Innovation vs. Data Privacy or Innovation & Data Privacy?

Nowadays, data security and customer satisfaction are increasingly gaining attention – both in the B2B segment and in the B2C segment. But what does this mean for companies when it comes to the handling of customer data? It has now become clear that it is better for companies to collect less, but more targeted, customer data and to use it more efficiently. By taking this approach, companies can maintain their customers’ trust and remain successful in the long term.

Last week, I read an article about data usage and artificial intelligence (AI) in a hotel. The author of the article was in favor of collecting the data of hotel guests and, with the aid of AI, using this data to improve customer satisfaction with the company. In this particular case, the company was a hotel chain and our author was a guest at a hotel in this chain.

The author was evidently so unhappy with his stay at the hotel that he considered ways in which it could be improved, and then explained them in his article. He suggested using the hotel cameras to scan guests and analyze their mood. He said that the data acquired in this way should then be made available to the hotel employees so that they could improve the service at the hotel.

My first thought was: That is so manipulative; it is certainly not legal! Would the customers’ consent not be required to do that? And, if a guest does not want this kind of “service,” would it be that easy to opt out of this tracking and manipulation?

Data Collection vs. Data Protection

Continuously filming and analyzing customers is a huge breach of their privacy. And no matter how clever a system may be, it will not be able to determine the reason why someone is in a bad mood from their facial expression. The information generated in this way would not be anywhere near sufficient for sustainably improving customer satisfaction.

The system described above works on the basis of data. In an era of increasing digitalization, it is becoming more and more easy to collect data. Virtually all companies collect and store data. Often, more data is collected and stored than is actually required. Companies then have excess data that they neither require nor can cope with.

At the same time, reservations about large data collectors are growing – remember the scandal involving Facebook and Cambridge Analytica, where it emerged that Cambridge Analytica illegally used the data of Facebook users to influence the 2016 US election campaign?

So, we have two phenomena: Firstly, enormous quantities of data are being collected and stored without being needed. Secondly, the General Data Protection Regulation (GDPR) came into effect just under a year ago with the aim of ensuring better protection for the data of EU citizens.

Data Use vs. Data Privacy

Most companies make a big mistake: They collect a lot of data (too much) that they do not need and are unable to analyze anyway. Customers question what is being done with all their data and are skeptical toward the company. In the worst-case scenario, customers abandon the company and shop elsewhere.

This should make companies realize that customers value their privacy and the protection of their data very highly. Companies must start to collect only the data that is actually relevant. By doing this, they can convincingly demonstrate that they are taking their customers seriously and that they are making a conscious effort to protect their customers’ privacy and the data that customers have entrusted to them.

With the right strategy, by collecting less data and making optimal use of it, companies can also increase customer satisfaction and improve long-term customer loyalty. The aim should be to use less data efficiently – not to collect and store masses of data without ultimately having any use for most of it.

Data Use without Customer Alienation

Companies must be able to generate and use data without risking alienating their customers. Nothing is more damaging to a company than losing the trust of its customers and therefore their buying power. In the long term, data usage and customers’ privacy must always be considered hand in hand. Customer satisfaction must always be companies’ top priority. Even if that means that they are not able to utilize the full potential of data collection and analysis opportunities. After all, just because something is possible, that does not mean that we should do it. The data entrusted to you must be managed securely. That is the only way to reconcile innovation with the need to protect customers’ privacy.

Efficiency and Less Data

Companies that view this not as a conflict but as an opportunity and have understood the principle will enjoy greater growth in the long term – by gaining and retaining their customers’ trust. In the long term, you need to use the data you have collected more efficiently, store less data, and ensure that data collected in this way is given optimal protection.

Combining Data Privacy and Data Use

Companies that do this have a competitive advantage. In the long run, they are in a stronger position and more viable than their competitors. To return to my unhappy hotel guest once more: Manipulative strategies and processes at the customers’ expense are a no-go. Particularly if the company allegedly has the customer in mind but actually is just thinking about its own benefits.

However, this requires companies to understand that data analysis, data protection, and privacy must be considered in connection with one another. They are not conflicts – they are key aspects of B2B and B2C relationships that must not be neglected. Companies that give consideration to these aspects every day will be more successful in the long term.

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