The use of consumer data is under scrutiny like never before. Concerns about privacy have come to the fore, while the new General Data Protection Regulation has forced companies to consider how they store and manage customer data. Used well, however, data can transform the way that business works, benefiting both companies and their customers.

BUSINESS

Data rules

Data rules

The use of consumer data is under scrutiny like never before. Concerns about privacy have come to the fore, while the new General Data Protection Regulation has forced companies to consider how they store and manage customer data. Used well, however, data can transform the way that business works, benefiting both companies and their customers.

In the beginning there was the internet, and the internet was good. Then came the smartphone, and that was even better. So beguiling is the combination of internet and mobile that many people would rather lose their wallet or even their sense of smell than be parted from their precious phone. 

Of course, the impact on business of this mass change in consumer behaviour has been correspondingly seismic, and perhaps the biggest shift of all has been the dramatic rise in the availability and importance of data. Entire industries have been shaken up by the way that data, used well, can deepen customer relationships. Even the largest and most deeply entrenched of incumbent businesses quail at the prospect of being disrupted or disintermediated by a lean, agile and data-driven start-up. Just look at what Airbnb has done to the hotel business, or Netflix to cable and satellite TV.

The new oil

Data has thus been described by some economists as the ‘new oil’. One business that has certainly mined data to good effect is US-based car-sharing business Zipcar. Founded 18 years ago in Boston, Zipcar was bought by rental giant Avis in 2013 and now has more than a million members across 500 cities in nine countries, including the UK, France, Germany, Spain and Turkey.

When it comes to building the network and deciding where to place new cars, data provides the bedrock on which key decisions are made, says Jonathan Hampson, general manager for Zipcar UK. “Proximity is everything in car sharing – the car has to be close enough to where people live to be a viable alternative to owning their own car. There’s maybe a 10-minute radius around a location and that is the target market.’

To assess whether a street has the appropriate catchment, Zipcar builds heatmaps based on its proprietary algorithm, Zipcar Ability, which shows the most and least promising locations in a given city.

Get smart

The algorithm is fed with key data points, including public transport use (because people who use public transport to get to work do not need a car every day), population density (a proxy for parking difficulties, and because the more people in the 10-minute catchment area the better) and income. “Our early adopters come from middle income groups,” says Hampson. 

Data also points the way to new products and services, such as Zipcar Flex. Rather than booking a car for a several-hour round trip to go shopping, for example, Flex allows users to drive one car there and another one back, avoiding parking charges and paying only for the time they are driving. “There was a real danger that we were going to become less relevant to our customers if we couldn’t provide a one-way service. You have to constantly re-evaluate what your customers need and make sure you are meeting that need,” says Hampson. 

That restless quest for improvement is expected to help Zipcar navigate oncoming challenges, including first electric and then fully autonomous vehicles. As Hampson explains: ‘We might have been seen as a disruptor, but everyone is also there to be disrupted. People assume that ride-sharers like Uber will win in the end, but Uber does no fleet management. It manages driver resource. Take the driver away and what’s left?”

 

BUSINESS
Fame and notoriety

Disruption is a widely-used – some might say over-used – word. But any discussion of data-driven businesses today would be incomplete without considering the latest and potentially most disruptive technology of all – the blockchain.

This has gained fame – and notoriety – through its association with cryptocurrencies, such as Bitcoin. But strip away the hype and air of high-tech mystery that surrounds it, and blockchain is essentially a highly secure distributed digital ledger. Every transaction forms a block of data in the chain and every member individual or organisation on a given blockchain network holds a copy of all the blocks on that network. 

Every time a transaction creates a new block, all those copies are updated automatically. So anyone wishing to alter the ledger would have to alter every copy of it – no mean feat when there might be thousands, or more, copies.  

Direct connections

For further security, the data in each block contains a record – a hash code – of the contents of its neighbouring blocks. Change even a single bit of the data in one block and the hash in the next block no longer matches. On top of all that, the data is encrypted, too.

According to blockchain enthusiasts, that creates a friction-free way of immutably recording transactions without the need for an intermediary to manage the ledger – removing the risk that anyone might be cooking the books in their favour.“The blockchain has become synonymous with disintermediation because it is used to connect counter-parties directly,” says Tyler Welmans, co-founder of the Blockchain Lab at professional services giant Deloitte. “It is the latest stage in a trend that goes back to things like big data, mobile and the internet itself.”

