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

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The Public Promise

Many breakdowns in trust come from misunderstanding and ambiguity. We see this breakdown often in daily personal life: "I thought you meant.... I didn't realize.... but you promised." Generally, we address trustworthiness through what may be termed classical trust: choosing to deal only with those within a clan, club, or community directly known to us.

Here, we have some reliable validation and often sanctions against breach of trust. The central problem the Internet has generated is that we don't have many such validations and sanctions. We have to trust people and organizations we've never seen, whose identity we may not be able to validate, and in situations where misunderstandings are both easy to occur and hard to handle. Modern trust, as opposed to classical trust, involves trust relationships where the old school tie, firm handshake, and referral by a family friend don't help you. We need something else.

The starting point is clear public promises. Think of all the great brands and service providers, online, and offline. They are very clear in their offer: FedEx's guaranteed on-time delivery, for instance. Nordstrom and leading retailers automatically accept returns. Banks provide detailed truth-in-lending disclosures.

Many, perhaps even most, e-business Web sites provide none of these assurances. Two widespread, obvious, and trust-breeding problems are return policies and delivery guarantees. The 1999 holiday season was a big success for e-retailing in terms of transactions - they increased fourfold since the 1998 season - and a disaster in terms of customer satisfaction. It was here that, belatedly, retail players discovered just how much business processes behind the Web site matter, especially fulfillment. Several leading e-retailers, faced with class action law suits, fines imposed on them by the FCC, and bad press, defended themselves by pointing out that they had achieved accuracy and on-time delivery rates higher than physical stores could match. They missed the trust point.

Online ordering is instant and raises expectations of equally fast and responsive fulfillment. When those expectations are not met ("You promised"), then it's too late to reply, "But we didn't say that we guaranteed delivery by Christmas Eve, and we really did try."

Promises have to be public and explicit. Skilled trust relationship players manage expectations carefully. Their policies are explicit and they use the Internet to manage the trust dialog. It ought to be routine, for example, to send an email confirming an order and delivery date commitment, to make policies on payments, handling returns, use of customer information, and after-sales service explicit at the time of the customer transaction and on the Web-relationship interface. The transaction mindset of product displays, catalog management, shopping carts, and credit card authorization ignore their relationship context.

This issue pertains to architecture because until it is elevated to the level of policy, authority, and accountability, it will fall between the organizational cracks. Moreover, Web site designers and programmers handling interfaces to legacy systems and external partner systems rarely consider this process part of their own job. The executive question is who has authority and accountability for ensuring the integrity of the customer experience. If the answer is "no one," this key element of setting expectations, defining commitments, and stating promises is missing. Then "caveat emptor" is the customer imperative.

The Safety Commitment

Promise, commitment, warranty...they all build trust. A critical issue for providing these is customer safety - the one area that more than anything else could threaten the short- and long-term growth of the online economy. Safety includes privacy and security but goes beyond the technical operations of each of these. The obverse of trust here is betrayal. One partner enters into an interaction only to find that the other partner is collecting and selling private information - intruding on what he or she assumed was a private space - and has been misleading about who else could be observing or interfering with the interaction.

A core problem for all online businesses is that personalization and customization are key to building relationships and that they involve gathering as much information about the customer as possible. In addition, revenue models often rest not on making money from a direct transaction but by referrals, electronic partnerships, and cross selling, all of which makes customer data a currency in the New Economy.

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Consumers have shown how concerned they are about the downside of this process. Most people are still wary of how and where they provide credit card and personal data. Businesses show their concern about company data by their heavy investments in firewalls, encryption, and network monitoring tools.

Safety is a perception - a sense of personal comfort. Although credit card fraud on the Internet is much lower than for transactions in the offline world, if people don't feel safe, no amount of statistics or claims will change that perception. Statistically, driving to the airport is a thousand times more dangerous than flying on a plane, but most people feel safer driving than sitting in a giant cigar tube at 30,000 feet. You can't force people to feel safe, but a sense of safety is the core of trust in every element of life. In e-business, customers now have so many choices among providers that over time they will gravitate to the relationship builders that make them feel safe. Those will be the new brands.

Consequently, you must define, implement, and monitor policies and procedures to guarantee the maximum degree of customer safety as rigorously as your firm does for its finances. Privacy policies should be tight and explicit; it's not enough to adopt an opt-out policy for customers about how you use their personal data or not inform them that you sell it to other firms. It's you, not customers, who is responsible for safety in the relationship.