Will consumers share their data without a share in its value?

By

Robert Holston

EY Global Consumer Industries Advisory Leader

Unlocking differentiated value for consumer-facing companies navigating an increasingly complex, connected digital world. Inclusive leader, high-performing team champion. Ironman triathlete. Foodie.

15 minute read 3 Jul 2018

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Only companies that master the role of data can work with consumers to create value. Discover insights from our Los Angeles hackathon.

“The world is changing fast. The biggest risk to my business is that we’ll underestimate how much power the consumer has to reshape tomorrow.” That quote is from an executive who took part in the FutureConsumer.Now hackathon I led in Los Angeles earlier this year. This particular executive — whom I won’t name — is a seasoned industry professional. Even so, the hack completely reframed the way he thinks about future consumer needs. It was a game-changing experience for him.

  • With FutureConsumer.Now EY is helping business leaders make their organizations fit for a very different future, by thinking differently about the future

    Research and interviews with global innovators, futurists, business leaders and EY professionals identified over 150 drivers that could shape the future consumer.

    We used those drivers to create eight powerful hypotheses. Each one relates to a key aspect of the future consumer: how people will shop, eat, stay healthy, live, use technology, play, work and move.

    We then held a series of innovative hackweeks around the world to explore these hypotheses further and to model the kind of future worlds they might create: in Berlin, London, Los Angeles, Shanghai and Mumbai.

    We invited an eclectic mix of futurists, entrepreneurs, business leaders and EY professionals to these events. Over the course of a week, they used the 150 change drivers and eight hypotheses to model three alternative versions of the future.

    The experience of creating these “future consumer worlds” helped participants anticipate the direction of travel and the implications — and opportunities — for business today. It challenged all their assumptions about what it takes for a consumer-facing business to succeed — today and in the years ahead.

    By the end of the hack, they were better prepared to stay relevant as consumers evolve, and to shape that evolution.

I can relate to that. My grandparents were grocers 100 years ago. I often wonder what they would make of the consumer-facing companies I work with today. A lot of what it takes to succeed now — and into the future — would be familiar to them. But now we’re in a Transformative Age. New technologies are changing what’s possible. Industries that used to be separate are starting to converge. The catalyst that will drive it, the eye of the storm, is a new kind of consumer – one that will use, and be shaped by, data in ways that are hard to imagine today.

It’s time to challenge ideas that have shaped the consumer products and retail industries for decades. Some of them are toxic and several will be fatal.

To navigate this emerging world leaders need to challenge all their assumptions: What do consumers want? How do they feel about data-sharing and privacy? Where can you create and capture value? Who will you compete against and who might you collaborate with? What business are you really in?

Whose data? Whose value?

At the LA hack, we divided into three teams and each one extrapolated a different set of hypotheses to explore the kind of worlds that could emerge. We created a world in which consumers trade their personal data privacy to get goods and services that are hyper-personalized and super-convenient; one where people are rewarded for the value of their personal data and the influence they can wield; and one in which they use data to sustain an optimal balance between what they need — in the fullest sense — and how much they consume, so they can prosper in a gig economy.

However the future unfolds, attitudes to data ownership and privacy are changing. It’s clear that a new role is emerging for data, one that will make new business models possible. Most will die on the vine. A few will change everything.

Each of the worlds we modeled is very different, and each suggests some fascinating opportunities for companies. But across them all, two common factors stood out:

  1. Artificial intelligence (AI) and personal data will play a central role in the way companies and brands engage with consumers. People will trust their individual AI companions to curate choices for them. They’ll become the intermediary between consumers and brands, and also between other AI systems.
  2. Who owns and controls data will be a critical pivot point. In some of the future worlds we created, consumers controlled their data; in others, companies had more power. How this relationship plays out, and whether it becomes a source of tension or mutual benefit, will be critical.

You can get a better sense of each world below.

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Chapter 1

Tailored life

Data insights lead to personalization of goods and services.

Consumers trade their personal data privacy to get goods and services that are hyper-personalized and super-convenient.

Today most companies are focused on turning data into value by extracting nuggets of consumer insight from a vast ocean of information. But what if the paradigm changed and access to the ocean was blocked or assiduously controlled — not by regulators, but by consumers?

In LA, one of the teams created a world in which people control their data privacy and trade it to get goods and services that are hyper-personalized and super-convenient — tailored to their exact needs.

In this world, data is no longer about the mass market or even the segment. It’s about getting under the skin of the individual consumer.

The bespoke nature of this world would actually be an illusion for most people; in reality, their options would be shaped and curated by data and algorithms. Genuine privacy would be a luxury that only the 1% could afford. But most people wouldn’t mind. They would value the convenience and simplicity of a well-curated life. As one industry leader put it: “The right to be forgotten would be forgotten.”

