This is a big vision, but the team is thoughtful about how to drive transformation in this complicated industry. They will use a phased approach to build increasing patient value over time. They plan to start by serving focused populations in a specific region, and using blockchains on the backend. Once they have proven the long-term cost savings and better value that can come from focusing the technology on the task of cutting waste and fraud, they’ll layer on more functionality and regional reach. “Blockchains are uniquely suited to make things better, faster, and cheaper,” said Nick. “But, we are a health care company that happens to use blockchain, and it is not the only tool in our arsenal. We are fixated on anything and everything that delivers more value to patients.”70
Open Garden: Disintermediating the Internet Service Provider
The team at Open Garden is building a product that could make it possible for anybody with a mobile phone to become their own internet service provider (ISP). Cellular and data plans charge one rate, regardless of usage—and in the US, an average of 70-80% of that goes unused. Open Garden is part of a broader movement for “peer-to-peer mesh networking,” using connected devices to deliver service instead of a centralized provider like AT&T or Verizon.
Users who sign up on Open Garden will be able to buy or sell service from each other. They decide when they want to share capacity, how much, and with whom. The more participants, the higher the availability and the lower the cost—and this cost is potentially much, much lower than what customers pay today. Transactions happen between participants using Open Garden’s OG token. Sellers earn OG, and buyers pay OG. The company is focused on building a service strong enough to connect the “next five billion mobile devices” through this people-powered internet.
Backed by investors that include Verizon’s own venture arm, the company has gained significant experience with peer-to-peer mesh networking through a free, non-blockchain messaging service that debuted in 2014, called FireChat. This service, used in pro-democracy protests in Taiwan and Hong Kong, the Bersih anti-corruption movement in Malaysia, and historical elections in Venezuela and the Republic of the Congo, works by connecting devices stepping-stone–style into a rich fabric that enables broad coverage. And, unlike mobile and internet networks that break down with more users, the more people in a mesh network, the better it works. Micha Benoliel, the creator of FireChat and founder of Open Garden, explains, “a swarm of smartphones can build a real networking infrastructure—decentralized, resilient, and local.”
Lantmäteriet: Streamlining Land Registry
The Swedish land registry authority, Lantmäteriet, has, with a diverse team of partners, been testing land registry on a private blockchain. Around the world, land titling systems are susceptible not only to forgery and clerical error, but also to large fees levied by middlemen such as title insurers, who have little competition in many markets (in the US the industry has attracted much criticism for high prices and scams). In many emerging economies, land titles aren’t even possible. At Lantmäteriet, which is relatively advanced—the process is already paperless and highly digitized—it can take months from the signing of a contract to register the sale.
In June of 2018, Lantmäteriet completed the third phase of its experiment. With a group of participating banks, businesses, and startups, they were able to demonstrate the creation of smart contracts that automated transactions on a blockchain, enabling buyers and sellers to digitally sign a bill of sale, with signatures verified automatically instead of at an agent’s office. When a land title changes hands, it would be verified via the blockchain, and recorded again. It’s still a long way until a blockchain-driven registry is widely available in Sweden, but estimates put taxpayers’ potential savings at over $100 million a year.71
Chapter 7. DEEPER TRANSPARENCY
The currency of the new economy is trust.
Rachel Botsman
Summary
Leaders will actively leverage blockchain-driven transparency to demonstrate adherence to corporate values and as a marketing tool. This will set new standards for transparency—and ultimately an expectation for it.
Blockchain technology has the potential to immutably track and make transparent many parts of a business. Leaders will actively leverage this functionality to demonstrate that they stand by their values and that their products are verifiable and compliant.
This will set new standards for transparency—and ultimately an expectation for it, creating pressure for other businesses to follow along. Customers’ definition of quality will expand beyond the immediate characteristics of the good consumed or the service rendered to include a judgment on its creator, provenance, and journey into their hands.
Leaders will carefully craft and actively market their transparency story. While not all consumers will choose to inform their brand and buying decisions with this new information, others will increasingly demand it. Over time it could build to become a force, and businesses that don’t offer transparency would ultimately be punished in the market.
The Setting
Seeking Assurance in a Complex World
We are asking tough questions of our brands. We want to know where our goods come from, what they are made of, and who made them. We increasingly expect the companies we buy from to have clarity and control of everything from ingredients to production practices. We are increasingly vigilant about choosing the “best” products: researching, comparing, and considering relentlessly, whether for a new car or a bottle of shampoo. More than anything, we are demanding transparency.
Customers are asking tough questions of their brands: more than anything, they are demanding transparency.
