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December 10, 2003

The Customer Peers Back

Corporate integrity is a more valuable asset now that the world is more transparent. With abundant and free information, customers can now discern the true value of vendors and their goods and services. Business policies and processes — and the systems in which they manifest — should embrace this transparency rather than fight it.

by Don Tapscott & David Ticoll

For years, intelligent enterprises have had a window on their operations, customers, and other stakeholders. They've used BI, CRM, data mining, and other techniques to get this view. Now those who interact with corporations are doing the same thing: gaining unprecedented access to all sorts of information about corporate behavior, products, and performance.

Armed with new tools to find out, inform others, and even organize, stakeholders now scrutinize the firm like never before. Every corporation is becoming naked as various outsiders gain intelligence about it. This reversal of fortune has profound implications: Enlightened self-interest will lead companies to embrace transparency and become open enterprises.

BI — Outside In

Consider customers. In the past, firms relied on surveys to discern customer preferences. Today massive, exquisitely detailed databases track customer behavior. A large retailer, for instance, can know which models of jeans sold in the Cleveland store in the last hour. If they were bought with a credit card, the company also knows the buyer's purchasing habit — information tailor-made for custom marketing campaigns. For years, customers have been on the disadvantaged side of a one-way transparency mirror.

Today, all of that is changing. Customers can peer back at companies. And they can act on what they now know — with seismic effects. Customers have increased access to knowledge about products and services and they can discern true value more easily.

Once upon a time, in the 1950s, consumers were only too happy to buy just about any good or service that came their way. Abundance — what John Kenneth Galbraith called the affluent society — was a novel experience for Americans, and they embraced it with gusto. No more. Today, many industries and markets are battlegrounds where consumers and sellers wage battle in a fog of mutual mistrust. This problem is not universal: great brands like Coca-Cola, IBM, Disney, and Mercedes retain their sheen despite ups and downs. But it's nasty down in the trenches.

Increasingly consumers depend on growing transparency to protect themselves and prepare for marketplace combat.

They prepare for car purchases with military precision. The Internet provides, mostly for free, government crash test results, product reviews from a variety of perspectives, personal advice and consultation, and several versions of dealer pricing. One site (Edmunds.com) offers dealer price comparisons by ZIP code.
The travel industry's economics are beset by transparency. Air and hotel bookings continue to increase on the Internet, and many analysts predict that in both good times and bad, online bookings will push prices down.
Not only did Wall Street lose the confidence of consumers, but banking is also under pressure. E-Loan, a dotcom survivor, returned to television advertising and turned profitable in 2002. It ended the year with $13 billion of consumer loans on its books. Its site lives and breathes the transparency of its lending process.
Type "insurance rates" in a search engine, and find all sorts of resources that provide advice and comparative deals for your particular situation.
The recording industry has been in crisis since the MP3 file format took off in 1998. Because music is pure information, transparency in this case challenges a century-old business model.
Millions of Americans think the healthcare system misleads them. Tenet is but one example of a major provider that lost public trust under suspicion of overcharging Medicare and conducting unnecessary operations. Physicians and pharmaceutical companies seem to be in an unholy alliance, fueling a new mini-industry in Canada — the sale of low-cost branded and generic drugs to U.S. patients via the Internet. Pharmaceutical companies malign the safety of these suppliers; Glaxo Smith Klein has threatened to cut off their supplies. But elderly patients on fixed incomes know that this idea works.