The Decision Maker

A Lesson from Amazon & Uber: How to Transform Data into Your Most Valuable Asset

Posted by Austin Wentzlaff on Nov 6, 2014 11:57:00 AM

In recent years we’ve experienced a phenomena in business – the transformation from physical, brick-and-mortar retailers to online/mobile retailers.  This transformation has shaken up the way people interact with businesses and consequently how business operations have changed to accommodate.  Online/mobile has created a whole new definition of the word convenient by making payments more simplistic and by giving users unique experiences by recommending products and services they unknowingly love.  Online/mobile retailers are becoming integral parts of many consumers’ day-to-day lives by creating a new type of relationship, unrivaled by their brick-and-mortar counterparts.  But how have companies such as Amazon and Uber taken so much market share with so little in physical assets?  The short answer, data.

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Amazon’s Data Management Paying Dividends

Amazon, started in 1994, has gone from an online bookstore ran out of Jeff Bezos’ garage in Washington to international retail behemoth in less than two decades.  The company’s publically traded stock (NASDAQ: AMZN) has appreciated over 17,000% since its IPO. One of the primary drivers of Amazon’s astronomical growth is its sophisticated Information Management (IM) technology.  Amazon’s business strategy is based primarily off information delivered from their data warehouse, one of the largest in the world. 

The data collected, stored, and analyzed in the data warehouse enables Amazon to build deep relationships with the customers without ever physically interacting with them.  In a matter of seconds Amazon’s data allows customers to find exactly what they want with a few key words, compare prices, see product features and reviews, and even see other similar products that compliment what is being purchased.  Amazon recognized the value of their own data and used data management techniques (now being referred to as Big Data/Analytics) to dominate their competition at a fraction of the cost.

Uber Revolutionizes the Taxi Industry with Data

Uber is another great example of a company that is leveraging data to conquer market share.  If you haven’t seen or heard of Uber in your city, just wait, you will.  Uber entered the market 2009 and turned the taxi industry on its head.  As of September 2014, the company offered services in 45 countries and was valued at more than $15 billion without owning any of its own vehicles.  Like Amazon, Uber can attribute their success to innovative data management.  The company utilizes:

  • GPS – to determine the pickup and drop off locations. And now, with Google Maps, the estimated fare.
  • Smartphones Applications– to request a ride from wherever, whenever.
  • Social Networking – to establish trust and accountability between both drivers and passengers.
  • Other People’s Vehicles – to eliminate depreciating vehicle expenses that affect taxi companies.

These element help Uber deliver a superior service that customers love and it’s all because of data.

The Opportunity for Retail Banking

As online/mobile retailers have shown in the past few years, data, not infrastructure, is the most valuable asset. In fact, at a recent Wikibon conference in New York City, we heard the term “data is the new infrastructure.” 

This discovery presents both opportunity and challenge for companies that currently operate primarily through physical locations. The majority of these organizations are rich in data and its growing exponentially. Yet, they are neglecting to leverage it to provide value.

Fortunately for retail banking organizations, such as credit unions, online/mobile banking is naturally assisting in the transformation from brick-and-mortar.  Credit unions are sitting on a mountain of data that, if managed properly, could yield serious value.  Just as Amazon made consumers love them by customizing the user experience, credit unions can revolutionize the entire retail banking industry.  By implementing Big Data/Analytics techniques similar to Amazon, credit unions will be able to build more intimate relationships with a larger member base while decreasing their total number of physical branches. 

Consumers are being conditioned every day to expect more personalized information at their fingertips through all aspects of their lives. This information expectation should be a top strategic priority for credit unions and the rest of the financial services industry.  In the credit union of the future, which model will prosper?  Will it be the brick-and-mortar, physical approach taken by Borders Books (now defunct) and the traditional taxi companies or the online/mobile (data-driven) approach taken by Amazon and Uber?

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You now have more information at hand about your credit union than ever before. But are you using it to "out-think" your rivals? If not, you may be missing out on a potent competitive tool.

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