data driven
Is Your Data Worth Anything?
One signpost that a firm is maturing their analytic and data-driven capability is when they monetize data…IDC’s Dan Vesset made this point to me and I agree. Specifically, I’m talking about data, housed within the firm that has not previously been used or leveraged as a source of revenue. It could be dark data (stored and largely unused) or internal data that is frequently used but not shared. That said, understanding where and how you monetize your data is not such an easy task as it turns out either. Predominantly, I believe, why financial firms (or other industries for that matter) aren’t finding this easy is largely due to some key factors. While not exhaustive, the big ones tend to be:
- They are lacking a robust data-driven (digital, information, analytical, etc..) strategy or are lost on what that is in the first place
- Do you know what data you have is even valuable? Or what could be valuable?
- New cultural, behavioral and business model considerations need to be made. And these don’t have to be grand corporate wide sweeping initiatives, they can be more focused and tailored to start.
What does data monetization look like? There are actually very good examples in financial services from new and old firms alike. New firm business models (digitally native) are largely doing this as a big data play as seen in the financial peer-to-peer and crowd-funding/sourcing segment. One good example is Estimize, a give to get model, where crowd sourced estimates are turning the model of analyst stock earnings forecasts upside down. On the site, anyone can contribute to the earnings consensus for a particular stock. As it turns out the predictions are eerily more accurate than what you will get from the street. That data then becomes something Estimize turns around and sells. Another post I’m writing will look more closely at these new data business models, but for now it’s an example of how data is being cultivated and sold. The best examples of where older, more traditional financial firms are winning is in credit cards and payments firms. Other good old guard examples are financial firms (intermediaries) that sit at the intersection of markets, such as State Street, who fairly recently launched Global Exchange to take advantage of the massive amounts of data it collects across markets and offer advanced risk analytics to its clients.
While not in financial services, BloombergBusinessweek’s recent article covering The Weather Channel provides a great read on how a whole company transformed itself with this approach. It offers a nice glimpse into how it could be done and the success it can wring for a firm
There are few particularly interesting highlights of this story. First, is the business was stuck in a traditional model and was seeking a way out. Whether it is a data-driven, innovation, growth, or some other strategy that is being worked through, having the top ranks recognize the opportunity and move on it is always cited as a starting point – and exactly how the Weather Channel started. The next important element is that they worked diligently to close the ‘digital loop.’ This means being able to digitally account for or process information across a life-cycle from start to finish. In this case, mobile was not only a pillar and linchpin in their digital strategy, but also a key component in tightening their digital loop. A firm may not have every aspect of their processes collapsed into a digital workflow, as we often see with new economy e-commerce companies, but they are diligently working to improve it and that is a major feet and accomplishment unto itself.
The last take away I had was the two above steps paved a path to data monetization. The Weather Channel’s data-driven strategy is realized as it is able to apply advanced analytics on its data and recognize a new major source of revenue. And the great part is how they combined their competitively advantageous weather data with partners (Procter & Gamble) to gain insights that have begun to force them (or us even) to rethink some of our basic assumptions about weather, marketing and how people buy products as noted in the article:
In the beginning, WeatherFX assumed it would have to break down its data along the traditional marketing demographics of age, gender, and race, but it quickly realized it didn’t. No matter who they are or what they look like, people in the same place mostly react to weather the same way.
Some thoughts on tackling the challenges. Work to understand what being data-driven means and how it’s achieved. Having researched and written on it more deeply over the past several months, it’s not as obvious as one my think – it can’t be a “I’ll know it when I see it” approach. While the word and concept is used often (and has been for a while) there is surprisingly little that examines what it really means and how to make it a strategic part of your business.
