Data-driven growth

A global undercurrent is shaping products, companies and a whole swathe of markets. It's happening at a rapid pace and needs urgent rethink by the government, business and civil society. It is not the internet, it is the digital footprints of consumers captured as clicks, likes, location and buys – this trove of digital data, capable of providing insights, is shaping social science, psychology and marketing. Focus groups are passé and extrapolating on a sample survey is dead – there is now real data about what people like, use and shop along with what influences their buying behaviour. The science of big data using machine learning is building artificial intelligence that predicts buying behaviour – it can even influence behaviour ranging from selecting a candidate to choosing a spouse.

This is not happening just because of technology; it is happening because technology has a massive amount of data, in terabytes, to crunch and build hypotheses. There is enough data that can test the output backwards into input until it is fine-tuned into an algorithm. Entrepreneurs are amassing this data to redefine products and create new markets that had never existed before.

Data is not the new oil as that analogy distorts its importance and also assumes ownership in the hands of a few, like the big oil monopolies. Data is more like water, we intuitively know it's importance but have never defined its ownership, clearly. It is also renewable and its ownership and usage will determine the future. Data, like water, also has individual and distributed ownership with individuals having clear rights to their own data and its usage. But anonymous non-personal citizen data has to be governed in such a manner that it promotes entrepreneurship and innovation. Therefore, a set of data's ownership can be distributed and treated like public good(s).

The rules for keeping big data open is important as it impacts competition, entry-level barriers, new products and entrepreneurship. Data incumbents are trying to skew the debate on data to protect their monopolies. A social media company entering payments will share data with its payment subsidiary but not the ecosystem. The incumbents cannot determine the law that should govern data generated by citizens. India has to set clear rules for the usage of data, irrespective of the platform, to create a perfect market. These rules will determine future economic growth.

An example elucidates this, e-commerce is small as compared to the total size of retail but it has already started making a dent in pricing, branding and growth of established companies. Any large consumer goods company knows its customer through the distribution chain and has sales data of its products segregated location wise. This data is used to plan production, pricing, inventory and growth. The distribution network is used as the data point for testing new products, pilots, surveys of consumer preferences, etc. The crucial gap in the network is the final consumer, the leap to the final consumer and his buying behaviour is available on e-commerce platforms. While consumer behaviour data is available it is not accessible.

As more and more sales move digital, all the nuances, like what is influencing buying behavior, can be identified if companies gain access. But because they don't get it, they will sooner or later lose their consumer. Especially young consumers and digital-first consumer platforms will monopolise future product innovation. A classic example of this is the cloud kitchens created by food delivery platforms.

Food delivery companies like Swiggy and Zomato which started as passive platforms connecting restaurants with consumers have become data powerful. This power arises from their control over consumers and their data. Almost every restaurant association in the country has complained to the Competition Commission of India (CCI) against them. Unfortunately, our outdated competition laws do not address the abuse of data by internet platforms. Competition law is important for free markets and economic growth. These food aggregators are not governed by the e-commerce rules either.

They have opened up budget-priced food kitchens that serve home-cooked food to a large section of office-goers, affecting not just the restaurant business but even tiny home food entrepreneurs. This innovation of both cuisine, pricing and location comes from data insights of consumption on the platform. The location of the kitchen is the single-most-important insight in this business and it determines success or failure. Which is why the National Restaurants Association of India (NRAI) is asking food aggregators to share their data with members so they are not left out. Here, it is important to know that the food aggregators are no longer passive platforms; they have entered the domain of the suppliers.

This is happening across sectors like travel, hotels, and more, where data is allowing platforms to enter new domains. While the consumer benefits in the short-run because of lower pricing and easier access to home delivery. In the long-run, choice and competition will shrink. Therefore, a proper market for data has to be created, rules need to be framed for the operation of such a marketplace.

This obviously will also raise a wider debate on privacy, data security and even pricing of such data. Platforms will not part easily with data as they see it is a competitive edge. They have lobbied hard to prevent any legislation on it. The best way to move forward is to recognise data as a public product or good. Certain broad principles need to be followed for this wherever the law is talking about data. The confusion of which law or Act will determine data sharing is a spanner thrown to delay the process. Unnecessary conflict is being created between ministries and pending legislation to prevent basic data principles from being followed.

(The author is a policy analyst. The views expressed are strictly personal)