Start with Technology, End with Trust
The central economic imperative of the industrial age was to
increase productivity. Every aspect of an industrial firmfrom its
machines to its organizational structurewas tailored to enhance
the efficiency of economic production. But today productivity is a
nearly meaningless byproduct in the network economy.
The central economic imperative of the network economy is
to amplify relationships.
Every aspect of a networked firmfrom its hardware to
its distributed organizationis created to increase the quantity
and quality of economic relationships.
The network is a structure to generate relationships.
Networks haul relations the way rivers once hauled freight. When
everything is connected to everything else, relationships are rampant.
Each variety of connection in a network begets a relationship. Between
firms and other firms. Between firms and customers. Between customers
and the government. Between customers and other customers. Between
employees and other firms employees. Between customers and
machines. Between machines and machines, objects and objects, objects
and customers. There is no end to the complexity and subtlety of
relationships spawned in a network economy.
Each of these types of relationship has its own specific
dynamics and quirks. And each is nurtured by a particular type of
technology. The technologies of jelly bean chip and boundless bandwidth
are, in the end, relationship technologies. "We need to shift away
from the notion of technology managing information and toward the idea
of technology as a medium of relationships," writes Michael Schrage
in Shared Minds, a book about the new technologies of
collaboration. Despite the billions of bits that information hardware
can process in a second, the only matter of consequence silicon produces
Of course reputation and trust have been essential in all
economies of the past, so whats new? Only two things:
- With the decreased importance of productivity,
relationships and their allies become the main economic event.
- Telecommunications and globalism are intensifying,
increasing, and transforming the ordinary state of relationships into an
excited state of hyperrelationsover long distances, all the time,
all places, all ways. Its not Kansas anymore; its Oz.
Relationships among more than two people can be structured as
hierarchies or as networks. In hierarchies, members are ranked in
privilege relative to one another; in networks, members relate as
peerscounterparts of similar power and opportunity. In previous
ages the most intelligent way to construct a complex organization in the
absence of plentiful information was to build a hierarchy. Rank is a
clever and workable substitute for ubiquitous real-time information.
When information is scarce, follow orders.
When information is plentiful, peers take over.
In fact, as reliable information becomes common, almost
nothing can stop peers from taking over. As computers and communications
unloose a million bits of information in every dimension, we see
peerages form in every dimension. Email and voice mail have brought
peerage pressure to corporations. The flattening effect of network
technologies and the subsequent turmoil in the organization of business
firms is well recognized. But in many ways the emerging peerlike
relationship between boss and staff is probably the least interesting
and least important of all the relational changes now taking place.
More consequential is the relation between customer and firm,
which is yielding to the peer effect. More important still is the
relation between firm and firm, which is shifting rapidly to a web of
overlapping nets. Still more vital is the lateral relation between
customer and customer, which is just beginning to brew. Finally, the
elevated relation between customers (rather than citizens) and the rest
of society, a relation that is just now being defined, may be the most
important of all, as economics elbows its way into every activity. As an
example of expanding relationships, consider the traditional
relationship between customer and a firm, roles that have been around
forever. In the network economy the separation between customers and a
firms employees often vanishes.
When you pump your own gas at the filling station, are you
working for the gas station or for yourself? Are all those people
waiting in line behind the ATM machine more highly evolved bank
customers or just nonpaid bank tellers? When you take a pregnancy test
at home, are you a savvy self-helper, or part of the HMOs plan to
reduce costs? The answer, of course, is both. When everyone is linked
into a web, its impossible to tell which side you are on.
Web sites and 800 numbers can invite customers into the
internal knowledge banks of a company to almost the same degree of
"inside" that employees stationed on the other side of the
line enjoy. Many technical companies post the same technical information
and diagnostic guidelines on their help sites that their own support
professionals work from when you call their hotline. You can have
someone trained to look up and then read troubleshooting answers for
you, or if you are in a hurry, you can try to find it yourself.
Whos working for whom?
At the same time the complexity of an employee contract,
particularly in high-tech fields, is quickly approaching the complexity
of a contract with an outside vendor. Stock options, vestment periods, a
thousand insurance and benefit combinations, severance clauses,
noncompete agreements, performance goalseach one uniquely
negotiated for each person. A highly paid technical employee becomes in
essence a permanent consultant. He or she is an outsider on staff.
Outsiders act as employees, employees act as outsiders.
New relationships blur the roles of employees and customers to the point
of unity. They reveal the customer and company as one.
