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Business Transparency - Finding the Right Balance for your Firm

In April, it will be two years since Wikileaks came to prominence by releasing a video of a controversial US helicopter attack in Baghdad. Over the remainder of 2010, Wikileaks published several hundred thousand pages of additional US government material, much of it classified as confidential.

Business Transparency

Would-be whistleblowers must understand that they will likely face the full force of the law.

Whether you tend to support or condemn such unauthorized, whistleblowing practices, one thing is clear: things have not gone well for those involved. Despite Wikileaks’ impressive anonymity technology, being the one who actually blows the whistle remains as risky as ever. The accused leaker, Private Bradley Manning, has been in US custody for more than 600 days, and may well spend the rest of his life in jail. The Swedish government is still trying to extradite the founder of Wikileaks (Julian Assange, an Australian citizen) from the UK, perhaps for eventual extradition to the US. Wikileaks had to temporarily suspend its service as its funds dried up, and, in the most ironic twist, Assange is making a series of TV programmes to be aired on that bastion of transparency, state-run Russia Today.

Wikileaks’ recent release of apparently millions of documents from the US intelligence firm Strategic Forecasting, Inc. (better known as Stratfor) is different, mostly because this time it is a private company that has been compromised, but even here public support for Wikileaks has been minimal. Perhaps most tellingly, the Obama administration, which promised to be the most open in US history, has relied on the US Espionage Act with unprecedented frequency. For every Daniel Ellsberg (whose courage releasing The Pentagon Papers about the Vietnam war is lionized), many others are severely punished. Would-be whistleblowers must understand that they will likely face the full force of the law.

Effect on business transparency

All of these scary headlines can’t help but shape business attitudes toward information transparency. Not surprisingly, many executives instinctively feel that the best policy is simply to lock everything down. However, it doesn’t take long to realize that this is not a viable overall strategy. The reality is that every firm already has implicit business transparency policies, whether they are formally articulated or not. This suggests that more nuanced responses are required.

During 2011, we conducted our first study of business transparency, work led by Mike Nelson. We found that most firms do not have an explicit or holistic approach. Instead, practices tend to grow up piecemeal across the firm. In our discussions, we identified eight main areas where current transparency practices and their costs/benefits should be systematically evaluated:

  • Strategic communications – to generate publicity and support
  • Research and product plans – to motivate the business ecosystem
  • Personnel data – to highlight employee activity and achievement
  • Sales and market figures – to demonstrate success and leadership
  • Anonymized customer data – to identify trends and support partners
  • Customer satisfaction information – to drive improvements
  • Pricing and purchasing data – to build customer trust
  • Crisis management – to enable an effective organizational response

Of course, we are not saying that businesses should be fully or “radically” transparent in all or any of these areas; each possibility comes with its own obvious risks. We are merely pointing out that increased business transparency can have many significant benefits, and that too often it is the risks that get most of the firm’s attention.

Our research showed that very few firms have actually done a systematic cost/benefit assessment of their transparency policy. While the results of such efforts will differ considerably by company, industry, and especially geography (as local laws and practices vary widely), in an information age, superior transparency policies can be a significant form of competitive advantage. Somewhat counter-intuitively, increased transparency can also be a way of protecting the firm, as accumulated goodwill and trust can help offset whatever bad news might someday emerge.

Finally, a firm’s current transparency practices – both internally and externally – are often a pretty good proxy for its overall culture. Transparency practices help shape traits such as brand, trust, openness, reputation, empowerment, engagement, collaboration and ecosystem contribution. In this sense, more effective transparency policies should also be seen as a useful source of cultural change.

Transparency requirements will only increase

Implicit in our decision to research these issues is our belief that transparency will become increasingly important over time. Technology is certainly part of this, as business data grows exponentially and the tools for creating, distributing and copying improve. But other important factors are also at work. Government requirements for regulatory and financial reporting will continue to expand, as will market pressures from customers, partners and employees. As more work moves online, detailed information is often required to offset the loss of confidence that comes with diminished human contact.

Perhaps most importantly, increased transparency is – for better or worse – becoming a personal mandate as well. For most of us today, how we appear online has become almost as important as how we appear in person, and thus we need to think carefully about how we are seen or not seen on search engines, as well as social media services such as LinkedIn, Facebook and Twitter. In most of these emerging virtual worlds (and unlike the physical world), our work and non-work selves are not easily separated. The net effect is sharply increased personal transparency, whether we like it or not.

Strategic positioning

We think the need for more transparency leadership represents an important opportunity for Enterprise IT, which at a minimum is responsible for most of the key enabling and/or inhibiting technologies. The relatively informed and neutral position of IT makes it a logical driver of discussions about increasing or decreasing transparency in the eight areas listed above. Toward this end, we have developed the simple positioning grid below to highlight key issues and facilitate discussion. We welcome your feedback.

While most firms will have at least some position in all four quadrants, most will also have clear centres of gravity. Where are yours? We think it is especially important to think through the relationship between internal and external transparency. One can generally assume that what is made available externally is also available internally, but the reverse, of course, should only sometimes be true.

If there is a lesson from the Wikileaks release of US government internal information, it is that a lot of that information actually made the US diplomats look pretty good – informed, concerned, professional, human, etc. Other information was more harmful, reinforcing the rule that you shouldn’t put anything in an email that you don’t want the world at large to see. Such built-in precautions remain the best way to ensure that transparency will mostly work for your firm, not against it.

Conclusion

There will never be a clear winner in this struggle, only constant balancing and rebalancing.

Transparency is an important business/IT topic because it forces us to confront the central tension of information management. Yes, information does want to be free. But at the same time, information is power  that can be damaging when placed in the wrong hands. There will never be a clear winner in this struggle, only constant balancing and rebalancing. Today, few companies do this systematically. Not only does this leave value on the table, but it can also leave your firm ill-prepared for the day the societal spotlight shines on you.

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AUTHORS

David Moschella
Research Fellow
David Moschella, based in the United States, is a Research Fellow for Leading Edge Forum.  David's focus is on industry disruptions, machine intelligence and related business model strategies.  He is the project lead for our 2017 research into Disrupting ‘The Professions’ – Scenarios for Human and Machine Expertise. David was previously Research Director of the programme. David’s key areas of expertise include globalization, industry restructuring, disruptive technologies, and the co-evolution of business and IT.  David is the author of multiple research reports, including 2016 Study Tour Report: Applying Machine Intelligence, There is Now a Formula for Machine Intelligence Innovation,  Embracing 'the Matrix' and the Machine Intelligence Era and The Myths and Realities of Digital Disruption. An author and columnist, David’s second book, Customer-Driven IT, How Users Are Shaping Technology Industry Growth, was published in 2003 by Harvard Business School Press.  The book predicted the shift from a supplier-driven to today’s customer-led IT environment.  His 1997 book, Waves of Power, assessed global competition within the IT supplier community.  He has written some 200 columns for Computerworld, the IT Industry’s leading publication on Enterprise IT, and has presented at countless industry events all around the world. David previously spent 15 years with International Data Corporation, where he was IDC’s main spokesperson on global IT industry trends and was responsible for its worldwide technology, industry and market forecasts.    

CATEGORIES

21st Century
Adaptive Execution
Assets/Capabilities
Identity/Strategy
Proactive, Haptic Sensing
Reimagining the Portfolio
Value Centric Leadership

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