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The importance of ethical use of data for a business

Data is crucial for accomplishing any business goals, especially given the consumer-centric nature of businesses today, based on the values buyers most cherish. Sreeram Viswanath explores why it is even more critical for companies to use such data responsibly

Many of us can remember a time when telephone directories and the Yellow Pages were our one-stop-shop to gather information or access data. Sales people went door-to-door and selling and buying were about the personal touch. A newspaper delivered to the house held all the information we could acquire about the world. How much things have changed in the last two decades. From morning milk brought to you in a glass bottle, you can now have advertising and news that targets your personal wants and desires in an almost scarily precise fashion. Big data has arrived and with all its life-enhancing aspects brings with it some unpleasant nuances.

With the prevalence of data-driven algorithms, websites and applications have become increasingly personalized. As businesses can collect information about their users to offer more relevant content and services, this trend is likely to continue. Users trust companies with personal information because they expect their data to be used responsibly. But recent reports across the world convey a picture that is not entirely rosy, with user data being exploited by even reputed organizations. It becomes of paramount importance that corporate ethical data utilization is the cornerstone of responsible data management.

What is it?

Corporate ethical data utilization is a framework for data collection and utilization that prioritizes user privacy. It not only deals with avoiding illegal data practices but entails data usage in a way that respects user privacy, autonomy, and rights. The goal here is to use data to benefit both the business and the customers while ensuring that user information is safe and used ethically.

Although this buzzword may sound similar to responsible data management, it has a broader scope. Corporate ethical data utilization extends beyond the technical aspects of data management and into the realm of business strategy. It encourages businesses to think about the value of their data and the ways in which it can be ethically and appropriately utilized.

Mark Zuckerberg

More than a fad

“Data privacy and protection are clear priorities for consumers,” says Vijay Jajoo, Principal, cyber security services, KPMG.

Every company functions with the power of data. A powerful tool can also be a potent one, which is why we are talking about the responsible use of data. Many prominent names across the world, including financial institutions that were once highly esteemed, suffered major losses due to data breaches. The social networking community hasn’t yet fully recovered from the Cambridge Analytica scandal, a breach that exposed the data of billions of Facebook users. A data leak in Yahoo’s system compromised the information of millions of its users in 2013, costing the company $350 million in damages. This happened at a crucial time for Yahoo, as its value plummeted by $350 million just before Verizon looked like acquiring the company. MySpace, another social networking company, lost 360 million records to data fraud, a scandal that shook the social media community before Facebook’s Analytica scandal managed to steal the headlines. 

While consumers like to be rendered the personalized treatment that only data collection can offer, it’s high time businesses put a framework that ensures data is used appropriately and stored securely. User trust is essential for companies to thrive in the new data economy, failing which they might incur severe reputational or financial losses, some of which they may never recover from.

“As the power of contemporary enterprises grow, they bear a larger responsibility for going beyond compliance to engage with ethics,” says Laura Norén, visiting scholar at NYU’s Center for Data Science and VP of privacy and trust at Obsidian Security.

Corporate ethical data utilization extends beyond the technical aspects of data management and into the realm of business strategy

A win-win proposition

Ethical data utilization is a lot more than a corporate responsibility platform and can render a range of benefits, which include:

Stronger relationships with customers – Customers who value their data will stick with those providers who offer transparency in how they gather, process, and store data. Businesses that demonstrate a commitment to transparent, responsible data practices will earn a reputation as trustworthy partners and therefore earn the much-needed competitive advantage. This will result in stronger customer relationships that benefit both the customer and the business.

Reduced risk of regulation – Consumers are increasingly aware of the ways businesses collect data and expect companies to be transparent about their practices. Companies that fail to meet these expectations risk regulatory action, including fines, shutdowns, and other penalties.

Improved reputation and search engine optimization (SEO) – Companies that collect and use data ethically will have a better reputation among customers and search engines. This will result in higher brand recognition, increased traffic, and better conversion rates.

Greater financial impetus – Companies with proven efficacy and willingness to prioritize the appropriate usage of customer data will generally have a better reputation, encouraging funds from investors or credit facilities from banks.

Tim Cook

Businesses that demonstrate a commitment to transparent, responsible data practices will earn a reputation as trustworthy partners and therefore earn the much-needed competitive advantage

Working the how’s

Ethical data usage may seem like a buzzword, a piece of copywriting, or promotional material for businesses with higher ambitions. But many data breaches of the last decade and the consequential impact on consumer behavior point to a trend wherein customers are wary of the data threat, despite their intentions to trade their information for value-centric products or services. Yes, businesses need a framework, but what exactly can it be? Let’s dive deeper to understand this.

Despite much evidence to the contrary, businesses, many of them, practice ethical data utilization. Apple’s CEO, Tim Cook proudly says, “We do the right thing, even when it’s not easy” (an Apple user will agree with glee). Google works with comprehensive security algorithms to satisfy its global user base. A read into Uber’s privacy policy shows that they entrust users with control of data shared by them.

The aforementioned companies and many others follow their unique data safety practices. But in common – they provide clear, accessible information. This includes the types of user data collected and why, the source of data, whether the data had informed consent for use by third parties, whether it contains any information that shouldn’t be publicized, etc. Importantly, they only collect the necessary data for their core operations. This means using data minimization techniques to avoid unnecessary data collection.

Companies must educate their users about the types of data collected and used. This includes providing clear and easy-to-find information about the company’s data practices. Additionally, businesses can use data visualization and tagging tools to make their data practices more transparent. Frequent interactions with the users also give the latter a closer look at the company’s practices, building a culture of trust. This may include communicating with users via email, in-app notifications, or social media. Companies can also use surveys and focus groups to get users’ feedback about their data practices.

Key takeaways

Data-driven companies can build on user data to improve their products and services, but only if they use that data ethically. Corporate ethical data utilization is emerging as a critical tool that protects the rights of those who make your data-driven business prosperous. Businesses should be transparent about their data practices, minimize data collection, and use data-based insights to inform their decision-making. Companies that practice ethical data utilization have stronger customer relationships and earn a stellar reputation. And the majority of such case studies spell success. Something that every company aspires to.

Sign of the times

The Secret Mood Control Experiments of 2012

Almost eleven years ago, in January 2012, Facebook released a mood control experiment on 689,003 of its users. They were shown positive or negative content in their news feeds in order to guage their emotional responses to the curated content. The participants were unaware that they were engaging into this experiment.

Facebook’s 9,000-word data-use policy stated that the company had the legal means to conduct such experiments. When users signed up to the company’s policies, they had consequently agreed to their information and responses being used “data analysis, testing, [and] research.”

Unsurprisingly this did not go down well, when the experiment came to light and the consensus was that the experiment extremely disturbing and in clear violation of people’s morals rights.

And they said

“A better world won’t come about simply because we use data; data has its dark underside.”
– Mike Loukides, Ethics and Data Science

“Privacy means people know what they’re signing up for, in plain language, and repeatedly. I believe people are smart. Some people want to share more than other people do. Ask them.”
– Steve Jobs, Apple

“If you make customers unhappy in the physical world, they might each tell 6 friends. If you make customers unhappy on the Internet, they can each tell 6,000 friends.”
– Jeff Bezos, CEO at

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