Changes in the pharmaceutical industry, which include tightening legal control over the distribution of drugs and lowering the threshold for entry into the pharmaceutical industry, have increased the cost pressure on pharmaceutical companies. To address the difficulties encountered, the companies initiated direct-to-patient (DTP) messaging, which involved direct communication between the pharmaceutical company and the consumer of the prescribed drugs (Culnan, 2005). In particular, the companies sent reminders to customers about the need to refill, suggestions for alternative drugs, as well as information about the condition. However, such a measure caused dissatisfaction with data privacy and required companies to introduce compliance measures to obtain patient consent for the use of personal data for marketing purposes. Later, legislation was passed in the US to protect personal health information from misuse and oblige pharmaceutical companies to protect consumer data.
Giant Food has been contacted by pharmaceutical companies to access information about the company’s customers and conduct DTP. After conducting research in the industry, Giant Food concluded that the use of compliance programs such as those offered by Elensys does not involve legal problems and is common among other companies. Due to the high potential costs of the program, Giant Food decided to outsource these services. Giant Food sought to avoid ethical issues by using independent Elensys by controlling which pharmaceutical companies have access to their data, as well as what messages their customers receive from these organizations. To analyze the performance of the program, as well as to identify trends, Giant Food shared its customer data with Elensys on a weekly basis. Third parties could not access this information; it was intended solely for internal use. However, later Gian Food received information that its customer data was sent to a Massachusetts pharmaceutical company, which uses it for DTP, violating privacy.
Problems and Opportunities
From the facts described, it is possible to identify the problem of violations of Fair Information Practices (FIP), as well as Privacy, Accuracy, Property, and Access (PAPA), which were allowed by Giant Food in cooperation with Elensys. The case of unauthorized use of private information of customers, which should be under the protection of the company, is one of the most significant ethical problems of private data security. FIP describes the principles that are the basis for privacy governance when dealing with personal data. These principles include five basic rules that require companies to inform customers about the use of their private information, provide choices about how to dispose of it, provide customers with access to the ability to correct data, maintain data security, and develop procedures to ensure compliance with these principles. PAPA, in turn, describes similar principles that ensure data privacy. Privacy principle refers to the choice of private information, its share, and security; accuracy refers to the responsibility for the correctness of private data; property describes intellectual property rights, including data; access requires clients always to have access to their private data.
The main principles that were violated by the company are non-compliance with the notice and choice (PAPA privacy principle) principles (the company did not inform and did not obtain the consent of customers about the transfer of their data to Elensys), as well as the security and enforcement principles (the company allowed unauthorized use of data). Additionally, Giant Food did not comply with the property principle, as it did not ensure the articulation of its responsibility in relation to the data and in case of unauthorized use. As part of the existing privacy issue, Giant Food faced a challenge in ensuring the security of customers’ private data and excluding the possibility of unauthorized distribution and use of data. Another significant challenge in overcoming the current crisis is the need for effective communication with affected individuals. The opportunity in this situation is for the company to potentially improve its privacy policy and improve relationships with existing and future customers.
Recommendations
The recommendation for addressing the existing privacy issue for Giant Food is to ensure compliance with the described FIP and PAPA principles. In more detail, the company needs to take the following steps to overcome the existing problem:
- First of all, the company needs to develop appropriate privacy policies and amendments, which need to be communicated to all customers. The main task is to provide oversight of what private information the company has, how it is used, and who has access to it.
- Ensure compliance of all employees with new procedures and data privacy policies;
- Finally, Giant Food must ensure the safety of data and provide customers with guarantees for the privacy of their information through insurance policies. This item corresponds to the principle of property and is key to ensuring trust between customers and the company.
These recommendations require the company to create its own database for storing the company’s private data, which will enable the enforcement of security measures. These steps require the company to have sound IT planning and budgeting in order to create a reliable database, as well as appropriate privacy policies. Outsourcing compliance programs will prevent Giant Food from maintaining data privacy and being responsible for their security, which violates FIP and PAPA principles.
