Privacy vs. growth: the great reputation tension in tomorrow’s economy

The West Wing was wonderful for many reasons. The characterisation. The pace. The way it casually educated millions about the way the US constitution works. Above all, it was insightful about society’s biggest issues and built drama in telling their stories through a political lens.

In Episode 9 of Series 1, which aired in 1999, the impossibly-talented-and-chiselled Presidential advisor, Sam Seaborn, utters a line to President Bartlett about privacy:“The next decade is all about privacy. I’m talking about the internet…. In a country born of the will to be free… what could be more fundamental than this?”

I hadn’t faintly considered the ramifications of the growth of the internet when the West Wing first aired – my priorities as a teenager at the time were, predictably, too self-absorbed.

Fast forward twenty years and the line still holds resonance. The political tension between privacy and freedom underpin some of the biggest debates of our time.

But what now needs more consideration is the tension between privacy and the course of economic growth on which we’ve unwittingly set sail.

A large volume of the funding which has flooded into the tech sector over the last decade, epitomised by SoftBank, is often a big bet on corporate growth strategies predicated on the effective acquisition of customer data. These now-maturing, well-capitalised businesses will help define the economy of tomorrow.

But many of the winners from this funding glut will be committed to delivering on a strategy which can only succeed if they find ways to extricate and monetise the customer data which is embedded in their growth ambitions.

And so the next decade will see a corporate hunger for data like we’ve never seen. We’re still at the hors d’oeuvre of this digital feast.

At the same time, people will begin to wake up to the value – and importance – of sharing their data responsibly. And of course, as we’ve seen through measures such as GDPR, regulators will accelerate this consumer awakening.

Whilst consumers are increasingly comfortable with the concept of giving away data in return for a service, it would be folly to model that the attitudinal trend line continues to smoothly head upwards.

There’s an inevitable strategic collision ahead for many fast-growing businesses: the growth-driven desire to harvest consumer data crashing into the need to go to (potentially extraordinary) lengths to convince people to share, whilst convincing a wider group of stakeholders you can do so efficiently and responsibly.

There’s a future cost of capital drag as this plays out. Have these businesses properly priced future regulatory risk and changes in consumer behaviour?

But perhaps more fundamentally, a complex reputation conundrum abounds. How hard will businesses have to work to convince people to give data to a third party if they’ve been educated over a period of years to be wary to do so? A single issue around a company’s data protection policies could prove fatal to its entire strategy.

And the more fundamental issue is that it won’t be easy for these businesses to strategically pivot their corporate strategy (one of tech’s favourite get-out-of-jail arguments when their future growth is examined) if there is a meaningful change in consumer attitudes.

Across the next decade organisations may find themselves wanting to fudge a response and communicate contradictory data narratives to consumers, investors and regulators. But that’s a recipe for reputational decline.

In the 2020s, the way the inherent tension between consumer privacy and many businesses’ growth ambitions is handled will determine if they remain reputationally viable.

As Mr Seaborn aptly put it two decades ago, for Corporate Affairs Directors in data-hungry firms: what could be more fundamental than this?