Disruptive potential

And while blockchain is best known for underpinning the speculative, high-stakes world of cryptocurrencies, it has the potential to upend a range of everyday industries from insurance and commodities trading to power generation.

“The blockchain will be transformative, providing new ways to enter markets and new forms of ownership. It will lead to products and services that just aren’t possible at present,” says Welmans.“

It may have started in crypto, but it is now being experimented with by companies that have no interest in crypto and never will have.” 

A red herring

One such company is energy micro-grid start-up LO3 Energy. As far as the real potential of the blockchain is concerned, says founder Lawrence Orsini, it’s all about the data. “Crypto is a red herring. This is not a crypto play, it’s a data play,” he says. 

LO3 is best known for its Brooklyn Microgrid (BMG) project in New York. The BMG uses blockchain to augment the existing power grid by allowing local micro-generators – typically buildings with solar photovoltaic panels on the roof – to buy and sell power to each other directly.“

Currently you can choose which provider supplies your energy, but that’s about all you can choose,” says Orsini. “You are obliged to pay your network provider and you can’t buy direct from your neighbour across the street.”

Power up

The company – which has just closed its series A funding round with investments from the likes of Siemens and Centrica – is scaling up fast and currently has projects “on just about every continent”.

The ultimate goal is to combine microgrids with the internet of things to create real-time markets, so that domestic power users will be able to decide not only who to buy power from, but when and for how much. 

An English person might be prepared to pay a hefty premium to make a cup of tea in the late afternoon when demand is high; people in Germany or Australia, not so much. But households could offset that cost by heating their hot water when the price of power is low. All they need to do is set the parameters. “You don’t need a utility provider, your devices can do it automatically. Your house can respond for you,” Orsini explains.

Prediction as a service

Innovative start-up Delphy is involved in an even more eye-catching business: prediction as a service. Headquartered in China, it uses the Ethereum blockchain to help crowdsource answers to questions about what might happen in the future. “The questions are like stocks and the price is related to the probability of the answer,” says Fox Holt, vice president of business development at Delphy.

The platform is used mainly by cryptocurrency investors to get a steer on the value of, for example, Bitcoin in 10 weeks’ time. But plans are afoot to move beyond these crypto-roots with an international roll-out and an expansion into the wider forecasting market. 

Holt says: “You might ask: ‘What’s the price of corn going to be?’ Traditionally, lots of experts would weigh in on that, but they don’t have to put their money where their mouth is.

“But a corn farmer in Iowa, he really has some knowledge. And now he has an economic incentive to share that knowledge – he can use it to make some extra money.” 

With the right community of users, Delphy could provide predictions on anything from politics and entertainment to sport. “The answers are not infallible, but prediction markets are better than traditional polls,” he claims, citing research findings that these markets are 75 per cent more accurate than traditional forecasting methods. “We’re trying to make the world a more predictable place, and that’s good for everyone,” he adds. 

Trust issues

Holt believes that blockchain will spread rapidly across new markets, because it tackles an issue that has loomed large in people’s minds since time immemorial: am I being taken for a ride? 

“One of the best things about it is that it resolves trust issues, especially with governance. Are markets being manipulated by companies or insiders to their own ends?” says Holt. 

If blockchain really can overcome concerns about manipulation, then the key question is surely whether its claimed immutability really stands up. Many believe that it does. 

“There are thousands of public blockchain networks in place and they’re being attacked all the time. They are anti-fragile – the more they are attacked, the stronger they get,” says Deloitte’s Welmans.

“Is it technically impossible to crack? No, it’s not,” he admits. “But it is very, very difficult, indeed.”

Some might say they have heard that before. But, when it comes to new tech, usefulness and convenience seem to be the key drivers of success. On that basis, blockchain looks set to take its place beside mobile, big data and the internet as the next business-model technology buzzword of choice. The only question is: how long will it take? 

Back to articles

Data has been described by some economists as the ‘new oil’”​

In the beginning there was the internet, and the internet was good. Then came the smartphone, and that was even better. So beguiling is the combination of internet and mobile that many people would rather lose their wallet or even their sense of smell than be parted from their precious phone. 

