching all the time. As the representative of the customer, the CCO should make sure that the whole business understands that and behaves accordingly.

Transparency is a fact of life now, whether it’s something you do by design or not. That means CCOs must champion the CCTV test: Imagine a security camera is recording what you are doing or saying right now. When that footage ends up on Youtube, are you happy for your customer to see it? If not, then you shouldn’t be doing it.

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< The beta blog | Oct 1, 2014

What's the key to social media success?

In the digital age organisations are using social media to build trust with their employees and their customers. Used well, social media enables organisations to innovate, stay ahead of the competition and engage with their customers on a more personal level. But, while social media offers a large number of opportunities, the key to achieving success is to have a well thought through strategy that is underpinned by good governance and risk management.

Watch our video to see how to harness the power of social media through good governance and risk management.

What do you think is the key to social media success?

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< The beta blog | Sep 26, 2014

iOS8 & three waves of digital development: What this means for businesses in the digital age

A lot has been said and written about iOS8, what works, what doesn't work, whether one should install it or whether one should wait. There are statistics on the number of installations compared to iOS 7 and both my colleague Simon and I have received numerous calls from our friends asking us whether we felt it was safe for them to go ahead and download it! Well, we did download and install iOS8 on our devices and were pleasantly surprised with to see how nice the features were!

Put a Digital Strategist (Simon) and a Digital Transformation Specialist (myself) together and what you are bound to get is a conversation around customer journeys and need gaps addressed by the new features. And here were the conclusions that the two of us came to:

i. The new features could help us do things we couldn't do before (send an audio message, get reply notifications, see when a message was sent, manage mails quickly, Siri knows the tune)

ii. The new features could help us accomplish more than what we could do before (Reach your favourite people, actionable notifications, Extensions, Quick Type, Selfies on a timer)

iii. If we chose to share some of our personal data, we could get a differentiated experience and enjoy both a cost advantage and a knowledge advantage (Healthkit, Share with your family)

This neatly ties up with PwC’s Three Waves of digital development:

  • First wave: Economies of products and services

This is all about successfully offering new digital capabilities to customers and stakeholders

  • Second wave: Economies of outcomes

This is all about enhancing digital capabilities to enable customers and stakeholders to accomplish more

  • Third wave: Economies of wishes

This is about providing a differentiated experience and a clear advantage/benefit when a customer or stakeholder provides access to his or her data

Putting the two together, it seemed safe enough to infer that companies that were highly successful in this digital age (a.k.a Apple – one cannot argue with that):

  • Tended to have product releases that addressed all 3 waves at the same time.
  • Seemed to have a “magic ratio” of features in each wave for every release (for example it could be argued that the iOS 7 release with the movement away from skeuomorphism was skewed towards the first wave – economies of products and services).
  • Had greater integration with what was “good” out there with each release while still differentiating themselves on core brand value. A fearless market stance seldom exhibited before! (Apple taking tentative steps into opening up iOS for integration with extensions and widgets)

Gartner’s view is by 2020, 75% of businesses will be digital businesses – hence there are implications of these inferences on almost every business and client we provide advice to. Simon and I have taken a look at these inferences and interpreted these into actionable suggestions at the strategy level:

  • From Agile Development To An Agile Mindset

The world is truly in beta and internet and mobile banking product owners, heads of development and customer experience specialists need to think of their platform capabilities as versions and plan on quarterly, yearly or minor and major releases. This mindset is very prevalent in the digital and IT departments in banks, but this mindset needs to move into Business and the Board.

  • The Rise Of Three Dimensional Capabilities

As explained in the 3 waves of digital development; digital capabilities, like physical assets exist in 3 states. Digital capabilities exist either as products & services, as outcomes or as wishes just as physical assets exist in solid, liquid or gaseous states. And just as physical assets behave differently when they are in different states (water has different properties to steam, energy can be generated from both but through different ways), digital capabilities in different states need to be leveraged differently (example OAC through actionable notifications is a capability as a product, when we use actionable notifications for employees in customer care to react instantaneously to customer queries, it is an outcome.) Digital capabilities like physical assets can move between states, so business leaders need to clearly understand the state and the resultant properties of each digital capability to get the desired impact in the marketplace.

  • Customer Empowerment May Be A Sharper Differentiator To Customer Experience

As platforms and capabilities between competitors open up, to allow customers to configure what they consider “best” (for example, I can choose the Apple keyboard or choose to use Swiftkey or Swype), we will enter the bold new era of truly unified, best in class customer experience as defined by customers. The question that customers are likely to ask is “where am I empowered more?” and make choices based on that rather than pure play best in class customer experience. So we may need “Customer Empowerment” departments rather than “Customer Experience” skills.

