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Are companies ready for data and AI regulations?

Redefining competition and market power for the digital age

Executives understand the value of protecting their data and AI assets from intrusion, manipulation, and theft. But are they prepared for data and AI regulations that might impact their strategies?

May 22, 2019

Source: Deloitte, “State of AI in the Enterprise, Second Edition

In Deloitte’s “State of AI in the Enterprise, Second Edition1 survey, executives were asked to rank a set of risks related to their use of artificial intelligence (AI). Twenty-three percent of respondents agreed that the greatest risk pertained to the cybersecurity vulnerabilities of AI. At the same time, only 12 percent ranked the risk of regulatory noncompliance as their top concern.

These findings show that executives place a high value on protecting their data and AI assets. Yet, in 2018, they did not see the potentially larger impact of a strong regulatory response to restrain the market power conferred by those assets.

In 2019, it’s likely that more executives sense the coming regulations, but many may still be focused on implementation, security, and scaling. They may also anticipate regulations on data without fully understanding how dependent their AI strategies are on that data. Any strategy to establish competitive advantage with AI should consider how the strategy will hold up against a strong regulatory response.2

For many technology, media, and telecom (TMT) companies, competitive advantage may rest on their ability to gather data from across their value chains and use it to train machine learning systems that can better understand their customers, their markets, and their operations. Indeed, many of the largest companies have pioneered this strategy to reach hyperscale market power. The ability to capture and defend global markets—along with the privacy implications of data collection and the ethical challenges of scrubbing biases from machine learning algorithms—are driving regulators to respond.

To better understand market power in an age of hyperscale platforms that are often free to users, many regulators are re-examining competition and antitrust legislation.3 Data privacy, security, and ownership are one aspect of this evaluation. Data hoarding by businesses can deliver tremendous market power when used effectively, but the users that provide the data and who suffer when it is stolen are starting to seek greater control over its use. Another aspect is the ability of businesses to deploy AI to better target individuals. With so much data about customers, businesses—and potentially, adversarial third-parties—can model, predict, and influence users to a far greater degree.

All of this is amplifying the regulatory response.4 Several regulatory developments could impact the competitive advantage of many businesses:

  1. Greater controls on data collection and storage that require disclosure, accountability, and oversight.5
  2. A requirement that market leaders share their data, while giving users more ownership of data about themselves and the ability to transfer their data among services.6
  3. Auditing for biases in learning systems, and punitive measures against those who are non-compliant.7
  4. Liabilities for breeches, biases, and runaway AI that potentially hold executives directly responsible for such events.8
  5. The breakup of hyperscale data companies that keep prices low at the expense of privacy, ethics, and economic and political stability.9

These scenarios appear to be gaining greater currency, but they bring the risk of uneven and poorly informed regulatory responses. Yet, many business leaders agree that guardrails should be put in place to mitigate the consequences. Now more than ever, TMT business leaders should consider how they may need to shift their strategies to accommodate the coming data and AI regulatory response.

This charticle authored by Chris Arkenberg.

Endnotes

Jeff Loucks, David Schatsky, Tom Davenport, “State of AI in the Enterprise, 2nd Edition,” Deloitte Insights, October 22, 2018.
Bill George, “These Are the Challenges Tech Giants Will Face in 2019,” Fortune, January 18, 2019.
Big tech faces competition and privacy concerns in Brussels,” The Economist, March 23, 2019.
Changes to EU antitrust enforcement on Big Tech urged,” The Financial Times, April 4, 2019.
Big tech faces competition and privacy concerns in Brussels,” The Economist, March 23, 2019.
Changes to EU antitrust enforcement on Big Tech urged,” The Financial Times, April 4, 2019.
Emily Birnbaum, “Lawmakers, tech set for clash over AI,” The Hill, April 17, 2019.
Makena Kelly, “Elizabeth Warren introduces bill that could hold tech execs responsible for data breaches,” The Verge, April 3, 2019.
Letter to the FCC, EPIC et al, January 24, 2019.

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