By: Gigaom
If data is the new oil, don’t end up being BP
The US presidential election was further proof that 2012 has been a good year to be a quant — and being a data scientist has never been sexier. But data is nothing without trust, says former Last.fm executive Matthew Hawn.

In the run-up to the US election, stats nerds and nervous Democrats sought and found reassurance in Nate Silver’s aggregate polling model, spiking traffic at the New York Times  but it was Harper Reed,  CTO of the Obama 2012 re-election campaign,  who really taught us a lesson about the value of personal data in politics.

In the most sophisticated (and expensive) campaign season in history, Harper and his team provided the highly targeted information that allowed the Democratic machine to reach potential donors and optimize the get-out-the-vote efforts across just about every communication channel possible.  It’s probably not an exaggeration to say that their analytics work changed the course of the election, giving Obama the edge over Mitt Romney and his SuperPAC donors …and four more years in the White House.

No matter what your politics, the power of personal data in the 2012 election season was undeniable.  And all over the world, c-level executives are salivating as they think about they will use the same quantitative analysis and personal data mining techniques to supercharge growth and revenue.

Just about every would-be pundit has been telling us this year that “Data is the new Oil”.  You can practically see them scratching off “Social Media Guru” from their business cards and replacing it with “Data Scientist”.

But without considering the ethical and best practices of personal data collection, you are more likely to end up as the Exxon Valdez or with a BP-sized sized disaster on your hands. If you’re serious about using customer personal data effectively in your business, build your data policies on solid ground from the beginning and focus on three key concepts:  permission, control, and transparency.

Permission

Always get explicit, opt-in permission to use personal data.  Opt-out models are deceptive and slimy. Only ask for the data you need to make your service work better for your customers. Storing more personal data than you actually use just opens you up to risk from malicious hackers or unscrupulous employees. 

Think twice about using personalized data when aggregate, non-identifiable data could just as effective — especially for advertising purposes. And while the temptation might come up to sell customer data to third parties when revenues are tight, it is never worth it.  Selling your customers to the highest bidder destroys the trust you established with every great interaction with your product.

Control

Start off with a simple rule of thumb:  You don’t own your customer’s personal data: they do. Increasingly, consumers know that the data they give you is valuable currency and when they deposit it with you, they expect a return on their investment. Make it as easy to view and change personal data or even remove it entirely as you did to collect it. Be clear on how each data field is used in your service and let customers decide what should be private and what should be public. Don’t make it hard for them to walk away from your service whenever they want.

Transparency

Be honest about how you use personal data in your services and explain this as you collect it. Educating people about what you do with their information and the benefits they get from depositing it with you creates better informed and more loyal customers.  Don’t write privacy policies in nine-point type or obscure them by burying them deep in your services dark corners.

And don’t listen to anyone who tells you that we’re in a post-privacy society.  It’s as important as ever to people and when the inevitable privacy screw-up happens, how transparent you are about what happened and how you are fixing the problem will be more important than the incident itself.

By focusing your policies and day-to-day communications on these concepts, you’ll build a more valuable asset with your customers:  Trust.  It’s more valuable than oil and much harder to refine. It’s what your reputation is based on and if you lose it, your customers go with it.

Matthew Hawn is product development and strategy consultant based in London, and previously VP of product at Last.fm



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