Historically, a company could control brand image with marketing. Customers had limited access to information, and to each other, beyond school, work, religious community, and friend and family networks. Businesses invested in spin over the difficult work of transparency. But that all changed with the internet. Access to online information mushroomed. Social networks multiplied. Customers got smarter, and more connected. Suddenly, the discovery of child labor or a waste management disaster tucked deep within a supply chain could plunge stock and trigger consumer revolt—overnight.
Consumers Expect More
Research firm Hartman Group has been tracking consumer attitudes and behaviors surrounding sustainability and transparency in the US since the 1990s. In a recent study, they found that consumers view sustainability more holistically than ever before, and that openness and honesty are becoming the currency of trust. More consumers seek out information about sustainability than in the past, and labor issues and environmental contamination have become more salient issues. Consumers also want to see corporate responsibility efforts that indicate an authentic commitment to ethical action.
Openness and honesty are becoming the currency of trust.
The study found that sustainability-related concerns impacted the values, attitudes, and actions of nearly 90% of adult consumers. At the shelf level, transparency increases a product’s chances of being selected over an otherwise identical product.72 Research firm Nielsen found that 66% of consumers (and 73% of millennials) say they will pay more for sustainable brands.73 Consumers are demanding more traceability from the food industry in particular. Fifty-four percent want as much information as possible on the label, and nearly 40% want country of origin, allergen alerts, and GMOs all identified on the label.74
This all points to the idea of “quality” evolving to be more expansive than just the immediate characteristics of the good consumed or the service rendered. Customers want to know what’s “inside” in every sense of the word—not just the product ingredients and packaging, but the supply chain ethics and sustainability and corporate responsibility agenda of the company that made it.
Sustainability and Responsibility: The New Corporate Norm
The corporation is responding. They are addressing these heightened expectations by bringing corporate social responsibility (CSR) initiat
ives into the C-suite. Research from the Boston College Center for Corporate Citizenship showed that the number of companies directing corporate citizenship from the C-Suite has increased nearly 75% compared to five years ago.75
Corporate responsibility (CR) reporting has also become standard practice for large and mid-cap companies around the world. The KPMG Survey of Corporate Responsibility found that three quarters of companies issue CR reports. And this is true across industries—60% of industry sectors showed a healthy rate of reporting. The vast majority (78%) of the world’s top companies are also including CR information in their annual financial reports, while 67% are conducting third-party assurance and audits of their CR data.76
Everyone Is a Stakeholder
The underlying theme of all this attention is that companies are starting to understand that nearly everyone they come in contact with considers themselves a stakeholder. Not only does each customer get a vote with their wallet every time they choose one brand over another, but also the actions of a company can impact a population—and the population is starting to understand this.
Investors, employees, partners, NGO activist organizations, and even governments are asking for more information about what is really happening to source, make, and distribute products.
Investors, employees, partners, NGO activist organizations, and even governments are asking for more information about what is really happening to source, make, and distribute products. A survey conducted by Ernst & Young and GreenBiz Group found that while customers were the stakeholder group driving most companies’ sustainability efforts (37%), employees (22%), shareholders (15%), policymakers, and NGOs (each at 7%) were also key influencers.77
Many experts believe that more regulation is imminent. KPMG reported it as a clear and recurrent theme in their research as governments and stock exchanges around the world—from Latin America to Japan, the US and the EU, to India and Taiwan—are bringing in new layers of regulation for environmental, social, and governance disclosure. Voluntary guidelines are transitioning into mandatory reporting requirements in many parts of the world.
The Focus on Sustainability Is Here to Stay
The Global Reporting Initiative published a forward-looking paper forecasting the environment in 2025. It spoke of a future in which companies will be held more accountable than ever before, and business decision makers will take sustainability issues into account more profoundly.It also predicted that stakeholders will have more access to data, which will require organizations to report and respond more in real time instead of annually, aiding in better sustainability-supporting business decisions.78
A Business Case for Urgency
But the case for transparency goes far beyond external pressure. Understanding what is really happening in the supply chain is simply smart business. In today’s increasingly dispersed, diverse, and global supply chains, it is much easier for things to go wrong. Even small problems deep in the supply chain—an incorrect material used by a supplier’s supplier—can become massive after that material has been molded, welded, and rolled down the assembly line as a finished product. As discussed earlier, human rights and environmental issues across a company’s vast ecosystems of thousands of suppliers and partners can be immensely costly when discovered.
Understanding what is really happening in the supply chain is simply smart business.
We saw how consumer demands have contributed to companies becoming more purpose-driven and sustainable. Now companies are realizing they need to demand the same high standards of their suppliers. They will be using their power to increase demands for transparency and hold suppliers accountable more than ever in the coming years.
