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How Big Data is Like Big Tobacco (Part 2)

Bad news for Big Data, we are accelerating through the litigation step and going straight to government intervention. If you thought the EU ruling on ‘The Right to be Forgotten‘ was crazy, you would be shocked to know that the US Federal Trade Commission recently recommended far more radical legislation in the US. The FTC’s somewhat unheralded publication “Data Brokers – A Call for Transparency and Accountability” is a landmark document that should be a bright, flashing red light to the entire industry of Big Data. It’s the result of a multi-year investigation into the practices of Data Brokers (e.g. Acxiom) but it applies equally well to titans Google, Yahoo, Amazon, Facebook and others that live off user data. Here’s a summary in the NYTimes. The fact that Google and other Big Data players are not called out in the FTC report is incidental. They have fundamentally the same model as the Data Brokers, although they execute it far more effectively and have considerably more influence in Washington. The report speaks to Big Data’s billions of users (i.e. data providers), as well as their customers who buy data about the billions! In the document, the FTC condemns deceptive practices of Data Brokers, primarily for their failure to disclose the information they are collecting on consumers or allowing them to control it. (Duh. That’s what they sell!) Yes, it might surprise a user to know that their frequent history of browsing sites on motorcycles could identify them in a high-risk category for an insurance company considering coverage. Oh, did you assume all data collected about you was a current and accurate depiction? Oops. No, no, no. Who knows if it’s accurate? It’s just out there to be bought and sold.

Among other things, the FTC recommends legislation that would allow users to “opt out” of having data collected about them. That would be interesting, to say the least. Imagine if everyone opted out. Suddenly the services for data for advertisement continuum screeches to a halt. The Obama Administration has also called for a “Privacy Bill of Rights” to protect on-line consumers. That seemed to have lost some momentum until recently. In May, the president’s commission on the topic cited big data’s threat to civil rights. All these recommendations walk the fine line of positioning the Big Data co’s as a potential threat on a discrimination basis, while largely ignoring dubious industry practices. Again, this follows the Big Tobacco path: Lobbying will sway government policy for a period of time. Ultimately, public sentiment will determine when and to what degree Government will step in.

Do we have an Insider? Oh yeah. However you view Edward Snowden, the great irony of his revelations is that he actually exposed the guys late to the party: federal governments. Phone tapping strikes a chord with everyone because the tactic is so well established in the folklore of our society. That’s how they catch gangsters! But wait, don’t many of us reveal as much or more in email and social networks, which are richly mined by Big Data for their benefit? Maybe more so. Meanwhile, Google’s outrage over NSA spying on their data centers is rich. Hey, no fair! Only we should be able to look into the intimate details of our users! Quite true, when that is the core of your business model.

What is Big Data’s equivalent of the “nicotine delivery business”? Simple. They are a data monetization business. Yes the Big Data oligopoly sells advertising. That is one, but far from the only, strategy for data monetization. So while Big Tobacco spent billions in R&D to deliver nicotine to as many bodies as possible, as efficiently as possible, Big Data’s mission is to extract as much data as possible from as many people (or “things”) as possible, as intrusively as possible. They are finding incredible ways to extract and monetize data, well beyond advertising. Search was the killer app to find out what mattered to us in exchange for organizing the web. Then it was/is social networks, which kept people connected with each other, businesses, causes, you name it (as long as we can listen in). Need more? There’s an app for that. In fact, there are millions of apps for that, most of them ‘free’. As long as you don’t mind telling us precisely where you are, who you are and what you are doing every waking second. The new strategy is to get smaller and closer. Enter the next big thing: Wearables. We’ll stop messing around with games and just extract info directly from your body. (Did you think this was about fitness?!?) This is particularly clever. The smartphone replaced the watch… so there’s an open spot on that arm! There’s also an open spot on the wall, in the sky, on the road… If you’re not going to oblige us by walking around with our mobile device, we’ll just build something around you to watch. Awesome investment follows. We recently saw a glimpse of where Big Data wants to take this and it goes well beyond advertising to mood control, which has dizzying possibilities.