This close coevolution between users and producers is more
than poetry. There is a very real sense in which the owners of the phone
network sell nothing at all but the opportunity for customers to have
conversations among themselvesconversations which the users
themselves create. You could say the phone companies cocreate phone
service. This blurring between origin and end spills over into the birth
of online services, such as AOL, where most of what is now sold is being
created by the customers themselves in the form of postings and chat. It
took years for AOL to figure this out; they initially wanted to follow
industrial logic and sell downloadable information created at great
expense by professionals. But once they realized that the customers
acted like employees by making the goods themselves, the online
companies started making money.
The net continues to break down the old relationships between
producers of goods and consumers of services. Now, producers consume and
In the network economy, producing and consuming fuse into
a single verb: prosuming.
"Prosumer" is a term coined by Alvin Toffler in
1970 in his still-prescient book Future Shock. (Toffler first
found his insights as afuturist while working for the telephone
networks.) Today prosumers are everywhere, from restaurants where
you assemble your own dinner, to medical self-care arenas, where you
serve as doctor and patient.
The future of prosumerism can be seen most clearly online,
where some of the very best stuff is produced by the people who consume
it. In a multiplayer game like Ultima Online, you get a world with a
view and some tools and then youre on your own to make it
exciting. You invent your own character, develop his or her clothing or
uniform, acquire unique powers, and build the surrounding history. All
the other thousands of characters you interact with have to be sculpted
by other prosumers. The adventures that unfurl are cocreated entirely by
the participants. Like a real small town, the joint
experiencewhich is all that is being soldis produced by
those who experience it.
These eager world makers could be viewed as nonpaid content
makers; in fact, they will pay you to let them make things. But the same
world could also be viewed as full of customers who have been given
tools with which they can complete a product to their own picky
specifications. They are rolling their own, just as they like. In the
new economy-speak, this is known as mass customization.
The premise of mass customization is simple. Technology
allows us to target the specifications of a product to a smaller and
smaller group of people. First we can make Barbie dolls in the millions.
Then with more flexible machinery and computer-generated target
marketing we can make ethnic Barbies, in the hundreds of thousands. Then
with improved market research and advanced communications we can make
subculture Barbies, biker and grunge Barbies in the thousands.
Eventually, with the right network technology, we can make the personal
Barbie, the Barbie of you. In fact there is a company in Littleton,
Colorado, that currently makes the "My Twinn" baby doll to
look like the dolls owner. The dolls eye and hair color and
hair style are matched to a photo of the child who will own it.
The most interesting aspect of prosuming and mass
customizationof this new relationship between the customer and the
firmis that because customers have a hand in the creation of the
product they are more likely to be satisfied with the final result. They
have taught the firm how to please them, and the firm now has a customer
with a much fuller relationship with them than before.
But creating a product for "a niche of one" is only
a small part of the transformation of the customer relationship.
(Detroit car makers learned long ago to create customized cars, but that
was all they learned.) Network technologies such as data mining, smart
cards, and recommendation engines are escalating the levels of
relationships available to customers.
The drive to relate to the consumer intimately, to the point
of encouraging prosuming, can be articulated as a series of progressive
1) to create what the customer wants
2) to remember what the customer wants
3) to anticipate what the customer wants
4) finally, to change what the customer wants
Each of the missions elevates the firms commitment to
the customer and raises the customers involvement with the
To create what the customer wants. Sometimes this will
mean simple customization: You want a vacation experience unlike anyone
elses. Sometimes this will mean mass customization: You want a
pair of jeans that fit your unusual leg shape at the same price as a
regular pair of jeans. Sometimes mass customization is not what you
want. The huge fashion industry makes its fortune on peoples
dependable desire for wearing what everyone else is wearing. Sometimes
what you want is semicustomized: You read the New York Times because
everyone else is reading it, but you dont read the sports section
or the obits. You want not the Daily Me, but the Daily You and Me, the
publication your 12 closest friends read.
A huge tide of information and trust must flow between users
and creators in order to create exactly what the customer wants. The
interface technology must be clear and simple for people to convey their
desires. The nightmarish logistics of delivery and production must be
managed with exactness. The most difficult aspect of this mission may
not be the order form but the manufacturing; anything that involves
atoms is much harder to customize than first thought. But any solutions
surely involve networked technologies.
To remember what a customer wants. A majority of the
things we do, we do repetitively. We engage in the same tasks every day,
or once a week, or every now and then. Things done iteratively have
different dynamics from things done once. Little events become
important. We bristle at having to remember our password again, or
having to recite how we like our coffee one more time, or having to
explain again what we dont like about bathing suits. Humans who
learn our quirks (and they must be learned) earn our favor. Firms who
learn our quirks will also earn our favor.
