The WHAT principle and the WHO effect
The economic climate means that there is a focus on costs and revenue at the expense of opportunity and innovation. “In the bank” is winning over even “in the bag”, but it is also true that you cannot cost cut your way out of recession, you need to trade. Balancing future and survival is as much an executive skill today as at any time in corporate history.
Companies who are taking the opportunity to adopt networked technologies, which have been developing over the last 5 years and in our view are starting to become stable enough to show promise, are likely to seriously enhance their ability to offer better services, provide unique customer experience, be more responsive, delivery on service promises and keep costs down, during these difficult times and the upturn.
A key driver for these pioneering companies in the adoption curve is how they handle and analyse customer and social graph data. To explain this concept, this Viewpoint focuses on “The WHAT principle and the WHO effect”
We hope that our Viewpoint improves awareness, raises questions and promotes deliberation over lunch.
The WHAT principle
The focus of today’s higher value services is personalization – the making of your user experience, creating value from the reduction in churn and incremental service revenue, assuming that any incremental margin is not eroded by competitive pressures. The focus on personalization is, to AMF Ventures understanding, a focus on WHAT:– what you as a user want to do; what service you want; what is needed now. The sole benefactor is the individual, but does this create any value? The assumption is that personalization provides focus, and that this focus leads to the ability to deliver engaging and personalized services including advertising. This advertising being derived from the same advertising budgets, which is now redirected from other display channels. Therefore does personalization actually create any new value and will it actually grow the overall spend of the entire market?
Commentators, consultants and media sellers will provide convincing evidence to back their own propositions and the purpose of this Viewpoint is not to debate the personalization opportunity but to introduce the WHO effect. Whilst personalization will increase value for the provider [more effective marketing and efficient sales]; assuming that there is value for the user, it does not itself create new value for the entire converged industries. However, personalization could create value, if the focus is on WHO and not WHAT!
The WHO effect
Personalization has been about the WHAT principle. This has focused on a single customer: ‘you’. The WHO effect is the multiplier. The focus shifts from WHAT, to orientate on WHO you are doing something with. In simple terms when you go for dinner, who are you with? When you are in a business meeting or seminar, who are you with? When you are at a concert, in school, or on holiday – who are you with? The opportunity is that these ‘WHO’s’ are gravitating towards and enjoying the same experiences as ‘you’. The additional profiles of those who you are ‘with’, can combine to create a new and incremental market value, assuming as a company you are able to reach these customer and deliver services that they want.
Consider the advertising issue created through personalization, it reaches you – one person in two billion. The world is divided into two billion personalized worlds, only relevant to one person at any given time, and each person with an unequal bite of the advertising spend! The WHO effect would suggest that as you are enjoying something with others, even though it is outside of their personalized preference, it is possible that it would be worth providing information on products and services to the group. The WHO effect is the electronic ‘word of mouth’. It assumes and depends on the fact that we adopt at different rates and some not at all. These issues provide the limitation to personalization and the WHAT principle, but opportunity to the WHO effect.
How WHO Works
WHAT based decisions are not using information in a sophisticated enough way. To move to the WHO based system, customer data needs to be understood in a more nuanced way. We think of data on 2 main axes: How ‘active the data is’ (static to dynamic) and ‘type of data’ (factual to behavioural)
Factual vs Behavioural.
Factual Data just is – date of birth, where you live etc.
Behavioural data is what you do, your footprint over time.
Dynamic vs Static
Static data is data that doesn’t change – your date of birth. Highly dynamic data is what is changing every minute – movement, current location etc. Some data is dynamic, but over long time periods – eg place of work, home address etc
Some dynamic data is repeated, ie there are patterns in it (such as the daily commute) that allow one to predict behaviours and events.
Clearly, if a service provider has a grasp of this information, they would be able to make better decisions about the user context and thus serve up better information or services to the user – critical for the limited real estate on even the smartest of mobile devices.
This WHO effect is not open to the traditional broadcast, TV and entertainment companies, although they are the traditional home of the display advertising budgets. This service could be offered by Web companies, however as your profile and personalization has a dependency on your web access time, it could be difficult. The major benefactor of the WHO effect will be mobile companies as the mobile device becomes the platform to collect data, interrupt the connection and deliver the value.
First: the opportunity to exploit the WHO effect is not open to companies who want to ‘control’ the user experience and developer environment such as Apple, they can only enjoy the WHAT principle. Open mobile platforms, open access services and developers who services work across all devices will be able to exploit the WHO effect. The multiplier value of mobile is not in knowing WHAT you are doing (location and attention), but WHO you are doing it with.
Second: user pre-acceptance and buy-in is critical – “Snooping” behaviour has already blown up in a number of companies’ faces. Users need to be certain that data will not be misused, sold on or otherwise exposed.
Third: trust is critical. Is your Brand value on of trust and what will the user trust you for?
Fourth: regulation and law. This is a black hole of debate
Fifth: this concept is deeply embedded in “web as a platform concept” This is a change from domains, destinations and portals. A way to understand this is to view that owning a top level domain such as www.news.com is not important. Users will never visit this site, but rather interact with the data that comes from this source via Twitter, RSS feeds, readers, blogs and social sites. The stats on your site are not important, but rather where you content is consumed and how? Customer ownership, as per caveat one, is not important – owing the customers data is.