Look no further than the humble jar of honey.
Across several retailers, high-end Manuka honey was being stolen for a criminal ring diluting the expensive product with cheaper honey and exporting it. Slightly bizarre and relatively low value thefts individually, yes, but larger when combined. Yet the case was cracked with the help of data from a technology-enabled network created by crime prevention software company Auror, which picked up the Manuka honey thefts and shared this data with police.
It’s an interesting example of how even the crime industry – particularly the lower-end segment – is ripe for disruption.
As described by Clayton Christensen in his seminal work, The Innovators Dilemma, the process of disruption generally involves taking advantage of a change in technology to provide a low-cost new service, typically to non-customers or low-end customers of existing services, and then improving that service over time until it dominates the market.
Its reshaped industries for more than a hundred years, famous examples including mini mills disrupting integrated steel mills, the Sony transistor radio disrupting table top radios, Wikipedia disrupting Encyclopaedia Britannica, Airbnb disrupting Hilton. Industries are being transformed by technologies, with the Internet, mobile phones, cloud computing and big data all sitting at the heart of this transformation.
As it turns out, we can apply the same pattern of disruption perfectly to the crime-fighting industry, and understand how, over time, we can take advantage of a lot of the same technologies and trends that are emerging to change society for the better.
As an example, if we consider police as the “product” and citizens as the “customers” within the crime “industry”, then we can apply the disruption framework.
In reviewing the current product, the delivery of policing services and the latest technologies employed to resolve crimes, we can see that the standard has become incredibly high. The application of DNA testing, data footprints, thorough examination leads to a high resolution rate of significant crimes. However, while policing and related technologies continue to get better, the process itself is getting increasingly expensive, meaning it is almost unaffordable to provide the full extent of services to lower-end everyday crimes such as shoplifting and petrol driveaways, where the average incident value is only around $100.
As a result, up to 90 per cent of everyday crime is not reported to police. According to the fuel industry, there were approximately 192,000 petrol driveaways in Victoria during 2015, while police only received reports for 3000. Similarly, a significant portion of credit card fraud experienced by banks is not reported to police.
That could be about to change with Auror’s new solution: a network that enables ordinary citizens (businesses and ultimately households) to report criminal incidents experienced. Classically disruptive in that it is a “good enough” version of reporting a crime made available to non-customers, Auror – one of our portfolio companies – leverages a new distribution channel (a crowd-sourced, mobile-enabled data network), operates at a lower cost and as the data network grows, it will continue to improve in efficiency and value over time.
Using the logic of previous patterns of disruption, we are expanding the market for reporting and managing crime – enabling a larger, lower cost network to gather criminal intelligence. We are servicing non-customers or low-end customers of policing services – ordinary crime victims who under-report low value crime. And as the disruptive product improves over time, it leads to the disruption of crime, through a shift from criminal investigation to pre-cognition and prevention of crime, as well as surfacing intelligence that helps the police lower the cost of prosecuting serial offenders of ordinary crime.
A powerful data network effect sits at the heart of this approach to resolving crime – the broader the adoption of the network by the community, the more effective the intelligence gathering process, and as a result, the more effectively we can all work together to prevent crime. Petrol driveaways are a good example, falling dramatically across Auror’s network once an initial crime is reported. So in effect, that crime only occurs once.
The major difference worth highlighting is that the police are neither a commercial enterprise nor a market competitor. Given the important role they play in society, and the continual cost pressures associated with the delivery of policing services, by partnering with – instead of disrupting – police, we can expand the overall effectiveness of policing services at a lower cost.
Disruption is normally a negative force for incumbent organisations within affected industries. The lower cost makes it infeasible for the incumbent to respond on a price basis. In the case of the crime industry, however, disruption is a powerfully liberating force for police, with the lower costs leading to efficiencies and ultimately leading to an overall disruption of crime itself.
For more, Rohen Sood from our team and myself recently talked through this idea in greater detail in a podcast.
By Peter King
Acting Chief Executive Officer, Westpac