We may already have iOS8.0.1 to handle all the bugs that have cropped up, but we know that Apple will solve those, and all of these features will become “best in class” and will herald in the age when beta became mainstream.

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< The beta blog | Sep 23, 2014

'The world is in beta' event 30 September, Science Museum, London

We believe the world is exploding with potential and the way organisations embrace emerging technology will allow them to create value, reaching more customers, more quickly, and more directly. Because of this, we believe the world is in a perpetual state of beta and companies need to develop not a digital strategy, but a business strategy for the digital age.

On 30 Sept at the Science Museum in London's South Kensington, we are hosting the world in beta event to discuss the opportunities and implications of digital transformation and what companies need to do in order to gain an advantage in this increasingly complex environment. The full agenda is below and I'm happy to say we have assembled a fantastic list of speakers from both inside and outside of our firm.

The event starts at 15:30 GMT and for those interested in keeping up with it, follow the Twitter hashtag #worldinbeta or the PwC UK Twitter account. We will be tweeting live from the event and sharing materials, insights and videos of the sessions post-event.

'The world is in beta' agenda

Registration - 15:00-15:30

Welcome address - 15:30-15:40

Welcome from the event host Mike Greig (@_MikeGreig), Digital Leader at PwC and Warwick Hunt, our CFO and Head of Operations.

The world is in beta – Digitally driven change and its impact on your organisation - 15:40-16:00

PwC Partner, Carlo Gagliardi (@_carlogagliardi), will discuss what it means to be in a world 'in beta' and what companies must do to adapt and prosper in this age defined by digital opportunities.

Five emerging technologies shaping today’s world - 16:00-16:30

Tom Standage (@tomstandage) is Digital Editor at The Economist, overseeing its output on digital platforms, and is the editor-in-chief of its website, He previously served as Business Affairs Editor, Business Editor, Technology Editor and Science Correspondent.

Tom will be focusing on five key emerging technologies that are cutting across and breaking down the boundaries between sectors and the opportunities they present for those organisations willing to challenge their perception of themselves.

The consumer of the future - 16:30-17:10

We have all heard lots about digital natives and their impact, but the fact is, the expectations of digital natives are changing every day. In this session we will put ourselves in the shoes of children today and look at how the technologies they are using now will mean new challenges for organisations tomorrow.

This fun and engaging session will be delivered by our dynamic Emerging Technology team; a group of young entrepreneurs and business people. Our speakers are Mia Bennett @mialomo and Kiran Earwaker.

Session 2 - 17:40- 18:50

‘You are here’ – Discover your organisation's digital starting point in this live and interactive diagnostic session

During this interactive diagnostic session, our speakers will ask the audience a series of questions and highlight best practice so you can build a picture of where your organisation is relative to others in the room. All data will be available for you to take-away after the event and explore further.

There will also be a chance to hear how other organisations are leading digitally driven change and the challenges they face in doing so.

Our speakers for this session are Richard Horne; Partner and Cyber Specialist at PwC and Matthew Tod (@LoganTod), Mike Greig and Carlo Gagliardi; Partners within PwC's Consulting practice.

Close - 18:50-19:00 

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< The beta blog | Sep 17, 2014

The digital world of freight haulage

It is hard to think of an industry less likely to conjure up an image of digital revolution than freight haulage, which is more associated with heavy vehicles, roadside cafes and the movement of physical goods around transport networks.

However, at the forefront it is, with haulage firms around the world grasping the potential of the ‘internet of things’, and busily harvesting data from all possible sources and applying advanced analytics to address their biggest business challenges. The industry now abounds with examples:

  • Locus Traxx, a specialist in refrigerated cargo haulage in the US, has wired up its entire fleet with sensors to detect a range of metrics on its containers and the goods inside them – temperature, vibration, door opening events – all of which send data back to HQ in real time. As a result, Locus Traxx is able to immediately identify when its cargo is in danger of being damaged, causing wastage with the inevitable impacts on costs and customer relationships. Through its data approach, Locus Traxx claims to have reduced wastage to zero.
  • Other operators have started to combine vehicle telematics and other journey log data, with HR data on lorry drivers to predict which drivers are most at risk of having a road accident, in order to proactively intervene and address risk factors.
  • Some innovative European haulage firms are collecting journey log data from on-board vehicle systems, and combing this with external data sources – such as weather data - to optimise route planning and freight scheduling, with claims of up to 10% in fuel savings.

Cargo wastage, accidents, fuel costs – data analytics is now having a major impact on some of the haulage industry’s biggest cost drivers, in some cases making a genuinely transformational difference to the operator’s bottom line.