TripIt Case
In recent years, the travel industry has witnessed an active growth in the number of online travel agencies (OTAs). At the same time, traditional offline agencies, although they have become less widespread, are still popular among connoisseurs of customized services. TripIt has become a hybrid organization that provides customized travel itineraries through convenient online channels (Piccoli & Pigni, 2018). However, the company faced the challenge of having to expand and grow with limited resources. In particular, the main monetization strategy for the company was the sale of services of partner companies through its own platform. This approach implies the need to expand both the affiliate network and the number of users who could generate traffic for profit.
Under these conditions, the previously externally unfunded company received investments from three large investors. In this regard, TripIt began to experience financial pressure from investors who demanded the growth of the service’s profits and expansion of the company. To achieve this goal, TripIt needs to expand the base of intermediary partners to generate advertising money. However, the central product of the company (customized routes) emphasizes the focus of its activities on customers and the expansion of its network. TripIt, in contrast to other players in the industry, is focused on the aggregation of the collective travel experience, which involves active interaction with customers, not with participants.
Problems and Opportunities
The facts presented identify that TripIt is currently in a dilemma as to which direction it should focus. On the other hand, in order to generate more profits, the company needs to develop an affiliate network in order to offer more options to its customers. On the other hand, the main value of the service lies precisely in providing travelers with the opportunity to choose based on the collective experience and relevant reviews of other customers. In this case, the network effect plays a huge role since the more customers are involved in using the service, the more value they can generate. This includes the opportunity to increase the use of partner products and generate more advertising revenue. It is a significant fact that the travel market is a highly competitive environment, and TripIt’s focus on expanding the customer network is its main feature.
The main challenge for the company is the need to develop both partner and customer networks. In the case of TripIt, the activity of the service is based not only on the interaction and collective participation of customers, which create a critical mass of the network effect, but also on the partner network. In particular, the companies are needed as well as the other group, which ensures the possibility of providing services. Although the main activity of the company is the compilation of tourist routes for convenient access to them, the partners form the basis for the monetization of the platform, which is necessary for its existence. Thus, TripIt has the opportunity to create a two-sided network, where an increase in the number of customers brings additional benefits to the partners of the company, and an increase in the number of partners brings benefits to the users of the service.
Recommendations
TripIt should focus on developing and increasing its network effect by expanding the consumer base and using the growth in the number of users for monetization. One of the main recommendations is to develop a model for monetizing the company’s activities through paid subscriptions to the service. This solution has a number of important advantages, including the ability to increase the income from the platform, which satisfies the requirements of investors; increasing the value of the product for customers by declaring the cost of services; expanding freedom in choosing an approach to service development due to less dependence on partners. In order to prevent a possible reduction in the number of new users, a number of limited free features must be provided. This strategy will allow the company to prove its profitability while maintaining a focus on its core value.
Another important recommendation for increasing the company’s network effect is cooperation with other platforms and services outside the industry, in particular with media resources. The main focus should be on platforms that use a similar model and use the network effect, including Twitter, Instagram, YouTube, Facebook, and others. Communication with users through these platforms will allow the company to increase the number of customers in order to achieve its financial goals. Moreover, such distribution channels do not require large financial expenses from the company and correspond to the business model.
Expanding the number of users of the service will allow the company to provide two-sided network benefits to TripIt partners. In particular, more users that generate value for the service mean more leads for service partners. In the long term, this development of the network effect will allow the company to increase the income from advertising partner services. It is important that TripIt, with sufficient network effect, can potentially reach a tipping point in the industry, which will make it dominant in the market.
References
Culnan, M. J. (2005). Giant Food and Elensys: Looking out for customer gross privacy invasion? Communications of the Association for Information Systems, 16, 317-328. Web.
Piccoli, G., & Pigni, F. (2018). Information systems for managers: With cases (4th ed.). Prospect Press.