Can business be profitable and also ethical using personalisation?

Can businesses use personalisation to increase profitability while also being ethical? This was the subject of the talk led by Professor Tiberio Caetano, co-founder and chief scientist of Ambiata, at CeBIT 2018 today.

Caetano started by defining personalisation as treating different people differently in order to maximise profitability. He outlined the steps businesses need to take to achieve profitability and stressed that not only is ethical personalisation possible, its possible without sacrificing short-term profitability, and the ethics act as a cheap, long term insurance policy.

“Personalisation is absolutely profitable. Businesses need to be personal, that’s why the market economy works; it’s an easy way for people to get what they want,” Caetano said. “To achieve it, you need large scale, data-driven optimisation, or machine learning (ML), and data is the fuel helping you to achieve this.”

The first step, according to Caetano, is business survival. 

“To achieve maximum profitability, you have levers, such as promotions, prices, new products, basically a variety of different actions you can use to make more money. You want to find the optimal value of these levers in order to maximise profit, but you also need to do that with real competence at scale,” he said.

The mandatory conditions needed to achieve this are good data, infrastructure, good machine learning, and a working business model. They are not all that’s needed, but they are necessary if you want to compete in the marketplace with ML at scale, he said. 

However, as Caetano pointed out, many businesses meet those requirements, but it still goes wrong because something is missing. Survival is not the whole answer.

“The next step is enlightenment. Businesses need to step back and wake up. Ethics is an insurance policy sold at a bargain and most people don’t recognise that. Ethics insures business against worse-case scenarios that could happen in the future,” he explained.

“The market is intelligent, but it’s not as wise as it will be in 20 years' time. The market does not entirely understand what is likely to go wrong years or even months from now.”

Caetano said if a business is operating well, and has a wealthy repertoire of levers, it doesn’t matter if it pulls these levers, it will have the same profitability.

“This moving area is the ethical mining range. Look in this region to obtain a better ethical outcome, as you won’t lose in profitability, but the ethics will protect you as an insurance policy against future loss of profitability,” he argued.

By doing this, business will elevate into operating in a different world, and have the ability to grow a long-term, sustainable, large scale business.

In order to find this ethical profitability using personalisation, Caetano said companies need to understand the consumer surplus for each individual, they need to understand why the customer is willing to pay what they pay.

“If the causes of consumer surplus are ethically charged, you need to be wise and make better decisions. Perhaps modify them in your machine learning objective to get the same profit  by forgoing this ethically-sensitive revenue. The impact on short-term profitability will be negligible, but it’s safeguarding against risk down the road,” he said.

Caetano said ethical profitability is possible for the same price. “The basics needs to be there, but you can make the world a fairer place and it’s not expensive.

“Of course, there is no such thing as an ethical person who is dead. You first have to survive, be lawful and compliant. However, if you are operating optimally, then you can be more ethical on the margin without sacrificing profitability. Then ethics become a cheap insurance policy.

“ML can be adapted by incorporating causality, by understanding prediction and outcome and why people are paying what they are paying."

Follow CMO on Twitter: @CMOAustralia, take part in the CMO Australia conversation on LinkedIn: CMO Australia, or join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+: google.com/+CmoAu