How Much Is Your Privacy Worth?

By November 23, 2015Strategy

In order to accurately predict and forecast the needs of the consumer technology is asking for the consumer to give up their right to remain anonymous. In theory, this is done as a way to connect data and technology to the consumer, who demands everything in real-time. Technology is attempting to be proactive and not reactive. It is up to the consumer to judge the benefits and detriments of forgoing privacy.

Companies are creating these applications and harvesting increasing amounts of data from the consumer. Consumers need to decide how much consumer privacy concerns they are willing to sacrifice for compelling technological benefits. It is a classic case of risk versus reward. The benefits that businesses derive from visibility, into the high transparency and detailed information about the movement of people and things, is highly evident.

Unipol was one of the early adopters of vehicle telematics in Italy. They enacted the program as a way to mitigate company risk and in addition save the consumer money. The concept behind Unipol’s insurance program is that it monitors driver behavior and rewards for good behavior. This is in contrast to the traditional insurance formula where drivers are grouped into categories based on various demographic and psychographic attributes.  Using this technology Unipol was able to successfully augment insurance rates to change dynamically with each driver. After successfully testing this system Unipol was able to infer that drivers with OBU (on-boarding unit) system had better safety rate than those without the OBU system. This became an interesting conundrum for Unipol customers, because, they were forced to judge whether the benefits of saving money outweighed the costs of forgoing privacy in their vehicle. Unipol recognized this issue that consumer had and took steps to address privacy concerns about this new technology. To roll out the product successfully Unipol concocted a classic viral strategy via targeting good drivers who would benefit the most from this system. Combined with government support Unipol was able to build a collation of value where other major companies and agencies had direct interest in the success of Unipol’s OBU units.  The strategic plan in how Unipol approached this problem contributed to the success of the project.  They recognized the privacy issue and they strategically looked at ways where they could overcome the objections of the consumer and create a product that not only contributed increased profits to the company, but maintained an ethical focus.

The first piece of advice for any company who inputs, on-boards a new technology , or asks the consumer to surrender privacy is: to have patience and understanding. Companies must realize that in today’s global world some externalities of privacy that may have been ignored in the past are too large to disregard. Many companies today place such a large credence in arriving first that they ignore the positive or negative externalities until they surface. However, worse than arriving second is blundering a large rollout.  

Consumers may quickly forget successful product launches but are less apt to forget product failures or blunders. Any company on-boarding or launching a new product/technology has to acknowledge privacy concerns. They must take proactive steps to placate them or roll out the product in such a manner these issues are then mitigated. These steps are often best utilized by significant transparency and education, where the company clearly defines what the product does and how it might encroach on any consumer privacy concerns.  This way companies can acknowledge these issues and set realistic goals to solve them.

Conducting business in a SEER (Social, Environmental, Ethical, Responsible) friendly way is not an easy task.  It requires modifying one’s thinking about how a traditional business should run and acknowledge businesses place as citizen of the world. However, all people do not see this the same way. For example, shareholders prefer to see immediate results for their investment and are less keen on waiting for significant company cultural changes. As with any business revolution, margin pressure will occur during any cultural change. As a consequence investors may become angry about potential loss in value. Senior leadership is responsible for communicating the SEER principles to the shareholders and how this relates to the end values or mission of the company. It is important for the shareholders to understand how truly building a sustainable business model is good for the long run health of the company. The principles of SEER and the concept of transparency to the consumer in the digital age go hand-in-hand. It is important from an ethical perspective to disclose the privacy concerns to the consumers with whom you are marketing your product too.  Most importantly, it is good business. Companies have been given a great deal of trust either directly or inadvertently. It is up to them how they act upon it.

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