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Data & Insights 4 min read

Learning to navigate responsible data use

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Kendra Vant

Dec 15, 2021

Small business owners already have so much on their minds. Usually this revolves around getting the best possible products and services to their customers. Ensuring that they’re also using customer data responsibly – and that their outside partners are doing the same – can often fall to the bottom of their long to-do list. 

The topic of responsible data use (RDU) and how small businesses can find the time and resources to prioritise it was one focus of the most recent meeting of our Xero Responsible Data Use Advisory Council. This was the second virtual council meeting and it’s a real pleasure for me to chair this group as we all share a passion for small business and using data for good.

Sharing our recent insights

Xero formed the council to help small businesses and their advisors stay up to date with practical information on RDU, and that’s exactly what our council members have been doing over the last few months. Maribel Lopez of Lopez Research penned a great piece on governance entitled Five Steps to Launch a Responsible Data Use Policy. Laura Jackson of Popcorn Shed has written an article on why reading terms and conditions closely is important.

Our council members have also taken to social media to share their insights. Eli Tagi of WE Accounting posted about how accountants can simplify data sharing for business owners. Laura Jackson wrote about how both consumers and small business owners need to be savvier about how data is being used

We’re also working on some great video content that’s in its final production stages, featuring Wyndi and Eli Tagi talking about data protection and trust, and Aaron Wittman of XBert on data privacy tips for small businesses. 

Handling unethical data use

Prior to the meeting, Council members voted on discussion topics, the most popular of which was how small businesses can ensure they (and their partners) handle data ethically.

We started by considering the concept of ‘trust equity’ when handling data, which can take years to build and an instant to lose. The group discussed the viability of employing a Chief Data Ethics Officer – something larger companies are doing – and agreed that this would not be high on the list of priority for small businesses.

As Eli Tagi said: “Data is something small businesses typically look at when they need to. But this is best handled with a principles-based approach – putting it at the front of your mind and doing your research so you don’t get surprised with a serious data ethics problem.”

One place smaller businesses can begin is to consider the barriers to using data responsibly and applying some ‘life hacks’. For instance, when it comes to partnering, small businesses may choose to only work with tech providers that take RDU seriously and have written commitments that spell out how they secure your and your customers’ information.

Sam Burmeister commented, “Having solid data ethics compliance only helps with your company’s longevity. But being qualified as a company that is strong in data ethics – with a seal of approval – really depends on your industry. It’s essential to have an ethical data partner who can define what those qualifications mean for your business.”

Ultimately, transparency is at the heart of ethical data use, whether establishing your internal data handling practices or working with third parties. Maribel Lopez said: “The issue is that many companies are still not being transparent enough. What small businesses need to do is incorporate transparency of all sorts in terms of the data they collect.”

Data at big versus small companies: The perceived power imbalance

The second topic we explored was the perceived power imbalance between small and large businesses regarding responsible data use. The group acknowledged that the power imbalance is real, citing the examples of unequal bargaining power, and the ability of big companies to leverage data for analysis and product improvement. But rather than rail against something that can’t be fixed, the group instead turned their minds on how best to live within these power imbalances.

A key point we talked about was how cloud technology can enable small businesses to operate like larger businesses, building agility and scalability into a small business from the outset. We also talked about learning from the mistakes that big business makes, and not ending up in the same ethically fraught situations.

The conversation turned to how small businesses can be more savvy consumers of big tech. We discussed the differences between business partners that offer paid services and those that charge no fees in exchange for obtaining your data and your customers’ data. Aaron Wittman said, “Consumers will, understandably, go with free options online. But there is a perception that companies become relaxed in how they treat [customer] data because they are making money off selling that data. If [they are] offering paid services, there is an expectation that the data will be more closely protected, so it’s important to make that clear to customers.”

One enterprise that has been in the news frequently of late due to its branding change is Facebook/Meta. Our council also weighed in on some of the lessons learned from the launch of Meta and the concept of transparency to fill the consumer data education gap.

It’s this transparency that becomes essential for small businesses to differentiate themselves. Responsible data use means not only being clear about how your users’ data is protected, but also how your small business uses it to benefit them. Maribel Lopez added, “Part of responsible data use is figuring out how to use it to make better products and services. Companies need to show people that leveraging their data and taking time to analyse it is the only way to get there.” 

Perhaps the most crucial lesson for small businesses is learning how they can take advantage of the data ecosystem in an ethical manner. Wyndi Tagi said, “You can bring value to your customers if you use their data the right way. It’s there, so SMBs just need to learn how best to use it so they are benefiting from it.”

What’s next?

Heading into 2022, the council is excited to produce new content that will focus on the themes mentioned above. We’ll address how companies can ensure ethical data use and be more transparent with their customers. We’ll also provide tips for small businesses to close the gap with their larger counterparts in terms of how they leverage their customers’ data. Be on the lookout for our articles, videos and a panel discussion about these issues in the coming months. 

In the meantime, we wish you all a happy and safe holiday season and new year!

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