New Frontier:Unhosted Loyalty - Less big data, more my data

There's an intriguing new application available called Forever.

From a functional perspective it's not ground breaking - it simply provides address book functionality.  What is interesting however is that it does this without actually holding any data.

Of course it manages personal data - it has to so it can bring up a friends address details - but it doesn't persist it.  It keeps your address book in sync and up to date -  but it doesn't change anything.

Forever is a new breed of application known as an unhosted app and this has been defined by unhosted.org as:-

"Also known as "serverless", "client-side", or "static" web apps, unhosted web apps do not send your user data to their server. Either you connect your own server at runtime, or your data stays within the browser"

The application provides a service and works upon your own data, but it never actually "owns" the data.  Instead, you connect your own data store, such as that provided by a personal cloud, which the application can then work with.

In a world where everyone is talking about big data, this really is a breath of fresh air.

Rather than gathering data in bigger and bigger corporate repositories, the data is essentially always owned by the the customer.  Sure, it's probably still going to be hosted by a 3rd party for most people - the average consumer is not going to want to spin up their own homebrew hosting solution.
However, these 3rd party personal cloud suppliers are more akin to the 4th party concept spoken about within VRM - they work for the consumer.

Now, I'm a marketing technologist at heart, so I like customer data because I want to be able to market relevant products and services to that customer - and to be relevant, I need to know something about them - I need their data. However, I don't think that the 4th party personal cloud as utilised by the unhosted app concept precludes this from happening.

We just need to think differently.

If the data belongs to the customer, then we essentially need permission from the customer to access it.  This permission will be granted if the customer sees a worthwhile value exchange for their data and also feels in control of it.  They can grant access and they can revoke it - which side of the fence we're on will depend on what we provide back.

In reality though, as corporates, we don't need huge repositories of personal data despite our quest to build them.

Increasingly the battle field for relevant communications is real-time.  As I spoke about in my last post, technologies like Complex Event Processing and other solutions like collaborative filtering (people who bought x also bought y) are executing at the time a customer is carrying out a behaviour - on that behaviour.  At this point of interaction, we're working with the customer and will have access to their personal data and can use this within the application to make decisions.  Of course, we'll also need large amounts of historical data to support recommendations, but this doesn't need to be "a single customers data", it just needs to be aggregates of behaviours.

Imagine this within a loyalty programme context - one of the biggest aggregators and users of consumer behavioural data.

In an "unhosted loyalty app" context, when I swipe my identity card (4th party identity provider), the retailer would send my purchase information about the transaction to my 4th party personal cloud.  At this point, that data is mine to do with as I wish - it's basically an electronic till receipt.

• I could then choose to connect this data to a 3rd party application that analyses my nutritional intake
• I could connect it to the retailers loyalty programme which would then recognise my purchases and update my connected bank provider (cash or points)
• I could connect it to one or more FMCG/CPG manufacturers who could choose to recognise my purchase of their products (or my purchase of their competitors), and respond to me with relevant offers or rewards
• I could simply connect it to my shopping list app to tick off what I'd already purchased

It's my data, I get to choose who I let see it and for how long - but they don't need to hold it, process it, sell it or bombard me using it.

While this may seem like a step back for companies currently designing big data solutions which will increasingly sweep wider and wider customer interactions into larger and larger repositories, it's actually a giant leap forward.  I'm betting that Walmart would love to see detail on the transactions I've made with Costco.  Or Visa would love to see my spend with MasterCard.  Presently this data will never be shared between these competitors.

However, when it's my data, I can choose to share it with whom I like - my supermarket can have access to my credit card spend (and see who else I spend with) if I feel this provides value back to me.

Why though would a retailer simply give this data away in a format I can use electronically?

Well, ignoring the fact that this will likely be mandated soon by governments, it's also a customer retention mechanic.  When my data has value to me, then I'm more likely to frequent a retailer that can actually provide it.

In the last century, I gave my loyalty to a retailer so they could have my data; in this centuary I'll be giving my loyalty to the retailer so I can have my data back.

In my professional role I design and build loyalty solutions for clients including the backend systems to support these - I'm part of the machine that is gathering big data across wider interactions to help engage and retain customers.  I'm positive about this and it's an exciting place to be, both as a marketer and as a consumer.