So what is a Big Data player to do?  Well, read the Big Tobacco playbook:  Diversify. Diversify. At all costs, diversify.

Warning: Duplicity is Harmful to Your Health

The issue here is not whether it is “right” or “wrong” to run your business this way.  There is a highly energized debate on these points which gathers more and more attention each day.  The issue is whether / how long consumers will tolerate it — and what happens if/when they don’t.  That is where the enterprise has to focus its strategic analysis.

There are two increasingly obvious conclusions to draw from this situation.  First, the Big Data model created by major brands like Google and Facebook is not sustainable in its current form.  It is a safe bet they will adapt quickly, which is their strength.  Second, enterprises that think they can copy that model are heading down the wrong path.  Now ask, How quickly can we adapt if we push hard in this direction and hit a dead-end?  Whether it is core to your business model or an important part of your customer engagement strategy, deception won’t work long term.

We learned a long time ago what the art of persuasion, and by extension the sales process, is all about.  Aristotle taught us that the three key elements to communicate with and convince your audience/customer are: Logic, Emotion and Character (as in, virtue and advocacy on the audience’s behalf).  In the profession of sales, we have placed major emphasis on the first two, increasingly at the expense of the third.

Much closer to our time (and without the need for vagaries of translation) is the wisdom of Estaban Kolsky, CRM thought leader, who points out that “Trust is the currency of engagement”.  He continues “delivering what is in the best interest of the other person in the relationship, accurately and repeatedly over time, generates trust….the trust generated is what (over time) engenders engagement.”  Estaban focuses on the brand promise as the proxy for trust from business perspective.  See full white paper here.  Whatever your brand promise may be, it seems safe to assume that deception is not part of the message you are trying to convey. That would seem particularly true for a company whose values explicitly include “Don’t do evil.”

But Big Data continues its push.  Just like Big Tobacco tried a feint with the “safer cigarette”, Big Data is repeating its old tricks in new ways.   That is not innovation.  That is optimization.  The underlying business model is the same.  All companies stuck in optimization mode are ripe for disruption.  Don’t assume Big Data is an exception just because they have been tremendously successful in the recent past.  Remember that Henry Ford rode the Model T too long and gave up over half of his market share in the process.

Is all big data (lower case) bad?  No.  It is, however, time to discriminate the effective uses of big data.  You already know it is not a panacea.  Now that the crush is over, we all need to take a critical look at how big data can support sustainable business practices.  That includes an ethical element.

But All the Cool Kids Are Doing It!
Mainstream enterprises are trying, albeit with limited success, to copy the model that has created the Big Data oligopoly.  It started with enterprise use of data brokers (e.g. Acxiom) and moved to their full-service, modern equivalent, the aforementioned behemoths.  But there are also a huge range of tools that are popping up to make this DIY for the enterprise.  Digital marketing analytics tools offer to harvest a lot of clandestine data.  If the internet bigs are taking a short cut (by deceiving consumers into providing more data about themselves than users realize), does it make sense for enterprise to follow aggressively?  No. At least not at high scale or until we understand where the privacy pendulum will settle.  It’s one thing for Google to throw some of its limitless resources to accommodate the “Right to be Forgotten” ruling — and potentially many others to follow.  That’s their core business.  It’s quite another for enterprise to do it.  A short cut on a short cut is not a smart play.  And maybe, just maybe, Big Data doesn’t have the killer model after all.  Remember that public — and legislative — sentiment is turning against this business model.

Enterprises have a much better option.  Rather than destroying trustthrough deception, this option develops trust and leverages it up to the engagement all enterprises seek.  But first, a quick detour to understand why this is happening.