    • What are the first enhanced experiences that will pave the way for trust in AI?
    • What will confer value in lives that become tailored? Personalization, convenience or simplicity?
    • What tools will be developed to enable wealthier consumers to step out of curated lives?

Trust would be the ticket to play in this world. Consumers would need to trust companies to use their data responsibly; the consequences for any company that breached that trust would be immediate and devastating.

Our “Tailored Life” world would create some interesting challenges and opportunities for consumer-facing companies. Some of its key features are already here in the world we know today. Others would represent quite a shift. It’s a world where people only actively choose a small selection of products and services. Bespoke products and services become commonplace. Luxury brands depend on restricted production, ephemeral products and their relationships with aspirational influencers.

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Chapter 2

Data influence

Consumers are the new influencers.

Consumers are judged by the value of their personal data and the influence they can wield.

Social media is playing an increasingly important role in shaping consumer attitudes. Brands have been quick to embrace the idea of paying influential users to endorse their products and services. The metrics around how to value that influence and what to pay for it are still rather crude.

In LA one of our teams modeled a future world in which new technologies enabled everyone — not just celebrities or people with tens of thousands of followers — to maximize and monetize their data capital.

In our “Data Influence” world, people could earn rewards from companies and brands based on the value of their personal data and the influence they wield. They could increase the financial value of their data capital by making their data available in new ways, such as opting to engage with advertising or sponsored media. And they could then spend or trade the credits they earned as a form of virtual currency.

In this world, your power to influence others can be more relevant to a brand than your disposable income.

Consumers would use their data capital and their “power to influence” to reshape and optimize their lives — not just their net financial worth. Their personal AI platform of choice would curate branded media content for them to engage with and experience. This would be hyper-relevant entertainment that matched their income, status and data profile. The more they engaged with brands, the more data capital they could generate and “spend.”

What I like about this world is the way it solves a problem that has blocked innovation for too long: value that’s currently soft and intangible becomes measurable, bankable and tradable.

    • How will consumers reclaim and gain value from the data they have already given away for free?
    • How can brands overcome competitive concerns to create a shared and seamless ecosystem?
    • Will tailored entertainment remove the cultural touchpoints that shared experience brings?

Today, data complexity traps innovation. The insights that brands could use to reach consumers more effectively and offer them the engaging content and experiences they crave are locked away in too many third-party intermediaries and platforms. They don’t own the underlying data and often get in the way of a mutually beneficial relationship between brands and consumers.

Empower consumers to control and monetize their data in ways that are platform/ecosystem agnostic and you start to unlock the value of that data. In this future world, everyone can become a data entrepreneur, and trade the “credit” they earn not just in the realm of media and entertainment but across other industries — such as airlines, automotive and food.

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Chapter 3

Balanced life

AI will allow consumers to balance what they need and what they want.

Consumers try to sustain an optimal balance between what they need — in the fullest sense — and how much they consume, so they can prosper in a gig economy.

Our ability to find the right balance in life often depends on our ability to make the right compromises — from what we’d like to eat vs. what we know is good for us, to when and how hard we work vs. our desire to slow down or make room for other interests.

One of our teams in LA explored what it would take for future consumers to achieve the kind of life they want more often, while minimizing the kind of sacrifices that made them unhappy or conflicted with their other goals and values.

They modeled a world in which consumers trusted smart platforms to help them function successfully. In a more chaotic gig economy, where traditional work patterns are fractured and income fluctuates, people would use their platform of choice to optimize every aspect of their lives — from how they managed their workflow and finances, to how they traveled around, to how they stayed healthy. People would aim to sustain an optimal balance between what they needed — in the fullest sense — and how much they consumed, thanks to AI.

Each platform would be regulated by government but managed by an ecosystem of businesses. Companies on the platform would tune all their products and services to the nutritional and well-being needs of each individual consumer, in real time.

Consumers in this world enjoy eclectic and fulfilling work opportunities and can sustain wide social circles and enjoy new experiences.

In our “Balanced Life”’ world, people quantified and optimized everything they did and were mindful about what they consumed. Technologies like blockchain meant they could see the full environmental and social impact of their choices, and whether any choice conflicted with their desire to cut resource waste and increase convenience.

While these consumers would spend a lot of their time immersed in this data-informed reality, they would also make a lot of time for “offline”’ experiences, like eating with the family or taking time away from work. They relied on their super-smart artificial intelligence services to suggest choices and experiences that added something to their lives and helped them develop a sense of balanced equilibrium.

With food, for example, there would no longer be a trade-off between what tastes good, what’s good for your health, and what your budget can afford.

