From Pigeons to Oodle! Wal-Mart move to the new info advantage...

Paul Reuter, who later founded the Reuters press agency, used a fleet of pigeons to deliver news and stock prices, including the outcome of the Battle of Waterloo, which helped his clients trade on valuable information before their competition.  Every company can find an information advantage, if they are creative enough. On June 3, the Wall Street Journal reported on Wal-Mart's quiet launch of Oodle.com, a free classified service that carries 30 million items - from Madonna tickets to houses.  Of course this will give them even more traffic to Walmat.com, and provide service to their 130 million weekly customers.  But the more interesting angle is how it allows Wal-mart to better understand consumer demand.  They already dominate all other retailers in their ability to spot trends, analyze data, and capture demand - from Hurricane stock ups, to college car washes, they see them coming.  My bet is that they have ramped up Oodle.com so that they can get access to the new frontier of insight which will come as they analyze the used market, and items they don't carry.  They can see the used price for things they sell, for things that complement things they sell, and for things they don't sell, but may be good indicators of consumer sentiment - like cars.  Wal-Mart now has a view into an entirely new set of transactions that helps them to run their core business even more powerfully.   The advantage has migrated from analyzing just purchasing behavior of the new to the new and used.

They are not alone in creating such an information advantage.  In December Goldman Sachs bought Litton Loan Servicing, which is a mortgage servicing company that services high yield loans.  They used Litton to buy Fremont General's loan servicing rights for $12.2 billion in loans as well. Not only will Goldman make money on servicing the high priced loans, but as importantly, by buying this asset, they are able to get superior access to information about the mortgage market more broadly.  The information premium can be found by understanding not only the sourcing, structuring and trading of assets, but also in the servicing behaviors too.

Likewise, back in 2005, Aetna bought Active Health Management a healthcare data analytics company for $400 million to help them better understand consumer behavior, and early indicators of problems so that they could design superior health management plans.  For Aetna to take the next step in accurate pricing and better client servicing, the needed a more complete predictive model of customer health behaviors so that they could intervene with a diabetic by having a nurse call him to take his insulin shot - and they know to make the call due to behaviors tracked by Active Health's data.  The competitive battle ground is not just in pricing and claims anymore, it has moved to predictive analytics and health management.

So the questions are:

Where is the information advantage in your industry?

Are you making the strategic moves to capture it and use it to drive value?

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