Idea in Brief

The Problem

Though consumers worry about how their personal data is gathered and used, they’re surprisingly ignorant of what data they reveal when they’re online, and most companies opt not to enlighten them. This dynamic erodes trust in firms and customers’ willingness to share information.

The Solution

Companies need to design products and services with transparency and data privacy in mind. They must provide customers with appropriate value in exchange for data, educate them about how it is collected, and allow them to have control over it.

Best Practice

Disney devised electronic wristbands that give park visitors access to attractions and hotel rooms and allow them to charge food. Disney uses the bands to collect data on customers but clearly spells out its practices and privacy policies. The trade-offs are transparent to the customers, who find the convenience and other benefits the bands offer worthwhile.

With the explosion of digital technologies, companies are sweeping up vast quantities of data about consumers’ activities, both online and off. Feeding this trend are new smart, connected products—from fitness trackers to home systems—that gather and transmit detailed information.

A version of this article appeared in the May 2015 issue (pp.96–105) of Harvard Business Review.