Trust – Part 1

No one reads my long blogs.. so my 2017 resolution is to break them up into smaller thought “chunks”.

I can’t believe its been 2.5 yrs since I wrote Brokering Identity. The central element of that blog, and today is to take a “trust” view of Network and Platform strategies. The rules, standards and processes by which trust is managed are critical to the success of networked businesses and markets from eBay to Visa/MA to the NYSE.

Business networks require the enforceability of rules, standards and transactions as well as the counterparties that can participate. Not all transactions are the same however. For example “do I trust you to deliver soft slippers that I will like and fit my feet” is very different than “do I trust you to deliver $1M USD into my account in New York in exchange for my shares of Disney”.

For example Visa requires every member to be a registered bank, and to abide by very detailed operating rules, further every participant, supplier and device operating within their network must go through a certification. This enables Visa to reliably send messages to participants with a high degree of confidence in the source, destination and content of the message. The operating rules place responsibilities on parties that generate risk, errors or liabilities to others in the network. These same rules outline the economic opportunities for those that participate. For example, interchange provides issuers with a basis for economic investment to add cards to the network.

Many failed networks outline the rules for operation, without an economic basis for investment. The internet is perhaps the best example, but do any of your remember the GSMA, NFC and the TSM? A Trusted Services Manager is a great idea… but it was a hidden attempt by MNOs to become the “trust broker” for who could use consumer information within a phone.  OEMs like Apple have taken the proprietary route (ex SecureEnclave) as they realize consumer data and auth are core to their future.

The “KEY” [prerequisite] in value orchestration is owning the Consumer relationship. Therefore Identifying and Authenticating the Consumer is the first, primary, service that must be owned by a platform.  What was a separate “Trusted Services Manager” in the NFC world has been co-opted by platforms which will take a proprietary route.

There are also networks that outline the economics, without enforceable standards or operating rules. Examples include: Amazon, airBnB, uber and eBay. In these networks, the services and goods vary and qualitative “reputation” becomes the measure of trust.

The complexity of managing trust has shaped the design of firms, in addition to factors (ie TCE) that I discussed in Collaboration and the Sharing Economy. Vertical and horizontal supply chain integration (ie Apple) has shown itself to be a very profitable model. Apple’s Hardware and Software create the greatest most reliable consumer experience.

In part 2 I will cover what I see as the key elements of trust in a collaborative infrastructure.

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