I also understand however that consumer attitudes are shifting, government approaches are changing and technology is democratising data - looking out 5 to 10 years, I'm betting it's "My Data", not "Big Data" thats going to be the new frontier.

Data the new oil? Then exploration is just the start

What do Google, Amadeus, AmEx and Tibco all have in common?

Well, they are all market leaders in their verticals.  

Amadeus for example are the largest travel transaction processor in the world, processing 440m bookings per year for 693 airlines across 195 countries.  Tibco are a software company with a suite of products that focus on real-time data transfers powering many of the Fortune 500.  AmEx account for almost a quarter of all dollar volume for credit cards in the US and Google... well they are Google.

What they also all have in common is data.  

Each company manages and processes vast amounts of data.  You could say that they are in the data business and they just specialise in a particular vertical, whether this is travel bookings or web search.  If, as has been said before, data is the new oil, then these companies have very deep reserves.

It's this data though that is also the catalyst for the third thing they have in common.  

They all do loyalty.

They may not be widely known or recognised as loyalty companies and this may not be their core business - however they recognise the importance of loyalty and have made strategic acquisitions to add this capability to their services.

Back in 2010, Google acquired loyalty startup Punchd and Tibco acquired SAAS vendor Loyalty Lab.  In 2011 AmEx acquired Loyalty Partner which operates Payback in Germany and Poland and i-Mint in India.  Then in 2013 Amadeus recently acquired airline loyalty specialist Hitit who provides loyalty solutions for over 40 airlines - more than any other provider.

So what's the rationale here?  Why are these companies branching out into loyalty marketing?

AmEx stated that this was to "diversify it's fee service", "deepen merchant relationships" and "add more than 34 million consumers".  Ed Gilligan, Amex's Vice Chairmain said at the time that:-

"The loyalty coalition model is growing rapidly in many parts of the world. Increasingly, consumer decisions about where to shop and how to pay are based on loyalty offerings"

It's that final statement that real nails it.  "Consumer decisions...are based on loyalty offerings".  

If you can package up the offering from the initial consumer decision then you potentially get to control the whole value chain.

This seems in part to also be the rationale for Tibco purchasing Loyalty Lab.

Increasingly loyalty is about real-time decisioning and next best action and the software to manage this, known as CEP (Complex Event Processing), is an emerging frontier.  Tibco provide the software, but Loyalty Lab allows them push further up the value chain for their consumers in the B2B space, helping them steal a march on their competitors (incl. Oracle, SAP and IBM) by providing a solution to the problem (packaged up in a loyalty application) rather than just a cog in the overall solution.

Google is interesting in that having acquired loyalty start-up Punchd, they then went on to shut it down.  It's not totally dead however and the "closed for business" web page alludes to something bigger and better coming when it says:-

"The team has been working to integrate Punchd features and ideas into other Google products. Retiring Punchd is the next step towards our integration with Google"

For Google, Punchd provided a means to access small, local, offline retailers - and this is a key, strategic market for them.  As I've discussed previously, Google actions seem to be about protecting it's "economic castle" - it's ad revenue.  Having increased control from personalised online offer, through to purchase (via Google Wallet), loyalty and repeat purchase helps them to secure the whole value chain.

Continuing with the data being the new oil analogy - these companies have essentially mastered the "upstream" segment in terms acquiring the resource through exploration and production.  They've got the data reserves and the means to extract them.

However the "downstream" segment which involves refining, processing and distribution is increasingly attractive.  Loyalty is very similar to a network of forecourts - it provides a guaranteed consumer base for the core product and ensures the companies have line of sight from raw material through to consumer demand.

Vertical integration doesn't work for every industry or company, but what these examples show is that loyalty still has the power to drive and direct consumer demand.

The 5 steps to creative ideas (still relevant today)

I'm not a big fan of workshops or brainstorming.

They are typically done to generate ideas or solve problems, and yet the research suggests that in fact large groups of people has the opposite effect on creating on ideas.  It creates "group think", stifles ideas and can lead to the lowest common denominator being accepted.  It could also be that I just don't like large meetings.

