by Jack Santos | December 19, 2012 | Comments Off on The Digitalization of Business
One of the things we talk about at Gartner is how computerization is changing business – not just back office systems (HR, CRM), but from a fundamental product perspective.
I can remember discussing with my business colleagues (at an insurance company in the 1990s) what a treasure trove the collection of OBD (on board diagnostic) information we have at our finger tips – and how it could impact the rating and pricing of car insurance. At that time actuaries were skeptical. “People will just keep there cars in the driveway during sampling periods” said one. “Why would we want to do anything that potentially reduces revenue?” said another.
So goes the innovators dilemma. Leave it to market disruption to force a hand. Like Progressive’s “Snapshot”.
Progressive insurance’s product is now in 42 states and is revolutionizing auto insurance. Plug in a small 5×5 inch device into your car, and they get near real-time reports on your driving. This is the new world of telematics. Look forward to reports like these:
For the record, those two trips from 9-1 on Sunday were back and forth to church…
OK. Guilty as charged. I am a homebody. No getting out bars at 1 am for me…
But I probably need to get a little less aggressive on braking, which confirms what my wife has always told me, now with hard incontrovertible evidence.
I can only imagine the mountains of data being collected…and its eventual use in determining pricing, rates, identifying habits that forecast the potential for an accident, and (ultimately) how it could be used by drivers to adjust their driving habits. The analysis and use of this data is a poster child for Big Data and Business Intelligence.
And it is only the beginning. This is the bricks and mortar equivalent of what happens with online shopping, as our lives go online more and more. Surveillance, collection, use, ownership of data –all issues for our time.
“Progressive will retain information collected or derived from the device indefinitely”
Archeologists thought they had a field day going through latrine trash from the colonial era – wait another two hundred years to see what they do with this data!
There is a whole host of legal technicalities here – use by law enforcement in an investigation (criminal or not), or even use by a spouse in a divorce proceeding (imagine that!).
Parents monitoring teenagers driving… accident re-creation using data from multiple vehicles..correlation of speeds with local speed limits (can I get a ticket after the fact? A potential enormous new source of revenue for municipalities…); the list can go on and on.
Eventually, the use of this data may bring more income to Progressive than the base insurance product….its only a matter of time. Already, third party providers (such as Telanon) are offering services to analyze driving habits based on the data collected.
…and all the other companies are now playing catch up….
Progressive has an exclusive arrangement with Xirgo, the manufacturer of the device, and it communicates over the AT&T wireless network. They also have patents on the concept (usage based policy rating). Lets see how long that lasts…as my colleague Carlie Idoine pointed out, it’s an innovation that will only provide temporary competitive advantage as everyone plays catch up. State Farm is using OnStar, SYNC or In-Drive technology to mimic similar data collection.
This form of predictive analytics has profound implications – not just for companies, but for society as a whole. Note Progressive’s own report on what they have learned thus far. Their study correlates with our own assessment of the increased personalization and individualization that technology is enabling. Interestingly, one of Progressive’s findings is that “the majority of drivers with lower-risk driving behavior are subsidizing a smaller number of drivers with higher-risk behavior.” Whether it’s auto, healthcare, or homeowners – insurance is about the spreading of risk over a group of individuals, and establishing a community pool. But it also has always been about the financing of, or spreading the cost of, adverse events over time for groups AND individuals. Clearly, the model is changing – or at least getting readjusted (pun intended) – for some companies.
Just another example how the creative use of IT can change a business….
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