Friday, June 21, 2013

Privacy as Product Differentiation

In past times, the amount of information that businesses held about an individual was relatively small. Today, the amount of information held about a user can be astonishingly large. Location information alone gives detailed granular information about somebody’s life and travels. In a hypercompetitive world, differentiation on the basis of privacy policies represents a range of positioning that can be used to gain competitive advantage and also to claim (and presumably deliver) different levels of ethical relationships with customers. 
Roughly speaking one might imagine companies in a market pursuing ten alternative strategies:
  1. Lie about what information is collected
  2. Don’t reveal what information is stored about the user
  3. Reveal policies and superficial description of information stored about the user
  4. Reveal partial information about what is stored
  5. Reveal all raw information stored about the user
  6. Reveal all raw and evaluative information stored about the user including connections to other users
  7. Allow editing and export of privacy information by user
  8. Pay user to use their stored information
  9. Make the information stored useful to the user
  10. Make the information stored useful to the user and charge for it as a service

Today, few companies have been aggressive in their use of privacy information as a differentiator. Though some are now beginning to realize that government surveillance experience may influence customer attitudes. Perhaps an early sign of competitive use of privacy as a marketing weapon is an internal 2013 video developed by Microsoft ( ). Now leaked outside Microsoft, the video’s theme is that Google tracks everything you do so that it can make money off you. While it may not have been intended as an external marketing weapon, it does illustrate the kind of marketing campaign that might be pursued by aggressive companies in the future.

One can easily imagine that in a highly competitive market, where differentiation is hard to achieve, or when a smaller player wishes to gain on a larger player, that trumpeting premium privacy policies might switch customers. The Dutch search engine, differentiates on privacy in a market dominated by Google. In banking, one of the oldest information businesses, privacy has been a key product attribute for decades, if not centuries. And it is also reasonable to expect that those that collect information from customers will make counterarguments around collected information making the service more useful or permitting the service to be free.

Two other factors make it likely that privacy will become a more important marketing issue. First, governments have put in place, Freedom of Information (FOI) laws. In 2013, the US Federal government is being required to make the default for government files a machine readable open format to increase the transparency of government information and decisions. In the US, the Obama administration has suggested a Privacy Bill of Rights which includes

  • Individual Control: Consumers have a right to exercise control over what personal data companies collect from them and how they use it.
  • Transparency: Consumers have a right to easily understandable and accessible information about privacy and security practices.
  • Respect for Context: Consumers have a right to expect that companies will collect, use and disclose personal data in ways that are consistent with the context in which consumers provide the data.
  • Security: Consumers have a right to secure and responsible handling of personal data.
  • Access and Accuracy: Consumers have a right to access and correct personal data in usable formats, in a manner that is appropriate to the sensitivity of the data and the risk of adverse consequences to consumers if the data is inaccurate.
  • Focused Collection: Consumers have a right to reasonable limits on the personal data that companies collect and retain.
  • Accountability: Consumers have a right to have personal data handled by companies with appropriate measures in place to assure they adhere to the consumer-privacy bill of rights. 

Second, even if businesses in particular countries are able to prevent or modify legislated requirements for disclosure, market forces will, albeit slowly, move competitors to reveal more, and aggressive competitors to test and subsequently expand increased disclosure.

Increasing intelligence located in the “network” raises ethical issues in the same way that science fiction writer, Isaac Asimov raised them in thinking about the relationship between human and machine intelligences with his Three Laws of Robotics.
1.      “A robot may not injure a human being or, through inaction, allow a human being to come to harm.
2.      “A robot must obey the orders given to it by human beings, except where such orders would conflict with the First Law.
3.      “A robot must protect its own existence as long as such protection does not conflict with the First or Second Laws.”
In a sense, when businesses choose to store massive amounts of information, they take on a new responsibility not to damage the lives of those they serve. The responsibility is likely not merely ethical, but rather also a legal one. In the same way that we have slander and libel laws, and restrictions on disclosing medical records, unauthorized disclosure of private information will increasingly be exceptionally costly in terms of both legal suits and company reputational damage.

Even more thought provoking is the idea that a company may acquire, model or infer information that allows it make predictions about a user. Disclosure of such evaluative or predictive information, e.g. about financial condition, health, life expectancy, job prospects, political views, gender preference, proclivities around a taboo might be exceptionally damaging in some societies, a topic raised by another science fiction writer, Robert Heinlein as far back as 1939 in his short story, ”Life-Line”.

Copyright Alistair Davidson, 2013, all rights reserved. Phone:  650 450 9011
Alistair Davidson is technology strategy consultant based in Silicon Valley. He is the author of four books on technology strategy, his latest being Zeitgeist Innovation: Digital Business Transformation in a World of Too Many Competitors, Amazon Kindle, June 2013 on which this article is based.

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