1 1 Peter Hinssen, editor INFORMATION IS THE NEW OIL DRILLING NEW SOURCES OF INNOVATION
2 Information is the new oil. is the first in a series of thought-provoking booklets that Across Technology will be publishing this year, sponsored by EMC Greenplum. These booklets are an element in the Data Science Series, which is also a series of events, and a website: Publisher: Across Technology Editor: Peter Hinssen Executive editor: Philippe Gosseye Contributing editors: José Delameilleure, Hans Vandenberghe Layout: Stijn Van Herck SPONSORED BY
3 1 Peter Hinssen, editor DRILLING NEW SOURCES OF INNOVATION 2 Peter Hinssen, editor BIG DATA HELPS REVEAL HIDDEN HEALTH TRENDS AND BUILD RISK MODELS 3 Peter Hinssen, editor PREDICTING WHAT HAPPENS NEXT 4 Peter Hinssen, editor HOW BIG DATA TURNS EVERY CITY INTO A DATA CAPITAL i Dear reader Markets are fast disappearing, and being replaced by networks. Networks of intelligence. Consumers can t be controlled anymore, and become active, and are turning markets into dynamic systems. The age-old subject of marketing is being redefined. Companies used to have time to respond. But, these days, their clock-speed is falling behind and many are running behind the facts. Ailing companies are realizing that they are out of tune with trends, with consumer behavior and don t have the right insights anymore. Many companies are running blind. Information is becoming stale faster than ever. Access to information is critical, but the amount of information seems to be exploding, and it almost seems pointless to try and keep up. Intelligence is key. Insight is crucial. And information is the new oil. Data is no longer the data we expect it to be. Data has not only turned into Big Data, waiting to be explored. Data has also become Fast Data: we no longer have the luxury of analyzing customer behavior after their purchase, we want to know what they will buy immediately. Data has also become Live Data, as consumer behavior is no longer explained in long-term trends. Above all, data has become Context Data, as we cannot analyze the essence in isolation, we need to analyze the context as well. With so much data available, information is gushing at us from different wells. Holding the power in an industry is not a question of getting as many oil wells as possible. In actual fact, the single biggest asset your company has lies in its refining capacity. It s not about the amount of data, it s about your ability to spot the patterns in that information. With this booklet, we want to offer you the views of innovation technology guru Peter Hinssen on the way markets are changing and how you can make informed use of these trends to strengthen your company s position. To keep you informed on a constant basis, we have created the Data Science Series website (www.datascienceseries.com), offering you case stories from your peers, valuable insight into market research and an overview of the Catalyst partners that help EMC Greenplum bring the right building blocks to the market. Allowing you to build the right refinery for all the information that is coming your way. INFORMATION IS THE NEW OIL THE AGE OF DATA-DRIVEN MEDICINE ANALYZING CUSTOMER BEHAVIOR OPEN DATA POWER SMART CITIES Make sure you don t miss the installments of the series. Please contact your local EMC Greenplum organization to obtain all of these booklets. 3
4 04 4 THings happen faster every day. Trends materialize faster every day.