Of course, the impact on business of this mass change in consumer behaviour has been correspondingly seismic, and perhaps the biggest shift of all has been the dramatic rise in the availability and importance of data. Entire industries have been shaken up by the way that data, used well, can deepen customer relationships. Even the largest and most deeply entrenched of incumbent businesses quail at the prospect of being disrupted or disintermediated by a lean, agile and data-driven start-up. Just look at what Airbnb has done to the hotel business, or Netflix to cable and satellite TV.

The blockchain will be transformative, providing new ways to enter markets and new forms of ownership. It will lead to products and services that just aren’t possible at present”​

Blockchain will spread rapidly across new markets, because it tackles an issue that has loomed large in people’s minds since time immemorial – am I being taken for a ride?”​

The blockchain will be transformative, providing new ways to enter markets and new forms of ownership. It will lead to products and services that just aren’t possible at present”​

The new oil

Data has thus been described by some economists as the ‘new oil’. One business that has certainly mined data to good effect is US-based car-sharing business Zipcar. Founded 18 years ago in Boston, Zipcar was bought by rental giant Avis in 2013 and now has more than a million members across 500 cities in nine countries, including the UK, France, Germany, Spain and Turkey.

When it comes to building the network and deciding where to place new cars, data provides the bedrock on which key decisions are made, says Jonathan Hampson, general manager for Zipcar UK. “Proximity is everything in car sharing – the car has to be close enough to where people live to be a viable alternative to owning their own car. There’s maybe a 10-minute radius around a location and that is the target market.’

To assess whether a street has the appropriate catchment, Zipcar builds heatmaps based on its proprietary algorithm, Zipcar Ability, which shows the most and least promising locations in a given city.

Get smart

The algorithm is fed with key data points, including public transport use (because people who use public transport to get to work do not need a car every day), population density (a proxy for parking difficulties, and because the more people in the 10-minute catchment area the better) and income. “Our early adopters come from middle income groups,” says Hampson. 

Data also points the way to new products and services, such as Zipcar Flex. Rather than booking a car for a several-hour round trip to go shopping, for example, Flex allows users to drive one car there and another one back, avoiding parking charges and paying only for the time they are driving. “There was a real danger that we were going to become less relevant to our customers if we couldn’t provide a one-way service. You have to constantly re-evaluate what your customers need and make sure you are meeting that need,” says Hampson. 

That restless quest for improvement is expected to help Zipcar navigate oncoming challenges, including first electric and then fully autonomous vehicles. As Hampson explains: ‘We might have been seen as a disruptor, but everyone is also there to be disrupted. People assume that ride-sharers like Uber will win in the end, but Uber does no fleet management. It manages driver resource. Take the driver away and what’s left?”

Data has been described by some economists as the ‘new oil’”​​

Fame and notoriety

Disruption is a widely-used – some might say over-used – word. But any discussion of data-driven businesses today would be incomplete without considering the latest and potentially most disruptive technology of all – the blockchain.

This has gained fame – and notoriety – through its association with cryptocurrencies, such as Bitcoin. But strip away the hype and air of high-tech mystery that surrounds it, and blockchain is essentially a highly secure distributed digital ledger. Every transaction forms a block of data in the chain and every member individual or organisation on a given blockchain network holds a copy of all the blocks on that network. 

Every time a transaction creates a new block, all those copies are updated automatically. So anyone wishing to alter the ledger would have to alter every copy of it – no mean feat when there might be thousands, or more, copies.  

Direct connection

For further security, the data in each block contains a record – a hash code – of the contents of its neighbouring blocks. Change even a single bit of the data in one block and the hash in the next block no longer matches. On top of all that, the data is encrypted, too.

According to blockchain enthusiasts, that creates a friction-free way of immutably recording transactions without the need for an intermediary to manage the ledger – removing the risk that anyone might be cooking the books in their favour.“The blockchain has become synonymous with disintermediation because it is used to connect counter-parties directly,” says Tyler Welmans, co-founder of the Blockchain Lab at professional services giant Deloitte. “It is the latest stage in a trend that goes back to things like big data, mobile and the internet itself.”

