The Bankwatch

Tracking the consumer evolution of financial services

Posts Tagged ‘haque

The Dangers of Thin Value


Umaiar defines thin value as a mirage that will eventually evaporate. it is value that has no point nor reason, other than generate revenue for the corporation. The landmark example he offers is ARPU, or Average Rrevenue per Customer in the telco business. The 15 second instructional wait time in front of every voice mail is worth $620 million to one telco is one example he offers. The sole purpose of the 15 seconds is to generate revenue, notwithstanding claims that it is for the benefit of the user.

The Value Every Business Needs to Create Now
| Harvard: Umair Haque Edge Economy

Profit through economic harm to others results in what I’ve termed “thin value.” Thin value is an economic illusion: profit that is economically meaningless, because it leaves others worse off, or, at best, no one better off. When you have to spend an extra 30 seconds for no reason, mobile operators win — but you lose time, money, and productivity. Mobile networks’ marginal profits are simply counterbalanced by your marginal losses. That marginal profit doesn’t reflect, often, the creation of authentic, meaningful value.

He goes on to refer to other examples of thin value, and its the last that interests me here.

Thin value is what the zombieconomy creates. The healthcare industry profits, but Americans get poor healthcare. Automakers fought tooth and nail against making sustainably powered cars. Manufacturers of all stripes stay mum about environmental costs. Clothing companies can’t break up with sweatshop labour. The clearest example of thin value, is, of course, banks: they invested our national wealth in assets that turned out to be literally worthless.

That got me to thinking what examples of thin value in retail banking are – value that has no direct correlation to benefit received.

  • no interest on the first $ xx
  • chequing accounts vs savings accounts
  • credit card interest
  • credit card terms
  • overdraft fees

The list can go on. The theme I see in the thin value concept is this: there is no direct attributable consumer benefit associated with the cost paid out. Everyone accepts there is a value expected for their financial services, and the thin/ thick value approach focusses on the relationship between the cost and the benefit.

Thin value suggests that the operator cannot rationalise the value they are creating, therefore must use back door methods to bring in revenue in other ways.

Relevance to Bankwatch:

Here is Umair speaking on the concept some more. The concept is scary for corporations, because it means that business is not going back to the way it was before. It is all to easy to assume that the crisis is easing and recovery means going back to business as usual.

But this is not going to be business as usual, as i have talked about previously here [consumer mindsets] and here [Enter the Zombie Banks]. Consumers are more self aware than ever, and more aware of switching opportunities through bank and non bank designed tools to perform self assessments online. Services such as Wesabe exemplify.

How will your bank redesign services to demonstrate thick value?

Written by Colin Henderson

August 1, 2009 at 09:26

“Instead of extracting value, they create it” | Haque


Umair continually presses us to think about new types of corporations that are creating genuine value.  The definition is evolving, and you can check back with his earlier posts about the companies mentioned, but the final sentence in this paragraph is a great objective.

An Open Letter to 20th Century Business | Umair Haque

Who are some of those innovators? We’ve discussed lots of them – Apple, Google, Tata, Threadless. What makes them different is simple. They are more profitable and valuable than rivals because, well, they do stuff that counts. Instead of extracting value, they create it.

Written by Colin Henderson

May 25, 2009 at 20:53

Bailout or buy some time while industrial disruption occurs for auto, banks and telco sectors


I have found myself reading more economics blogs over the last couple of years, trying to understand better what is going on and the impacts of the banking crisis.

This blog, StumblingandMumbling is worth the subscription. It is insightful, and contrary enough to provoke thinking. It also happens to articulate things that I cannot help thinking about.

Recession or Inflation targeting

2. The cost of recession isn’t just unemployment hitting a few hundred thousand, but the fear of unemployment hitting millions.

But this fear exists even in normal times, because the job destruction rate is so high. The 25,000 jobs that’ll be lost when Woolies closes represents just half of one average week of job losses between 1997 and 2005.

And what recession?:

The other day, I tried to do some Christmas shopping. I went into six shops looking for a Wii fit. All were out of stock. When I get home, I get a Barclaycard statement telling me my credit limit has been raised.

What’s more, the welfare benefits of lower inflation – savings on shoe leather costs and on tax distortions – don’t stop at zero inflation. Friedman, remember, thought the optimal inflation rate was negative.

The facts are that few of us understand all this. Its all to easy to insist on bailout packages and economic stimulus. Times of change make everything very personal.

Some thoughts:

We are in a time of industrial revolution. Many businesses that have prospered through the last 50 years of relative boom times, did so because consumer demand exceeded their need to innovate. Where are the cars that do 150 miles per gallon.Where are the payment systems that seamlessly shift money easily simply and cheaply to merchants, people or internationally. Where are the mobile devices that work on primarily data plans with voice as an extra.

Innovation has come erratically and in small localised pieces. Innovation has resisted peoples requests, preferring to intercept those requests with scripted call centre employees. Yet companies have no idea, institutionally, what is in the content of those conversations.

But things are changing, and that is where the industrial revolution is taking place. Internet has brought together movements in conversations, and the peoples requests are being spoken, heard, and gathering strength.

Here are three industries [auto, banking, telco] that have challenges – what will they look like in 25 years. Do they need a bailout, or temporary money to keep them in a holding pattern while industry disruptors give people what they want.

Thoughts welcome.

Written by Colin Henderson

December 5, 2008 at 22:29

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