5 01 The general theory of relativity Have you ever noticed that things are going faster than they used to? Have you ever had the feeling that the world is speeding up, and that you re just not going fast enough? Have you ever thought that it never seems to slow down, but things just keep moving quicker and quicker? You re not alone. Occasionally, when we watch a television show from our childhood, or take in a movie on TCM from a couple of decades ago, it s not the clothes, homes or cars that strike us most as being out of touch, it s the amazing slowness of life back then. And we all wonder how we could have ever watched those movies and TV shows when we were younger. The unbearable slowness of the past. Things happen faster every day. Trends materialize faster every day. Novelties wear off sooner. Old news gets older faster with every passing day. Speed is the game, and this whole world seems caught up in an ever faster pace, a circle of increasing velocity. This is not necessarily a problem. As long as you can move faster than the market. 1. How long does it take to get ANYTHING done around here? When I visit a company, I have one simple question: How long does it take to realize anything around here?. This is not a loaded question. It s a genuine question of interest. And it s important. So think about this in YOUR organization: How long does it take to realize anything around here?. You are in a brainstorm, the group has a brilliant idea, you spec it out, you get approval, then how long does it take to have a finished product, a new service, fully rolled out to your customers? How long does that take? My favorite person to ask is typically the CIO, the Chief Information Officer, because they re often the most honest and unbiased officer in the company. 5
6 01 The general theory of relativity 2. How quickly does your MARKET change? And then I ask a second question: How quickly does your market change?. The CMO, the Chief Marketing Officer, is often my favorite person to answer this one. As they are in charge of marketing, they should know how fast the market moves, right? Surprisingly, the answer to that second question is, today, more often than not: Our market now changes more rapidly than we can adapt. So, we have our problem. In today s fast-paced and increasingly speed-driven society, markets evolve more quickly than companies can adapt. That s not a problem. That s a Big Problem. I love formulas. Adore them. And this one is a simple formula: (MARKETS) WHERE V STANDS F0R VEL0CITY Now this used to be different. In the past, markets did not evolve faster than companies. Companies still had enough time to innovate, adapt and evolve faster than markets. As a matter of fact, companies dictated the rate of change of markets. Carmakers would dictate which novelties would be in our cars, telephone operators would dictate when new service features would be available, soda companies would dictate which flavors would be available,... But all that has changed. Markets have evolved faster and faster, and companies have not evolved fast enough. 6
7 CL0CK SPEED INTERNAL CL0CK EXTERNAL CL0CK I like to use the term Clock-speed. You might remember clock-speed as a feature of computers a while ago. Nowadays, we don t really care because computers are fast, but in the old days when computers were slow, we used to worry about clock-speed. The term comes from the little clock inside computer which would determine at which speed your computer would run. And so, a 2 Megahertz computer was half as slow as a 4 Megahertz computer. Silly old world. But think about this simple thing: how slow does your internal clock tick? And how fast does your external clock tick in your market? And how do they compare? Einstein will forever be remembered for his treatise on the General Theory of Relativity. This mathematical tour de force, that was barely understood by any of his peers when it came out, was based on a very simple principle: everything is relative. Basically what the General Theory of Relativity said is that everything is fine according to the laws of Newton when you move slowly, but when you move really fast, close to the speed of light, than everything changes and the laws of physics as we know them don t apply anymore. That s exactly what I think is happening today. Our laws of marketing, our laws of dealing with consumers and the way we build organizations worked just fine when markets were slower than our own capacity. But when markets heat up and become faster than us, the laws as we know them don t apply anymore, and everything changes. Everything is relative. And when markets change faster than companies, I believe that we get into a situation when markets will flip. They will flip in favor of the consumers. Not in favor of the old masters anymore. 7
8 8 Consumers are getting vocal
9 02 When markets stop being markets Marketing was invented to help Sales. That s the story that the giants of Marketing like to tell. Marketing was created to generate insight into what consumers wanted, so that companies could produce exactly what the market wanted. But times have changed. In the beginning, marketing was really about relaying a message from the Producer to the Consumer. And it was a one-way conversation. ONE WAY! When a company had a new product, or had developed a new service offering, they wanted to tell the market. And that s exactly what marketing did. The clever marketers of a company would hire the clever Don Drapers of this world to craft a clever message they could hurl onto the radios and television screens of the consumers. And then the consumers started getting vocal. They woke up. They wanted to be heard. They wanted to be involved. The consumer become engaged and the power based shifted. It was not enough to have a message to the consumer, companies needed to build a conversation with the consumer. The monologue became a dialogue between Producer and Consumer. Let s talk about it 9
