Let’s just say it: In the future, successful data companies will not own any data. The data economy is the engine of growth for all digital businesses. However, the landscape is changing. We are heading for a data crunch. Data has huge economic value but it is becoming businesses’ biggest liability. As a consequence, in the future, data companies will not own data. They will just manage flows of it.
Now that we are approaching three years since the Edward Snowden revelations, citizens are more conscious of their personal data. This is true not just from a government surveillance perspective, but also when it comes to corporate surveillance. Recent research shows that 97% of consumers in the UK, US, Germany, India and China are concerned that businesses or governments will misuse their data.
Trust is becoming an important currency in the business world. It’s not just trust in an organization to deliver quality products and services; it’s the trust that customers place in an organization to responsibly handle sensitive information. Another international study shows that 75% of consumers distrust brands with their personal data.
This distrust and sense of anxiety about how personal data is being handled is affecting how people behave. The latest data from mid-2015 shows that 198 million ad-blockers were installed worldwide. This is costing businesses $22 billion per year. Even users of Facebook are taking radical steps to protect their personal identity, as it was recently reported that a million people access Facebook on the “dark web” every month.
It’s not just digital citizens who are taking action. Regulators are, too. The EU council recently passed the General Data Protection Regulation (GDPR), which has severe fines for non-compliance: 4% of annual revenue or €20 million Euros, whichever is highest. The GDPR contains a number of new measures that will change the way businesses handle data.
Consent is a big one. Businesses will need to obtain consent for each specific use of that data. So the method of “collect it now and figure out what to do with it later” will become a high-risk strategy.
The other major change will be data portability. Businesses will have to provide their customers with a copy of their data. This will make data fluid and put the citizen in control of their personal data. In other words, not only will businesses be data-rich, people will be too. This will drive the decentralization of data as the individual becomes the point of integration.
Businesses that store customer data in the cloud are naturally worried about the impact of the GDPR. A recent study showed that only one in five businesses are confident about being compliant. This opens up enormous opportunity for novel data-driven business models that are compliant by design.
Decentralized, networked data
The next wave of innovation is not better ad-tech, data aggregation and promises of greater transparency. It’s a fundamental re-think of the value exchange and data ownership. The outcome is still the same–match businesses and customers in a timely and relevant way. It’s just the method of achieving the outcome that will change.
There’s a lot that data companies can learn from businesses that have risen to prominence this decade such as Uber, Airbnb and Coursera. They all leverage the network to form exciting new user experiences, introduce greater efficiencies and transform how their industries function. Through the network, they connect people that have something with people that want that thing. They don’t care about the actual thing itself. Owning a fleet of cars or a chain of hotels is not scalable, and it’s not where the value is. In fact, it’s a liability.
In the world of data aggregation, there are businesses making billions of dollars from harvesting personal data and re-selling it without the knowledge or consent of the data owner. These companies hold thousands of data points on millions of people. Their biggest asset is now becoming their biggest liability. They face risks of hacking, negative consumer sentiment and new regulation. What’s worse is most people don’t know who these companies are. We, as consumers, have no direct relationship with them.
In an information age, this business model is wide-open for disruption. If these companies were a taxi business, they would have a bloated fleet of cars. A fleet that big is hard to maintain, not to mention inefficient and unreliable.
Data companies that leverage the power of the network will dis-intermediate traditional data aggregators. Instead of aggregating data at an organizational level, data will be integrated around the individual. People will just authorize permission-based access to businesses when the need arises. Businesses benefit too. They get access to richer data in a timely way that avoids major compliance issues.
This perfect storm of citizen sentiment, new regulation and networked business models will change the way businesses view data. A new wave of Uber-style data companies will emerge. These companies will have no interest in owning masses of personal data. They will just manage the flows of data between those that have data and those that need it.