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    Posted by Opiria 15 Apr
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    Why is Personal Data the Oil of the 21st Century

    The internet has made it easier for businesses to launch new products and services, but also easier to waste time and money, and fail. The human imagination can launch endless new products and services. Now, low entry barriers (children can build simple websites), an increasingly interconnected world, and the rise of outsourcing have led to an explosive proliferation of new products and services, all competing for limited market share. For example on Amazon in the USA, the number of available products jumped to 488 million from 253 million in only two years (since December 2013). That’s an average of 485,000 new products per day! Numbers similar to Amazon’s can be found in most markets worldwide¹.

    The downside and bitter truth of this development is that 70–80% of all product innovations fail, which leads to investment losses of more than 12 billion USD per year, as pointed out by GfK market research institute² and Harvard Professor Clayton Christensen³. The major reason for failure, according to Dr. Ken Hudson⁴, is that a new product or service does not excite customers and retailers” because companies misunderstand consumer needs and the problem that the product is allegedly solving.

    So why do companies need personal data?

    The lesson is that products and services must strive to fuel the deepest human desires of their target customers. Additionally, companies need to put the right advertising and sales strategy in place. Companies need to know and understand their target customers, the best channels to reach them, the right advertising messaging, and the right time to offer and advertise the product or service.

    The following Figure 1 shows this cycle which is key for the success of any of the worldwide 57 million B2C companies.

    Personal data drives this understand-design-advertise cycle, which is why we believe personal data is the new oil of the 21st century. Collecting and analyzing personal data is the fuel that’s increasing driving today’s new economy. Raw data needs to be collected, processed, and transported. We are following similar principles of 100 years ago during the oil boom. One tries to gather data from as many sources as possible in order to profit from them. A typical approach is to analyze a large number of touchpoints and use the data obtained to generate actionable forecasts and, as a result, derive new products and services.

    Forecasting

    Collecting and analyzing personal data allows companies to better forecast consumer behavior and trends, and thereby continually iterating on better products. Predictable changes in purchasing power, travel habits, mobility preferences or attitudes towards topics like fitness/wellness, health and environment allow companies to come up with, for example, new concepts for cars, novel travel types or radically different hotel concepts.

    This allows companies to better allocate their R&D budgets, including early stage efforts with new launch targets as far as 5–10 years from now, where predictions are toughest.

    Development

    Companies spent 1.8 trillion USD⁵ on R&D in 2015 — which is 15.5 percent of their total revenue — without often knowing exactly how to further develop or optimize their products and services to better meet their customer needs and requirements.

    Data on how customers actually use a product or service can feed right into the design of a next generation offering. Companies hence achieve “targeted optimization” of new products.

    Mercedes Benz Research of North America used Opiria research platform to track and understand how their customers are using the new Mercedes meapp, which allows customers to remotely control certain functions⁶ of their own car, such as starting the engine from inside a warm home on a cold winter morning. Mercedes Benz research measured for two weeks when, how and where customers were using the Mercedes me app. They also received daily feedback in the form of comments, pictures or videos. This allows Mercedes to make just the right changes and adjustments as well as to integrate exactly the right new features that customers want.

    Customer contact

    Collecting and analyzing personal data allows companies to better understand and target specific customers. For example what is a customer’s preferred medium to access the internet (smartphone, tablet, laptop, PC)? At what time is the internet accessed? What is their shopping history? What kinds of products and services were purchased and what is the purchasing power of the company’s target customer group? This information allows companies to better understand and segment customers and to contact them very specifically with the right message, via the right channel at the right time. Today worldwide spending on advertising is almost 500 billion USD⁷. By better understanding the customer the same amount of spending can get better results, or lower spending can get the same results. Companies win either way.

    Conclusion

    Personal data from and about customers give companies a huge competitive advantage. Companies that better understand their customers can build smarter products and services that much better meet customers’ deepest human desires. The result is fewer failed products and money savings from fewer failed investments. Another benefit is a more optimal allocation of company R&D budgets.

    Personal data also allows companies to optimize their customer contact. A better understanding of their target customers enables them to contact them with the right message, via the right channel, with the right pricing at the right time. This improves the customer experience, brand reputation, and reduces spending on advertising dramatically. In summary, collecting and analyzing personal data allows companies to increase their market share whilst improving profit margins.

    This is why personal data is the oil of the 21st century!

    ¹ https://export-x.com/2015/12/11/how-many-products-does-amazon-sell-2015/

    ² http://presse.serviceplan.de/uploads/tx_sppresse/301.pdf

    ³ https://www.bizjournals.com/bizjournals/how-to/marketing/2017/03/why-so-many-new-products-fail-and-it-s-not-the.html

    http://drkenhudson.com/wordpress/why-do-leaders-accept-the-failure-of-a-staggering-percentage-of-new-products/

    https://edisciplinas.usp.br/pluginfile.php/3378934/mod_resource/content/1/RD%202016.pdf

    http://bit.ly/2njymQW

    https://www.statista.com/statistics/272850/global-advertising-forecast/

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