Don't Gamble Your Company's Reputation on Data Governance

CIO — Over the last two decades, the primary contribution of information technologies in firms has been about efficiency and enablement: to improve processes, make people more productive, reduce time to market, or enable things that couldn't be done previously. The focus has been on costs and payoffs. This decade is witnessing a new challenge: data. There is suddenly too much of it, and while firms rush to mine it, they do so without adequate regard for the risks in keeping and using it.

Hardly a week goes by without yet another major breach or scandal involving data. The last month has been particularly bad. Tom Tom sold location data to law enforcement without asking its consumers, Apple has been gathering consumer movement and use data on its devices, while >Epsilon and Sony were hacked, with sensitive data on hundreds of millions of individuals stolen. Despite reassurances from these companies, it is hard to be certain whether and when this data will be misused. More importantly, the reputations of these companies have been badly damaged.

Are these incidents any different in terms of potential impacts on franchises from product recalls due to defects in industrial products? Not really. And perhaps some companies are beginning to realize this. Indeed, one major positive development from the Sony fallout has been the creation by the company of a "Chief Information Security Officer (CISO)". This is a laudable step that others should follow. But it doesn't go far enough in acknowledging the real problem.

Sony and many other firms view the security and use of data as a technical problem. But in fact, the governance of data is a management problem. The lapses we are seeing are not technical ones, but failures in management. Where data is the lifeblood of commercial activity, its management in many industries must reside in the C-suite, not in the trenches.

Lapses in data governance in data-dependent industries are no different than product defects in the physical world. The reason is simple. Increasingly, it is information itself that is the product, with technology being the critical conduit for its exchange. Many industries that touch our lives on an everyday basis involve information products. If one considers the firms that we deal with every day, such as Google (GOOG), Facebook, banks, media, and telecommunication companies, their products are information-based. Even when there is a physical product, digital interaction with consumers transforms part of the consumer experience into one that is information-based. Information products have different properties than traditional physical products and are subject to different economics and risks. Furthermore, the growing volume of data created as a by-product of this digital interaction brings with it significant benefits as well as risks.

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