Extreme Trust: can honesty be a means of competitive advantage? (part 2)

I value what Don Peppers and Martha Rogers write and as such I am making my way through their latest book (Extreme Trust) and using it to write a series of posts on matters that are touched upon by Don and Martha.  In the first post I set out the bigger picture – why trust matters, what the  challenge is and how transparency will force companies to become “trustable”.

What is the core challenge of authentic customer-centricity?

In Extreme Trust Don and Martha name the key challenge of customer centricity.  Can you guess what it is?  I can tell you that it is not what most folks are working on: People, Process, Data, Technology.  According to Don and  Martha the key challenge is that of business model design – coming up with a business model that allows you to serve the needs and interests of your customers profitably.  Here are some quotes from Extreme Trust that shed light on the matter:

Untrustable business models thrive in our economic system today largely because being untrustable can be highly profitable – in the short term anyway – and many businesses are managed almost entirely for the short-term results………

a trustable company must find a business model that allows it to create shareholder value by acting in its customers’ interests.  It won’t  – and shouldn’t – sell its products or services at a loss, but to be trustable it must be sensitive to the customers’ point of view and try to deliver a fair deal

In the past, companies assumed a gap between what’s good for customers’ and what’s good for profits.  The trustable company sees no such gap, but – starting from scratch if necessary – figures  out how to use what works for customers as the basis for developing its business model and strategy.”

Whilst I find myself in agreement with what Don and Martha say I cannot help noticing something that strikes me as being falseThey say “In the past, companies assumed a gap between what’s good for customers and what’s good for profits.”  I disagree.  Right now, today, the  assumptions is there and the gap is there. This is an issue that needs to be addressed if companies are to become authentically customer-centric and it is not being addressed as the assumption is that authentic customer-centricity will drive down profits and profitability.

How do you tell if your organisation is “trustable”?

Don and Martha point out the Michael Schrage has put forward a litmus test: 

Are your best and most valuable customers dumb, uneducated or not paying attention?  (If the answer is “yes”, then you should engage in a little self-analysis of your business model.)  AOL may like ‘em stupid, but no trustable company should.”

How exactly is a “trustable” company different from a merely “trustworthy” company?

According to Don and Martha:

” .. a trustable firm is always trying to understand what it’s like to be the customer, and then to make that experience as hassle-free and satisfying as possible……”

“A trustworthy firm will do what it promises to do, but a trustable company, like a friend, will do what’s best for a customer even if the customer isn’t really paying attention or isn’t well informed or knowledgeable as the company is…”

How does “trustability” show up in the lives of customers?

Lets take a look at some concrete examples that indicate and/or show up as being trustable:

Amazon:  just the other day I was about to buy an ebook for my Kindle and Amazon told me that I had already bought it.  I checked and sure enough I already had it.  Furthermore, Amazon makes reviews available on all the products it sells – one of the few sites to do so.

Apple: if you are about to buy what you have already bought through iTunes then Apple will alert you that you have already purchased it. Also any tracks that you purchased from Apple are protected so that you cannot lose them. And for a small annual fee you can apply the same kind of protection to any and all other tracks that you have stored in iTunes.

JacquieLawson.com: an e-card site alerts customers before their credit cards get hit with renewals so that customers who do not wish for the automatic renewal to occur can opt out and thus not get charged!  Now compare that with my recent experience in unsubscribing from various lists – the bloggers made it easy, the commercial marketers made it hard.

RBC:  the Royal Bank of Canada uses its superior insight into its customers to extend automatic overdraft to low risk customers – most of the customer base.  And RBC does not charge a fee for this and in the process forgoes revenue from penalties that most other banks rely on.

Why should you make the effort to be a “trustable” company?

The short answer is that the ‘workability and performance’ of our lives, our organisations, our communities, our societies improves dramatically when trust is present between us. We are social and as such we have a strong sense of empathy, fairness and justice.  Or as Don and Martha write:

The world we live in and raise our children just works better – for us too – when we play fair.…. Our own well-being is wrapped up in the well being of our society and empathy for others is a social stimulant, a catalyst for collective welfare.”

Now, I get that this simply will not speak to some of us.  So let me share another reason for you to transition your organisations towards “trustability”, again in the words of Don and Martha:

In the e-social world, companies will be expected to act toward their customers the way people act towards people.  With empathy.  Violators will be prosecuted.”

For my part I do not think that these companies will be ‘prosecuted’ as the law and the lawmakers have shown themselves to be pretty lax and advocates for ‘business as usual’.  I am of the view that the ‘public’ will name and shame companies and even persecute some of them – showing up the gap between fine words and the not so fine deeds.  Like was done with facebook (privacy), Netflix (price hike, division into two businesses, Shell (Nigeria/North Sea), Apple (Foxconn)……  And the tools they will use?  Smart phones, tablets, PCs and social media/networks.  I believe this is Don and Martha’s point – radical transparency will force companies to change.

What do I say about what Don and Martha say?

Broadly speaking I get Don and Martha in Extreme Trust and I am in alignment with them when they point towards the need for business model design and rethinking strategy to genuinely, authentically, act in the interests of customers whilst making the requisite profit.   About a year ago, I captured my point of view and put it forward in the following diagram:

This diagram is my way of saying that the world has changed and four environment pressures (digitisation, mobile/smartphones, the social customer, the economic environment of austerity) will force companies to revisit/rethink/revise/transform four critical domains of organisational life: Leadership, Business Model, Mission & Strategy, and Culture.  I see these as interconnected.  Only when these dimensions are adequately addressed does it make sense to start making adjustments in the People, Process, Data and Technology domains.  However, this is pretty much the opposite of what organisations have done in the realms of CRM, Customer Experience, Customer Focus and Customer-Centricity which is why so few companies are loved.  Really how many brands/companies would leave a hole in the lives/hearts of their customers if they ceased to exist?  Which is pretty much why there is little or no real (emotional as opposed to behavioural) loyalty.

Posted on May 21, 2012, in Case Studies, CRM, Customer Experience, Customer Philosophy, Customer Strategy, Leadership / Change / Transformation, Social and tagged , , , , , , , , , , , . Bookmark the permalink. 1 Comment.

  1. Excellent thinking! Well written. Your remark, ” being untrustable can be highly profitable – in the short term anyway” resonates with me. Yes, in the short term.

    In Second Life (a virtual world where I interact), everyone is anonymous and can look any way they want, even cloak themselves in a style that portrays trust. However, even in this artificial world you quickly learn who can be trusted and who is worthy of trust.

    You have a wonderful and refreshing message.

    Like

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