A transformative approach to data

Where does a transformative approach to data start? This was the question posed in our report, The New Age of Data in Real Estate, written jointly with Nuveen Real Estate. The answer begins with a foundational layer built on understanding what data is available to a business, and the matrix of legal rights and obligations that it carries. In addition to having a clear strategy defining the outcomes sought from a data project, it is also important to develop a data governance policy setting the overarching approach of the business to data. There is a legal contradiction inherent in the commercialisation of data. On the one hand, pure information is not usually considered to be capable of being “owned” as a matter of law. On the other hand, data is increasingly being referred to as an asset. Customer data is collected in exchange for some otherwise “free” services. There is a growing ecosystem of data providers that sell data. So, whatever the technical legal position, data is in fact at the heart of many commercial relationships. Legal matrix The first step in evaluating the worth and potential applications of information is to understand the matrix of legal rights and obligations attaching to a particular data set. Data regulation is crucial (and evolving). The rights and obligations around personal data under the General Date Protection Regulation and its UK equivalent are well known. Marketing data flowing from cookies and other tracking techniques is subject to further regulation. Non-personal data is much less likely to be subject to regulation unless it concerns activities in a regulated sector such as financial services or energy. Although the vast majority of data is not regulated, failure to comply with these regimes typically risks heavy sanctions and reputational damage, so the potential application of regulation needs to be checked. In some cases, compliance risk can be designed out of a project: for example, counting anonymous feet rather than recording identifiable faces in order to measure footfall. Intellectual property rights also feed into the legal matrix. The data itself might be subject to copyright, or the database may be protected under database rights. Database platforms and analytics techniques may have patent protection. Many commercially valuable data sets will be protected by the law of confidential information or trade secrets. Value can be maximised by considering whether data considered to be valuable is entitled to any of these protections. Have all available intellectual property rights been secured? Is the data handled in such a way as to maximise that protection? Should intellectual property in data be kept proprietary, or would it be better to license it, to generate a revenue stream or to enhance collaboration? Finally, there may be contractual rights and obligations associated with the data. This is the most versatile aspect of the legal matrix around a data set, given that it is shaped by the parties’ respective negotiating positions. Some real estate businesses now bring an IT and data lawyer to the negotiating table for all deals, considering data to be a significant factor in their commercial relationships. Tenants from some sectors may already have a sophisticated strategy around data, so it is important that landlords and investors come to the table with their own thought-through negotiating positions. We still come across situations where, although draft documentation initially includes detailed IT and data provisions, they are dropped without much resistance. That approach will increasingly be a mistake. Data governance Data governance is well established as a matter of good IT practice, but can extend beyond operational matters into legal, ethical and reputational issues. Moreover, operational issues such as cybersecurity can be reinforced through practices such as including performance expectations and monitoring provisions in contracts involving digital interactions with third parties. Real estate organisations that are only now starting to realise the value of their data will need to consider whether existing data governance frameworks are fit for purpose. As well as data privacy concerns, are intellectual property and contractual issues taken account of at an early stage in data-intense projects? The business may wish to fix governing principles for its use of data. Is it willing to share data as a matter of principle and, if so, on what conditions? Data-driven applications that are considered unethical can generate reputational damage – does the business wish to add an ethical dimension to its policies around data? See also: A new dawn: creating a digital interface for a data-driven approach and Data-as-a-service and how we can learn from experience “The challenge for the real estate sector is to unlock the benefits that data can bring while balancing privacy, ethical and legal considerations.” A related point is whether the board of directors has the requisite skills to understand the impact of data-centric projects, particularly where digital transformation is new territory. We have seen clients appoint a new non-executive director in order to ensure that the strategy and associated risks around a digitalisation initiative can be robustly evaluated at board level. Data strategy If data governance sets the principles on which to approach data projects, data strategy gives the project its commercial impetus. Data strategy can be key to ensuring data projects make a tangible contribution to achieving corporate objectives. Rather than amassing vast, unstructured data without a clear goal, innovation activities should be focused around a defined business need, responding to a competitor initiative, or anticipating future customer needs. The most effective place to start leveraging value from data – and developing the skills to analyse and manipulate it – is usually by focusing on internal business needs. However, as noted in our first article, real estate sector interests are aligning and interaction between the different layers and stakeholders is increasingly seen as benefiting all concerned. Collaborations around data require care. First, the legal matrix around the data needs to be taken into consideration. Any constraints on using the data, or requirements for permissions or consent, must be respected. Any obligations must not only be adhered to by the business itself, but may need to be reflected in the contractual provisions for the project. Intellectual property rights may need to be licensed on specific terms. Second, like any collaboration, data sharing projects, whether stand-alone or part of a wider project, need to be given shape and structure, reflected in a clear contractual framework. Organisations should also be thinking strategically about where data ownership and rights best sit within their group structures. For example, would there be commercial or tax advantages in putting IP rights in data into a data holding company, which then licenses use of data to third parties and to the rest of the group? Frameworks and playbooks For projects that bring together a number of parties, consortium arrangements may need to be in place, or the initiative might even be structured around a distinct corporate entity. Terms of access, participation and exit need to be agreed at the outset, as well as issues such as financing the collaborative activities, and ownership of any resulting revenues and intellectual property. Agreeing such terms can take time and there are many variations in how to structure multi-party data sharing arrangements. The terms of bilateral data sharing may be simpler to agree but parties will typically want similar clarity, particularly where the arrangement is expected to generate value. Cybersecurity responsibilities and performance expectations will need to be worked into the arrangements. Where competitors are collaborating, both the terms of the collaboration and the scope of information sharing will need to be carefully structured to avoid allegations of anti-competitive behaviour. Where public sector bodies are involved, care will be needed around public procurement requirements. We are seeing clients invest in mapping out the options that their data commercialisation projects could take, developing playbooks for the various alternative approaches. One of the most powerful consequences of digital transformation is where a business turns technology and knowhow developed for its own purposes into a revenue-generating business in its own right. The new age of data The real estate sector is realising that the challenges and disruption in shifting to a data-driven approach are complex but very manageable, given the gains and commercial advantage that could be generated. “Data consciousness” is more advanced in some parts of the industry than others, but we are undoubtedly seeing it grow. With it comes a recognition of the role of considered contractual frameworks and careful legal and compliance risk management. “The huge promise of data-driven transformation is not realised without a considerable amount of effort.” As we note in our report, progress is likely to be incremental and gradual towards an integrated, data-rich real estate ecosystem. But it will be fascinating to see how many of today’s complex and stretching aspirations become aspects of our built environment that we will simply take for granted in years to come. Click here to read the report Conrad Davies is head of urban dynamics, Tamara Quinn is an IP and data protection partner and Catherine Hammon is a digital transformation knowledge lawyer at Osborne Clarke Picture © Shutterstock