Trust.

All companies are now data companies.

In the post-COVID-19 business environment, few deny that their organizations are data-driven. Data now plays a role in nearly every aspect of a company’s operations – from bringing skilled employees on board to marketing and advertising campaigns to day-to-day functioning. Recent leaps forward in generative artificial intelligence (AI) will only speed up the ways in which businesses become data-driven.

“Every company needs data to grow, thrive, and develop now and in the future. ”

Because they need data to grow and innovate, today’s companies need more than a savvy chief information officer and a solid IT team. All company executives must act as “data leaders.” They must thoroughly understand not only how to use data to achieve organizational goals but also how to make their companies good data stewards. In a previous generation that underwent rapid technological transformations, the motto was, “Move fast and break things.” The key word for the new generation might be “trust.” Data leaders need strategic plans to gain and retain the trust of their customers, clients and colleagues. Companies that employ wise data practices will earn trust and thrive. Those that don’t will fall behind. 

Companies hoping to benefit from digital transformation must understand how to leverage data effectively.

Digital transformation – loosely understood as taking steps to leverage digital tools and become more explicitly data-driven – is necessary if a company wants to remain competitive in the modern world. But despite investing billions in tech initiatives, many companies remain, at their core, untransformed.

“Without a real definition of digital transformation, corporate America has thrown tens of billions of dollars into new technological initiatives.”

Over the past decade, companies – particularly those in sectors like health care, finance, retail and manufacturing – have amassed vast quantities of data, gathered not just by computers but also by smartphones and a wide array of objects equipped with sensory devices. But except for big tech firms, few organizations have leveraged their data effectively. Indeed, for most, data-gathering has increased liability without a concurrent boost in profits or innovation. 

Leaders need to learn how to benefit from digital transformations. The first step is mastering the tools necessary to work with data. As you accumulate data, you need to find out what the data shows you about your customers. Data provides essential insights about your customers – such as how old they are, where they live and what they value. Shoe brand Nike’s choice to run a major ad campaign featuring former football player Colin Kaepernick may have seemed risky. However, thanks to data-gathering and analysis, the company knew that a majority of its customer base was young, diverse and in favor of Kaepernick’s protest activities and, thus, correctly predicted the ad would boost its sales. Analysis of customer complaints and suggestions can also help guide product development – revealing what people want or need – and your mergers and acquisitions approach.

Cyberattacks are an inescapable part of the data-driven world. Plan accordingly.

Your data is a significant “pre-tangible” asset that, properly understood and leveraged, can directly drive growth. But for data to serve your company well, you must not only understand what your current data is telling you and what further data you need to gather to achieve your goals; you must also be proactive in protecting that data. 

The world generates 2.5 quintillion bytes of data every day. Advances in AI make data at this level ever more valuable. Yet data’s scale and people’s reliance on it make it vulnerable. Trillions of dollars are lost worldwide each year due to data privacy and security failures. People expect cyberattacks alone will cost the world’s economy around $10 trillion annually by 2025. Poor data security is not just an issue for business. Nations are using data for political leverage and regulating the movement of data to other countries.

“Increasingly, we are seeing data being used as a political tool in disputes or negotiations between countries.”

Given this geopolitical reality, companies must fully understand their legal obligations related to data-gathering and protection and ensure their practices can stand up to governmental scrutiny. Until Europe implemented General Data Protection Regulation (GDPR) in 2018, there were few data privacy and cybersecurity regulations. At this point, over 100 countries have data protection laws.

Companies must show they regularly conduct privacy and security audits and have otherwise prepared to protect the data they gather. They must also have clear plans in place if a security breach occurs. Leaders and their legal departments should be in close communication regarding company preparedness before a digital breach and must move in lockstep after a breach takes place. A company’s board should establish a group responsible for company privacy and security, and leaders should allocate resources to ensure company data remains appropriately private and secure. People accountable for data privacy and security should keep leaders informed about relevant laws as they evolve.

Data privacy leadership is more urgent than ever.

Data privacy – “control over the conditions of sharing data” – differs from data security – protecting data from hackers, but it is no less critical. Failures in data privacy can cause legal issues. But they can also create business issues. In 2022, data privacy breaches caused over $1 trillion in losses overall. Weak or irresponsible data privacy stewardship leads to customer and employee distrust and, ultimately, market losses. After all, if your customers or the people you work with don’t trust the way you handle data, they’ll stop working with you and move on to a company with better and more reliable practices.

“Any sector that relies on data analytics, algorithms, data innovation, and digital advertising is vulnerable to losses if data leadership is not mastered.”

Clear-eyed leadership can help ground a company’s commitment to data privacy. They must understand both legal requirements and customer concerns. Companies who make data privacy a part of their strategy flourish: In 2022, the 10 most profitable companies worldwide had clear privacy protection policies in place. Leaders and board members should be aware that outside entities such as Institutional Shareholder Services monitor companies’ data privacy policies and should consider ways to collaborate with government and consumer advocacy groups to formulate data privacy strategies that serve both company and consumer interests. While, at present, data privacy laws vary around the world, ideally, at some point in the future, a common standard will emerge.

Companies that insist on proper oversight of privacy and cybersecurity will likely become market leaders. 

