Data is big business. But as consumers become more aware of their digital footprints, a competitive advantage is sliding to those who promise privacy.

A question of trust

The world is a scary place right now when it comes to digital data: Hackers make off with the personal information of one in three Americans, Google recently released a smart speaker with built-in microphones that turn on at random times to record and transmit audio to its corporate servers, and Facebook now acknowledges it helped spread fake news and ads designed to influence the US election. All of these scenarios make you sit up and pay attention to how the rapid advances in being able to store, mine and monetize data are ushering in a new and confusing landscape for corporations and customers alike. What once was the domain of a few privacy advocates putting large platform players and startups on the spot for their transgressions and oversights has broadened into a much wider array of voices that includes legal experts, technologists and entrepreneurs. They all wrestle with the fundamental question: Is there such a thing as "data ethics"? What exactly does the term mean, and how can such arguably fuzzy values be turned into a competitive advantage?

Call for new ethics

Like an emerging field, a lot of efforts are underway to lay claim to the proper definition of "data ethics." One of the first comes from Luciano Floridi of the Oxford Internet Institute. Building on a workshop held in late 2015, he published a seminal essay entitled "What is Data Ethics?" According to Floridi, it's a new branch of ethics "that studies and evaluates moral problems related to data, algorithms and corresponding practices in order to formulate and support morally good solutions." Floridi identifies three central issues: consent, user privacy and secondary use by entities a consumer might not be aware of – as in the case of ad networks that track browsing and habits.

If that sounds like too abstract an approach to real-world business problems like real-time segmenting, profiling and targeting of users, there's also the more hands-on approach by Danish data activists Gry Hasselbalch and Pernille Tranberg. Their book "Data Ethics: The New Competitive Advantage" presents dozens of companies that already practice more responsible and transparent methods of handling data. "Ethical companies in today's big data era are doing more than just complying with data protection legislation," Hasselbalch argues. "They also follow the spirit and vision of the legislation by listening closely to their customers and implementing credible and clear transparency policies for data management. They're only processing necessary data and developing privacy-aware corporate cultures and organizational structures. Some are developing products and services using Privacy by Design." Tranberg admits, however, that getting it right is still a process of trial and error. "In some sense, data ethics in 2017 is similar to the dawn of the environmental movement. We are beginning to wake up to the downsides of this amazing resource called data that everybody loves to compare to oil or gold. Extracting any resource comes with nasty, toxic side effects. We're learning how to do things better, so everything is in beta right now."

Austrian-born lawyer Viktor Mayer-Schonberger, who teaches at Oxford and is the author of the influential book "Big Data: A Revolution That Will Transform How We Live, Work and Think", won't have any of that. "I have no idea what data ethics means. It's one of those buzzwords that pretends to help us navigate these new waters, but it doesn't do much." Instead, he suggests something more tangible: "What companies should and are focusing on is the use of data. What value does it add to a company and society at large?" In his view, every company needs to have a strategy for data use that goes beyond proclamations. "If a company usurps all of the value of the data and doesn't give anything back, then people will say 'no, thank you' over time, as they do with any other crappy product."

His market-driven, transactional interpretation is one that almost all companies dabbling in ethical data handling can agree on. It also makes it easier to gauge if a company indeed has a competitive edge. Despite the enormous market share of the big platform players such as Amazon, Facebook and Google, a wide range of early adopters spanning the worlds of enterprise and consumer applications already exists. No matter what their intentions are, they've taken the cues of a more privacy-focused environment in Europe, often driven by the EU's General Data Protection Regulation (GDPR), which will come into effect at the end of May 2018.

Take Swiss messaging service Wire, which offers end-to-end encryption that competes with the likes of Slack, Microsoft Teams or Skype but is designed to meet Europe's new, stringent data protection framework. Wire was launched by Skype co-founder Janus Friis and recently expanded from a free consumer product to a paid enterprise version. "We don't talk about ethics when we speak with corporate customers," says Head of Marketing Siim Teller. "For consumers, the important issue is privacy, while for companies it's security and compliance. That's the point we stress." The ethical handling of data shared via the service, then, is more of an implicit selling point.

