5 steps to accelerating trust development
Arguably trust is today more than ever at the heart of value creation in the economy. The development of trusting, high-value business relationships is not an accident, it can be done purposefully. Below is a still highly-relevant excerpt from Chapter 4 of my book Living Networks describing how to do this.
Accelerating trust development
Participating in the network economy requires very actively developing new and existing relationships with customers, suppliers, and partners. As you saw earlier in this chapter, companies’ external relationships are becoming both deeper and broader. Some firms do whatever seems right each time they take on a new customer, supplier, or alliance partner. Others have careful and detailed processes for building closer relationships that benefit both parties. IBM spends almost $1 billion on its alliance program for software developers, getting its return through the generation of over $4 billion in additional sales. It has a formal 40-step process that executives must go through with potential partners before signing an alliance agreement, including examining the fit with IBM, and getting a senior IBM executive to agree to act as an internal sponsor for the alliance.
On the other hand, in high-value professional services such as accounting or investment banking, many firms celebrate winning an account or major client transaction with a boozy dinner, but have no clear processes for actively developing trust and deepening relationships with these accounts. Each industry and situation will call for a different approach to trust development. However since the ability to develop trust faster and deeper with new clients and partners is becoming a key competitive differentiator, it is not something that can be left to chance. There are five key steps in accelerating the development of deep trust in relationships.
1. Establish an overt trust development program
2. Create transparency
3. Treat security as a business enabler
4. Streamline legal issues
5. Work to align objectives, culture, and technology
1. Establish an overt trust development program
One of the most powerful actions to develop strong trust quickly with partners is simply to openly discuss the issue. Frank conversations can vastly accelerate the process. The first step is to raise trust as a key issue, and together talk about the potential benefits of developing strong mutual trust. You and your clients, suppliers, and partners can together certainly gain far greater value from higher levels of trust, but you need to define the specific activities and ventures that will be made possible by this. Once you start to identify clear opportunities that will depend on mutual trust, this creates a stronger drive towards accelerating trust development, and helps to clearly establish the risks and concerns that prevent these happening immediately. Once you and your partner understand where you want to go with your relationship, and the perceived risks in doing so, you can agree on a staged program for both parties to gain the necessary confidence to build a truly collaborative relationship. This kind of process is very useful across every kind of high-value relationship, however it should be approached slightly differently depending on the situation. For suppliers seeking to develop a relationship with a powerful client, the initial emphasis may be a more one-sided effort to demonstrate the potential value of higher trust levels, and getting clients to precisely articulate their concerns so these can be addressed.
Ultimately, deep trust comes from the repeated experience of positive expectations being met. As such, a trust development program must set a sequence of expectations for both sides. An initial workshop will not only establish where the program is going, but also a series of highly specific commitments from each side. Fulfilling these—or sometimes even the frank communication of reasons why they weren’t met—will deepen trust that future commitments will also be met. Trust is all about taking risks. In building trust you need to take a series of steps that each stretch the willingness of your partner to take a risk with you. Every time a risk is taken and trust is shown to be merited, it allows you to move a step further. Expecting too much trust initially can break the relationship—the process must be staged. Depending on the nature of the relationship, regular workshops can be run to review whether the commitments have been achieved, make adjustments to the program, and recognize the activities have been enabled by higher trust levels. Often discussion of the trust development program will be incorporated into the agenda of other regular meetings.
In one case, the European operations of a multinational chemical company worked through a series of workshops with its major client, helping to bring out unspoken concerns, and eventually establish an information sharing initiative with strong mutual benefits. One of the issues that became clear to the chemical firm through the process was the importance of addressing the internal politics of its client. The involvement and interaction of key stakeholders in your partner organizations can enable or derail the trust development process.
2. Create transparency
In today’s economy, trust increasingly depends on transparency. Clients or partners may choose not to become closely familiar with every aspect of their external relationships, but the knowledge that they can access and become involved in details provides a solid foundation for trust. This is not just about information systems, but the ability to walk into partner firms, see what is being done, and have frank discussions.