It's not just me though... organisational psychologist Adrian Furnham is quoted as saying "Evidence from science suggests that business people must be insane to use brainstorming groups. If you have talented and motivated people, they should be encouraged to work alone when creativity or efficiency is the highest priority."

Innovation and creativity is though of paramount importance to businesses and even more so now because the costs of cutting edge technology become less and less with every month that passes.  Now, a couple of people in a garage (or more likely their spare bedroom) can spin up a new idea in a matter of weeks - mashing together cheap cloud infrastructure with free open source solutions.  This can make established companies, with layers of bureaucracy, established roles and "group think" workshops seem slow and antiquated.

It was interesting then to see on the BBC Horizon programme this week some new research into how we have new ideas - what creates that spark of creativity - and importantly when we have it.

Psychologists and scientists are mapping the brain as they work with people to see how they solve problems, whether this is done analytically or through flashes of insight... and there were some interesting findings.

The spark of creativity is generated within the sub-concious - Using a divergent thinking test whereby they ask a subject to come up with as many uses for a house brick as they can, people were allowed a break after coming up with initial ideas.  Those people who either did nothing or who worked on another complex problem were the worst at coming up with additional ideas after the break.  However, those people who did something mundane during the break so that they were occupied on something different, but not mentally taxed were then able to come up with even more uses for the house brick.

Breaking existing routines can make you more creative - In the Netherlands, researchers showed how just changing simple everyday routines such as the order in which you prepare breakfast can make you more creative, allowing new ideas to flow.  The suggestion is that we need to break established neural paths to allow more things to connect and reconnect and so providing more opportunity for divergent thoughts to collide and provide creative ideas.

What really amazed me though is that all of this cutting edge research into creativity seemed to just be confirming what had been published back in the 1940s by an advertising executive called James Young Webb.  He had no formal scientific training and yet in his book A Technique for Producing Ideas (McGraw-Hill Advertising Classic) he basically lays out the steps required for creative thinking, all of which is backed up by modern science.

Step 1 - Gathering of raw materials - For the first step, Webb recommends reviewing materials both for the immediate problem and wider, from general knowledge, adjacent knowledge, etc.  The purpose is really to ensure that you have enough material lodged in the grey matter to actually allow it to collide in different forms.  Ideas don't really come from the ether, they come from building on existing knowledge.  As Italian sociologist Pareto (of 80/20 fame) is quoted as saying, "an idea if nothing more nor less than a new combination of old elements".

Step 2- Work over the materials in your mind - This is an analytical process where you try different ideas, fitting them together in different ways and trying to form relationships.  What Webb is suggesting here is that you start off analytically - this may sometimes produce some immeadiate results, but either way, it's all about creating new connections and relationships.  The research that was presented on the Horizon program showed this too, with subjects being asked to solve various puzzles and to indicate if these were solved through analytical comparison (trying each piece in different ways) or via insight (it just came to me).    This is about breaking existing routines / assumptions and making new connections and relationships.

Step 3 - Incubate the idea - Just like the work with the divergent thinking tests, Webb recommends you simply go and do something else unconnected with the problem.  He says "drop the problem completely and turn to whatever stimulates your imagination and emotions.  Listen to music, go to the theatre, read poetry or a detective story."

Step 4- The "eureka moment" - This is when the idea comes to you; when you're not actually thinking about it.

Step 5 - Shaping and development - This is where you take the wonderful new idea and begin to circulate it to colleagues, friends, etc.  The chances are the idea will not be perfect and working with others to shape it will turn it from a good idea to a great idea.  The idea itself is a combination of old elements joined in a new relationship; this new relationship will break existing routines and assumptions for those around you, letting their creative juices flow too.

It's interesting that author Susan Cain who has written the book Quiet: The power of introverts in a world that can't stop talking highlights in an article she wrote on this topic for the New York times that "During the last decades, the average amount of space allotted to each employee shrank 300 square feet, from 500 square feet in the 1970s to 200 square feet in 2010"

In our rush to bring people together for the free exchange of ideas in our open plan offices, it's ironic that we may in fact have suppressed innovation and free thinking.

Whatever job we do, new ideas and new approaches are needed to keep us moving forward and being leaders in our industry.  Understanding better how these ideas form, how there is a process to it and that this process can be helped will lead to a greater number of truly innovative ideas.