10 02 When markets stop being markets But that was just the beginning. The advent of the New Normal accelerated this. Marketers quickly seized the opportunities of social media, and became conversation managers who needed to understand how to converse with their consumer base. But, all of a sudden, markets stopped being markets. Markets turned into networks of intelligence. These days, consumers are not just dumb individuals, but have become extremely informed networked thinkers. Consumers will seek information, seek advice and get informed by their peers who are easy to reach. They will trust each other more than some commercial message aired or played on TV or Radio. Consumers have found each other. No way this box of Pandora will close again. Funnels have been used in marketing forever. The idea is simple: there is a population out there of potential users of your product or service. This is your universe. But not everyone will buy. You can t convince everyone to take your offering. Your job as marketer was to take this universe through the funnel. Understand who your prospects are, who would really be prospective buyers of your offering. One step further in the funnel are really qualified leads, people that when given the right information will definitely want to buy. And you would guide your leads through the funnel until that final decision point: the Moment of Truth. The Moment in the store where they take YOUR product instead of the other brand, the Moment where they pick up the phone and order YOUR service instead of the alternative. The funnel is a powerful metaphor. But the funnel doesn t work when your market has become a network of intelligence. Present-day consumers have the power and the ability to inform themselves. They gather intelligence from peers, from friends, from the network. They trust the network more than they trust you. The funnel doesn t work anymore. The funnel has become a loop. Before a purchase, consumers will inform themselves by gathering all the information necessary. TV and Radio are, of course, in the mix but, more and more, they will seek out websites, 10
11 blogs, experiences on Facebook, Twitter, anything in fact. And when they get to the Moment of Truth they will be influenced more by their own network of intelligence than by your marketing efforts. Surprisingly, AFTER the Moment of Truth they will keep communicating with the network. They will talk about their purchase, about their decisions, and about their experiences. In some cases consumers will actually spend more time doing this AFTER the Moment of Truth than BEFORE the Moment of Truth. This means that the old Funnel has become a loop. Exit Funnel. Hello Loop. But it also means that the days of the power-balance between Producer and Consumer have fundamentally changed. Forever. Markets have now become Networks of Intelligence. And are in constant flux. You can t control a market anymore. You actually have to work very hard to follow a market, and then observe the flux in that market. Forget control. The new paradigm will have consumers being more informed than you, in markets that have become networks, and that can change and adapt faster than you can. It s a whole new ball game. 11
12 012 The amount of traces that we leave today is staggering.
13 03 Information becomes the new oil The key to solving this conundrum is Information. Information has become the new Oil. If you want to make sense of all that is happening in a market, you have to gather input. That hasn t changed. But the way to harness information is completely different from market intelligence of the past. In the past, we would ask customers what they wanted. If your sampling was big enough, you got an accurate reading of your market, and you could base your offering on that prediction. Three reasons why that doesn t work anymore: 1. The Old approach is based on averages. Averages are out. 2. The Old approach assumes things won t change between taking the market temperature and delivering the medicine. You don t have that time anymore. 3. The Old approach is based on Action - Response. That doesn t work anymore. It s a system. A dynamic system. 4. The amount of traces that we leave today is staggering. We don t just ingest huge amounts of information, we also LEAVE huge amounts of information. Averages Marketers like averages. They like to lump people together in categories so they can label them. Single Moms. DINKs: Double Income, No Kids. That s why, for example, in television, series and even whole TV stations have been designed exactly for the group of people that are put into the box: Double Income Intellectual Yuppies with 1.7 children who drive a Volvo. And we assumed because of the law of large numbers that all these people who fit that category would basically behave pretty much in a similar fashion. Abandon that idea. 13
