How in-house legal teams can seize the opportunities of data-driven business models
Published on 25th Jul 2022
Data-related legal and regulatory developments can be viewed as an opportunity for unlocking future markets – and repositioning the role of in-house counsel within businesses
Data-driven business models are an emerging phenomenon across all business sectors, whether they involve consumers and the Internet of Things in the retail, automotive or media sectors, smart metering in energy and utilities, or the increased exploitation of data in real estate.
Meanwhile, the way that data is regulated in the EU and the UK is undergoing fundamental change. Osborne Clarke published a recent report, in partnership with the European Company Lawyers Association (ECLA), exploring the role of legal teams in delivering data-driven business models in this challenging regulatory landscape.
As Marcus Schmitt, general manager of ECLA, observed at the report's launch, the survey of more than 400 in-house legal teams across Europe identified significant legal issues around implementing data-driven business models. He explained that "it was legal and regulatory obstacles that came highest for almost seven out of 10 (67%) participants."
The other major obstacles identified by the survey included cybersecurity risks for 38% of respondents, lack of internal experience and skills (36%), access to external data (33%), integration (32%), the use of internal data (28%), and lack of internal resources (26%).
Evolution of in-house legal function
Joining a panel of experts from Osborne Clarke at the launch, Jan Wittrodt, head of privacy and technology law and privacy governance at Berlin-headquartered firm Zalando, and Franziska Fuchs, senior legal counsel and head of discovery and IT-security law at German technology group Robert Bosch, spoke about their experience of the evolution of the role of in-house counsel in data-driven businesses.
Ms Fuchs said that understanding the new business and "getting your hands dirty" is essential. "You cannot take the position anymore that you are just the 'legal adviser' – you give standalone legal advice and retreat back to your office," she said. It is essential to be involved with the business from the outset, to see the opportunities, assess risks and to suggest alternatives to what the business is proposing.
Mr Wittrodt agreed that legal teams need visibility across the whole business. The team needs to be involved as part of the product development lifecycle, involved in both solution design and execution. It cannot wait until the business comes to it with a problem, when it may be stuck with decisions already made.
Both speakers were of the view that the role of the legal team is to anticipate the future, accepting the uncertainty of regulatory and technological developments, in order to be able to guide the business as trusted adviser. Perceived obstacles can instead be reframed as opportunities for in-house legal teams.
The panel agreed that lawyers are trained to spot the risks or problems in given situations first. A shift in mindset is therefore recommended to view regulatory change and new compliance obligations as opportunities.
Mr Wittrodt, in his keynote speech, suggested that the report's findings could be rephrased so that instead of 67% of companies believing that data-related legal and regulatory obstacles prevent them from implementing data-driven business models, one could say “67% of companies have a major opportunity to unlock future markets, productivity and efficiency by mastering data-related legal and regulatory obstacles.”
Fully understanding the products, being on top of the value creation and talking to the technical people about what is technically possible and what they are working towards helps to generate this shift in mindset. It builds relationships within different parts of the business, and the business understands it can come to the legal function at all stages to discuss options. The key challenge for the legal team is to have enough awareness of what is going on and to be sufficiently ahead of developments, so they can quantify and qualify uncertainty and communicate that to the business.
The speakers agreed that in their experience, if this can be achieved, this is what helps the legal team to broaden its skills, adapt its strategy and embed itself across the whole business.
Mr Wittrodt stated that with digitalisation bringing immense change at immense pace, it is not sufficient merely to apply today's legal concepts to today's problems. He spoke of the importance of solving problems backwards: "Try to think two or five years ahead and understand the underlying themes and trends to guide your business." He recommended thinking holistically, to consider how society is developing and evolving globally (not just in local markets); especially in relation to technology and digitalisation.
Ms Fuchs agreed that it is essential to understand societal trends, and also to consider the ethical dimension of what is being proposed, not just whether it can be done or is legally possible. Mr Wittrodt observed that businesses need to think about what makes customers use their products and noted that the more data the business uses, the more trust is likely to be needed.
Changing regulatory framework
Online businesses are now finding themselves active in a regulated industry, previously confined to certain sectors. There is a steep learning curve for the non-legal parts of the business in adapting to this. The speakers agreed that the legal team's role is to help the business understand the implications – and keep on top of the developments. Ms Fuchs pointed out that smaller units trying out new things can be more open to asking for advice.
Mr Wittrodt commented that alongside an increase in new regulatory frameworks and regulations, there has been a new focus on enforcement (first seen with GDPR). Managing the complexity of the regulatory framework, and understanding how the different regimes fit together and will affect the business is essential (whether data protection, the Digital Services Act, Digital Markets Act, Data Act, Data Governance Act, the AI Act or other future developments).
The speakers agreed that some of the complexity stems from the manner in which the regulatory frameworks have been separately developed. Ms Fuchs added that it is important that more businesses get involved in influencing the discussion on future legislation and regulation early on, rather than being left with decisions that have already been made and that may not work well.
Osborne Clarke comment
The regulatory landscape is moving fast. Access to data is critical for data-driven businesses – and is a challenge in different ways depending on the sector. Some businesses can negotiate access, some need to resort to litigation. The Digital Markets Act will complement competition law in terms of access to data, balancing this with an awareness of the innovation needed to develop datasets. As regulators are now approaching issues in a more joined-up way, lawyers need to see the bigger picture beyond their area of specialisms and be able to identify issues and opportunities on the horizon.
The Osborne Clarke experts on the panel at the report's launch (listed below) felt that a similar perspective and evolution is required from outside counsel to that of the in-house legal team: integrated advice stemming from a deep understanding of the business is key, rather than narrow advice given from only one angle (whether data protection, intellectual property, competition or consumer law).
For larger projects, there might be more project management from outside counsel; and they can assist in training legal departments or making presentations to the board on new topics that they may be unfamiliar with. Outside counsel can assist with benchmarking, having seen the merits of different approaches, or assist with opportunities to influence future legislation.
For more information on and coverage of our data-driven business models and the role of legal teams in delivering success, please visit our topics page.