Cybersecurity and data privacy aren’t just issues for IT and legal departments. It’s a straightforward business issue that affects revenue and shareholder value. Investors are tracking how companies manage privacy and cybersecurity risks. 

“Privacy and cyber preparedness have become market differentiators, thereby presenting opportunities for forward-looking companies to contribute to market recovery.”

Company boards often struggle with data privacy and cybersecurity oversight – they can be very technical issues. It may be wise for boards to ensure at least one or two members have a background in cybersecurity or to employ specialists who regularly report to leaders. In addition to bringing in outside experts to provide technical know-how, boards must do the following:

• Maintain a working knowledge of the company’s security and privacy protocols. 
• Stay up-to-date on the ever-evolving regulatory environment.
• Determine a data strategy that will allow the company to pursue its goals while still meeting investor and customer expectations surrounding data privacy and security. This step will involve discerning what data matters to the company’s success and what data the company can cull to cut down on risks. 
• Consider how cyber risks could affect the company’s finances.
• Look at data risks and opportunities from a broad perspective.

A proper data strategy can enhance revenues.

Gen Z spends some $360 billion a year on consumer products and activities. They use smartphones. They receive information about brands through social media platforms like Instagram and YouTube. A decent data strategy can increase a company’s revenue to the tune of billions. It can do so by increasing demand awareness, communicating with consumers, developing products in a targeted way – and hiring the right people.

“A data strategy will allow you to understand your customers better and know what they want.”

Marketers are seeking targeted communications with consumers that reflect what consumers really want. Following social media is a simple way for marketers to see how customers perceive their brands. Paying attention to discussions on social media can also help make product development more relevant and precise. In this way, new products can be more tailored to consumers’ wants. Finally, a company’s value and relevance are tied to the people who work for it. Your ability to hire the best and brightest stems from your digital strategy. It’s not just that you’ll find skilled employees on social media. Top gen Z prospective employees will assess your company’s importance by your digital footprint. They care about whether you’re an innovator and a leader in your field.

Artificial intelligence is the key to data-driven firms’ success.

Data’s value isn’t well reflected in standard accounting practices. Sometimes, a company’s data is more valuable than the company itself. Understanding your data’s value is important for developing a targeted data strategy. For company leaders to determine their data’s value, they need to decide what data they need, where they can find it, who is responsible for it, and who in the company is in the best position to use it. When you’ve identified relevant data, assign it value. Data value comes from customer data, data as it’s actually being used, and whatever you can anticipate from possible future use.

“The reality is that not all data is necessary or even helpful for your business growth and development. Attention should be focused only on the data that will help enhance your strategic goals.”

The future of data-driven companies lies with artificial intelligence. Any company that hasn’t accelerated its digital transformation through AI is already behind. The global expenditure on AI in 2022 was $434 billion. By 2029, it’s expected to go beyond a trillion dollars.

From the leader, board and stakeholder point of view, AI requires trust. Leaders and boards need to take steps to garner consumer trust. They should prioritize human oversight of AI, ensure the integrity of data used for AI, engage in rigorous algorithm testing, establish up-to-date verification protocols and build diverse algorithm development teams.

Compliance is good for business.

Compliance isn’t just about adhering to rules and regulations. It’s a good business practice that helps you treat your customers with the respect they deserve. 

“Companies would do well to develop a top-line compliance strategy to ensure substantial compliance in the jurisdictions that they care about.”

You can carry out your compliance program in a series of “phases.” Most companies have a chief data officer, but that position usually focuses on digital transformation. You’ll also need someone to oversee privacy and security specifically, sometimes called the “chief trust officer,” or, better still, a team with the relevant expertise to create data-related rules and protections. Do a data inventory to determine where your data comes from and how it’s used. Then, see whether your current practices comply with relevant data privacy and security laws. Next, identify high-risk areas of your business – pertaining to children or health and financial data, for instance – and assess how you are attempting to mitigate data-related risks. Finally, you’ll need to ensure your “auditable record” showing how you’ve complied with relevant data and security laws is up-to-date.

Achieve true digital transformation by pursuing trust.

At this point, it should be clear that your company will suffer if you don’t establish thoughtful, strategic data privacy, cybersecurity and AI implementation practices. Something will cause brand damage, and your competitors will move in. Moving forward may feel daunting, but you can do so successfully by following a few simple guidelines.

“You do not need to be a technical wizard to lead change. You need to be aware of the issues, ask the right questions, and ensure that you have the right leaders for this brave, new data-laden world.”

First, always treat your data as a hard asset. Like any other asset, it should appear on your monthly balance sheet and be up for discussion at every board meeting. Second, employ a professional data strategist who is familiar with AI and cyber trends and privacy laws and understands how to manage growth in a way consistent with compliance issues. Third, know your data; connect your data with your company’s broader goals; and analyze your data so you better understand your customers’ wants and needs. Fourth, make sure your data is insured and protected. You don’t want to expose your company to unnecessary risk or transgress privacy or security laws.

Once you have all these elements in place, you will have completed your data transformation. You will have earned the trust of your customers, colleagues and various stakeholders – and will be able to innovate and thrive.