When Big Data Turns Into a Big Nightmare!

January 22, 2014
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In today’s world, data is one of the biggest assets companies can possess. The smartest and most successful companies are those that have the right data as well as the ability to extract insights from that data to answer their most important business questions.

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In today’s world, data is one of the biggest assets companies can possess. The smartest and most successful companies are those that have the right data as well as the ability to extract insights from that data to answer their most important business questions.

One of these smart companies is the U.S. retail giant Target, which has over 1700 stores and in excess of 350,000 employees. Target has long had an intensive focus on collecting and analyzing customer data.

I am sure that you have heard about the story that has floated around in the big data scene for years now: Target uses its big customer data to accurately predict when a woman is expecting a baby. For retailers, this kind of information is important because there are not many times in our lives when we significantly change our buying patterns, but starting a family is one of them. The company also knows that expecting parents spend a lot of money on baby-related goods in the last trimester of the pregnancy and the correct predictions can enable companies to send marketing material and special offers just at the right time.

You could safely say that Target is into big data analytics. However, the company has just witnessed (again), how one of their biggest assets (their customer data) can turn into a massive liability.

The nightmare started in December 2013, when criminals forced their way into Target’s systems, gaining access to their customer data. It was one of the biggest data-thefts of all time and Target estimated that about 40 million customers where affected. The data theft took place on and around Black Friday, normally the busiest shopping period of the year. In a sophisticated attack, criminals managed to install data-stealing code on to card-swipe machines at all Target stores.

This week, the nightmare got worse. Target has just revealed that the ongoing forensic investigation of the data breach revealed that the theft was much bigger.  According to CIO the new figures mean that up to 110 million people have had their data stolen from Target’s system. This includes credit and debit card information as well as customer information such as mailing addresses, phone numbers or email addresses.

The massive problem Target is now facing is regaining the trust of customers (or guests as they prefer to call them). In fact, it looks as if the data breach scared away many customers as Target has just announced disappointing results with a fourth quarter 2013 comparable sales decline of about 2.5%.

This shows how costly data breaches can be in terms of lost customer trust, which is likely to be shaken further with the recent announcement. In addition to the drop in sales, Target is facing many other costs including reimbursements for credit card fraud costs, liabilities from civil litigation as well as fees to investigate and fix the security gaps.

At Target, customer data has long been viewed as one of their most important assets; it looks like it is now turning into one of their largest liabilities. In an open letter, Target CEO Gregg Steinhafel writes:

“Our top priority is taking care of you and helping you feel confident about shopping at Target, and it is our responsibility to protect your information when you shop with us. We didn’t live up to that responsibility, and I am truly sorry.”

He assure customers that they will have zero liability for any fraudulent charges arising from the breach and offers all Target guests in the U.S. one year of free credit monitoring and identity theft protection.

The point I would like to make is that with big data comes big responsibility. Every company that stores personal customer data has to ensure this data is protected and made as safe as possible. As more and more companies collect, store and data-mine large volumes of personal information there is a lesson in here for everyone: One of the most important assets in today’s companies – data – can quickly turn into a massive liability. 

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