Firms are increasingly investing in how they protect consumer data and give consumers more control of their data, but this type of data privacy performance requires a delicate balance. The higher the performance of a firm on data privacy, the more it might be giving away opportunities to monetize the data it has collected. The lower the performance of a firm on data privacy, the more susceptible the firm is to risk from multiple harms (e.g., reputation scandals, litigation penalties). When it comes to data privacy, firms lose out if they tip too far in one direction of the other. So, what should leaders do?
How to Optimize Your Company’s Approach to Data Privacy
More isn’t always better.
August 26, 2020
Summary.
The author found that the relationship between data privacy performance and firm’s market valuation is more complicated than the conventional wisdom of “the more the better” suggests. Instead, the relationship takes the form of an inverted U-shape; the higher firms perform on data privacy, the more they are valued by financial markets, but only up to an optimal turning point, above which improving performance actually hurts firms’ market valuation. How do you know if your company is in this optimal zone? The authors suggest looking at competitors and making sure you’re not an outlier on how much data privacy your offer your customers. The sweet spot, they say, is with the crowd.
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Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Digital Intelligence . Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Excel in a world that's being continually transformed by technology.