14 03 Information becomes the New Oil Everyone is unique. Everyone now has access to information, access to networks, access to each other. We don t WANT to be average. We all WANT to be individuals. Unique, one-of-a-kind personalities. Not a number. Not a label on a box with other people. People want to be treated as individuals. They want information tailored to THEM, not to the 1.7 children with a Volvo category. They want personalized, highly tuned messages, offerings and services for them. People don t want to belong to a category anymore. People don t want to be an average. But the downside of that is that we now have an explosion of information. Modeling the whole customer database in a number of simple to manage categories is passé. We now have to construct our information universe where everyone is unique. Enter Big Data. Timing We used to have oceans of time. The clock-speed worked with us. Now it works against us. Markets change faster and faster, and we have to process information faster and faster. There is no point in knowing everything about your customer four minutes after he walks out of your store. There is no point in knowing everything about your online customer four seconds after he leaves your website. Or four milliseconds for that matter. We used to have time to process our databases. We would build models, and standard queries, and run reports. Some intrinsic customer segmentation reports could takes weeks to gather all the input, churn the facts and turn out the nice gleaming glossy report. But that is old-school. When markets become networks of intelligence you don t have that luxury anymore. You don t have the time anymore to churn. You have to move faster. You have to up the ante. You have to boost your clock-speed. Enter Fast Data. Dynamics We used to be able to treat data as relatively static. Information that we gathered from customers didn t fluctuate that much over time. Of course consumer habits would evolve, and change, but slow enough for our modeling to work. We could assume that if we ran some tests on a small sample of a population, we would get the same response as if we d scaled that to all our customers. It was essentially an Action-Response system. 14
15 But that is pre-flip. After the Flip, the markets become a network, where the response is not just based on all the inputs, but on the interactions and the dynamics of the network behavior. We have to look at a market not as an input-output system, but as a dynamic system. Enter Live Data. Fingerprint Finally, the amount of information we would store on a customer was simple, and relatively basic. What did they buy, where and when? All straightforward enough. Maybe traces, every so often, to see if the purchase was the result of a special offer, a marketing program or a campaign. Nowadays, the picture is a little more complex. When a customer makes a purchase they will base their purchase on what they have observed, seen, discussed online. After they make a purchase, they will tweet about it, post on Facebook, pin on Pinterest or whatever. They will leave a digital footprint as a customer that gives all the context of a purchase, instead of the naked essence of a purchase: product and price. When we want to really understand customer behavior, we must take into account this context rather than the essence. That means we have to look at a customer s digital footprint, which is much, much larger than the old basic facts. It s like a diary where you would put Hawaii, May 1999, Vacation. That s the essence all right, but the context would be the pictures of your holiday to Hawaii, which show the rocky cliffs, the sandy beaches, the gorgeous weather, the weaving palms, that amazing banana Dacquiri... You get the picture. Forget essence as the source of information. Enter Context Data. If you put all that together, the world of information suddenly becomes much more alive. Big Data, Fast Data, Live Data and Context Data. And if you re really clever, you will probably come up with a whole lot more types of relevant information, for turning data into insight. 15
16 16 people will be creative in thinking up new derivatives of information that have value, and which can be traded.
17 04 We re all in the information business now One of the characteristics of the era we live in, is that everyone seems to be in the information business nowadays. As a matter of fact, those companies which understand what the power of information can bring, will probably excel in the post-flip era. But you have to be prepared to completely rethink your business model, and your current relationship with the customer. Be prepared to invert how you think about information. Many companies, till now, have used information as secondary input: information was used to help in the primary process of dealing with their customers. It was useful, helpful and sometimes essential, but it was not their core business. But the times they are a-changing. These days, at some companies, information is becoming primary the core offering of the company. Nike Imagine a company like Nike. I adore Nike for their power in branding, their products, their style. Nike is an admirable company. But Nike is also extremely interesting in terms of how they are looking at the world that has become digital. Nike+ was launched years ago as an experiment. A joint product development between Apple and Nike, that produced probably the most advanced, hi-tech set of running shoes in their time. You could synchronize your ipod to play those songs that would match your jogging pace, and after a jog you could upload your run to the Nike+ community to share. All of a sudden Nike was not just selling shoes to customers, but was getting constant feedback on how their shoes were being used. Or not used. In any case, it was getting an enormous amount of information. Nike via the Nike+ community started getting constant updates on where people were jogging, when they were running, what their favorite jog paths were, where they slowed down, where they paused, where they rested, where they met other people. Suddenly, Nike was gathering an amazing insight into how their products were being used. 17
