Consumer ire over Big Data can hit businesses, Facebook's crash an example

Companies typically use only 5% to 10% of the data they collect. They're beefing up their efforts to use more-but a consumer backlash is brewing

For years, conventional wisdom said the smart way to build a blockbuster company was to amass big amounts of information on your customers. Now comes the downside: Big Data can also inflict big harm on a business.

Companies are facing an erosion of faith in their ability to do the right thing with what they’ve learned. Most of us are using Facebook, for instance, but a growing number of us don’t trust Silicon Valley tech giants to responsibly handle what we share.

Facebook Inc. Chief Executive Mark Zuckerberg is the most visible tech executive to face the music thus far. Facebook shares crashed this past week after reporting slower-than-expected revenue growth in the wake of the Cambridge Analytica privacy scandal.

The confidence problem transcends Facebook. Data breaches have hit companies nationwide, and executives have on more than one occasion appeared to be asleep at the wheel or orchestrating a coverup.

In 2017, credit-reporting firm Equifax Inc. EFX 0.19 per cent disclosed that the personal information of nearly 150 million people was compromised in a data breach. Before that, Uber Technologies Inc. paid hackers $100,000 to keep secret the theft of 57 million accounts. The list goes on.

Analysts have for a while now been predicting a downturn in public sentiment toward Big Data. In 2013, for instance, consulting firm Ernst & Young in a survey report titled The Big Data Backlash said “the Golden Age of anytime, anywhere, free-for-all access to customer data” would come to end in 2018.

Regulations could slow the ability to collect Big Data. Take the European Union’s new General Data Protection Regulation: Its enforcement began in late May and led to a decline of 1 million Facebook users in that region during the second quarter.

Companies are responding by appointing more chief data officers who report directly to the CEO, Ernst & Young’s global analytics leader, Beatriz Sanz Saiz, said in an interview. While this promotes better accountability, it is primarily because “the first priority for most executives is to leverage their own internal data.”

Ms. Sanz Saiz estimates companies typically use only 5per cent to 10 per cent of the data they collect. They would like to use more. That’s why a slate of industries—from oil to transportation to health care—are beefing up internal data departments or forging new partnerships with tech giants like Alphabet Inc. or Microsoft Corp.

Companies can’t just leave these strategies to the tech guys, Andrew White, an analyst with tech research firm Gartner, said in an interview. Boards of directors need to look at the functions tied to Big Data (machine learning, artificial intelligence or cloud computing, for instance) with the same rigor as executive pay, financial auditing or management succession.

“IT cannot do the type of governance we’re talking about,” Mr White said. “This is a business that provides a service and they are not entirely weighing the social consequences. … It’s not different than dealing with climate change.”

Ernst & Young’s survey found nearly 80per cent of respondents believe companies collect data in order to line their pockets rather than to simply make life easier. “As a result, they are becoming more selective about who they share data with and a backlash is building,” the firm said.

To counter this, companies must prove they can do more than simply “monetize” our data.

Think about the impact Google Maps has on a rural road like the one I live on in southeast Michigan. For years, residents have fought to keep the narrow dirt road, which was a critical thoroughfare before the Civil War, from losing its historic character.

Traffic, however, is increasingly thick because traffic-and-map apps like Google’s direct people to use it because it will shave a minute or two from their commute. This has led to higher maintenance costs, crashes (three vehicles have wrecked in our front yard in as many years) and an increase in dust.

“Municipalities and agencies responsible for managing roads and reducing traffic are free to take measures according to their individual needs (e.g. speed humps, changing speed limits, adding traffic lights),” a company spokeswoman said. “Google Maps will then strive to reflect that reality completely and accurately in our map model.”

The Cleveland Plain Dealer recently published columns on real-world backlash to a Big Data grab: Older people were being required to have their license swiped before buying age-restricted items at Giant Eagle grocery stores -- and they were concerned about the protection of their personal information.

“They’re not scanning it because of your age,” Roy Hewitt, a 71-year-old-retired sports editor at that paper, told me. He’s clearly eligible to buy alcohol, cigarettes or propane: “My beard is older than 21.”

Mr Hewitt alerted a columnist at the paper about the practice and the subsequent coverage triggered a robust response.

A Giant Eagle spokesman said: “We understand that some customers might have reservations about having their identification cards scanned and want to reassure those customers that Giant Eagle takes its responsibility to protect their personal data very seriously.”

Mr Hewitt says he no longer gets carded, but still has a dim view. “You can’t trust some banks and some companies to look at your credit and not get hacked. How in the world are you going to trust a grocery store?”