Why the personal data economy is an important trend for businesses & citizens

Back in 2011, the World Economic Forum (WEF) compared personal data to oil, as an asset class of extraordinary economic value. Oil was central to the development of the industrial revolution. Without it, much of the infrastructure we take for granted today (transport, energy, etc.) would not have been realized. Presently, personal data is the lifeblood of the information age and central to everyone’s day-to-day connected digital experience. As we move further into 2014, the debate around how we implement the fair use of personal data will gather momentum.

PAST

The exchange of knowledge and the sharing of ideas have been central to our progress throughout history. Over the course of time, we have moved from verbal communication, to the printing press, to a networked world of information and data. Much has been written about the parallels between the Gutenberg printing press and the internet [1]. Both have radically changed the way we communicate and distribute knowledge and both have had a substantial impact on the cost of circulation and accessibility.

In the 1970s and 1980s, the early pioneers of the internet were driven by the desire to link and share data. The introduction of the web in the early 1990s harnessed the power of the internet and opened it up to everyone – not just to academics and government agencies. If you measure the growth of the web by the number of available websites, it has grown from one website in 1990, to around 6.5 million in 1999, to close to 600 million in 2012. All of these websites collect data and, over the past decade, much of our lives from shopping to socializing are carried out on the web. We have therefore moved from having no data in the 15th century (pre-Gutenberg), to having some data up to the late 20th century (pre-Web) to having too much data in the early 21st century.

PRESENT

Since the WEF defined digital personal data as an asset class on its own in 2011, the interest in Big Data has grown substantially. Personal data, those data items relating to an individual, make up a huge part of the Big Data ecosystem. Of course, companies whose business models are built on the internet – such as Google, Apple, Amazon, Facebook and Twitter – led the way in Big Data, much earlier than 2011. Indeed, most businesses born online are typically monetizing their users’ data through advertising, helping advertisers to refine the targeting of their marketing campaigns through the utilization of personal data.

In recent years there has been a growing concern about who owns personal data and what privacy rights users should expect from the vendors who collect it. As more and more big corporates transform their IT strategy to capitalize on the Big Data opportunity, we are arriving at a point where internet users are concerned about the security, control and privacy of their personal data. There is a growing concern among consumers that people share too much personal information on social networking sites. According to GfK Global Trends, this has risen from 23% who ‘strongly agree’ in 2010 to 39% who ‘strongly agree’ in 2013. Consequently, the progress of Big Data is likely to hit a data privacy ’crunch’ where the flow of data ceases due to the fear and risk of interacting online and sharing data. Throughout 2013, the beginning of this crunch really gathered momentum with much disagreement between legislators and business leaders on the way forward and, of course, the big story of the year: the Snowden revelations. As a result, trust among consumers is at an all-time low [2]. In order to progress in a productive way, where both the organization and the end user benefits, the terms of business need re-balancing.

FUTURE

The two main visions for the future are: a world without privacy or one where privacy is an integral part of the design of all internet services.

One of the early pioneers of the Arpanet and now Chief Internet Evangelist at Google, Vint Cerf, told the Federal Trade Commission (FTC) that “…privacy may actually be an anomaly”. In the context of Cerf’s overall comments, he was not arguing that personal privacy is not important but that greater transparency “…is something we’re gonna have to live through”. There are benefits to this vision: the greater use and transparency of data will facilitate much smarter technology. Products and services will be deeply personalized, and the ability to live a seamless lifestyle (beyond media devices and towards an Internet of Things) will be greatly enhanced. Living in a world without privacy requires a significant shift in everyone’s mindset. This will face huge opposition from pressure groups and people around the world.

However, as our research shows, the alternative future is driven by consumer sentiment: a future that respects privacy ideals. According to GfK Global Trends, consumers now rank “personal information getting into the wrong hands” as their #12 concern, having increased in priority from 2009 when it was ranked #15 [3]. The big challenge however, is balancing the need for privacy and security with the commercial realities of business in the information age. It is the solution to this very question that will take shape and gather momentum in 2014.

The book, The Intention Economy written by Doc Searls in 2011 [4], describes a future where consumers are empowered to make smart purchase decisions and to control which vendors they have relationships with. The idea is that we will eventually move from an ’attention economy‘, where advertisers fight for brand preference by pushing out adverts, to an ‘intention economy’, where customers will be empowered to signal their intent to purchase and invite offers from different vendors. There is a lot of work needed to create the infrastructure and protocols to make this happen, but these are starting to come to fruition. The UK’s Midata initiative is piloting new ways of empowering individuals to make smarter decisions by aggregating and using their personal data. Northern and Eastern European markets have made great strides in digital identity programs. In the US, the Respect Network published a paper entitled, Big Privacy: Bridging Big Data and the Personal Data Ecosystem Through Privacy by Design, which maps out a future path where Big Data and privacy can co-exist. The report contends:

“So if privacy infringement is the negative externality that Big Data frequently ignores, the PDE [personal data ecosystem] is the emerging positive externality that can turn the combination into a positive-sum outcome where both data subjects and Big Data users benefit.”

The vision painted by this report is an important step forward. One that is likely to restore trust which is crucial to the flow of data and thus the growth of commerce in the information age. Without it, technology business leaders could fall victim to the Economist’s 2014 prediction of a ‘Tech-lash’ similar to the backlash against bankers and politicians in recent years.

BUSINESS IMPLICATIONS

Businesses should be aware that their customers are becoming increasingly aware of the value of their personal data. Respecting their privacy is essential to maintaining and building strong and lasting relationships. To avoid a data crunch, where neither the business nor the individual gains any value from the data, business leaders should aim to give their customers control of their personal data. Through empowering people with their own personal data, businesses can expect a deeper level of trust and engagement with their customer base. In the long run, this will open up new opportunities to generate revenue and will evolve existing product and business strategies. Noddle, Fiat Eco Drive and Nike Fuel are all great examples of empowering customers and generating new value that has real impact on business performance.

NOTES

This was originally written for GfK TechTrends 2014 publication

[1] See John Naughton’s “From Gutenberg to Zuckerberg” or Clay Shirkey’s “Cognitive Surplus” as just two examples

[2] GfK Global Trends

[3] GfK Global Trends – consumers ranked out of 20 concerns monitored consistently between 2009-2013 across 25 countries

[4] The Intention Economy (2011), Doc Searls

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March 31, 2014 at 08:03 AM

[…] will facilitate the mass personalization of everything we use and purchase. The explosion of personal data collection and usage will empower the individual to customize products and services to their own […]

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