For a long time now, software-based startups have been launching their products and thrived by having users’ data as the very foundation of their business models. Social media platforms are the perfect examples of how a business can profit from a well of consumer data. While users had traditionally been in the dark about how the information they share when interacting with digital products is used, various notorious scandals have changed the narrative.
Consumers are becoming increasingly aware of how powerful their data is and how it can be used against their own interests. Today, 86% of consumers feel a growing concern about data privacy, and 51% express worries about their data being sold. And with studies on the dangers of irresponsible data management flooding the public space, consumers have started to demand new frameworks that secure safer, transparent, and accurate data handling.
Modern consumers want to be in control of their data again, not the other way around. Software accountability thus emerges as a way of answering this increasing demand. It proposes a fresh perspective for creating and managing digital products, mainly by making processes more reliable and transparent to every stakeholder involved. Even though software accountability is the inevitable next step, it is bound to transform the technology dynamics for startups and entrepreneurs radically, putting their solutions to the test and forcing them to pivot their whole mission as a business.
So, how does software accountability change the game for today’s startups?
Data management remains a hot topic – and even governments are entering the conversations. From California’s Consumer Privacy Act of 2018 to Brazil’s Lei Geral de Proteção de Dados valid since 2018, new regulations on data management are being introduced all over the globe. The European Union’s GDPR law, considered the toughest privacy and security law in the world, showcases how such legislation will become commonplace in the near future.
Interestingly, although many of the existing regulations cover how companies should store users’ data and alert consumers about what data they’re collecting, there is virtually no regulation on what companies can or cannot do with the data they collect.
That’s in part the reason why up until now many tech businesses have been created with the goal of fostering user engagement in order to gather additional information and then use it to generate revenue. But ruling with a free hand is in stark contrast to the data hyper-awareness of today’s consumers. When new businesses propose solutions based on the outdated approach to data to an audience that is becoming sensitive about the use of their information, they face the reality that if they don’t alter their value proposition, they will most certainly fail. Now more than ever, customers “vote with their feet” – they are willing to walk away from doing business with those who don’t value data privacy – so maximizing the potential of data securely and ethically means better positioning and long-term brand value.
Presenting a focus on software accountability and showing the tools a business will rely on to achieve that is becoming vital when pitching to investors too. Today’s VCs are up to speed with the trends and will consider users’ interests as a key part of their decision. According to Bob Ackerman, the founder and managing director at AllegisCyber, a VC firm focusing on early-stage cybersecurity investments, even startups with only a peripheral focus on privacy are now using buzzwords such as GDPR in their pitches to grab his attention.
Facing these new dynamics, startups need to ask themselves these key questions: Are you providing clients with a safer, more transparent, and trustworthy experience? If so, you have an opportunity to explore and differentiate yourself from the competition. If not, what should you change in order to adapt and avoid failure and rejection?
With high stakes, more and more software startups will be embracing accountability, resulting in diverse changes to their operations. These are some of the processes and considerations that startups will likely consider:
Accountability right from the start: The accountability discussion will be increasingly incorporated into the very beginning of software development. Along with that, companies need to educate their teams to prioritize products that are designed with and built upon the best accountability practices. As a quality of Agile, accountability can be directly translated into the way a team envisions and executes the product roadmap, manifesting in diverse ways, including timed logouts for users and strict requirements for strong passwords.
Solid structures in place: It’s not only about how startups market their products, but also about the choices they make in terms of what framework, architecture, interfaces, and even third-party providers they’ll integrate into their product. A limited number of systems will be preferred, considering that a smaller systems footprint reduces the chance of data breaches. Overall, everything should be aligned with what users expect and how to best communicate the product to them.
Killing the dead-ends: Empowered by regulations, users can request that their data be deleted. However, many startups don’t have the necessary systems in place to locate data sets scattered across complex IT infrastructures. And with some data located in affiliate or third-party databases, deletion or transfer can become virtually impossible. To future-proof their data management, startups will be looking at standardized procedures and integrated data architectures.
Communicating privacy rights: If a startup’s value proposition lies in handling user data to motivate a specific behavior, it’s important to reassess whether that’s actually clear to the user. Are the potential customers willing to engage and even pay for a service that delivers this particular product? Would they remain willing if they knew what the business intended to do with their information? Communicating data management to the customer will be vital.
Revisiting business models: With accountability on top of their minds, startups will be exploring business models and value propositions that can adjust better to their users’ expectations. With today’s attention economy, many companies are forced to base their revenue generation on the commercialization of user data, but there are other alternative business models that help strike a balance between business and user needs.
Taking the conversation further: Startups are bound to reflect upon how accountability influencers other aspects of their business, too. Are the tools to internally manage operations accountable? And can investors, board members, and clients clearly see how accountable the business is in terms of meeting goals and fulfilling their expectations? An accountability culture will help startups be transparent at every level of business and operations.
Educating users on why their information matters: By explaining to their customers the power that lies behind their data, as well as what they can expect from the specific product, startups can work to detach themselves from the negative image many businesses are having right now. Rather than being the “next Facebook” of software development companies, startups can set off on a path of smart solutions and a new way of approaching consumer data.
Every day, new startups are coming up with innovative software solutions for users’ needs in different areas, from communication to entertainment, from work productivity to grocery shopping. But with that come the increasing expectations for entrepreneurs and businesses to know how their products will satisfy users’ data privacy demands and provide them with a secure, trustworthy experience.
For that, startups will need to change their business models and shift from using users’ data to shape and influence buying behaviors to new, more user-friendly models, such as subscription models. As the era of the Wild West of data comes to an end, changing the digital status quo will likely be challenging, but it’s also an opportunity to differentiate as a business and foster a more sustainable, transparent experience for everyone.