In today’s business environment, data is one of the most valuable assets a company possesses. Customer data fuels insights, product/service development, personalized experiences and relevant go-to-market strategies. Many companies routinely share their customers’ data with their partners, which is a key component of their business model. Privacy laws such as CCPA (California Consumer Privacy Act) and GDPR (the European version) regulate the data storage, sharing and disclosure practices for consumer data in today’s digital economy and are disrupting these business models and the way data value transfer works, reports Forbes.
In addition to data privacy, data security is also a key priority for all companies. Failure in either one of these areas can result in huge expenses—the average cost of a data breach in 2022 is $4.35 million. But even worse and beyond the dollar value is the long-term negative impact a data privacy breach or non-compliance will have on brand, reputation and trust erosion.
The more first party-data that is shared, the greater the risk of compromising both data privacy and security. Therefore, it’s a strategic obligation for business leaders to understand the difference between privacy and security, the changing business landscape, its impact on business models and how emerging technologies can help meet the new regulatory requirements and customers’ expectations.
Data privacy is based upon the premise that personal identifiable information belongs to an individual and that they should be able to determine what, how, when and to whom their information is shared or communicated. Recent regulatory and market trends support more individual control, more consent and greater transparency, so companies holding customer data must meet these legal requirements.
The previous practice of consumer data being captured by one company and then sold to another without consent led to mistrust. In fact, privacy has become a competitive differentiator now. Take Apple with their iPhone privacy protection features, which provide those iPhone customers with the ability to shut down data harvesters’ app tracking. For the big social media platforms that rely on this data, this initial change cost them more than $10 billion in 2021. As individuals control more of their own data and decide whether and how they want to share or monetize it, business models will need to adapt to accommodate these new rules and economics.
While data privacy is focused on protecting an individual’s rights via organizations adhering to regulations and business practices, data security is how an organization protects its overall data, including personal data. The explosion of the amount of data captured, coupled with accelerated digital transformation and increasing sophistication of sensitive data attacks, has made it more difficult and complex to keep data safe. Fraud detection and prevention alone is a $30.6 billion market today with a 22.8% compound average growth rate.
Many organizations can’t keep up (automatic download) with data security requirements. And yet cybersecurity is a top strategic priority, especially for business platforms where data sharing and insights are integrated into all aspects of the business model. So how do business leaders balance the requirements of both and meet customer, employee, partner and shareholder needs?
There are a few key takeaways for business leaders.
- It is critical to know what data you are collecting, why and how it is being used and shared. If certain data is collected but not necessary, stop collecting it and certainly don’t keep it. In my experience, good data hygiene and periodic review are critical. As part of that process, conduct an internal review and/or audit of privacy regulations specific to your business to make sure you are compliant.
- Review how you are working with business partners in terms of data sharing. There are emerging technologies that enable businesses to garner insights without transferring personal identifiable information. These solutions range from simple mobile apps to sophisticated data science marketplaces and present new ways to aggregate and anonymize data without moving it.
- End customers expect clear communications about how their personal data is used. Reiterating the customer benefits by knowing their preferences and behaviors can reinforce a brand’s value proposition and deepen loyalty.
- There are a number of data security tools businesses can use to identify a security gap or breach. In particular, the area of Identity Threat Detection and Response (ITDR) is a new technology sector within cybersecurity that helps IT employees monitor and detect vulnerabilities. These types of tools, in conjunction with good internal data security training, can help to create a culture that aligns with the company’s value proposition and business model.
In summary, data fuels today’s digital economy, and the rules around privacy and security set the parameters for business models. To be successful, effective business leaders are keeping close tabs on their own data strategies, practices and how these sectors are evolving, not only for themselves but across their ecosystems. It is important to know about new tools and emerging technology, as they may solve some of these data challenges and present breakthrough opportunities for new revenue streams or business models.
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