Gregg Steinhafel's ouster at Target this week was a major C-Suite casualty in corporate America's war on hackers. Sales took a major nosedive after the retailer's big data security breach hit the news last December, with fourth-quarter profits down 46 percent. So what's a CEO to do?
First of all, if it seems a little overblown to blame Target's poor performance of late solely on the breach, I'd tend to agree with you. There was the weak rollout in Canada (arguably breach-related) that would not warm the cockles of any board member I know, and, speaking of warmth (or the lack thereof) it's important to bear in mind that retail suffered across the board this winter because of the extreme cold weather.
That said, Target has clearly hit the restart button. In addition to Steinhafel's resignation, the company announced a big new hire last week in the person of Bob DeRodes, a security expert whose bona fides include senior information technology advisor for the Center for CIO Leadership, the U.S. Department of Homeland Security, the U.S. Secretary of Defense and the U.S. Department of Justice. According to a company press release, "DeRodes will lead Target's information technology transformation." Meanwhile, the company is "continuing its active search for a chief information security officer and a chief compliance officer."
Security by Design
It sounds like Target is finally getting serious about security. Unfortunately, it's a lot too late. Target's reactive rather than proactive approach to data security has cost millions of breached consumers their peace of mind and shareholders a significant amount of value. The Ponemon Institute released a study this week that found the average cost of a breach for a company in 2013 was $3.5 million, with an average (global) cost per breached record of $145.
It's time we changed the way we do security, and a better set of best practices may already exist. In the 1990s, Ontario's Information and Privacy Commissioner Ann Cavoukian started pitching a new approach to privacy called Privacy by Design.
As companies began mining personal data and repackaging it to retailers, websites, advertisers and marketing companies, she rightly predicted that there would be a tipping point where end-users and consumers would start rejecting the practice, and opt for companies that did not do it.
Twenty years later, privacy by design has entered the business lexicon, and most leaders agree that it makes good business sense for consumer privacy to be sewn into the fabric of everything a company does and builds. Consumers demand it.
The practice, Cavoukian argued from the very beginning, was marketable. Recent history has proven her right, and point to a solution for today's breach problem: Security by Design, an idea that I believe Target started marketing in earnest last week.
The basic tenets of Privacy by Design are broken down into seven foundational principles that work well for the Security by Design concept:
1. Be proactive not reactive; focus on preventative not remedial. The company, "does not wait for privacy risks to materialize, nor does it offer remedies for resolving privacy infractions once they have occurred -- it aims to prevent them from occurring." Security by Design would focus on eliminating the risks associated with storing third-party information.
2. Privacy should be the default setting. "If an individual does nothing, their privacy still remains intact. No action is required" on the part of the individual to protect their privacy. It is built into the system, by default. Ditto with Security by Design: consumers should not have to worry about the security of their data when they make a transaction.
3. Privacy should be embedded into the design and architecture of IT systems and business practices, "not bolted on as an add-on." Security must be part of the design process, as well.
4. A positive-sum, not zero-sum avoids "false dichotomies, such as privacy vs. security, demonstrating that it is possible to have both."
5. End-to-end security is "embedded into the system prior to the first element of information being collected, and extends throughout the entire lifecycle of the data involved, from start to finish. This ensures that at the end of the process, all data are securely destroyed, in a timely fashion." This point would remain virtually unchanged from Cavoukian's original.
6. Visibility/invisibility and transparency/opacity: The Privacy by Design model says that companies need to tell consumers exactly what they are going to do with the information they collect. While this works for Privacy by Design, it would put a giant target, if you'll excuse the pun, on a company that touts its security. There's no greater magnet for a hacker than a good challenge. Security by Design requires invisibility and opacity.
7. Respect for the consumer: As with Privacy by Design, Security by Design "requires architects and operators to keep the interests of the individual uppermost by offering such measures as strong privacy defaults, appropriate notice and empowering user-friendly options."
Security by Design is an ethos that, implemented correctly, would be directly tied to a company's success or failure. That doesn't mean that a company can sit back and relax once this ethos is in full effect, however. Hackers will continue to get better at hacking, just as companies will continue to get better at fighting them off. Business owners both big and small still need to be prepared for a breach and its aftermath. After all, it is the third certainty in life.
It's my hope that when Target announced the hire of Bob DeRodes, the company ushered in the Security by Design movement. With more than 800 million people suffering breached records last year, it's way past due.