Bigger players will throw large quanta of resources and devour the competition
By TV Ramachandran
Deep in the headquarters of Coca Cola is a closely guarded vault with the secret formula for their signature drink. Even though the company employs over 85,000 people, only two employees at a time are privy to this secret. This proprietary data is the main reason why no competitor has been able to recreate the taste. Recipes for sugary drinks are not essential to a nation. However, what if a private company is sitting on a large amount of information about India’s infrastructure, healthcare, or financial landscape?
Can the government use this proprietary information to boost economic growth? This question is the driving force behind the Non-Personal Data Governance Report (NPD report). While data sharing between entities may have its benefits, we must avoid potential pitfalls that may compromise privacy, security, and healthy competition.
The Centre’s foray into understanding how best to leverage the power of big data to foster homegrown innovation is a significant move. In December 2020, a Committee of Experts (CoE) set up by MeitY released their latest version of the NPD report. However, experts in big data and artificial intelligence algorithms have some concerns.
The NPD report believes that non-personal data is a public good and is “non-rivalrous and non-excludable.” Non-rivalrous means that it does not diminish as more people consume it. Non-excludable refers to goods that no person or group of people can be prevented from using. The Centre, wishing to nurture innovation for start-ups with limited resources, mandates that private entities freely share their databases after removing personal identifiers. The issue is, does this promote or inhibit innovation in the marketplace?
The report assumes that Indian start-ups are missing out on growth opportunities because they cannot access large datasets owned by larger companies. However, this ‘David versus Goliath’ tug-of-war is the most natural ebb and flow of healthy and free-market competition. Large companies have many employees, an envious list of customers, and large datasets accumulated over a long time. They are entitled to this valuable information as long as they do not unfairly monopolise the entire market.
Start-ups have their advantages. Many have disrupted entire industries by leveraging their strengths. Start-ups have ninja-like agility and can rapidly innovate without the bureaucracy and internal turf wars that limit larger organisations. Rapid customer acquisition is a key metric used to evaluate a startup’s usefulness in the market, not a liability.Take the shining example of Apna—India’s fastest unicorn. The professional networking startup reached unicorn status 15 months from inception. Are other start-ups now entitled to the customer behaviour data that fuels the fire of Apna’s triumph? Even anonymised data can reveal a company’s “secret sauce.” Companies may incur high costs to scrub, process, and continuously share their data with their competitors.
The data-sharing mandate may hinder start-ups more than help them. Suppose a start-up collects data classified as “High Value Datasets” or HVD in the NPD report. In that case, they may have to give up their hard-earned customer behaviour data to their competitors and lose their advantage. Let’s look at PharmEasy, the online pharmacy that is now a unicorn, as an example. When they started, they did not have the data that larger players had. This is par for the course for startups. PharmEasy built an incredible customer database by generating genuine market demand. If their healthcare-related customer data is considered HVD, they may have to release their data. Bigger players will rapidly throw teams and resources to process this data.
These players may have the missing personal customer data in their own databases to connect the dots. Using these comprehensive datasets, they can devour their competition. Also, by sharing their data, do companies end up indirectly violating their customers’ right to privacy?
Is the mandate for data-sharing for HVDs only? How can companies protect trade secrets contained in their metadata and raw data? Are there better ways to nurture Indian startups without mandated data-sharing? Can we offer better tax financing options and infrastructure and incentivise local talent to develop innovative algorithms in select high-value sectors? If the CoE could clarify some of these concerns, the NPD report would become more robust. It can then evolve into a true partnership between the government and private entities to boost India’s economic growth.
(Research inputs by Chandana Bala)
Honorary fellow, IET (London), and president, Broadband India Forum; Views are personal