18 04 Information becomes the New Oil Nike clearly saw the potential, and went for it. They pulled all the stops on digital and pushed on at a lightning pace. Next, they introduced the Fuelband, a bracelet that traces your daily activity. Granted, it was rather limited at the start, but consider this: Nike+ allowed Nike to see what their customers were doing when they jogged, but this bracelet would allow Nike to have contact with their customers all day long. The first version monitors your steps, but what if Nike were to add a heartbeat monitor and a temperature sensor? Nike would then be able to see all day long exactly how their customers live their lives, where they are, what they do, how fast their heart races and how flushed they were. Would that Nike of Tomorrow still be in the running shoes business? No. Nike, by then, would be in the information business. Now, of course, Nike is not going to stop selling shoes. Probably not. But we are, with each passing day, getting into a world where information is currency. Information is the new oil. And those who have information will get ahead. So, Nike will HAVE to jump on the opportunity if it wants to stay ahead. Everyone is in the information business now. Banking Let me give you another example. Banks have not been extremely popular lately, and the trust that customers have in banks has been badly shaken. But that rocky-ride for the banking industry might be just the beginnings of rumblings in the financial services industry. Banks know a lot about their customers. They know how much money you have. They know what you spend your money on. They know what s coming in, and what s going out. But banks know a lot more. And there is a lot that they don t tell you. Because banks have so many customers, they would be able in a world of Big Data to do much more with information. Banks, for example, know what you spend on your utility expenses, on your phone bill, on your Internet bill, on your mobile bills. Banks would be able to aggregate and compare. Actually, the bank could tell you that you ve been paying too much for your mobile phone. But they don t. Banks could tell you that you probably should switch to another electricity provider. But they don t. Banks could actually give YOU, as the customer, an amazing insight into your personal expenses and your personal finance, but they don t. All they do is print you out some pointless statements at the end of the month where they show you where you ve spent your money. But you already know that. That is the essence. But the banks don t give you the context. 18
19 Banks could do a whole lot more. Banks are at the heart of virtually every major moment in your life. They are the heartbeat of all your precious interactions. But they hardly do anything with that. Buying your first bicycle for your daughter? Banks only store the $ at Ralph s Bikes. Buying that first bed as newlyweds? Paying for that lovely hotel in Tuscany? Banks only focus on the essence. But that essence is the nucleus of a story. That essence is the hook on which to hang pictures, stories, emotions, reviews, feedback, or even practical things like receipts. One of the ironies of today s shopping experience is the receipts. When you get a receipt these days, there s typically a statement at the bottom which says: Keep out of direct sunlight.. There are two options: either you store it out in the sunlight, but then it fades after two weeks and you can t read the receipt. Or you store it out of the sunlight, but then you ll never find it again. Anyway, people almost never find their receipts. But wouldn t it be great if your bank could offer you this service? They already have the essence, all they have to do is add the context. My point is, banks are not in the finance business anymore. Or not just that at any rate. They re also in the information business. The core financial products offered are rapidly being commoditized. Truly, there is very little difference between the essence of one bank and that of another. But there will be a huge difference between the context that banks offer in the future. And that will be the deciding factor on which bank I choose. Banks are in the information business. Everyone is now in the information business. Currency Information is an asset. Information is valuable. Shortly, there will be entities which buy information, and there will be those who sell information. Just as the world of finance has evolved, where you don t just sell shares in companies, but sell options, and futures, the world of information will evolve as well. Information is a currency, but people will be creative in thinking up new derivatives of information that have value, and which can be traded. 19