The technology of tracking and interpreting our whims
heightens the relationships between firm and consumer. The firm must
expend great effort to remember your preferences, but you also expend
effort in teaching them so they can remember. And the remembering must
be intelligent. You order the same espresso every day, except when
its cold out, and then you order a latte. The relationship tech
has to be robust enough to be taught these distinctions.
Don Peppers and Martha Rogers, authors of the amazingly
insightful Enterprise One to One, state: "A Learning
Relationship between a customer and an enterprise gets smarter and
smarter with every individual interaction, defining in ever more detail
the customers own individual needs and tastes. Every time a
customer orders her groceries by calling up last weeks list and
updating it, for instance, she is in effect teaching the
service more about the products she buys and the rate at which she
consumes them." In reward for the firms effort at being
taught, the firm and the customer develop a committed relationship.
Peppers and Rogers continue: "The shopping service will develop a
knowledge of this particular customer that is virtually impossible for a
competitive shopping service to duplicate, providing an impregnable lock
on the customers loyalty." At the same time, the customer has
invested so much in the relationship that the cost of switching to
another vendor gets steeper by the day. Peppers and Rogers: "When
the florist sends a note reminding you of your mothers birthday,
and offers to deliver flowers again this year to the same address and
charged against the same credit card you used with the florist last
year, what are the chances that you will pick up the phone and try to
find a cheaper florist?"
Since a relationship involves two members investing in it,
its value increases twice as fast as ones investment.
The cost of switching relationships is high. Leaving, you
surrender twice. You give up all that the other has put into the
relationship, and you give up your own investment. In other words, the
cost of loyalty is low. Thus we see the huge success of frequent flyer
and frequent buyer programs, made possible by the coinvestment that
airlines and supermarkets put into them. Affiliation cards are another
example of the relationship extension; the costs of tracking purchases
are so low compared to the value of belongingfor both
sidesthat it pays to invent other ways to spread the idea. And the
phone companies attempts at "friends of friends" calling
circles are likewise clever experiments in exploiting networked
Smarter relationship technology, or "R-tech" as
economist Albert Bressand calls it, will bind the connections between
customers and firms more tightly still. An emerging standard called P3P
offers a uniform way to store an individuals profile containing
name, address, and so forth as well as preferences, including
preferences of what they will reveal. If you shop a lot you will carry a
"passport profile" based on the P3P protocol (or one similar)
encased in your smart card or online in a browser. You exchange it with
the vendor during a commercial transaction. The passport technology will
help firms remember you as you teach them how to serve you and earn your
The portability of preferences is a big deal. As the net
creeps into yet more aspects of commerce, the ability to track
identities and desires across different systems will be key. The
Ritz-Carlton Hotel is justifiably proud of its ability to customize
rooms for you anywhere in its thirty-one-hotel chain, without having to
ask you. Some airlines can do the same. That still leaves a lot of room
for success in creating relationships in the network economy as a
To anticipate what a customer wants. Creating
tailored products for people is the first step of R-tech. The second is
recalling their preferences intelligently. The third step is
anticipating what theyll want even before they articulate it.
Thats a measure of any great relationship. You can boast you
really know someone when you can say, "I know shell love this
The most elemental form of anticipatory tech extrapolates
likes and dislikes from the customers past usage patterns. But the
most powerful forms of R-tech rely on the swarm of other customers and
the latent relationships between them to anticipate desires. A great
example of this social R-tech was developed by Firefly, a web-based
recommendation engine (recently sold to Microsoft). Heres how it
works in brief: I tell MyLaunch, Fireflys music vendor, my ten
favorite music albums. It takes my recommendations and compares them
with the top ten recommendations of 500,000 other Firefly members
interested in music. Firefly then figures out where in "taste
space" I belong. It places me near the few people who like the same
albums I do. Despite an overlap of taste with them there will be a few
albums my neighbors mentioned that I did not. Firefly will alert me to
those albums, and conversely will tell my taste neighbors about the
albums I mentioned that they had not. These are the albums I should try
because it anticipates I will like them.
