Welcome to the Trust Economy

Carefully crafted trust architecture - not just good intentions - will be a key factor in e-business success

By Peter Keen

At the level of common sense, trust is at the core of commerce and essential for long-term success in e-business. But common sense breaks down very quickly if trust is seen as just a value: honesty, sincerity, truthfulness, and related virtues. Ironically, these values can result in a loss of trust if they are not complemented by "trustability" - trust as a skill and a business design variable.

If trustworthiness is the question "Do you merit my trust?" then trustability is the question "Can we count on each other?" If not, then we can't build a relationship, and relationships are everything in the Internet-driven economy.

Here is a common example of a breakdown in trustability that is too quickly dismissed as a minor operational glitch: failure to respond to customer emails. This example illustrates the difference between a Web site-centered and relationship-centered view of e-business. In many instances, an email reflects a crisis for the customer: a late shipment, an error in delivery, a worry about after-sales service, and so on. Companies spend, quite literally, fortunes in marketing, promotions, referrals, fees, and price deals to pull customers to their site and then in effect ignore them.

According to a McKinsey study, large retailing sites average 1.8 million hits a month, which generates just 127,000 transactions. Of these, only 24,000 will result in repeat business. Given that it cost the firms an average of $50 to get the first transaction (and close to $200 for financial service companies) - and given that it must scale its technology capacity to handle nearly two million visitors to get just over 20,000 relationships - this approach is business insanity. The marketing announces that the company has something special for you. But when you try to interact with it, your message falls into the email ether, which announces that the firm really doesn't care and thus you can't trust it to resolve any problem that may occur.

Here is one of the principles for a trust architecture: Ensure that every customer interaction is double-loop, that queries are fully answered, problems immediately handled, and the customer kept appropriately informed of order status. Companies that are exceptional in this regard include Amazon.com, Charles Schwab, and National Semiconductor. They close the loop, with no one-way communication. Over time, that builds a relationship premium.

Amazon has close to an 80 percent repeat business rate. It's not the lowest cost seller, but it is assiduous in turning every keystroke into a relationship builder. Schwab is able to charge $29.95 for the same trade that other online services offer for $6 to $8 and dominates the market. That's because it is so skilled in anticipating problems, dealing with exceptions, responding immediately, and building close dialogs. National Semiconductor has made response to emails part of its organizational architecture. A message is screened by software that routes it to a staff member, who is required to get the issue resolved within two working days and has full authority to contact any other employee to do so. That employee is also accountable for providing the needed maintenance.

This is what architecture is all about: policy, integration, and clarification of authority and accountability. The business and IT executive's job is to define the policy principles and ensure their execution.

There are three main components of trust architecture: the public promise, the safety commitment, and the technology platform. They generate true trusted relationships.