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Why legislate on midata?

Posted on: Tuesday 7th of August 2012

As some of you may know, Ctrl-Shift has been acting as a strategic advisors to the UK Government’s midata programme. Now the pace is accelerating decisively with the Government’s move to give UK consumers additional statutory rights to their data in portable electronic form.

Of course, decisions like this are political and made by ministers. We weren’t party to the political discussions. But from the specific perspective of midata itself here are some reasons why this initiative is a good move.

Consumer Minister Norman Lamb notes in his introduction to the consultation midata has made significant progress over the last year. Some companies such as Scottish Power, EDF and First Utility are already releasing data back to their customers. There’s much more in the pipeline. But if we’re honest, there has also been resistance and if we look at the nature of this resistance we can see why regulation is helpful.

Here are some of the main pushbacks we’ve got when discussing midata with companies.

“But the data is ours!”

Among some, there is a reaction which goes like this. “We spend a fortune collecting, cleaning and managing this data. Now you want us to give it all away. For free. No way!”  In some ways this reaction is understandable even though it doesn’t hold water legally. (The Data Protection Act gives individuals the right to make a Subject Access Request and get a copy of all the data a company holds of them anyway. In this sense, midata is just a more practical application of an already existing right.)

Some companies are also worried that the insights they glean from analyzing customer data will be made available to competitors if they release the data. There are three points to note here. First, release raw data relating to one individual is not the same as releasing the insights that can only be revealed by crunching aggregate data. Second, the proposed statutory right focuses only on raw transaction /consumption data. Third, long term, it may well be that companies find more value in sharing insights with customers than in keeping them secret. But that’s not on the agenda right now, so it’s not at issue.

In this case, there isn’t really an argument to be had. The customer already has the right to the data.

“But we’d be giving away our competitive advantage!”

Some companies fear that if they release data back to their customers, individuals could then pass this data on to their competitors thereby giving competitors access to insights they previously didn’t have. It’s true. This could happen. So could the opposite. What companies lose on the swings they gain on the roundabout – the chance to access new information which they previously had no access to – for example, information about what the customer buys from its competitors.

The question is, why would customers bother sharing this data? The answer, of course, is to get some additional value. In one sense that’s what midata is all about: encouraging the growth of new, richer, trust-based information sharing relationships between companies and customers – information sharing that can generate and release additional value for both sides.

So, far from reducing all competitors to the same grey, uniform position. The exact opposite: it’s opening up a new dimension of competition around the value of information sharing relationships with customers.

“There’s no demand for it”

Some companies have said to us ‘if customers were queuing up asking for their data, we’d only be too happy to give it to them. But they’re not.‘ It’s a fair point. Customers are not queuing up demanding their data back … yet.

This is the critical chicken and egg challenged faced by midata. Customer demand for their data will only really become manifest once there are services in place making using of it. But these services won’t emerge until the data is available. This is precisely the log-jam that ministers are moving to break.

Turkeys for Christmas

Some companies fear that all customers are going to do with their data is use it for better, easier pricing comparisons leading to more switching.

True, switching is one of the applications of midata data. But midata isn’t actually creating this switching challenge – it’s simply facilitating switching if that’s what customers want to do. Which begs the question ‘why do they want to switch?’

The answer, of course, is to get a better deal. That means that in a midata world, if you offer demonstrably better value than your competitors, you have nothing to fear from midata and lots to gain. Only if you’re offering a worse deal is it a threat. But that’s not a midata problem. It’s a fundamental competitiveness problem. So, criticizing midata for encouraging switching is a classic case of ‘shoot the messenger’.

There is a more subtle debate to be had about switching – that it’s not as big a customer benefit as it’s sometimes made out to be. If all it does is create more churn then, ultimately, the only real beneficiaries are middlemen ‘churners’ such as price comparison sites.

This is a fair point. midata is about much more than switching. It’s about placing information as a tool in the hands of the individual, and making a vast new range of new personal information management services (PIMS) possible. Switching is just one aspect of decision support, and decision support is just one form of PIMS. In fact, by not progressing with midata – thereby cutting off opportunities to develop new types of PIMS – the chances are that the focus on switching will remain: because that’s about all customers can do with data.

“The cost! The cost!”

Some companies throw their hands up in horror at the costs midata could force on them. This is horses for courses. If you are company that already sends out millions of paper bills and statements, midata could be a route towards significant cost reduction – by accelerating the shift to digital channels. If you do not have this infrastructure in place, then creating it could represent a cost.

The issue here is whether truly represents an additional cost. We have to get this into perspective. Looking forward over the next three to five years, will any customer in a relationship where data is collected about them not expect some sort of ‘My Account’ facility? Looking forward, will there be more, or less, sharing of digital information between companies and their customers? If the answer is more information sharing rather than less, these costs will be incurred anyway. Like electrification, and computerization.

“Not now dear”

Some companies tell us they agree wholeheartedly with the midata vision and goals, it’s just that, right now, they’ve got other fish to fry.  That’s perfectly understandable. Every organization has its own, different priorities.

The problem with this is that if you are trying to create the conditions for a new market you need critical mass, and waiting for the last company to be ready is not a good way to build critical mass.

Putting things in perspective

If we review these objections as a whole we can see why creating a statutory right makes sense. The underlying goal, remember, is to encourage economic growth by empowering individuals with their own data; by creating the conditions for new Personal Information Management Services that a) make this empowerment possible and b) put it to good use (i.e. improved decision-making, life management etc). This new PIMS industry is not only good for individuals, it’s good for organisations too because it facilitates much greater, richer trust-based information sharing between the two sides.

But along the way we face a classic collective action dilemma. Long term, everyone would benefit from the enriched data sharing that midata would usher in. Short term, however, every company’s situation is different, creating a wide range of incentives and degrees of enthusiasm. If some companies move and others don’t, then we create an unlevel playing field and a chicken and egg logjam that could scupper the chances of the long term benefits ever being realised.

In today’s technology environment new types of trust-based digital information sharing relationships are inevitable. Introducing a new statutory right create a level playing field, removing the barriers and aiding a more orderly, accelerated progress.

In short, it makes sense.

Alan Mitchell