Recent breaches of data in tech have amplified the need for companies to develop new ways to protect data and build better corporate trust.The principal/agent paradigm is the anchor of almost every business relationship.
Principals entrust agents with the responsibility of acting on their behalf, and since principals are incapable of monitoring everything that agents do, it’s a relationship built on a significant amount of trust.
Unfortunately, corporate history has shown that this trust can be broken and when that happens, it can cause large-scale destruction of shareholder value, eroding corporate trust, as well as society’s trust in the broader marketplace.
In the Information Age, the most important part of the relationship between principal and agent is the management of customer data. 90% of the world’s data has been created in the last two years and as our ability to collect and monetize data grows, so does the need for a deep level of trust between all parties involved.
In this article, we teamed up with Georgian Partners to explore the topic of trust as it relates to customer data in the Information Age. This discussion is an expansion of Jason Brenier’s recent blog The Age of Trust.
Our New Reality
The reality is that companies have been collecting, using, selling and profiting from customer data for decades and consumers have had little control over this. The use of customer data has even become the primary business model for many new companies. However, in recent years, scandals like Cambridge Analytica, Equifax, and Target have put crucial customer data at risk and catapulted this issue into the spotlight.
Consumers are becoming increasingly aware of the risks and impact of inappropriate data sharing, and legislators are taking action to better protect them. The European Union’s General Data Protection Regulation became enforceable in May and the California Consumer Privacy Act was signed in June.
When it comes to regulation in Canada, the federal government has launched a national consultation campaign aimed at bringing business, academia and civil society together for the development of a national data strategy.
This program will undoubtedly create a new force in the marketplace and have a significant impact on how businesses operate in Canada. As the consultations unfold, it’s important to note that new Canadian data legislation should be compatible with existing legislation found around the world. Legislation should also be drawn in a way that ensures that it doesn’t impede technological development.
The Pioneers of Future Corporate Trust
In our evolving corporate landscape, some companies have chosen to pioneer the future of corporate trust.
Integrate.ai, for instance, is not only building trust with their customers, but they’re also helping those customers develop trust with their respective customers. The company's recently published guide Responsible AI in Consumer Enterprise shows businesses how to use AI not just effectively but ethically.
Software company, Delphia, is exploring a decentralized business model that offers customers fair value for the information and insights that they are explicitly willing to share.
IBM is tackling fairness in data with AI Fairness 360, an open-source toolkit of metrics that checks for unwanted bias in datasets and machine-learning models.
Companies throughout the marketplace can benefit tremendously from learning about the new trust pioneers and what they’re working on.
Hockeystick: Users Own Their Own Data
To encourage these kinds of discussions, we offer complete access to our security policies and open database. Anyone can access these links and learn, for example, how each entity in Hockeystick (company, fund or organization) owns its data and retains full control over how it is shared, regardless of how many times it is shared.
Everyone has a Role to Play in Building Trust
Venture capital and private equity firms also have a critical role to play when it comes to protecting data and building trust. Everyone wins when firms help their portfolio companies get ahead of this issue from the start.
Georgian also helps their companies build explainable models that better inform customers about the predictions made by machine-learning models. These modern products and services make Georgian Partners portfolio companies far more competitive in the market.
What’s At Risk If We Do Nothing
Modern companies simply cannot afford to ignore the reality of today’s data-intensive marketplace. Those that do risk eroding customer trust and losing valuable business.
Facebook lost US$123 billion in value practically overnight during their recent scandal. Even more frightening is the estimate that cybercrime will cost the world US$6 trillion per year by 2021.
It’s becoming clear that businesses that don’t grasp the importance of this issue will not only lose their opportunity to develop long-term relationships, but also risk losing significant financial value.
Consumer Trust As Currency
As we navigate this brave new world, there will inevitably be bumps along the way. Although we can’t predict for sure what will happen, what we do know is that more and more companies are building their business on the value of data.
When trust is broken, there is a real impact as customers choose to move their data to competitors. It stands to reason that those who prioritize consumer trust will undoubtedly have the advantage, and will be healthier and more prosperous.