Big data based on transparency and compassion

The promise of responsible data use is much more pronounced for a consumer-facing company such as Berlin-based Clue. Launched in 2013, it runs a popular fertility-tracking app used by more than five million women around the world and has raised in excess of $30 million. "One of the key things our service is built around, besides a scientific approach, is trust. You build trust through transparency and compassion," explains Gregoire Marino, the company's trust and safety manager.

Clue is up against a lot of competition, with dozens of apps and services focused on women as prime advertising targets, but many of them have been found to be either insecure or intentionally leak sensitive data to third parties. Clue, on the other hand, earned high marks from the US-based privacy watchdog Electronic Frontier Foundation (EFF). That praise most likely translates into business success and growth, says the company's spokeswoman Lisa Kennelly. "It's challenging to directly attribute growth or retention to one specific story, but we have heard [lots of] feedback from users that they choose Clue over other apps because of our commitment to privacy and responsible data handling."

Being honest while remaining a viable business is a key point for data expert Andreas Weigend, former chief scientist at Amazon. His recent book "Data for the People: How to Make Our Post-Privacy Economy Work for You" stresses that there's no turning back from the world of widely shared information that he calls "social data" – bits by us and about us. "What we need are standards that allow us to assess the risks and rewards of sharing and combining data, and provide a means for holding companies accountable." One of the two crucial dimensions is transparency about data use and reuse, meaning users ought to be able to see and inspect what Weigend calls the "data refineries." That doesn't mean the average consumer needs to pore over thousands of lines of code, but rather should get a simplified view derived from inspections and certification processes that are familiar from Fair Trade products. Such a labeling push will most likely create a new growth industry for auditors.

Upcoming companies with responsible approaches

Transparency in data handling and letting customers act on what a company knows about them can be a competitive advantage. Take contact management service Gentoo App, which synchronizes up-to-date contact info but lets users decide what parts of their personal information they want to share with whom and revoke access anytime, for instance not giving a professional acquaintance a mobile number or private email address. That's a much more granular level of control than, say, LinkedIn offers.

William Skannerup, Gentoo App's co-founder and CEO, thinks that this approach is better business for the long term. "It may put us at an economic disadvantage to not perform analytics, selling or trading the data we store, but we're confident that it puts us in a better position for the decades ahead," he explains. He's certain that young companies like his have a profitable niche to grow in since the controversy over data security and privacy will draw a clearer line between companies that collect and sell data for internal and external use and those that store and protect data for internal use only.

It will likely be a while before this new crop of companies espousing more stringent data handling practices generates a billion-dollar success story. "Large companies that have built successful data empires have no doubt realized the ethical implications of these practices, but they have been pretty slow on the draw in terms of taking concrete steps," says Raegan MacDonald, senior policy manager with the Mozilla Foundation, the birthplace of the Firefox browser. She sees growing awareness for a new, emerging class of companies that adopt ethical approaches, even if they don't make much marketing noise over their commitment. "From the user's point of view, the motivating factor doesn't matter."

Mozilla's Firefox may have sunken to fourth place in the battle of the browsers, but it's in good company when it comes to data ethics writ large. Apple recently joined the fray by blocking cross-site trackers in its latest version of Safari, rattling one of the key pillars of the current data regime for its massive user base of iOS devices. More ideas will find their way into the realm of digital business as the scholarly debate heats up. The US National Science Foundation announced it's funding research into big data ethics with $3 million, while the International Conference of Data Protection and Privacy Commissioners has declared digital ethics its focal point for 2018 in order to make sure that "our values, based on a common respect for the individual and human rights, remain a core component of innovation." And yes, there will soon be more successful apps for that.

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