The triumph of consumer choice | KPMG | GLOBAL

The triumph of consumer choice

The triumph of consumer choice

Are you ready to respond to shifting demands?


Partner and Asia Pacific Head of Global Infrastructure

KPMG in Hong Kong


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Technology has put the consumer in the driver's seat

And that is having a massive influence on the way we use, plan and invest in infrastructure. 

The impact of technology on consumers is undeniable. New devices, new interfaces, new relationships and new data are all giving consumers unprecedented control over their decision-making.

Consider, for example, how way- finding apps (such as the popular Waze app) are allowing drivers to identify, and possibly avoid, traffic and congestion. Or how smart home systems are enabling consumers to take greater  control over their utility usage. Or how ride sharing programs are changing the way people own vehicles and pay for mobility.

Interestingly, this is not a triumph of technology. Rather, it is a triumph of consumer choice and information. Waze doesn’t remove traffic; it allows consumers to make smarter decisions based on available information. Ride sharing doesn’t eliminate the need for vehicles, but it does allow consumers to select from a far wider range of mobility options. The point is that the consumer, not the technology, is making the decisions.

The power shifts

In the past, it was the infrastructure leaders and owners who were in the driver’s seat. They were the ones who decided what options would be available to consumers. They selected how much capacity would be developed. They worked with regulators to select fixed prices that, in many ways, influenced the way consumers used available infrastructure.

Today, however, many of these decisions have been passed to the consumer. Time-of-day and surge pricing, for example, allows consumers to decide when they will use services and at what price. Mobility options allow them to select from a wide range of both public and private transport modes. New ‘as-a-service’ models are allowing consumers to choose whether they want to be owners of assets or merely passive users.

A new paradigm emerges

A triumph for consumers, indeed. However, it is also a massive challenge for planners and investors. On the one hand, greater consumer choice is leading to shifting expectations and demand. Peak traffic hours are starting to change, as consumers adapt their patterns to avoid congestion and make better use of their time. This is freeing up capacity at peak hours. However, it is also changing what ‘peak hours’ actually means.

Many of the more disruptive consumer technologies are designed to do just that: utilize spare capacity. Uber makes use of spare vehicle capacity; Airbnb leverages living space capacity; Waze connects users to spare road capacity. At the outset, this will allow many infrastructure owners to delay new capacity decisions.However, as trends evolve and adoption increases, the trend will eventually lead to entirely new capacity requirements.

These consumer trends are leading to two fundamental changes in the way we plan and pay for our infrastructure. On one hand, new technologies are disrupting the traditional ‘fixed’ technology set.

Consider, for example, how the introduction of autonomous cars will change the way we build and plan roads (one could imagine that lanes might be narrower, traffic management systems would be less obvious and signage would be simplified). 

At the same time, the way consumers use and pay for infrastructure will become much more modular. In some cases, consumers will want to pay only for their actual usage and value. In other instances, users may be just as happy paying for basic access to service through flat fees and tax levies. However, in each case, the way consumers expect to pay for services will have a massive impact on the way governments and owners plan to fund those assets. In this type of market environment, the role and compensation of the residual/reserve supplier becomes increasingly important.

The data to decide

While technology may be creating some challenges for planners and owners, it is also helping create solutions. Indeed, given the amount of data and information now being generated by users, assets and organizations, infrastructure planners should now have unprecedented insight into demand … assuming they can handle all the data and translate it into usable insights. Interestingly, this proved a significant challenge in our recent Cities Benchmarking Study.

In part, this insight will be achieved by improving and simplifying the user interfaces in a way that improves the feedback loop and generates rich insights. But it will also require owners to partner with new solutions providers and technology companies to ensure they are seeing all the relevant data. Consider, for example, how investments into roads might be improved by visualizing actual user data from way-finding apps.

The problem, however, is that humans can be unpredictable. Even with all of the data available, one can never know for certain what consumers will actually want in the future. Nor can one know what technologies might be available to deliver on those demands. In this environment, owners must be able to apply judgement to data and experience to insights.

Making the right choices

Ultimately, the trend towards technology-enabled consumer choice is creating a new reality for owners and planners. And it is forcing them to take a dramatically different approach to the way they develop, operate and pay for their assets.

For one, as we suggested in our 2016 Emerging trends in infrastructure report, (PDF 708 KB) owners will need to start behaving much more like tech CEOs than ever before. The reality is that our assets are becoming much more dynamic and this, in turn, requires infrastructure decision makers and leaders to understand both the tactical requirements and the strategic imperatives of shifting consumer choice. It is no longer the case of `if you build it, they will come' but rather `if they see value, they will come'. And this will require a ceaseless focus on the customer.

Owners will also need to recognize that the old technology set may no longer be fit for purpose. And that will require them to build a new level of intellectual flexibility into their planning and investment. Data will certainly help make these decisions easier, but owners and planners will still need to make some pretty big bets for the future, particularly in areas where they are obligated to ensure a reserve level of peak capacity (such as power, water, roads and transit).

If we can get this right, the future will be both bright and highly responsive to consumer needs. But if we make too many assumptions - or if we ignore the data and signals consumers are sharing - we run the risk of investing into the wrong assets at the wrong time. And that is a risk nobody is willing to face, particularly in this era of consumer choice.

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