Call center operator Convergys expects executives from its clients to drop in at any time to observe its day-to-day workings and gather information and insights on its work for them. As described in Chapter 9, contract electronics manufacturer Flextronics provides complete transparency on every aspect of its operations to its clients. They have access to the same information systems as Flextronics, and can become involved to any level of detail that they choose in the outsourced operations.
3. Treat security as a business enabler
Systems security should be treated as a business enabler, not as a problem. Security is an absolutely vital issue in a connected world, because so much can go wrong. As companies become increasingly dependent on their information system, and confidentiality and privacy become their legal responsibilities, they will tend to avoid unknown risks. Potential customers or partners will only be prepared to deal with you if they trust that your systems are secure, and that their information and computers are not exposed in any way as a result of doing business with you. Similarly, you won’t choose to establish deep relationships involving systems integration or confidential information flows unless you are fully confident in your partners’ security. Security issues must be dealt with as a starting point to all trusting, collaborative relationships. However if security is demonstrably sound, it allows a higher level of trust with partners, deeper integration of systems, and in turn real competitive advantage.
Whenever companies exchange information directly, other than through e-mail or website access, they need to engage in a frank discussion about security issues. This is essentially a form of “due diligence,” which may include exchanging written security policies, and identifying precisely what technology and policies are in place to safeguard information and systems. Firewalls should be designed to let through only specific traffic, and monitor even trusted clients’ communication, in case their systems have been successfully breached by a hacker. Encryption of sensitive information should be standard practice.
Virtual Private Networks (VPNs) are specifically designed to provide privileged access to trusted third parties, making the public Internet safe by creating an encrypted “tunnel” for information flow. These types of systems should be actively implemented for all significant relationships, as they make information flow both easier and more secure, enhancing the ability to create value together, and creating an advantage over competitors. Physical tokens, such as smart cards, can be used along with passwords to make both you and your customers more confident in information security.
4. Streamline legal issues
Trust always trumps legal agreements. You can try to pin down details in long contracts, but without trust there are major limitations to how much mutual value you can create in relationships. However in most cases legal contracts provide a useful foundation to build strong, trusting relationships, especially in the early stages. Perkin-Elmer and MDS Sciex, in establishing their alliance entity Perkin-Elmer Sciex in 1986, set up a basic legal agreement at the outset, but the two firms have never drawn on the documents in resolving issues along the way. Baird Textile learned the value of legal contracts when British retailer Marks & Spencer, which accounted for 30-40% of its sales, suddenly terminated its relationship after 30 years without a legal agreement, despite the retailer openly describing the relationship as a partnership. Baird took Marks & Spencer to court, but lost.
Another approach that can sometimes have value in the early stages of a relationship is bonding, in which one or more parties deposits a bond with a trustee. If any of a specified list of conditions is breached, the bond is forfeited. The problems are in designing an effective bonding contract, and being able to prove that it has been broken. Clearly bonding does not build trust in itself, but it can help to create the conditions for faster initial trust development.
5. Work to align objectives, culture, and technology
Companies need to ensure that they are working in the same direction and communicating effectively. It is very hard to engage deeply unless each party clearly understands the other’s objectives from the relationship. Aligning objectives requires designing a partnership so that the same activities contribute to each participant’s desired outcomes. Procter & Gamble, when it sets up collaborative supply chain initiatives with retailers Wal-mart, Tesco, and others, begins by establishing and documenting high-level agreements on each party’s objectives for the projects.
Often different cultures and ways of communicating can result in unnecessary misunderstandings. Interactive media firm Giant Step hires staff from its major clients’ industries, and publishes a glossary of terms for its staff and clients to use. It gives this to its clients, and encourages them as well as its relationship managers to keep it on hand during conversations. Since the Internet world generates an immense amount of jargon, with often different meanings ascribed to the same words, this helps ensure that confusion is minimized. In the following section we will look in more detail at the issue of aligning technology with your clients and partners.
