The next time you look up the weather on your phone or have a smooth flight, spare a thought for The Weather Company. It’s a prime example of a business successfully navigating digital transformation at scale and evolving from an old style weather bureau into a data company.
It now uses millions of data sources – including your mobile phone and sensors in cars – as inputs for providing live weather updates and forecasts to consumers and businesses, and the forecasts are accurate enough to be used by airlines to optimise flight paths and set fuel loads.
Banks are also engaged in their own transformation as access to data opens up, and the availability of new technology enables better ways of serving customers and new ways of competing.
On trips to the US over the last two years, the Westpac board and management team looked inside technology leaders such as Amazon, The Weather Company and GE Digital. These visits have reinforced my belief that delivering value from data will be one of the biggest competitive differentiators in the years ahead, particularly for businesses focused on delivering extraordinary customer service.
GE is often used as a poster child for the migration from a product business to a service business. It harnesses large amounts of data from its traditional products such as jet engines. It combines this with other data sources, such as The Weather Company, to improve the performance of its engines in flight. For GE’s airline customers, this means that planes spend less time on the tarmac and more in the air.
GE gathers the data and applies predictive analytics to inform its customers when engines need maintenance, in what form and how much. It’s no longer about selling just the engine; it’s about leveraging data to deliver a superior service.
The Weather Company has similarly taken this leap and their transformation in a short period of time is remarkable.
In 2011, the company had around 1500 weather stations in the US. Today, it remotely gathers data collected by millions of devices, such as from planes sending weather patterns, mobile phones measuring barometric pressure, and cars recording local temperatures and when windscreen wipers are on.
The Weather Company then applies advanced analytics to this data to deliver the most widely used weather forecasts. To give some perspective on the degree to which this service is embedded in our lives, they claim to receive roughly five times the number of data requests per day than Google. Among their customers are many airlines using the forecasting for route planning to avoid turbulence and minimise fuel consumption, thereby improving the customer experience and avoiding unnecessary cost.
For banks, data is obviously topical ahead of the incoming “open banking” regime, and the opportunities are clearly significant. Seeing up close the way other industries leverage data on a trip to the US in May, clarified the magnitude and nature of the opportunity to serve our customers better by gathering and leveraging data. While such trips by Australian corporates have become common in recent years, they remain as relevant as ever. It is invaluable to actually see – rather than read about - how technology companies, new fintechs and other banks are using data, and to hear directly from the people driving these changes about how to really move the dial. It focuses the mind, sparks imagination and makes the path a little clearer. Also when we lift our heads and look outwards to the rest of the world, it reminds us of the importance of investing in future capabilities.
On a relative basis, the return on investment from data is pretty tangible and fast. But the challenge for companies is how to best use the vast amount of data available to effectively support the strategy of the business – connecting data into the business. This was a key reoccurring theme on the trip: each of the businesses we saw reflected on the importance of data, but more so the importance of having a clear purpose and strategy, which attracts people who want to make a difference and get things done.
This is even more important in periods of change and disruption.
Like many industries, banks are facing disruption on several fronts from old and new competitors including fintechs and technology companies, and this is fuelled by the availability of new technologies such as cloud, data analytics, AI and blockchain. As a result the shape of industries is also changing, with more collaborative “ecosystems” emerging instead of closed systems owned end to end by one company. In the financial services industry, fintechs are increasingly seeking to partner with existing banks and develop symbiotic relationships as both recognise the capabilities of the other. Learning how to compete and collaborate in this way, as an ecosystem, will be key to future competition.
There is a saying in Silicon Valley that “only the paranoid survive”. Successful technology businesses – more accustomed to rapidly evolving industries – are relentlessly outwardly-focused, continuously learning from those around them and rapidly adopting what works elsewhere. They never assume they have the answers themselves and are constructively restless.
Given how quickly the world is evolving, Australian corporates would be well served to do this too – look outwards, collaborate and learn from the successes and failures of others around the world. Challenging one’s own world view is as critical as ever.
To do anything else is to put your head in the sand. But it’s also a source of inspiration and energy, which I’m hopeful Australia will embrace.