Born-digital businesses that relegate digital ethics and data privacy to the back seat in favor of driving fast growth could end up crashing and burning instead of enduring.

This article is part of our Born-Digital study, where AlixPartners set out to research born-digital companies' unique blend of strengths and challenges and identify the most pressing needs and areas of focus needed to sustain their success. See all the articles in our series here.

“Most culture statements or value statements end up sounding very banal and very similar. Ultimately, it's not about what’s publicly stated. It’s about what’s publicly rewarded.”

— C-level executive of a born-digital company

Driving fast growth has come to define many born-digital businesses—and the transformative disruptions they leave in their wakes—compared with their traditionally born counterparts. The tech-start-up mantra, "Move fast and break things" says it all. By getting innovative products to market at breakneck speed, born-digital companies have birthed brand-new, multi-billion-dollar industries.

But in their pursuit to define the next big product category or reach the next big customer segment, many born-digital enterprises have relegated to the back seat certain topics related to digital ethics and data privacy because those topics strike them as mundane. As a result, such companies risk unwittingly facilitating unethical and even illegal behaviors in their management ranks, workforces, and users.

As more and more born-digital businesses mature into market leaders, they’ll have to buttress their strategies, processes, systems, and cultures so that they excel at digital ethics and data privacy—if they hope to endure. That buttressing will require that they foster the right values, that they monitor changing regulations and comply with them, and that they make data privacy an imperative across their entire organization.

WHO’S RESPONSIBLE FOR CULTURE?

For born-digital businesses, overemphasis on growth and speed can come at the expense of efforts to establish the right culture. Of course, born-digital companies have to be nimble so they can either drive changes to, or swiftly adapt to customer expectations. But to build a company that lasts, its leaders must also establish digital ethics and data privacy protection standards through consensus—so that everyone understands what’s expected and everyone feels accountable to adhering to those standards. Such standards define expectations with regard to access to private data, use of data, accuracy, and completeness in the collection of data about individuals or organizations, data subjects’ legal rights to access and ownership of their data, and rights involving inspecting, updating, or correcting data.

Company leaders should also encourage wide adoption of those standards throughout their organization. Doing so sends a clear message about which behaviors are acceptable—and which are not. Equally important, the standards focus both managers’ and employees’ attention on supporting the company’s long-term objectives such as developing products that meet requirements related to transparency and trust. The fact that customers are paying more attention to data privacy than ever before supports the notion that digital ethics should be core to the fundamental design of a product or service, as opposed to being an add-on or a compliance measure.

Privacy-by-design principles ensure a proactive approach to data protection and privacy, and they help reduce the temptation to cut corners to reach short-term goals, such as releasing a new product—without proper security measures in place—in order to go to market quickly. The disciplines that digital ethics and data privacy standards encourage can help companies avoid the kinds of problems that have blindsided more-careless enterprises.

Privacy by design

83%

view their products at "high risk of disruption"

according to born-digital companies less than 10 years old surveyed

DISRUPTION—THROUGH REGULATION

Of course, born-digital companies must keep investing in technology and must proactively monitor competitors’ moves so as to stay ahead in their fast-changing markets. But technologies and competitors aren’t the only disruptors companies have to worry about. We’re increasingly seeing warning signs of a different type of disruption: regulation.

Until recently, regulators had yet to fully outline the rules of the digital-business game. Born-digital exemplars like PayPal, Airbnb, Lyft, and Grubhub have all operated in gray areas for a while. In the latest digital industries—like the recent micro-mobility craze—new entrants, including electric-scooter players Bird and Lime, introduced a product so new that many cities had no pertinent regulations in place at all. That may offer some explanation for the reasons that born-digital respondents in our study prioritized innovation, customer focus, and creativity—all of them values focused on growth and products—over ethics-related values like social responsibility and accountability.

But the regulatory winds appear to be moving away from self-regulation and toward more oversight and governance, as indicated by increased levels of attention in the business press and by new regulations being discussed to protect consumer data. It’s therefore in born-digital companies’ best interests to closely monitor such developments and then define their own internal best practices for complying with digital ethics and data privacy legislation as they emerge and evolve.

To achieve the advantages, born-digital leaders should answer: 

  1. What values should define our organization?
  2. How will rapid growth affect key elements of our culture, such as hiring, product development and operating model?
  3. What commitments can we make to our stakeholder communities?  
  4. Where can we anticipate regulatory changes, and how can we proactively meet them?
  5. What standards will our customers expect us to adhere to three to five years from now?