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Earning the Right to Innovate

Earning the Right to Innovate

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For the past 15 years, the Edelman Trust Barometer has tracked trust in the global institutions of business, government, media and non-governmental organizations (NGOs). There have been long cycle changes, including the inexorable rise in trust in NGOs, a gradual ebbing of trust in the media, the fall from grace then gradual recovery of trust in business and a plunge of trust in government due to stalemate and perceived incapacity. In the period prior to the Great Recession, there was an exchange of trust among the four institutions. For example, in the early 2000s, we saw a rise in trust in non-governmental organizations that filled the gap left by loss of trust in business and government.

But now we see an evaporation of trust across all institutions, as if no one has the answers to the unpredictable and unimaginable events of 2014. For the first time, two-thirds of the 27 nations we survey (general population data) fall into the “distruster” category. The horrific spread of Ebola in Western Africa, the disappearance of Malaysia Airlines Flight MH370 plus two subsequent major air disasters, the arrests of top Chinese government officials on corruption charges, the foreign exchange rate rigging by six of the world’s largest banks and the constant drumbeat of data breaches, most recently from Sony Pictures, have shaken confidence in all institutions.

There is a new factor depressing trust: the rapid implementation of new technologies that are changing everyday life, from food to fuel to finance. This will shock many entrepreneurs, including Jeff Bezos of Amazon, who said, “New inventions and things that customers like are usually good for society.” Not so fast, Mr. Bezos. The 2015 Trust Barometer has uncovered a profound concern about the pace of change. By a two-to-one margin, respondents in all nations feel the new developments in business are going too fast and there is not adequate testing. Even worse, 54 percent say business growth or greed/money are the real impetuses behind innovation – that’s two times more than those who say business innovates because of a desire to make the world a better place or improve people’s lives.

The greatest concerns are about genetically modified foods and hydraulic fracturing (trust levels in the 30 percent and 40 percent range), with somewhat more confidence in personal health trackers (69 percent), electronic payments and cloud computing (trust levels in the 50 percent range). The industries charged with implementing these new technologies have a clear vote of no confidence. The food business, for example, is trusted by only a third of respondents to manage genetic modification in a responsible manner. The energy industry is trusted by only 48 percent to implement fracking. There is a desire for more government regulation of these developments by a four-to-one margin, but less than half have confidence in government to do it effectively.

The Trust Barometer confirms a direct correlation between the trust level in a country and its willingness to accept these innovations. At the top of the list of trusters are the United Arab Emirates (UAE), China, India and Indonesia. At the bottom are several nations in Europe including Germany, France and Spain, plus Japan and Korea. There is a profound difference between the attitudes in developed and developing worlds, with the greater acceptance of the technological innovations in developing markets (77 percent versus 44 percent).

Business sees innovation as imperative to competitiveness but fails to grasp the underlying problem of resistance based on fear of the unknown. The source of anxiety in this new age of disruption is lack of understanding. There are huge consumer benefits from the sharing economy, exemplified by Airbnb and Uber, in providing alternatives to hotel stays and car rentals. Entertainment programming streamed over the web by Netflix makes content available on demand. Oil prices have collapsed, from over $100 per barrel, to $50 per barrel, in the past year as hydraulic fracturing and other energy production technologies provide new sources of supply. Yet the consequences are being glossed over, from risk to environment, privacy violations and loss of jobs in disrupted industries.

Not since the Industrial Revolution in the 1800s have we observed such rapid change. Protest movements at that time were led by individuals, journalists or unions to mobilize resistance to uncontrolled innovation. The first automobiles on the streets in Europe were required to have people walking in front of them with red flags to warn pedestrians. John Ruskin organized an effort in the 1870s in the U.K. to bring back traditional rural handicrafts, against the woolens mills of the big cities. In his 1726 masterpiece “Gulliver’s Travels,” Jonathan Swift mercilessly critiques the scientists who try to extract sunbeams from cucumbers or convert feces to food. This was his way of lampooning the Royal Society of London for Improving Natural Knowledge and its fantastical notions. Upton Sinclair’s book, “The Jungle” at the turn of the century was a graphic depiction of the desperate lives of immigrants toiling in unsanitary slaughterhouses in Chicago, uncovering the dangers in the food supply chain. In every case, government responded to popular protests and media outcry against unregulated business innovation.

There are modern analogs to these protests. The city government in Paris has banned Uber in the wake of a strike by local cab drivers that crippled the city. The Attorney General of New York State has claimed that 70 percent of Airbnb’s listings in New York City violate the law and that the company has made $40 million on illegal listings. Fracking is banned in several European nations. Electronic wallets, such as Apple Pay, were barred by important retailers. Innovation through data collection is being demonized. A New York Times op-ed piece by a Northwestern University professor, Brayden King, argued, “We use these apps and websites because of their benefits … While we gain from digital connectivity, the accompanying invasion into our private lives makes our personal data ripe for abuse … we need to know where our data is going and how it’s used.”

Trust in Business Innovation: Pace is Too Fast by a Two-to-One Margin

the Pace of Development and Change in Business And Industry Today

The Pace of Development and Change in Business and Industry Today

The important insight for companies seeking to implement innovative technologies is that the traditional game plan used for the past decade will not work. The government is an ineffectual regulator, slow to establish an acceptable framework within which business can operate. The partnership with NGOs, even with celebrity activation, is not sufficient. The CEO taking the lead, promising efficiency and efficacy is not working. In a world of dispersed authority, a new compact of trust must be forged between the individual and the corporation. The individual must feel empowered to speak out, to be the other half of the innovation engine along with the genius programmer or scientist, to be a key part of the process of accepting of the new.

How companies do this is as follows. First, be transparent. We know from the 2015 Trust Barometer that the number one way to add trust in the fast-changing marketplace is to have business make test results publicly available for review (80 percent) or to have a partnership with an academic institution (75 percent). Transparency becomes the fuel for discussion of innovation, the rational backbone.

Second, demonstrate personal and societal benefits from innovation. There must be a new relationship of equality between the company and the individual, who agrees to surrender elements of privacy in order to achieve better service while maintaining the right to opt out. The broader objective should be a better world, as seen in the 81 percent of respondents who believe that business can both make a profit and improve society. The smart company will cultivate the new power of interested individuals who seek to collaborate toward a common purpose, so that marketing becomes a movement.

Professor Klaus Schwab, founder and chairman of the World Economic Forum, wrote, “There are four prerequisites of the company’s survival; profitability, growth, risk protection and earning public trust.” Schwab perceptively argues that the corporation, pressed by investors, has leaned toward profitability and growth but now must re-orient to risk protection and the regaining of trust. “Now it is time to minimize risk and build trust by meeting legitimate expectations of all their stakeholders … to find solutions to today’s most pressing social problems.”

Innovation should be a trust accelerator, but at the moment is not seen as entirely positive. To invent is not enough. Companies need to demonstrate that innovations are safe based on independent research. There must be a commitment to evolve the product based on consumer experience and feedback. The new product or service must be shown to be good for society, with transparency on the results of the innovation. We will not soon see an uptick in attitudes towards institutions. Therefore, if innovation is the lifeblood of the modern corporation, business must move beyond the WHAT to explain the WHY and the HOW. In the “Merchant of Venice,” William Shakespeare writes, “If to do were as easy as to know what were good to do, chapels had been churches and poor men’s cottages princes’ palaces.” In this moment, business must recognize the validity of this distinction and be sure that all of its innovation is seen as “good to do,” not just for the company but for the individual user and for society at large.

Richard Edelman is president and CEO.

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