Its remarkable how well this simple system works. I
eerily recommended great albums that I liked. There are many refinements
to increase its power. I can "teach" the system by grading the
results it gave me. Perhaps it recommended Pete Seeger because I named
Bob Dylan as a favorite. But say I happen to already know Seegers
work and cant stand him, so I tell it to forget Seeger (and thus
Seeger-likes). Its now smarter. I can further locate my space with
more precision by rating as many albums as I wish, indicating my love or
hate of them. (A strong negative rating is just as useful as a strong
positive rating.) Because it is the web, I also have the option of
listening to music selections to refresh my memory or evaluate
People who share small preferences for particular books or movies in a
single "taste space" can use thier collaborative sorting to
aid them in future purchases.
The real power of this system lies not in mere
recommendation, but in its ability to create relationships among its 3
million registered users. It allows members to link up with their
taste-neighbors. All the fans of ambient music, or early Seattle grunge,
are encouraged to strike up conversations in "venues," or
start mail lists, or simply introduce themselves. Out of this technology
is born yet another relationship: self-identity.
Most listeners dont have easily classifiable tastes.
Theyre fans of Nirvana, U2, The Beatles, Joni Mitchell, and Nine
Inch Nails. Theyll have neighbors in an obscure unnamed
spacethe Beatles/U2/NineInchNails space. Through Firefly, these
folks can identify their tastes by the microcommunity of like-minded
folks they create for themselves. What Firefly can do with music, it can
also do with books. And movies. And web pages. (Firefly recently spun
each of these domains out to separate partners.) They are rated in the
same way, with equally useful results. But now the combined media space
is tremendously potent. Weird subcultures can be detected long before
they have a name. Readers of Anne Rice vampire novels who like country
and western music and Woody Allen movies suddenly realize they are a
group! Self-recognition is the first step toward influence.
Online booksellers such as Amazon.com and Barnes and Noble
are using similar R-technology to sell more books, and to make customers
smarter shoppers. Amazon derives its collaborative recommendations from
customers who have a purchasing behavior similar to yours. Based on what
you have bought in the past, and what others have bought in the past,
Amazon advises: Dear reader, you should like these titles. And, they are
usually right. In fact, their recommendations are so handy that they are
Amazons prime marketing mechanism and their chief source of
revenue growth. According to company spokespersons,
"significant" numbers of users buy additional bookson
impulsebecause of the co-recommendations that pop up when you
inspect a book.
Evan Schwartz, author of Webonomics, goes so far as to
suggest that firms such as Amazon should be viewed as primarily selling
intangible relationships. "Amazon should not be compared to actual
stores selling books. Rather . . . the value that Amazon adds is in the
reviews, the recommendations, the advice, the information about new and
upcoming releases, the user interface, the community interest around
certain subjects. Yes, Amazon will arrange to deliver the book to your
door, but you as a customer are really paying them for the information
that led to your purchase." When you log on to Amazon you get a
relationship generator, one that increasingly knows you better.
The beauty of network logic is that the mechanics of this
software does not rely on artificial intelligence, or AI. Rather the
collaborative work is done by pooling the teaching that each person
would do alone into one distributed base. Its an example of dumb
power. Lots of people teaching a dumb program, but all connected
together, producing useful intelligence. The strength of the network is
built by the slim bits of information that each member is willing to
share. Sometimes thats all it takes.
The web is a hotbed of innovations in R-tech. If you had
success in a search and are willing for that information to be spread
collectively to others, this lateral relationship can improve the search
function for everyone. Sometimes called "collaborative
filtering" these kinds of social network functions will spread
widely within the web itself, as well as within companies and small work
As in other technological evolutions, relationship tech
will begin its innovation in the avant garde, then work back to the
R-tech first appears in the world of the web, but will
gradually infiltrate the world of canned goods and sports equipment, as
well as TV shows and vacation spots. Eventually it reaches the final
stage in the progression of customer relations:
To change what a customer wants. The
ongoing tango between customer and provider draws them together until
their identities disappear at times. This is especially true in frontier
arenas, where expertise is usually in short supply. At first there is no
authority on what customers want or what providers should
deliveras in these early days of the web and e-commerce. Expertise
has to be developed jointly, coevolved. Customers must be trained and
educated by the company to teach them what they need, and then the
company is trained and educated by the customers. We saw precisely this
equation in the pioneer days of online conferencing about a decade ago.
When email and chat began, no one knew the difference between great
email and okay email, between fabulous chat areas and average chat
areas. The best online companies learned all they knew from their first
customers. But the customers, too, had little expertise of what to
expect and so relied on the visions and vaporware suggested by the
companies. Customer and company educated each other on what was
Good products and services are cocreated: The desires of
customers grow out of what is possible, and what is possible is made
real by companies following new customer desires. Because creation in a
network is a cocreation, a prosumptive act, a multifaceted relationship
must exist between the cocreators.