21 05 The quest for patterns In the old days, it was all about data. Companies became more and more obsessed with data. We would gather all the data we could on our customers, and that data was used for all sorts of analysis on where to go next. Data was stored in databases, that grew larger and larger. But this data was structured data, and static. We would compile information on our customers and try to structure (or shoehorn) this into databases. Addresses. Sales figures. Contact information. Phone numbers. And we would build models, hoping to find the holy grail that would eventually deliver us the magic formula to control our customers, and understand exactly how to play the game. At the end of the 20th century, we realized that we had been busy creating too many databases. So we spent a considerable amount of time trying to get all those databases inside the company to be connected together and some of the bravest tried to put all these databases into a totally new shiny database: the one database to rule them all. Pretty expensive, mind you. To no avail. Just like trying to control the weather with larger and larger supercomputers, we constantly seemed to be running behind this illustrious holy grail of data. Today, we need to adopt a completely new paradigm when thinking about customers and their behavior, about markets and their dynamics. We have to adopt the butterfly effect, think of chaos patterns and think of market dynamics instead of compiling static data to eventually understand a market. (MARKETS) Essentially, you can t understand a market any longer with a static model. WHAT S IN WHAT S 0UT Dynamic, Patterns, Horizon & Flux Static, Structured, Secured & Steady 21
22 05 The quest for patterns Enter Flux Markets today are in constant flux. Markets have become so turbulent that it has become impossible to model them anymore, but instead we have to look for tell-tale patterns. We have to understand how to turn the flux of the market into insight and try to extract intelligence from a market without a complete and all-encompassing model. The customer is at the heart of the new experience economy. The faceless, nameless consumer has finally shifted from his plinth and the Arab Spring of marketing that has occurred in the past decade means we have to take the consumer seriously now. Very seriously... The consumer is now in play, the consumer is now the centerpiece that has control. But how do we communicate with an empowered consumer? How do we transition from massmarket carpet-bombing of the consumer to providing a meaningful dialogue? For a long time, companies have worked pretty much inside-out: they would think up a new product, a new product offering, a new idea and then project this to the outside world, the outside market. That meant that the boundaries of a company were pretty important. INSIDE the walls of the company, we could try to compile databases and build models of the outside world. Today it is all happening on the outside: customers are in charge. Customers are talking about you and your brand. It s not inside-out anymore, it s the other way around: the boundaries have reversed. It s outside-in. Today, the dynamics about your company, its products and its services are truly being lived in the market, out there. They are being discussed online. And you have no control. But you have to understand, you have to be able to get your information horizon as broad as can possibly be. The online communities, the social media, the constant and never-ending dialogue that is out there, beyond your company walls, has now become the dominant source of information. Your information horizon has exploded. Your information horizon is expanding every day. Like the expanding universe, that has been growing in all directions since the Big Bang. So, consider this: what is your company s information horizon? And how has it changed in the last couple of years? Where do you think it is heading? How is your information horizon expanding and reshaping? 22
23 06 The power of refining When we use the analogy of Information is the New Oil, we tend to think that the main aim is to find as many oil wells as possible. That the aim would be to build as many sources of information, gushing data like oil gushers, and that there is an oil rush going on out there. In fact, there is. But maybe that s not where the action will be. The real action might lie in the refining process. The Standard Oil Company does not exist anymore. Well, not in that form and under that name at least. Exxon Mobile, one of the world s biggest companies, is the biggest remnant of that once mighty company, the Standard Oil Company. The company was founded by John D. Rockefeller. Rockefeller is the classic American Dream story, a poor young man who would become the richest man in the United States through sheer ambition and a fair share of good luck. And by choosing the right battle. His luck was being in the right place at the right time, as it often is. Rockefeller was actually an accountant, a financial clerk, who happened to work at the docks when the very first oil was being struck and who observed how prices of oil were being set. Now Rockefeller was a very clever young man. He saw an opportunity in working on the spread in prices. He was not a cowboy who had struck oil by digging in the ground. He observed the flawed process of getting oil from the well to the refinery, and then ruthlessly exploited the inefficiencies in the system. He became the country s richest man by completely controlling the refinery process, then the pipeline system and, finally, the entire value chain, with all the oil sources eventually falling into his lap as well. It s not the wells, it s the refining process. Now of course, there are flaws in any analogy. But it could very well be that in the rush for Big Data, it s not about the wells. It s not about MORE gushers, but it will be about how to extract the essence from the raw Big Data. About the refining of big data. And whoever controls the refining process will be on top. The question for you is: are you a refinery? 23