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The future of digital business – legal and commercial implications

Out-Law Analysis | 05 Mar 2015 | 11:28 am | 6 min. read

FOCUS: Businesses will need to perform a radical rethink of the way they operate if changes predicted by technology market analysts Gartner come true.

Technology is already revolutionising business models, the skillsets required by employees and the way consumers behave. New companies have the opportunity to harness technology to disrupt markets dominated by big brands, and this requires established companies to innovate in response to these smaller 'challenger' businesses.

However, further tech-driven changes are on the way. According to Gartner, "we are moving from a world where people behave the way computers work toward a world where computers work the way people behave". This will require businesses to review and modernise their customer relationship management.

Here we look at four of Gartner's "strategic predictions" for 2015 and beyond and identify some of the legal and commercial challenges businesses will encounter as a result of the coming technological trends.

Gartner prediction: by 2016, $2.5 billion in online shopping will be performed exclusively by mobile digital assistants

The rise of mobile commerce has been charted for many years. This rise is supported by industry figures showing declining sales of PCs and rising demand for smartphone and tablet devices. Increasing innovation in the mobile payments market, from mobile payments apps to mobile wallets and recent initiatives such as Paym and Apple Pay, is also indicative of the increasing shift towards mobile shopping.

There are also a range of so-called 'digital assistants' on the market, which aim to help consumers identify products and services they might be interested in. Digital assistants, such as Siri on Apple's iPhones, Microsoft’s Cortana and Google’s Google Now, are becoming more advanced. Google Now, for example, is able to give its user personal web recommendations, based upon their browsing history and preferences.

In future, it is easy to imagine that other data stemming from internet users' digital footprints, such as search ranking results and meta tags, could be used by digital assistants to select products for consumers.

Gartner has suggested that, to respond to this trend, "marketing executives must develop marketing techniques that capture the attention of digital assistants as well as people".

However, in truth the anticipated growth in importance of digital assistants to online shopping means retailers need a strategy on how to exploit the potential of market. This might involve either exploring a commercial tie-up with an existing provider of digital assistant technology or investigating what implications such arrangements elsewhere on the market would have for their business.

For example, if Apple and Amazon had a commercial agreement which meant Siri would select products from their platform first, retailers might want to look into bolstering their presence on Amazon, through keyword advertising, for example, although there is a risk of trade mark infringement if businesses seek to use rival brands as a trigger for their own promotions.

Commercial agreements between providers of digital assistants and retailers or e-commerce platforms must also conform to competition rules which generally prohibit agreements, arrangements and concerted business practices which prevent, restrict or distort competition.

Gartner prediction: by 2016, 70% of successful digital business models will rely on deliberately unstable processes, designed to shift as customer needs shift.

In the future, many digital businesses will have no fixed business model, Gartner has predicted. They will operate with evolving processes to respond to the specific demands of consumers. In short, businesses will be able to be successful without following a rigid business model.

Gartner has said that chief information officers should create "an agile, responsive workforce that is accountable, responsive and supports organisational liquidity" to address this development. It pointed to Disney's 'MagicBand' as an example of a product that operates on an unreliable or flexible and unpredictable basis.

The MagicBand is a wearable device that enables visitors to the Walt Disney World to gain access to theme park and gain 'FastPass' expedited access to pre-selected attractions, as well as to access their hotel room, and buy food and merchandise. It tracks wearers' movement around the resort and utilises Bluetooth and contactless 'near-field communications' (NFC) technology.

MagicBands collect customer data by tracking their location, which attractions they visit and what food and merchandise they buy. Disney collates this data to determine relationships between what attractions and rides each person visits and how much and what they spend on in the gift shop.

Technology like the MagicBand raises a number of privacy and data security issues, as location data and transaction information that can be tied to individuals qualifies as 'personal data'. This data must be collected, processed and retained in accordance with data protection laws. If data is being shared with third parties, this must be made clear to the individual at the time of purchase.

Disney’s chief executive, Bob Iger, previously stated that the MagicBand was designed with privacy in mind and that use of the device was on an optional basis. He also noted that customers have complete control over what information they give and how it is used.

It boils down to a trade off - consumers can give up an element of their privacy but in return let Disney use their data to offer a more personalised service, for example by enabling Disney characters to greet them by name.

In Disney's case, device security is also paramount, as unauthorised access to hotel rooms and use of payment cards is at issue if criminals manage to hack into MagicBands.

Gartner prediction: by 2018, the total cost of ownership for business operations will be reduced by 30% due to smart machines and industrialised services.

TechTarget has defined smart machines as "systems that use machine learning to perform work traditionally conducted by humans in an effort to boost efficiency and productivity".

Smart machines range from virtual systems and software, robotics and the driverless car to machines used in warehouses to select products for customers.

Gartner estimates that smart machines will reduce the cost of ownership of business operations significantly. However, companies need to assess the opportunities as well as the risks involved in being a first mover or fast follower in deploying smart machines.

The opportunities are clear. There is the chance to get computers to work more efficiently and effectively in roles that have traditionally been viewed as ones only people could fulfil, and possibly gain a jump on the competition. The risks? Making a significant investment in something that proves unsuccessful or which is superseded by more superior technology and quickly becomes obsolete.

Businesses need to conduct a thorough review of their operational processes and undertake due diligence on the smart machines available to them to determine whether investing in such technology are cost-effective, or more bluntly, whether they can afford not to make the shift.

Gartner prediction: by 2020, life expectancy in the developed world will increase by 0.5 years, due to widespread adoption of wireless health monitoring technology.

Digital health solutions are not a new concept, but issues such as privacy and security and, more fundamentally, who should pay for them have held up their adoption in many countries.

Wireless health monitoring devices range from existing products such as blood pressure monitors, glucose monitors and calorie monitoring devices to the more futuristic – microchips like the ones found in cats and dogs which doctors could scan to reveal a patient's medical history when they have had an accident so immediate treatment can be provided.

Gartner has suggested that insurance companies could in future insist that policy holders wear devices such as blood pressure monitors to track health factors. For policy holders, an incentive to use this wearable technology would be the potential for lower premiums – the healthier you are, the less you pay. Already, some health and life insurance providers give policy holders the opportunity to benefit from personalised premiums if they wear a pedometer to track how far they walk each day.

It is feasible in future that the use of health tracking devices could be required for certain jobs. This could especially be the case where the people performing those jobs are responsible for controlling vehicles, machinery or equipment that have the potential, if operated without such control, to cause death or serious injury.

However, the trade off for faster medical care, lower insurance premiums and improved health and safety is the invasion into personal privacy that the use of wireless health monitoring devices brings.

These trackers collect and transmit sensitive personal health data – information that merits special protection under EU data protection laws. Organisations using these devices must ensure their data protection procedures are compliant with current legislation, which is set to change in the medium term, from having the necessary legal basis to gather, process and disclose personal data, to having a go-to policy in place for if the worst happens and hackers gain unauthorised access to the data or another data breach incident occurs.

Mhairi Mival is a technology law expert at Pinsent Masons, the law firm behind Out-Law.com