THE LAST WORD ON BECOMING DIGITAL

Trust

Continue to learn with humility, not hubris. Hubris is boring.

—Jimmy Iovine

For three straight years, the Harris Poll’s annual corporate reputation survey ranked Amazon number one. Amazon has been named to the “masters” group in Gartner’s Supply Chain survey, joining Apple and P&G. The Drucker Institute named Amazon the number one corporation in their Management Top 250 measuring 37 metrics. And Amazon tops the ACSI Internet Retail category for customer satisfaction for the eighth year in a row. That is what you call being on a roll. And I haven’t even mentioned Amazon’s stock price.

In contrast, Facebook’s Mark Zuckerberg testified before Congress in the aftermath of the Cambridge Analytica scandal. He answered questions from politicians regarding his organization’s lack of governance and its apparent inability to prevent bad actors from hijacking the platform. It was uncomfortable to watch. The poor guy was squirming. But it’s hard to feel sorry for him. I’m not certain if it was hubris or naivete that landed Zuckerberg in the hot seat. Maybe a combination of both. I do know he made an unforgivable mistake: he undervalued the trust of his customers. And it has tarnished his brand. Badly.

When I was at Amazon, there was nothing more sacred than building and keeping customer trust. The first leadership principle notes, “Leaders . . . earn and keep customer trust.” We understood intrinsically that customer trust was the brand and the enterprise. Here’s the rub. The final word. The bottom line. You are never done inventing the customer experience, which includes keeping your brand promise to your customers.

WHAT IS TRUST?

When I was at Amazon, we talked about “customer promise” as the essence of customer trust. “Promise” meant the right item would arrive in the right condition at the right address at the right time. As we started launching and scaling the Marketplace business, in which independent sellers outside of the Amazon fulfillment network were responsible for shipping items to customers, we felt that “promise” applied there as well as to Amazon retail orders. The customers didn’t care (nor should they be required to care) whether they were buying from Amazon the retailer or from a third-party seller via Amazon.

Yes, we could have just trusted our sellers to do the right thing, but we applied the mindset of “trust, but verify.” We forced the sellers to manage all communication to the customer through us, so we could understand the issues. We obliged sellers to send shipment notifications to us, and we tracked when packages were shipped and when they were delivered through the transportation providers. We tracked the number of complaints, refunds because of item issues, and out-of-stock situations.

In other words, all the components of “promise.” It made selling at Amazon an intricate choreography of transactions, a far more complex process than selling at eBay. As a result, it slowed down the adoption of the Amazon Marketplace among sellers because we demanded more from them. Finally, we extended the Amazon A-to-Z guarantee to all orders. Initially, this policy extension garnered fierce internal resistance because of the financial and procedural implications in managing tens of thousands of sellers. But it was key.

DOWNFALL OF SUCCESSFUL COMPANIES: THE ABCS

After I left Amazon in late 2005, I became a managing director at Alvarez and Marsal, a consulting and advisor firm based in New York. Alvarez and Marsal is the premier restructuring firm. It excels at helping clients through challenging periods in a business cycle. Of course, we also retained very healthy clients who were not in crisis. I particularly enjoyed working with restructuring clients and private equity clients because they were usually humble, striving for change, and not holding onto the past. These companies and leadership teams were typically truly committed to change, willing to embrace the pain and work to make a future, and eager to let go of past traditions.

Conversely, the most difficult clients were the large, successful companies. They typically resisted efforts to create lasting change and increase enterprise value. That’s because they often suffered from what Warren Buffett calls “the ABCs of business decay—arrogance, bureaucracy, and complacency.”¹ One warning sign of the ABCs is when company results become more important than keeping customer trust. The brand erodes when short-term financial results are prioritized over doing the right thing—that is, implementing controls in the business to protect the customer.

Take the massive Equifax data breach of 2017. The company’s leaders’ poor response and lack of accountability are one of several recent examples of big companies without governance. “Capping a week of incompetence, failures, and general shady behavior in responding to its massive data breach, Equifax has confirmed that attackers entered its system in mid-May through a web-application vulnerability that had a patch available in March. In other words, the credit-reporting giant had more than two months to take precautions that would have defended the personal data of 143 million people from being exposed. It didn’t,” stated WIRED magazine.² Furthermore, the company took six weeks to notify the public about the situation. It was a master class in how to lose customer trust.

WHAT’S YOUR PROMISE?

What do you promise to customers? What does your brand stand for? High reliability? Low cost? Current style? Durability? Personalized service? Design? There are many potential brand elements, but you should be able to outline and prioritize yours. This is your customer promise. But don’t stop. Find ways to create systems and approaches to measure and manage. Actively interrogate the risks that could most affect customers, prepare for these, and find ways to actively monitor them. This often takes real innovation and might end up producing other benefits!

Great brands, great companies, and great civilizations are lost when greed and complacency infect leadership. I know. In 1999, I was a young partner at Arthur Andersen. Fortunately, I left a year before the Enron situation materialized. Our promise to clients was “think straight, talk straight,” which implied that our advice and services would not be self-serving. Arthur Andersen lost control of that promise. The digital era offers more challenges, but more approaches and tools to manage them.

And now, what you’ve been waiting for—the ½ idea.