    • If you’re not part of the right blockchain, will your products be perceived as acceptable?
    • How will companies build corporate culture when they don’t employ the bulk of their talent?
    • Will optimization be enough to deliver sustainably or will austerity be necessary?

Consumption data is also aggregated, so that food suppliers can adjust production based on accurate demand-sensing.

This is a world where people want to eat and live well but want to balance that against the pressures of soil erosion, pollution and water scarcity. In a place like California, where these pressures are becoming acute, the food and beverage industry will play an increasingly important role in the economy and in society.

How companies perform that role will be of increasing interest to consumers, and also to regulators. In our “Balanced Life” world, waste is culturally condemned and is managed in granular detail. The need for sustainable food production and the public health costs associated with a growing population lead to “smart,” data-driven regulation aimed at reducing waste, increasing environmental efficiency and optimizing public health.

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Chapter 4

Five actions to win now

Data, personalization, agility, innovation and holistic thinking.

1. Make room on your board for a senior executive who understands how data can change everything.

Consumer-facing companies know the value of data. They’ve pioneered its use for decades. But mostly their approach is backward looking. They use outdated, low-utility syndicated POS data, or data locked in a mix of isolated EPR systems and tools.

The future worlds we modeled in LA make clear the need for a chief data officer working at both operating committee and board level. Their mandate should cover three imperatives:

  1. Make sure the business meets growing data privacy and global regulatory requirements.
  2. Drive the transition from control to commercialization. The organization must have appropriate data governance that also allows it to monetize data.
  3. Create a smarter approach to data certification and assurance. Use new algorithms and technologies (AI, IoT, blockchain) to protect the enterprise and the network of consumers and partners.

2. Work out how to give every consumer the unique product, service or experience they want and make money.

The ability to execute personalization at scale is going to become increasingly important. To win in the worlds we modeled, companies must be able to build brands, curate products/services and design/execute customer experiences that are right for the individual and their specific context. Digital marketing technology allows for great advances in providing a tailored individual brand message, but companies need to instill new processes and incentives that drive consumer back product and service development at the individual level.

When AI is doing the buying, more products and services will become commodities. To retain brand value in the face of that shift, companies will need to work ever harder to create highly relevant, personalized consumer experiences that feel natural rather than contrived. Low involvement brands and categories with marginal differential are in peril of being displaced. Massive marketing budgets might not rescue them from simply being bought for functional utility and not for emotive connectivity.

3. Move from a rigid supply chain to a responsive, demand-driven network.

The ability to capture, synthesize and apply a single version of consumer demand is an essential capability in the future worlds we modeled. That view of demand needs to be granular, and it needs to reach every node of a responsive, demand-driven supply network.

Increasingly, the activities that generate demand will be unique for each consumer, as will the products and services a company provides. As a result, it will be critical that a company can leverage intelligent automation and machine learning to drive a more responsive supply chain network that works in real time. This kind of network must be supported by a data and analytics platform.

4. The future will be won outside the traditional structures, thinking and cultural norms that define most companies.

The pace of future change will be so fast that incremental thinking and action will be too slow. Shaping an industry and engaging the future consumer will require market moves that are bold and differentiated. Short-term, quarterly financial metrics create drag and get in the way.

Companies need to find, attract and retain talented individuals and give them the freedom to win. By establishing a culture of intrapreneurship and enablement, new ideas can flourish or fail fast. In a workforce that is increasingly millennial — striving for purpose, autonomy, and creative problem solving — talented employees want a workplace where they can thrive and play a meaningful role in their firm’s survival and success.

5. Master the ecosystem. Even good innovators won’t evolve in a vacuum.

Looking at the worlds we modeled in LA, the pace and scale of change will be such that companies will need to collaborate in new and often unexpected ways. Companies that join the right network of suppliers, technology and data providers, advisors, academics and startups have an opportunity to create a new and distinctive form of competitive advantage: Ecosystem Mastery.

In the future, we’ll see increased “coopetition” across such networks. There will be new rules about how ecosystem members trade data with each other, and new forms of currency that enable them to create and exchange value.

Such ecosystems will play a key role in helping their members to understand the possibilities created by future technologies — especially those that enable companies to manage vast amounts of new data. They will also help their members to rapidly commercialize those opportunities across the ecosystem.

Summary

Attitudes to data privacy and ownership will change as the value of data increases. Companies that understand the future of data now, can position themselves to win.

About this article

By

Robert Holston

EY Global Consumer Industries Advisory Leader

Unlocking differentiated value for consumer-facing companies navigating an increasingly complex, connected digital world. Inclusive leader, high-performing team champion. Ironman triathlete. Foodie.