The lesson? Analytics is powering a revolution in the transport and logistics industry. The new digital age is not just about consumer devices, apps and disruptive online businesses. It is also profoundly changing some of the most – ostensibly - old world industries, by enabling the better management of physical assets and real world operations.

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< The beta blog | Sep 15, 2014

The last private equity value creation lever: digital advantage

Last week I led a meeting with the operating partners at a global private equity firm. The firm in question is a market leader whose portfolio spans industries and geographies, ranging from high-growth businesses to mature ones.

In many ways, this firm represents the epitome of what one expects from a generalist private equity firm: smart individuals investing in and transforming a diverse group of companies.

The operators in the room had more years of experience at the ‘coalface’ of operational improvement than I would care to count, but the discussion we were having was about a value creation lever that most of them had yet to grasp: digital advantage.

The word ‘disruption’ is overused and, frankly, abused. However, there is no denying that the rapid advancement of the Digital Age – the confluence of social media, smart devices, big data and cloud computing – represents both a massive opportunity for value creation in portfolio companies, as well a huge threat to existing value for those who ignore its threats and potential.

We view the advance of digital business as coming in three waves. Operating partners, management and entrepreneurs that understand these three waves will be better equipped to defend and create advantage in the Digital Age.

First digital wave

The first digital wave, that of Digital Commerce, has been with us for some time and is typified by previously offline businesses opening up digital channels alongside existing routes to market. This can be extremely valuable for both cost efficiency and top-line growth. But even if Digital Commerce has been with us for many years now, smart devices and an emerging generation of Digital Natives are changing the dynamics and creating new opportunities.

Non Digital Natives typically look at Digital as a channel on which they can transact, implicitly valuing usability and simplicity. Digital Natives typically look at Digital as some sort of “natural language”, and as an opportunity to engage with their own lives and goals in a visual, interactive and engaging way.

That’s why – for example in the retail sector - Digital Natives value not only bringing the store on an online channel, but also bringing digital into a store. They use great digital experiences as their benchmark; they almost want to walk into a website when they shop in the physical world; they want the option to double tap on things, online or not. So even if a company has been online for many years, it is very likely that a great deal of opportunities exist to create additional performance and advantage.

In our view this first digital wave is all about the Economy of Products and Services.

Second digital wave

If the first digital wave is all about advertising, marketing, selling and supporting products and services, the second digital wave is all about helping people achieve goals they care about. Simple goals can be delivered by well-engineered products (to the extreme the goal of opening a bottle of wine can be perfectly “delivered” by the product called “cork opener”).

But as goals become more valuable and more complex, engineering products and services that deliver these goals becomes increasingly hard. A few examples ? Personal fitness, healthy eating, cleaner home, safer driving, greener/cheaper household heating, listening to music that I really like, etc. These outcomes are not for sale per se, because they are not easy to engineer into a specific product or service.

Why not ? Mainly because in order to achieve these outcomes the customer will need three things that are hard to get:

1.They need understanding their own behaviour better

2.They need some help with their discipline and will power

3.They need their partner/supplier to understand their individual needs and wishes really well.

And that’s exactly what Digital technology can help brands and customers achieve today. Sensor technology (e.g. a Fitbit wristband) can help us see what we do. Social media and peer-to-peer comparison can help us stay focused. Platforms as Spotify can capture the unique way in which we listen to music (what, when, how often, etc.) and use this wealth of consumption data to learn and shape our unique music taste. In-car telematics can give us sharper premiums if we are consistently considerate drivers, and even help us drive in a safer or greener way.

The possibilities are endless. And there is also an additional bonus. In this second digital wave we are not transacting; we are playing a “life videogame” that is fun, interactive, engaging and real, because the goals we are going after are real. .

In our view this second digital wave is all about the Economy of Outcomes.

Third digital wave

The third digital wave, that of Digital Identity, will turn the idea of consumption on its head. Consumers’ data, collected by smartphones, fitness wrist bands, smart gas and electricity meters, car insurance monitors and all manner of other sensor devices, is there to be interrogated by trusted businesses, who can then tailor their offers to the individuals, or broker offers from other players in the ecosystem, like for example a reverse auction.

As a consumer, I will release my energy usage data and receive tailored offers from suppliers. I will release data from my music streaming account and it is up to music streaming suppliers to tailor an offer for me based on how expensive my musical taste is.

Of course there are non-trivial privacy issues, and we are squarely in Big Data territory here. But let’s think about this. The Big Data that the customer fears is a scary entity to which you surrender your data, which will do with your data things you are un-aware of for purposes that you have not approved, and which will give you neither ‘editing’ nor ‘deleting’ rights. We call this the “Selling Big Data”. The “Selling Big Data” does exactly what it says on the tin: it harvests and hoards customer data of all sorts, and crunches this data behind the customer’s back with the objective of selling more things and making more money.