We are in the throes of Digital Transformation as a society, a scary and exciting prospect for the enterprise.  In short, the physical, analog world — that is, everything we do — is being converted and recorded digitally.  All the traditional processes of the physical world are being redefined in the digital world, including sales.  The key tenets of this transformation are that it is entirely centered around the individual and it is evolving fast.  Very fast.  The Big Data companies are responsible in part for the incredible speed, innovation and disruption.  They can’t go fast enough, far enough.  The enterprise crowd is generally struggling to keep up.  “Go fast.  Excel at this game, even if you don’t understand it.”  (That’s a loose translation of orders from the CEO).  The situation is ripe for serious mistakes.

The enterprise, often led by the CMO for this scenario, is tasked with understanding the customer in intimate detail and creating a wonderful, completely personalized “experience” for them, each one of them.  The short cut is to join the Big Data game of harvesting infinite troves of data about the individual by whatever means necessary.  Sometimes it’s good data, sometimes it’s not.  But always the enterprise has a voracious appetite to learn more about the customer.  The deception employed in gathering this data erodes trust and ultimately defeats the purpose – to enhance the enterprise relationship with the customer.  The enterprise has to go the other way:  Transparency.

Aggressive transparency can be an excellent strategy for engaging customers.  It does not involve hidden tracking or the purchase of data obtained surreptitiously.  It centers on the hard work of creating an open environment across a wide range of interaction points and finding the preferred method for customer interaction.  Each customer.  As enterprise engages the customer, it must take great care to not only listen and record but share their understanding of the customer’s interests – with the customer.  Involve the customer openly in the collaborative process of creating and maintaining the right experience consistently.  Consider the major legislative recommendations of the FTC:   Consumers should be allowed to know what you know about them, they should have the ability to correct data and the chance to opt out of data collection.  For a business model that thrives on crafty data surveillance, this is a nightmare.  For a customer-centered company that thrives on doing what their customer wants, this is practically a mission statement.  In the era of the super-empowered consumer, which model is likely to thrive long-term?

If you want true innovation, look at the Vendor Relationship Management (VRM) movement.  Harvard’s Doc Searls, who is at the forefront of this movement, positions the situation best.  If, as most would agree, the consumer is in control, why should the commercial relationship be dictated by the enterprise?  In itself, that’s not a very controversial statement. We all agree that this is a joint process that fully involves the customer.  Now add this:  The customer should own her data, be collaborative about ensuring its accuracy and share it when and where it suits her.  Oops.  That crosses the line.  The irony of the current state of CRM is that conventional wisdom recognizes the power of the customer.  But very few sales processes — particularly in the B2B domain — have evolved to the point that they embrace the customer’s power.  Many offerings are trying to maintain the illusion of full enterprise control, increasingly through the use of Big Data-like tactics.  That has serious risk attached.  The VRM vision seems extreme in the context of the way business is done today (hence the disruption).  Whether it is ready for broad adoption remains to be seen.  Certainly this is a step beyond the very trendy “Customer Managed Relationship” mantra.  It is also a logical extension.  In any case, VRM clearly points the way towards a more healthy model; one that builds on our evolution to this point.

Yes, it is tough.  Consider, though, how much you already know about your customer.  The first big step in this process is not going out and seeking external data sources.  It’s gathering what you know into a logical framework that can be leveraged to properly engage your customer.  That is no short cut.  Then, of course, comes the difficult work of creating the environment of constant, heavy attention over time.  Digital channels will help simplify that.  There’s no quick answer though.

The transparency approach is not vogue.  Deception is in, for now.  However, with the onset of major consumer upheaval and government action, transparency will have a strong case.  It very well may become mandated.  In any event, it is the inevitable path we are on.  Now is the time to ask whether you actually believe we are in a customer-centric world.  If the answer is yes, it’s probably a good idea to avoid playing with your customers the way Big Data does today.  Truly innovative companies will see this trend, without the aid of Predictive Analytics, and capitalize.  Just read the warning on the pack!

This article was originally posted on The Customer Edge, a new webzine for Marketing, Sales, and Service leaders.

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