The second is how to go about realizing what data is of worth internally. Here are some some basic criteria (Gartner assist here) to understand what value your data has or can in order from strongest form to weakest:
- Scientific approach: firms are using advanced statistics (doing more with math and computing power) and being more experimental to test the correlations, relative values and accuracies of data. Getting a firmer grip on what influences/causes something else
- Timeliness: The most valuable information tends to be closer in time or fresh
- 1st party data: This is data that is unique to a firm about its clients, products or stores that no one else has and is a cornerstone in data as a competitive advantage.
- 2nd party data: These may evolve from alliance or partnerships that is again another unique set of information that is not openly available, yet not entirely your own
- Open or 3rd party data: Lowest level is freely available data that is public or from 3rd parties that can be purchased by anyone
The last major challenge in changing the business or culture with leadership…there are scores of books that have been written on the topic and frankly I couldn’t do it justice here. So, perhaps start with the Inc.’s Top 10.
PWC put out an article, The Data Gold Rush, that further explores what business models can be considered when trying to monetize data that is worth a read as well. We continually find in articles, about big data, that discovering new products is often one of the potential benefits from mining your data. That new product may very well already be sitting on your servers.
Is Wealth Management Missing the Message?
Rising costs to do business and contend with regulations has forced some consolidation within wealth management over the past eight to 12 months. Subsequently, the consolidation of the technology they deploy quickly follows. As infrastructure projects start, the conversation quickly leads to how architecture decisions must focus on client and product data and marketing to improve advisors messaging, communications, interaction and overall productivity.
Accelerating client loyalty and advisor engagement is often a leading identified goal. Yet a recent study by Teradata Applications on DDM, highlights a number of the issues that are arising for marketers which ring true for wealth management and are causing efforts to stumble. Drilling into the survey findings to look specifically at financial firms, one of the top priorities identified in the survey is delivering a customized/personalized experience. Other areas of focus, such as improving marketing efficiency, measuring marketing to business objectives and linking marketing activities to earnings.
We can point to the typical investment planning process, which involves a lengthy, large paper shuffling and data input exercise to onboard a client, followed with a plan and review of the plan with the client. Then, if the advisor is diligent the client may hear back in a year to review the last plan. A lot can change during those 12 months and clients are finding the lack of interaction alarming. More important, communication is a notable influence of how clients are deciding whether to maintain their advisor relationships. Calls reminding clients that their money market account positions are running too high or receiving a general investment newsletter is not hitting high degrees of relevancy or timeliness. Our survey highlighted that only about 50% financial services marketers are satisfied with the achievements of their companies marketing program. There are improvements, such as automated alerts, improved segmentation and target to improve advisor outreach.
One of the challenges with improving messaging and marketing activities that was cited in Teradata’s DDM survey was the lack of integrated data. In fact, 70% of financial services marketers agreed that data is the most underutilized asset in their marketing organization. And of those, 96% said they have obstacles that prevent them from using data to make more informed decisions. The data problem is an issue entirely to itself and according to research from CEB Tower Group, which cites that 90% of advisors cannot see a consolidated view of their clients’ holdings that are held away from their firm. Worse, 76% cannot see a consolidated view of their clients’ holdings within their own firm.
Before improving messaging, it is critical to improve data accuracy and availability first and then effectively measure marketing and communications activity. Which drives home what Peter Drucker once said: “If you can’t measure it, you can’t manage it.” For example, our survey found that 90% of financial marketers report challenges with calculating Return on marketing investment (ROMI) or how marketing activities impact sales revenue. With the cost of acquiring and retaining advisors being so high, it is imperative that their outreach and the firms marketing efforts are squarely aligned with not only improving productivity but also revenue outcomes.
Not surprising, the survey found that many financial firms (roughly 66%) cited IT and marketing are misaligned. The multiple disconnects between the business and IT impact how effectively the front lines engage clients. Marketing operations itself cannot seem to get out of its own way to drive towards goals of understanding which initiatives are effective to begin with. Many wealth firms are diligently looking at these issues and starting to understand how they may be able to improve advisor marketing, as right now millions of wealth clients can attest that too often the message is wildly off target.
Information Alpha 