Don’t Be Evil.or Creepy: Earning-and Keeping-Trust in a Transparent World

May 12, 2014, 11:01 AM ET

Don’t Be Evil…or Creepy: Earning—and Keeping—Trust in a Transparent World

By Malcolm Frank,

Our world is rapidly digitizing, creating new economic opportunity and redefining the boundaries of privacy.

Some companies have dominated their markets because they understand the virtual you (which we call your “Code Halo”) and actively engage with it. In fact, just six firms – Amazon.comInc., Apple Inc.AAPL +0.97%Facebook Inc.FB +3.46%, Google Inc.,Netflix Inc.NFLX +3.92% and Pandora Media Inc.P +5.08% – have collectively generated over $1 trillion in combined market capitalization in just the last decade by providing the mass personalization and curated experiences by delivering to the digital you.

The race is on. By 2020 more than 50 billion machines will be instrumented and online, and most corporations will be managing 50 times more data than they were in 2010.  Myriad aspects of our lives will be instrumented and digitized…and then personalized to our needs.

Yet, to some this feels as dystopian as utopian. Many experience a sense of trepidation, and we hear comments—such as “Yes, but…

…I don’t want big businesses knowing all my personal information.”

…this will be a hacker’s paradise.”

…how can I control my own information?”

…this is the final nail in the coffin of privacy.”

…I don’t want to live in a 1984 world.”

In the context of the National Security Agency spying scandals, such Orwellian fears are valid and understandable—and we share many of them.

With great insight comes great responsibility. Winning organizations will be those that generate and maintain trust in this digital economy.  We see five key actions critical to this pursuit:

Always provide opt-in. What’s one of the fastest ways to erode trust in our wired world?  Surreptitiously track customers online.  As such, organizations should empower customers to “opt-in” when asked to share their information.

Why is this so important?  Consider a simple example with location-based capabilities. Foursquare has 30+ million customers more than willing to broadcast their daily movements for social and personal reasons. At the same time, the government is proving quite capable of tracking individual citizens through the use of license plate readers. The state of Maryland collected 85 million driver records in 2012, and each of the over seven million registered vehicles in Los Angeles County was scanned 22 times on average.

The same consumer who freely elects to share her precise movements on Foursquare may also feel enormously violated by the presence of license plate readers.  This distinction between elective vs. surreptitious collection of data is a key line of demarcation in building or eroding trust in digital markets.

Give your Code Halo a delete button. Some customers who have opted in will love that you know all their interactions with your organization. Others may not. If they don’t, respect their desires fully: allow them to delete all the information your organization has on them.

You may be thinking a few things: “This sounds expensive.” “It’s impossible.” “Nobody else is doing this.” But these assumptions are wrong. Code Halo leaders, such as Google and Amazon, are already operating on these principles of data deletion, and it should become standard practice.

Show me how you know me. Code Halos, properly managed, become incredibly powerful correlation engines which create highly personalized moments of engagement. It’s how Netflix knows just the right film for your Sunday evening. Yet, there’s a fine line between creating a moment of magic—and being creepy. Just ask the retail customer whose local big-box store figured out she was pregnant before she informed any family or friends.

So, what do you do with that customer who is suddenly freaked out by the power of your digital insight? Be open.  Share the basics of your meaning-making process, how you correlate differing data points to make certain conclusions by saying “because of A, B, and C we are able to conclude D.”

Shine a light on your “give-to-get” equation. Successful digital businesses are all about “give-to-get.”  Take Pandora; you give them a list of your favorite artists or songs, and in return you get hours of listening pleasure.  A good deal. And the downside?  The give was free, took only a few seconds, and is not a huge secret. And what’s the worst that could happen if it went public: “Ooh. Joe’s a Led Zeppelin fan.”

However, what if the give is personal financial information, health records, or one’s personal whereabouts? These “gives” are much larger, and require more significant “gets.” To ensure clarity and trust, we recommend that you remain very open about your give-to-get equations with customers.

Hard code self-control. The four aforementioned actions are meaningless if you cannot hard code self-control within your organization. Given reports of government employees reading the emails of former love-interests, such behavior in your company would —rightfully—do great damage to your organization.

Thus, establishing not just technical safeguards, but also the right processes and cultural norms to do the right thing because it is the right thing with respect to customer privacy and security—is mandatory.

This must be overseen by a digital risk officer who is not only continuously monitoring potential bad behaviors, but is also vigilant about establishing the best practices, processes, technologies, and culture norms.  If you let things sit, or think this is not essential, then trouble awaits.

Self-control starting points include privacy and the inappropriate use of insight. Privacy is easier to deal with, as constructs have existed for ages in fields such as medicine, the law, accounting and consulting. These physical world controls can be extended to the digital.

Inappropriate use of insight is murkier. Your firm will face new ethical dilemmas, some without easy answers. If you are an insurance company, do you use your vehicle telematics device to turn off a car if the person shows signs of drunk driving? If you are a retail pharmacy with the ability to discern who has certain fatal illnesses, should you advertise specific health products? Medical management support? Family counseling? Estate planning? Some of these might be OK, while others are ghoulish and would rightfully damage your brand.

In summary, not every aspect of our new digital environment will be positive. However, the inherent nature of the incentives that exist for good behavior within it make us confident that, in the end, societies, organizations, and individuals will figure out how to navigate a new social contract for the social network. We unequivocally see this story as a “song of hope.”  Our five best practices above go a long way to ensuring your organization remains on the right side of this historical shift.

Malcolm Frank, along with Paul Roehrig and Ben Pring, is a co-author of Code Halos: How the Digital Lives of People, Things, and Organizations are Changing the Rules of Business, just published by John Wiley & Sons in April 2014, and the accompanying iPad app, Code Halos available on iTunes. 

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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