CASE STUDY: Walk this way
It’s good to talk, or so they say. With mobile phone penetration at 108% in the UK, and 98% of people keeping their phone switched on when they leave the house, we seem to believe it. Certainly the spread of mobile telephony has been one of the defining social changes of the last 20 years. And, as with any widespread environmental change, there are opportunities to be had for those clever and adaptable enough to find them.
One company both clever and adaptable is Solent Enterprise Hub company Path Intelligence (PI), which was chosen earlier this year from over 50 new start-ups as the winner of the inaugural SEEDA Enterprise Hub Showcase event.
Path Intelligence has developed a unique technology that can receive mobile phone signals and use that data to identify the path that people take through a space. Tracking mobiles is possible because of the way they communicate with each other and with their network. From that communication Path Intelligence gets a unique identifier from the phone. It’s anonymous, so there are no privacy concerns, yet the information enables the company to create a virtual path of where the person carrying that phone has gone. PI’s system is accurate to around three metres, so it provides a precise picture of how people behave in a space.
The first application for Path Intelligence’s FootPath product is providing information on the path shoppers’ take around shopping centres. COO Sharon Oliver explains why this is useful, “It’s critical information for the shopping centre. At the moment the only quantitative, regular information shopping centres have is how many people come into the centre each day. They have no idea of where those people go once they are inside.”
Planning and managing shopping centres has long been something of a black art – with little objective data available, Centre Planners and Managers have previously had to rely on their experience of what has worked before. PI’s system, believes Sharon, opens a new world of information, “Once shopping centre management know the paths their customers take it allows them to optimise their mix of retailers, set optimal rents for units, to understand how long people are staying in particular places (‘dwell time’, in the jargon) by day, week or month, and to use this information to increase that time. It also helps them operationally to understand where the busy parts of the centre are so they can see which areas might need more security, more maintenance, more cleaning.”
Most importantly however, the Path Intelligence system helps to understand how shoppers group stores together. Understanding and predicting shopper behaviour is the key to making shopping centres more efficient: if I go to Starbucks, where do I go next? How should those stores be laid out in order to get maximum foot flow and so profit, from me and the countless other people like me that flow through centres all over the country every day?
The initial idea for the technology came from Toby’s background in the sponsorship industry, but its development has coincided (and will doubtless encourage) a change in the way shopping centres are run.
Sharon explains, “In the past there’s been what we think of as the ‘caretaker’ Shopping Centre Manager. Effectively the manager looked after maintenance, security and cleaning - the property increased in value, and people just went shopping. Now, there is a lot more pressure on the Shopping Centre Manager to compete with other shopping centres, and with the Internet.
“Managers and owners are having to manage their asset a lot more aggressively: they’re having to think about what retailers they really want in their centre, what events they should be putting on, and how they manage their leisure offering.”
Another significant change is the length of leases. In the past Shopping Centres traditionally granted long leases, and the Shopping Centre Manager had little control over who went where. With shorter leases there’s more flexibility (on both sides) as to where and for how long retailers are sited. If managers see a ‘cold’ area of the mall they can move what they call a ‘destination retailer’ into that area, to change the foot flow around the centre.
DEVELOPING MARKET
The market for this technology is developing fast, both geographically, and in terms of applications. Path Intelligence has (amongst other applications) been asked to help locate mobile phones in Brazilian prisons, where gang leaders inside have been known to control street gangs outside via their phones, and a sergeant in Iraq called for help in detecting mobiles that might be used to set off IEDs (Improvised Explosive Devices).
“We’ve also,” adds Sharon, “been asked to help with understanding how people react in an emergency. If there’s a fire alarm here (because our system is on continuously) we can record how people react in a real situation, rather than a role play.”
MARKETING ADVANTAGE OR INVASION OF PRIVACY?
