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Why Enhancing Industry Segmentation is Critical for Better Regulatory Outcomes

Regardless of the industry, sector or market, every regulatory sector contains a wide range of participants, each with different motivations and drivers that influence their intent, behaviour, preferences, reactions, and willingness to comply with rules and policies.

For regulators of these industries and markets, maintaining a balance between the interests of the industry, and the interests of the consumer has always been a perpetual challenge. Arguably, the bigger challenge for regulators has been an inability to adapt their strategy and approach to address differences in human behaviour and intent within the applicable industry. These agencies have struggled to understand who their stakeholders are and how they are motivated today in this market.

A traditional approach to understanding the competing interests and dynamics within an industry or market sector has been to categorise the sector into logical segments. The intent is to enable service propositions and processes to be developed to address the specific challenges of each competing segment more effectively. Whilst segmentation is a step in the right direction, it is an approach that has limitations, particularly as markets and industries are evolving so rapidly. Participants are moving at different tempos and velocities through their evolution – and don’t neatly fit into these segments.

The most common feedback we have received from both consumers and industry members, across multiple sectors is that

“…we are all treated the same…”, and “…I am part of the 99%, but I am tarred with the same brush as those that make up the 1%...”.

This sentiment is not only an indication of deep frustration and dissatisfaction but is also a direct call for a more sophisticated approach to designing and executing both proactive and reactive regulatory actions and processes. To do this, regulators must develop a deeper understanding of the stakeholder Personas that operate within the segments of an industry or sector.

So, what’s the difference between Segments and Personas?

Whilst Segments help to separate and categorise groups of individuals and entities that operate within a sector or market, Personas provide a deeper understanding of the emotional and behavioural triggers that drive the individuals, entities or customers within that sector or market.

Take, for example, typical segments that exist within the building and construction industry. There are Builders, Company Licensees, Individual Licensees, Contractors, Apprentices, Homeowners, Renters, etc. These segments can then be broken down into sub-segments. But as many times as you break each segment down to a sub-segment, there will always be significant variants within each categorisation, exposing those affected to dis-proportionate, and sometimes un-required, or unfair treatment.

By understanding the Personas that inhabit each of these segments, communications, targeted investigations, disciplinary actions, response times and services can be tailored to ensure that each Persona receives an experience or interaction that is appropriate and fair, and at the same time, drives a positive outcome. The additional benefit for the Regulator is that resource utilisation is more effective, with effort directed to activities and actions that address the greatest need and return the greatest value.

Returning to our building industry example, and the “Builder” segment, we may come to understand that this categorisation hides many more distinct personas that must be addressed in very different ways.

Whilst most people just want to get their job done right, provide a quality service, and avoid issues, the data tells us that this is not a sentiment shared by all. The two examples below are an illustration of the vast differences in intent, mindset and motivations that can be seen across any sample of builders. These cases should drive the regulator to develop very different approaches to regulatory action, particularly compliance monitoring, audits or proactive investigations:

Builder A – Low to Medium rise building class.

  • Building licence held in excess of 20 years.
  • Professional development points maintained and up to date consistently over the past 5 years.
  • No regulatory disciplinary action taken in the past 5 years.
  • Less than 5 consumer complaints were lodged in the past 5 years, with no recorded major or negligent defects, and no unresolved minor defects.
  • Zero unlicenced contractors were identified at any building site related to the Builder.

Builder B – Low to Medium rise building class.

  • Building licence held less than 10 years.
  • Mandatory Professional Development Points not yet attained.
  • 2 upheld regulatory disciplinary actions in the past 5 years.
  • In excess of 10 consumer complaints lodged in the past 5 years.
  • 5 major construction defects were recorded, and in excess of 20 unresolved minor defects are still subject to open complaints.
  • Unlicensed contractors identified at multiple sites related to the builder each year for the past 5 years.

The difference between these two entities that inhabit the same segment, could not be distinct. The approach to communicating, educating, monitoring, disciplining, and providing direction to these two entities must therefore be adapted to the specific persona if the goal is to encourage compliance with regulatory standards and drive better outcomes for consumers. It is also critical if the goal is to develop and improve collaborative relationships between industry participants and the Regulator.

By then looking a little deeper into these personas, and developing more personalised profiles, Regulators can further understand the drivers and motivations of the participants inside their industries, and by extension, understand how to better assist the industry to develop, and making more accurate predictions of future behaviour.

A common, albeit generic, definition of the role of a regulatory body is “…to establish and strengthen standards and ensure consistent compliance with those standards…”. Whilst regulators have multiple strategies for achieving this aim, by far the most effective strategies we have witnessed that have successfully driven behaviour changes have centred around developing a deep understanding of the different personas in play. These have then been coupled with targeted and tailored approaches to each of these personas that take into account the motivations, mindsets and intent that drives behaviour.

Regulatory Optimisation Roadmap

Ian Edwards
Ian Edwards
Ian is leader across APAC in Operating Model Design & Optimisation, Strategy Integration, Operational Effectiveness, Customer Centric Design, Process Architectures and Business Process Management

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