ENVY: The seventh deadly sin of customer relationships

Collecting customer data has become a competitive advantage and businesses are racing to keep up. But the most valuable, useful and compliant data will come direct from customers themselves.

This post is part of a series about why today’s digital customer relationships are broken, and what we can do about it. You can find the other ‘seven sins’ posts here

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ENVY: The seventh deadly sin

It’s commonly argued today that access to customer data has become a competitive advantage.

Companies are racing to keep up with each other around how much data they can collect at scale. How large they can make their databases. How deep their customer insights and data-driven operations can be. 

Predictably then, the tech vendors, data consultants and analysts have all been promoting vast data innovation programmes that enable businesses to collect the richest, most detailed and valuable personal data.

It all feels like data envy to me.

Aristotle described envy as the pain at the sight of another’s good fortune, stirred by “those who have what we ought to have”. Precisely.

From a purely commercial perspective, you can see why collecting more and more customer data can be seen as valuable.

With deeper customer insights companies can achieve greater levels of personalisation and drive up average revenue per user. But from a compliance (where did you get that data?), customer experience (consent form hell) and privacy point of view (“why are those ads following me around?”), not so much.

This envious data collection behaviour is damaging customer trust, and the customer relationship.

These business data lakes and mountains have become honey-pot databases waiting to be hacked. Not a day goes by without some major announcement or other from an embarrassed big brand about yet another data breach.

Trust has never been lower in companies when it comes to looking after our data.

Innovation culture is (in)famously about forgiveness not permission, “...to move fast and break things”. But personal data is tricky stuff to work with: in reality, businesses need permission not forgiveness.

And that means having and building customer trust.

Not easy, and certainly not the default today. We’re in a kind of customer data arms race - which manifestly can only be a race to the bottom. If this data collection Hotel California is systemic across the whole digital economy, what’s the way out of this mess? 

If you put together SSI tools like digital wallets with new private DIDs, customers can get involved directly when data is needed by a company.

In some respect, the individual can become the master data record. Let’s call it “customer-direct data”. 

The economic case?

Let’s look at the two sides of this. First, the real costs of collecting and storing data with today’s approach. And second, the new ROI of customer-direct data using SSI.

Counting the real cost of data collection

Businesses need economies of scale for customer data to be useful.

So it makes sense to collect lots of it, centralise and analyse it. But how much does it actually cost the business to collect, store, clean, secure, analyse and maintain these data sets?

And to add to that the ‘soft impacts’, like how much customer trust is lost when the company asks for too much data, or when the business deliberately obscures data practices with user experience dark patterns

On top of all of that, there are the significant brand impacts when (not if) the business gets hacked.

The ROI of customer-direct data

With this approach companies can ask the customer directly for what data they need, when and where they need it.

It means the business can sidestep extensive customer tracking, cookies and data surveillance. It means they can remove the need for 3rd party data brokers. And it means they can kill-off the lengthy consent form at registration.

Not only is the data acquired much more valuable when it comes from the customer, but it’s also lower cost, and critically, much more compliant with data protection regulations. 

With DIDs businesses can connect directly with individuals, and ask for precisely the data they need to get something done.

And because asking for the data is so seamless, so simple, the idea of having to store, secure, insure and clean it becomes less and less attractive.

In fact, once the data has been processed it can be deleted (and perhaps only ever retained to meet regulations like Know Your Customer). And when the business needs the data - perhaps someone's age - they can just ask for it again at that moment.

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New SSI-based data strategies

The hawk-eyed amongst you will have also realised that when used together with the technology behind ‘zero knowledge proofs’ (go back and read Greed), the data never needs to leave the individual at all.

The organisation can minimise what data is stored centrally, and thereby minimise the compliance liabilities (not to mention the costs to secure, clean, store and insure the data in the first place).

They can store facts about the data, rather than the data itself.

Simply put, the pure economics of customer-direct data makes a pretty compelling case for developing a new SSI-based data strategy.

Now, centralised databases will continue to exist, and mostly for good business reasons. But with SSI we can challenge what data needs to be captured and stored centrally.

For example, most businesses today don’t want to hold a store of credit card details. Instead they ask for it only when they need it (or pass it off entirely to another 3rd party to handle it). 

So why should a business want to store a load of customer identity data like addresses and age? 

Today, organisations hold on to those datasets because it would ruin the customer experience if customers had to put in their address every time. But with SSI it can be shared seamlessly in the same transaction as the check out ‘click’.

The cherry on top is that businesses will then be capturing the latest, correct and in many cases verified data.

But perhaps even more importantly we’ll see a new market force emerging.

The most valuable data - the highest quality, lowest risk, most useful, most compliant - will come directly from the individual, not a 3rd party. 

Putting all of this together, SSI will shape how businesses develop their data strategies. They’ll shift from today’s default position of ‘collect, use and store’ to ‘request, use and delete (and ask again when you need)’. 

A new paradigm: ‘identity holder present’

The knock-on implications of customer-direct data are profound for companies in terms of risk and costs.

Think of it like card payments.

For a business, a ‘card present’ transaction is lower risk and therefore lower cost (the payment processing companies charge a lower fee). ‘Card not present’ transactions are more expensive to put through because they carry more risk of fraud and payment chargebacks.

With SSI we can do the same. With digital wallets businesses can get high levels of assurance that the holder of a credential is involved in the transaction.

That means higher trust and lower risk interactions - the equivalent of having an ‘identity holder present’ watermark on every transaction. 

Any other digital identity processes would be considered ‘identity holder NOT present’ which means more risk, and therefore would cost more. 

So the very economics of the costs vs benefits suggests that SSI will become the preferred approach. 

But back to customer relationships.

If a company can seamlessly ask for whatever data is needed at that moment, for that transaction or purpose, then why would they ever need to envy others’ troves of customer data? And why do that when data will probably be out of date, expensive to manage, and introduce more liability than value?

Maybe we can call it the envy shift: the move from being jealous of others’ massive data collection capabilities, to instead envying the seamless, frictionless and low-cost user experiences of competitors who inevitably start taking market share.

So I’m betting that when the penny drops and businesses fully embrace the opportunities provided by self sovereign identity - including asking customers directly for data with one click - they’ll be tickled pink.

Which will be better than being green with envy.

Next up: is redemption from the seven sins possible?


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