Delphy uses the Ethereum blockchain to help crowdsource answers to questions about what might happen in the future”​​

We might have been seen as a disruptor, but everyone is also there to be disrupted”​

Delphy uses the Ethereum blockchain to help crowdsource answers to questions about what might happen in the future”​

Disruptive potential

And while blockchain is best known for underpinning the speculative, high-stakes world of cryptocurrencies, it has the potential to upend a range of everyday industries from insurance and commodities trading to power generation.

“The blockchain will be transformative, providing new ways to enter markets and new forms of ownership. It will lead to products and services that just aren’t possible at present,” says Welmans.“

It may have started in crypto, but it is now being experimented with by companies that have no interest in crypto and never will have.” 

A red herring

One such company is energy micro-grid start-up LO3 Energy. As far as the real potential of the blockchain is concerned, says founder Lawrence Orsini, it’s all about the data. “Crypto is a red herring. This is not a crypto play, it’s a data play,” he says. 

LO3 is best known for its Brooklyn Microgrid (BMG) project in New York. The BMG uses blockchain to augment the existing power grid by allowing local micro-generators – typically buildings with solar photovoltaic panels on the roof – to buy and sell power to each other directly.“

Currently you can choose which provider supplies your energy, but that’s about all you can choose,” says Orsini. “You are obliged to pay your network provider and you can’t buy direct from your neighbour across the street.”

Power up

The company – which has just closed its series A funding round with investments from the likes of Siemens and Centrica – is scaling up fast and currently has projects “on just about every continent”.

The ultimate goal is to combine microgrids with the internet of things to create real-time markets, so that domestic power users will be able to decide not only who to buy power from, but when and for how much. 

An English person might be prepared to pay a hefty premium to make a cup of tea in the late afternoon when demand is high; people in Germany or Australia, not so much. But households could offset that cost by heating their hot water when the price of power is low. All they need to do is set the parameters. “You don’t need a utility provider, your devices can do it automatically. Your house can respond for you,” Orsini explains.

Prediction as a service

Innovative start-up Delphy is involved in an even more eye-catching business: prediction as a service. Headquartered in China, it uses the Ethereum blockchain to help crowdsource answers to questions about what might happen in the future. “The questions are like stocks and the price is related to the probability of the answer,” says Fox Holt, vice president of business development at Delphy.

The platform is used mainly by cryptocurrency investors to get a steer on the value of, for example, Bitcoin in 10 weeks’ time. But plans are afoot to move beyond these crypto-roots with an international roll-out and an expansion into the wider forecasting market. 

Holt says: “You might ask: ‘What’s the price of corn going to be?’ Traditionally, lots of experts would weigh in on that, but they don’t have to put their money where their mouth is.

“But a corn farmer in Iowa, he really has some knowledge. And now he has an economic incentive to share that knowledge – he can use it to make some extra money.” 

With the right community of users, Delphy could provide predictions on anything from politics and entertainment to sport. “The answers are not infallible, but prediction markets are better than traditional polls,” he claims, citing research findings that these markets are 75 per cent more accurate than traditional forecasting methods. “We’re trying to make the world a more predictable place, and that’s good for everyone,” he adds. 

We might have been seen as a disruptor, but everyone is also there to be disrupted”​​

Trust issues

Holt believes that blockchain will spread rapidly across new markets, because it tackles an issue that has loomed large in people’s minds since time immemorial: am I being taken for a ride? 

“One of the best things about it is that it resolves trust issues, especially with governance. Are markets being manipulated by companies or insiders to their own ends?” says Holt. 

If blockchain really can overcome concerns about manipulation, then the key question is surely whether its claimed immutability really stands up. Many believe that it does. 

“There are thousands of public blockchain networks in place and they’re being attacked all the time. They are anti-fragile – the more they are attacked, the stronger they get,” says Deloitte’s Welmans.

“Is it technically impossible to crack? No, it’s not,” he admits. “But it is very, very difficult, indeed.”

Some might say they have heard that before. But, when it comes to new tech, usefulness and convenience seem to be the key drivers of success. On that basis, blockchain looks set to take its place beside mobile, big data and the internet as the next business-model technology buzzword of choice. The only question is: how long will it take? 

Back to articles

Blockchain will spread rapidly across new markets, because it tackles an issue that has loomed large in people’s minds since time immemorial – am I being taken for a ride?”​​

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Bridgepoint  |  The Point  |  May 2018  |  Issue 33