“The Selling Big Data” invokes relevance as an honourable justification, but very often it erodes trust. Relevance or not, the “Selling Big Data” works for the seller.

But there is also another version of the story. We call this the “Buying Big Data”.

In this version of the story the customer does not surrender his/her data, but volunteers it. Why ?

Because it helps the customer achieve valuable goals; because the status of the customer as the legal owner of his/her data is recognised and respected; because the customer has full “editing” and “deleting” rights on this data, no questions asked. In this world of “Buying Big Data” the customer is in control, and his/her data is like a currency. That’s the key: in the digital age personal data is not a product to be sold for a bit of money, but a currency in its own right that can be spent to get to things that money alone can’t buy.

The “Buying Big Data” is where the Digital Economy meets the Trust Economy. The “Buying Big Data” is the 4D image of the customer in this digital world, and it works for the customer.

In our view this third digital wave is all about the Customer’s Digital Identity, and a fundamental enabler of the Economy of Wishes.

Implications for PE firms

For private equity firms, financial engineering has been a diminished part of the toolkit for some time now. The industry today works hard to drive operational improvement within its portfolio companies. For the private equity operating partners with whom I talked through these ideas last week, the value creation opportunity presented by the digital revolution is now undeniable. Efficiencies and opportunities abound from the back office, to the front office all the way into to the customers’ homes.

We anticipate that programmes to optimise portfolio companies’ digital fitness will become as important a value creation lever for private equity firms as programmes to reduce costs, improve working capital management and optimise the supply chain. Private equity firms that can demonstrate a positive digital track record will become more attractive business partners and a more compelling investment prospect.

We have helped a number of private equity firms by assessing digital opportunities across their portfolios and undertaking specific digital interventions, as well as supporting deal sourcing and digital due diligence. If you would like to have an exploratory discussion about the digital fitness opportunities within your portfolio, then please contact me on

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< The beta blog | Sep 12, 2014

Guts and Gigabytes : Capitalising on the art & science in decision making

The growth in use of data analytics in modern businesses is having a profound effect on all aspects of decision making. At all levels in an organisation, managers and leaders have an every increasing wealth of analytics available to inform the decisions which they need to make.

But there is an ongoing tension between those who follow the advice of the data scientists, the analysts and the statisticians and those who prefer to rely on personal options, informed more by experience and advice from colleagues. The difference between the Guts and the Gigabytes.

Jack Welch, the iconic former chief executive officer of GE, said that good decisions are made “straight from the gut”. Since Mr Welch’s retirement in 2001, an era of big data and advanced analysis has been ushered in. Most companies now have lots of data available to them and, increasingly, this big data is being used to provide new insights. So should executives still cleave to Mr Welch’s advice, or has big data changed big decision making into a more scientific process?

An Economist Intelligence Unit's report into the role of data analytics in corporate decision making explores the agenda for big decisions in 2014-15 and the process that business leaders will go through in making these decisions.

This report considers the agenda for big decisions over the next 12 months and examines the role that big data and enhanced data analysis are set to play in guiding the decision making process. The report draws on a global survey of 1,135 senior executives and in-depth interviews with more than 25 senior executives, consultants and academics. Some of the key findings include:

The quality of big decision making is improving. British business leaders are more likely to report an improvement in the quality of decision making in the past two years than the global average, with 83% reporting an improvement and a third (32%) a significant one. Highly data-driven companies are more likely to report improvements in big decision making.

Experience and intuition are the main inputs into the big decision making process. Although all aspects of data and data analysis are rated highly in the UK, data and analysis are only the third most important input into the decision making process, after own experience/intuition and advice/experience of others internally

Concerns about data quality and overload are the main barriers to the greater use of data. Despite the generally positive attitude towards data and analysis, many UK business leaders remain concerned about data quality, alongside data overload. Moreover, more than half of UK respondents (61%) feel that “relying on data analysis has been detrimental to our business in the past”. By contrast, there are few concerns about sufficient talent or skills to make the most of the data that organisations collect.

More people are involved in big decision making at UK organisations than before.The rise in more democratic decision making is not unrelated to the rise in the availability of data, which has encouraged a kind of evidence-driven, and more democratic, approach to big decisions.

Growth is top of the agenda, but cost pressures drive UK businesses to collaborate with competitors.Growing the business is regarded by senior executives in the UK as the single most important area for big decisions in the year ahead. However, because costs and margin pressure are identified as the main strategic motivations for big decisions, executives are looking for more creative ways to build their business without a large monetary investment. More than half of respondents (52%) expect to make big decisions in the next year that involve competitive collaboration, making this a much stronger trend in the UK than elsewhere.

The full report is available here.

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