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Data Transparency Sounds Good in Theory, But in Practice?

5 minute read
Len Williams avatar

The pressure on companies to be more transparent with their customers about the data they collect is ratcheting up. 

On May 25, 2018, the European Union’s General Data Protection Regulation (GDPR) will go into effect, introducing radical changes to how businesses around the world collect and manage data on EU citizens. 

At the same time, countless surveys have reinforced the point that consumers are suspicious of brands' current data collection practices.

Trading Data for Recipes

There’s a sense that consumers have little control and little real choice about what data they share. If they want to participate in any of modern life’s typical experiences, from participating in social media to hunting for a recipe online, they’re effectively forced to hand over a lot of personal information. 

So it’s a welcome development that regulators are at last playing catch up with companies about the ways they track data and the options they give their customers. Intuitively, it just makes sense that customers would trust seemingly transparent brands over those who appear shifty. 

Refreshing, but Rare 

Yet, transparent companies are still sufficiently rare that it is refreshing when an organization such as The Guardian takes the lead in disclosing how it uses its customers’ data. 

However, as appealing as it is to encounter data transparency in the wild, we need to acknowledge that most industries are still a long way from being transparent. What’s more, the process of becoming truly transparent with customers usually involves making big changes in the ways in which companies collect data and tell customers what they’re doing. 

Transparency Can Be Tricky

Realistically though, even with the best of intentions, navigating the process of improving data transparency policies can be tricky. 

Looking at the experiences of industries that have already had to become more transparent about their business dealings presents an excellent starting point for most businesses. This holds true regardless of whether companies want to be proactive in building customer trust or simply must conform to stricter regulations. 

For example, since the global financial crisis of 2007-2008, financial services firms have been obliged to be ever more transparent with regulators and shareholders about their activities. In theory, this is very welcome but the reality for most firms has been much harder.

Is the Prize Worth the Struggle?

That’s because even the act of compiling financial transaction reports can be incredibly time consuming and complex, due to the huge job of standardizing the required data. What’s more, there is often a lack of clarity regarding new reporting requirements, as well as a reluctance on the part of companies to share any data that could give their competitors an advantage. 

At least in the financial services industry, the road to transparency has been long, difficult and frustrating. So frustrating, in fact, that it has led some to question whether achieving the goal of transparency will even be as great as it sounds. 

Fighting Data Fatigue

Many companies increasingly mention so-called data fatigue, both for themselves and their customers. It’s no wonder companies often view having to report data to customers who will largely ignore their reporting efforts as being time-consuming and expensive, with little pay off. 

What’s more, the debate raises the question of whether transparency is enlightening in and of itself. In other words, while the ideal of being transparent is intuitively appealing, does it inform customers about what is really happening with their data? The reality is that if customers were to ask for all the data companies hold on them, most of it would be incomprehensible. 

Learning Opportunities

No Magic Wands 

While these arguments have some validity, it’s hard to argue convincingly that it would be truly undesirable to be transparent with customers. To foster an open internet, for instance, it’s clearly valuable to allow people greater control over their privacy. 

That said, we need to understand that there’s no magic wand which will suddenly make it easy to become more transparent. Even for firms that have grown up online, the process will entail big changes in how they work. 

4 Strategies to Meet the Transparency Challenge

With new data requirements coming into effect such as an individual’s ‘right to be forgotten’ and full disclosure to customers about what data companies hold on them, businesses face big challenges ahead. 

Here are four strategies companies can use to adapt to a future climate of greater transparency:  

1. Hire experts

Few businesses will be able to adapt to the new regulations without hiring new staff to treat customer data, redesign how it is presented, reconfigure websites and customer journeys and rewrite their legal small print. In addition, they may well also have to retrain existing staff. 

2. Reassess which data your business collects

Being transparent may require significant changes to the core processes that underlie how some businesses work. This may require collecting less data than they have previously, or at the very least, different types of data. 

3. Connect the dots

Connecting the dots between different data collected about the same customer in different parts of the business presents massive challenges for some companies. Especially vulnerable will be omnichannel companies that collect and store data on customers in different silos without a mechanism in place to know which data pertains to the same person. 

4. Report complex data clearly

Companies will have to design and build ways to compile complex customer data reports. This translates to developing ways to search through entire content libraries while also creating ways to present that comprehensive information in digestible form. 

Acknowledge the Impacts

Organizations worldwide are coming under increasing scrutiny about how they collect customer data and what they do with it. By and large, this is a welcome development and will return more power to consumers. 

However, it will also have a huge impact on how companies behave online, and may well entail major changes to their business practices. Organizations need to acknowledge just how much of an impact these changes will have and start developing plans to bring greater transparency to their organizations.