Additional danger comes from the infiltration of fraudulent or contaminated ingredients in the supply chain. A recent study by Robert Scharff, a scientist with the Ohio Agricultural Research and Development Center, estimates the annual cost of foodborne illness in the United States to exceed $93 billion.79 Former associate commissioner for foods at the US Food and Drug Administration David Acheson explains, “Thirty years ago if you had a little problem, you were not going to get discovered. Now the chances of getting caught are significant, and it can be the end of your company.”80 Scandals have involved everything from melamine in milk to horse meat in hamburgers. The direct costs of a food recall average $10 million,81 and an estimated 60% of companies in the industry have been affected by recalls.82
Within the health sector, pharmaceuticals stand out as particularly prone to corruption, in every region of the world. The World Health Organization estimates that 1 in 10 medical products in low- and middle-income countries is substandard or falsified. From cancer treatment to contraception, fakes extend well beyond high-value meds or well-known brands.83 The impact is vast, and hard to quantify. But studies often reveal chilling examples, such as the over 100,000 annual malaria deaths that are estimated to have resulted from falsified antimalarials in sub-Saharan Africa alone.84
Transparency Affects How Our Brain Perceives a Brand
True transparency can transform a relationship tarnished by suspicion. It reduces fear of the unknown, and creates a platform for building trust. In one study in which all organizations used the same transparent messaging in response to a crisis, participants judged the companies that had a reputation for transparency as more trustworthy than those that seemed less transparent.85 Charlie Arnot, the CEO of The Center for Food Integrity, talks about the results of the nonprofit’s recent research: “Transparency in an organization’s practices count most toward building trust. That’s because practices are a demonstration of values in action, and our research shows shared values are the foundation for building trust.”86
As businesses increase transparency, they will also increase customer trust.
Transparency in an organization’s practices count most toward building trust.
Charlie Arnot, CEO, The Center for Food Integrity
Trust in Crisis
Customers are increasingly wary of the ambiguity of certifications like organic, fair trade, and local. They are taking time to do their research; they are thinking hard about these purchase decisions; they’re spending more of their hard-earned income on these “higher quality” products. But they are not sure the claims are always real. They may feel better, but is all this extra work really keeping pesticides off their child’s dinner plate? They’ve seen companies greenwash marketing, and it’s increased their skepticism. The customer has become wiser: they want tangible transparency, for companies to prove they are doing what they claim they are, and improvement in areas that have real impact.
Even nonprofits are plagued by concerns over transparency. Donors are concerned that their dollars will be misappropriated, and these fears are stoked by more and more scandalous headlines each year. Executives for the Wounded Warrior Project were found to be holding lavish parties and staying in $500-a-night hotels (CBS News found that only 60% of the organization’s funding went to serving vets, while organizations with comparable missions were over 90%).87 The now-defunct Cancer Fund of America was found to have misused their $187 million in donations on items such as luxury cars, Caribbean cruises, and trips to Disneyland.
For 18 years, marketing firm Edelman has published an annual “Trust Barometer” study. The 2018 study, covering over 30,000 respondents across 28 markets, shows global trust in crisis. Twenty of the 28 markets surveyed demonstrated “deep distrust.” The trust decline in the US was the steepest ever measured, with Edelman calling it a “trust crash.”88
Fake News Fuels Skepticism
Fake news is being used as a weapon. It was used to influence the 2016 US presidential race. It has disrupted elections in South Africa. Singapore is working on laws designed to fight fake news. And Germany has already passed a law that fines social media companies for failing to delete fake news. The Edelman Trust Barometer found that nearly 60% globally felt they “are not sure what is true and what is not” in the news.89
MIT resear
chers recently published the most comprehensive study of fake news ever conducted. The team analyzed data on every major contested news story since Twitter’s launch—126,000 stories, tweeted by 3 million users, over more than 10 years—and found that the spread of truth simply cannot compete with the spread of hoax. By every metric, falsehoods dominate truth on Twitter. A false story reaches 1,500 people six times quicker than a true story does. And false stories outperform on every subject—including business, science, technology, and entertainment.90 The study immediately prompted alarm in the social science community, with a group of 16 political scientists and legal scholars calling for a “redesign of our information ecosystem” in an essay published in Science.91
Cybersecurity firm Trend Micro did a pricing analysis of fake news campaigns. They learned it would cost only about $55,000 to conduct a trolling campaign to discredit a journalist, or $200,000 to whip up enough frenzy to draw a crowd into the streets to protest against a made-up offense.92 This digitally driven erosion of information quality, and the ease with which malicious actors can hijack citizens’ perspectives, will only further stoke the battle cry for transparency.
Paradoxically, we can expect the “quality” of the deceit to increase as AI and machine learning create even more convincing fakes. Researchers at the University of Washington recently took an audio track of a speech by former President Obama and created a chilling fake video of him giving the speech “on camera.”93 Realistic audiovisual fakes will be even more powerfully deceptive than the static form of fake news deployed today.
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