At the moment the data Path Intelligence gather is completely anonymous – it can tell where a particular phone goes, but it can’t tell whose phone it is. “We’ve talked to the data privacy commission and Liberty International - the consumer privacy group. At the moment the data we gather is completely anonymous, there is no way for us to tie a phone to a particular person or number. Although our system attracts a lot of attention it is, in fact, far less intrusive than other data capture technologies you encounter in shopping centres, such as number plate recognition,” says Toby Oliver.
However, that may be set to change. Being able to identify whose phone is going where would enable retailers to give people relevant offers when they are shopping – so, a discount on trainers when they are passing the Nike shop for example, sent straight to their phone. “We know that making offers relevant at the point of decision moves the conversion rate of a voucher up three fold,” explains Toby. “Having a mechanism to hit people at the time and place when they are making a purchasing decision is one of the holy grails of marketing, and a lot of what we’ve achieved so far has been part of the journey towards achieving that.”
MISTAKES ON THE PATH
The journey’s not been without its difficult patches, some of which were possibly self-inflicted, as Sharon explains, “I was in the middle of my MBA at Massachusetts Institute of Technology (MIT) when we came up with this idea. I remember our entrepreneurship Professors very clearly stressing that there were three things you should not do:
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Never start a business with friends or family
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Don’t start a business straight out of business school
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Never start a business in an industry that you’ve not worked in before
“We’ve broken all of those rules and I think in hindsight it was good advice! Because we are married one of our challenges is knowing when to stop: we work all day and we go home and still talk about work; we work all weekend. We even emailed a client report out two hours before our baby daughter was born! It’s very hard when you are linking business and family to get a balance.”
Toby adds, “Neither of us really knew shopping centres; we’ve learned a lot about the industry in a short time - and our distribution partner FootFall really helps in this respect - but developing the company has still taken us longer than it would have done if we’d been familiar with the industry. In retrospect, I think the technology development took longer than it could have. I should probably have hired more people to develop the technology and developed it more quickly. That comes back to funding though.”
FINDING FUNDING
Like David Parry from SEHTA (see page 22), Sharon and Toby see a marked difference in investment attitudes between the US and the UK. “Investors in the US are a lot more willing to invest in new technology than UK investors. UK investors only really become interested when revenue is in place whereas US investors will take a longer view.”
Arthur Monks, Director of the Solent Enterprise Hub together with Finance South East were able to provide help to get Sharon and Toby further up the funding ladder, initially via a PoCket grant of £22,500 from Finance South East, a loan via the Small Firm’s Loan Guarantee scheme, followed by Angel investment resulting from an appearance at Venture Fest in Oxford.
Toby explains, “We already had one Angel Investor by this time, and at the Venture Fest we spoke to a range of potential investors, so eventually we were able to choose the deal that gave us the best mix of skills. We have one investor who used to be CEO of BBC Technology, one who worked for Vodafone, and one who is a property banker. They are important at least as much for their contacts and experience as they are for their money, though the money was very useful!”
OPENING DOORS
But Arthur explains that marketing was the area where he feels the Hub helped the most, “Path Intelligence needed a trial site and had spent many months talking to shopping centre operators who were interested, but didn’t take the final step of allowing the trial. I called the CEO at a recently opened centre owned by Land Securities, and got him sufficiently interested on the phone to see us within a week. At the meeting we secured agreement to run the trial, fully supported by them and with a significant contribution to setup costs. The ability for the Hub to intervene at top level in this way regularly opens doors that would otherwise be firmly closed to the very small firms we are supporting, it can easily move them forward by 12 months.”
THE PATH AHEAD
For the moment at least, their financing problems seem to be behind them. A finance round with a US Venture Capital firm is due to complete shortly which will provide the funds to roll the system out nationwide, as Sharon explains. “We’re coming to the end of our two trials and we’ve had significant interest from shopping centres and mass-transport stations both here and internationally. After that we’ll start to look at other applications for the technology such as working with larger retailers and developing a point-of-decision voucher system.”
Toby, “With permission.”
Sharon, “Of course!”
Author: Enterprise Hub Director - Arthur Monks
Created Date: 17-12-2007
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