Trust but verify: From transparency to competitive advantage

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Consider the following two companies, each involved in a negative event, and each approaching that event quite differently. When Company A discovered that tampering had occurred to one of its products, it immediately pulled the product from store shelves. Consumer safety was a core value at Company A, and that value shaped the organization’s immediate and effective response. While some loss of market share occurred in the wake of the crisis, it was eventually restored and in time exceeded prior levels, once the product had been repackaged and reintroduced. In fact, the company’s product design became the standard in the industry. A crisis had occurred, but it was remarkably well managed on the basis of sound values and effective communications. Trust and credibility were restored. Company B faced a similar problem, but without a plan in place, was uncertain as to how to proceed. Management ignored the impending crisis and suffered the consequences. The costs in terms of money and brand damage were high, and the CEO lost his job.

With regard to the impact of a negative event, timing is critical. Some questions to consider: When should statements be made? A mistimed public statement could sound an alert rather than provide comfort. If a competitor makes such a statement, do you make one as well? Even if you do, have you waited too long? And does that also raise a red flag? We ask these questions because we want to stress that, outside of a regulatory response, there is no single formula, no one proper approach, when it comes to trust and transparency. But once a unique situation has been identified and assessed, there are tools that can be brought to bear to deal effectively with the challenge of maintaining or reestablishing trust.

Establishing priorities

A serious challenge facing all companies in a complex global environment is living up to the specific priorities of stakeholders. For example, regulators, shareholders, customers, vendors, industry watchdog groups, and even the general public each expect organizations to behave in a specific manner. The problem is, many times, those expectations conflict with each other.

Establishing priorities, setting measurable goals, and taking action to preemptively identify problems and execute strategies enable companies to operate responsibly in a way that is defensible to stakeholders.1 Taking such actions as letting stakeholders know what and how well you are doing, that is, effectively communicating goals and visions, enables companies to establish levels of transparency that create trust in the marketplace. A high level of trust can provide a measure of brand immunity when bad things happen to good companies.

A serious challenge facing all companies in a complex global environment is living up to the specific priorities of stakeholders. The problem is, many times, those expectations conflict with each other.

Software developer Intuit, for example, has set very measurable goals around customer satisfaction and trust with respect to its product. The company has established customer satisfaction and loyalty as priorities and is using them to drive strategy. To that end, Intuit is an active user of Net Promoter®, a methodology that measures customer loyalty. In addition, the company factors in customer feedback to make product adjustments and keep employees attuned with customer needs. The company also fosters innovation aimed at keeping customers satisfied.2

Computer giant Apple is another example in which priority setting has made a significant difference in the levels of trust and transparency the company has been able to achieve. Apple’s established priority is to be an innovative market leader, and, in that regard, Apple’s brand is virtually synonymous with innovation. But this has not been accomplished without a measure of risk. For example, the company launched iTunes and the iPod at a time when the future of digital music with regard to ownership, distribution, pricing, and other intellectual property issues was uncertain, and, as a result, set the industry standard. Today, it’s a fair bet that no one using iTunes either to sell or to purchase music would question whether they are getting a fair deal with regard to pricing or royalties.

In fact, Apple’s prioritizing and communicating its commitment to market innovation have gained for the company levels of transparency and trust that have lifted its brand above negative impacts related to product failure that would be devastating to most other companies. For example, even when Apple products such as ROKR (an early cell phone that could play music as well as make calls) and Newton (an early PDA) failed, Apple’s brand was not seriously affected. Because of Apple’s priority positioning as a market innovator, stakeholders understood that something good— the iPhone and the iPad— would eventually come out of these failures.3

1 Christopher Meyer and Julia Kirby, “Trust in the Age of Transparency,” Harvard Business Review, April 2010.

2 Ben Fowler, “Intuit’s Philosophy on Net Promoter Score (NPS),” At, June 4, 2009.

3 For a more in-depth discussion of Apple’s approach to innovation, see Christopher Wasden, “Getting beyond novelty: How discipline and failure foster innovation,” View, fall 2009.

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