Data Privacy Just Makes Good Business Sense

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Data, data everywhere and companies sucking it up at breakneck speed, sometimes without rhyme or reason, just feeding the big data collection machine.

A few years ago in an interview with Forbes, Tim O’Reilly famously said, “The Guy With The Most Data Wins.” It seems his statement was prescient, or perhaps organizations took it a bit too seriously and have been collecting as much data as they can ever since.

Yet all of this data gathering comes with a host of ethical, moral and legal issues around ownership and proper collection and usage. Just because we have developed the technology to accumulate all of this information, doesn’t mean we are prepared to deal with the problems it poses, suggests Susan Etlinger from Altimeter Group, who helped author a recent report called The Trust Imperative, A Framework for Ethical Data Use.

“A lot of major technology shifts tend to get out ahead of our ability to understand and apply them. Sometimes that’s alright and we catch up and sometimes it’s problematic,” she said.

Over the last several months there has been a growing body of evidence from organizations like Pew, Annenberg School for Communication and the Altimeter Group that people are actually much more interested and concerned about consent, collection and analysis related to all of this data, then we have been led to believe.

That suggests that businesses need to take data privacy much more seriously, and begin putting customers at the center of every data decision they make.

Users Actually Don’t Accept Quid Pro Quo Data Policy

There is a prevailing belief that we are OK with companies using our data because we get these services for free in exchange, but recent data suggests that may not be the case and companies may be taking a risk by playing fast and loose with our data.

A report by the Annenberg School for Communication (.pdf) published last month found that this notion that consumers are willing to make a trade-off of data for discounts or services is in fact overstated.

“By misrepresenting the American people and championing the trade-off argument, marketers give policymakers false justifications for allowing the collection and use of all kinds of consumer data often in ways that the public find objectionable,” the report stated.

In fact, the study, which asked 1506 adults over 18 about their online privacy concerns found, “91% disagree (77% of them strongly) that ‘If companies give me a discount, it is a fair exchange for them to collect information about me without my knowing.'”

By misrepresenting the American people and championing the trade-off argument, marketers give policymakers false justifications for allowing the collection and use of all kinds of consumer data often in ways that the public find objectionable
— Annenberg School for Communication

The Altimeter Group’s report found a direct correlation between trust and business gains. Consider that 80 percent of respondents said that in the last 12 months, they bought products from trusted companies, 68 percent recommended the company to a friend and 54 percent paid more for a trusted company’s products.

That kind of data suggests that CEOs need to start directing their companies to rethink their assumptions about data privacy and the impact it could be having on their relationships with customers and even their bottom line.

Users Need More Control Over Privacy

If the current system is broken, how can we make it easier to help consumers understand and control the data they are sharing freely now?  We have certain industries such as healthcare, which can’t use our data freely because of HIPAA regulations strictly controlling its use.

If companies are careful with medical information, why can’t we do better in controlling all types of data? Etlinger says companies need to establish clear guidelines around how they use data and always keep the customer first when making these decisions. In fact her report offers clear advice on how to build a customer-centered data policy.

We are putting the smartest people in the world not to cure cancer, but to find better ways to serve ads.
— Steve Wilson, Constellation Research

Etlinger suggests that maybe it’s time we put as much creativity into context-based privacy notifications as we put into sales and ads. “We are very good at sales in context. Why [can’t we do better with] privacy to make the customer experience more trustworthy,” she wondered.

Steve Wilson, an analyst at Constellation Research was even more blunt in a presentation last month, “We are putting the smartest people in the world not to cure cancer, but to find better ways to serve ads,” he said.

It can be done, Etlinger says. She points to Pinterest as an example, which introduced a new buy button and sent users an email recently with a two paragraph explanation in clear language about what it meant. It was respectful of users and clearly written. She wonders why more companies aren’t doing this.

If Business Doesn’t Lead, Government Will

If business doesn’t start to build more sensible privacy policies and take the lead on this, Etlinger and Tim Walters, who studies privacy issues for Digital Clarity Group, believe the government will, and that lawmakers tend to use blunt force when they get involved.

“If market participants won’t help themselves (or stop harming others), the government will step in. The government is inevitably ignorant of the technical issues and far out of date in their understanding of the real benefits and threats. They therefore create crude, broadbrush solutions that typically make life worse for both sides of the debate,” Walters said.

If market participants won’t help themselves (or stop harming others), the government will step in.
— Tim Walters, Digital Clarity Group

Walters believes companies have to lead on this issue, be direct and help their customers understand what they are doing in terms of privacy. Data collection in itself isn’t inherently evil, but companies have to be more forthright about what they are doing because customers are watching.

“Many people are tuned in, and if a company takes a stand — like [Apple CEO Tim] Cook, or in whatever way makes sense given the business model — many will at least pay attention. This does not mean swearing off data collection altogether. It makes more sense to announce some kind of opt-in program, with clear incentives and benefits for the consumer,” he said.

Etlinger believes this is a pure business issue and there is increasing evidence that this is a trust issue for consumers. “I think that one reason I wrote that report was because it’s in business’ best interest to be privacy safe. We are at the very beginning of this data universe we live in,” she said.

There is no silver-bullet solution to these issues, or one-size-fits-all privacy policy. There needs to be more organizational experimentation and accountability, and it needs to be something that spans the entire organization.

Companies who aren’t thinking about this are putting the business at great risk, Etlinger said.

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