Cocreation and prosumption require an information peerage.
Information must flow symmetrically to all nodes. In the industrial
society, the balance of information inevitably sided with corporations.
They had centralized knowledge while the customer had only their own
solo experience divorced from that of all but a few friends. The coming
network economy has changed that. Each new layer of complexity and
technology shifts the action toward the individual.
The intent of networked technology is to make the customer
smarter. This may require sharing previously proprietary knowledge with
the customer. It may also be as simple as sharing what the company knows
about the customer with the customer herself.
R-tech tries to rebalance the traditional asymmetrical flow
of information, so that the customer learns as fast as the firm (and so
the firm learns as fast as the customer). At first the idea of focusing
on "learning customers" instead of the "learning
company" seems misplaced. But it is part of the larger shift away
from a view of the firm as a standalone unit and toward a view of the
firm as an interacting node in a much larger networka diffuse node
made up of customers as well as employees.
Letting the customer learn with help from the firm is not the
only way to make the customer smarter. The other way is to reverse the
usual flow of information in the market. John Hagel, co-author of Net
Gain, says, "Instead of helping your firm capture as much
information about the customer as you can, you want the customer to
capture as much information about themselves as they can." And you
want customers to capture as much information about the firms they are
dealing with as well. There are several ways on the web to bias
information toward the customer. Among the most exciting innovations are
new vendors that send a bot around to comparison shop for you. If thirty
music retailers online offer the soundtrack to the movie Titanic
for sale, web sites such as Junglee or Jango will collect the offers
from each vendor, and rank them for you. But the vendors are calling the
shots; they craft the offer, keep the data of requests, and drive the
By reversing the direction of information flow one can create
a "reverse market." In a reverse market (already set by a few
web sites), the customer dictates the terms of sale. You say,
"Id like to buy a Titanic CD for $10, new." You
broadcast your offer into the web, and then the vendors come to you.
This works best at first for high-ticket items such as cars, insurance,
and mortgages. "Id like a $120,000 thirty-year mortgage for
my house in San Jose. I can pay $1,000 per month. Do I have any
takers?" You set the terms, keep the data, and drive the
transaction. Technology, of course, means that much of this negotiation
happens in the background via agents and so forth; you dont have
to do the haggling yourself. But the R-shift moves the capture of
information into the hands of customers from those of the vendors. It
makes the customer smarter.
And whoever has the smartest customers wins.
The third way to make the customer smarter is by connecting
customers into a collective intelligence.
When personal computers first entered the marketplace in the
mid 1970s, user groups sprung up everywhere to assist the perplexed.
Anyone could attend a monthly meeting and swap useful tips about how to
set up a printer, or get an upgrade program to work. It was all
informal, and free, and democratic; those who knew, told; those who
didnt know, asked questions and took notes. Each specific computer
platform spawned local user groups in major cities. There were user
groups for "orphan" equipment such as Amigas, and video game
consoles, and of course for Macs and DOS-based PCs. Some user groups
grew to have tens of thousands of members and some ran their own free
software emporiums and had budgets in the millions of dollars.
Firms that encourage customers to talk to each other, to form affinity
groups and hobby tribes, will breed smarter and more loyal customers
while creating smarter products and services.
User groups were seen by the outside world as evidence of the
lousy state of the computer industry. Manuals were horrible, interfaces
unfriendly. Critics complained that you didnt need to join a user
group to get your TV up and running, or to turn your dishwasher on. Yet
for many computer wannabees, the shared knowledge of a user group was
essential in starting the journey into computerdom, or later onto the
net and the web.
In reality, user groups were not a sign of failure but a sign
of intelligence. They were a means of making the consumer smarter. Some
computer companies caught on to this reality early and made regular
visits to the bigger user groups to answer questions and hear complaints
and pick up suggestions. The user group, although independent and
nonprofit, became part of the computer companies extended
Today there are still some 2,000 Mac and PC user groups that
offer regular meetings in the United States (and an equal number
internationally). The Berkeley Mac User Group still boasts 10,000
members, and weekly meetings. Yet most user group action has
shifted to the online space. Web sites with attendant conversation
areas, FAQ (Frequently Asked Questions) archives, mail lists, and public
bulletin boards all keep the distributed exchange of knowledge
A user group is a peerage of responsibility. Group members
take education into their own hands, and distribute the job of keeping
up among themselves. Its long been appreciated that the best and
most useful working knowledge about technical gear comes out of user
groups. User groups are now a regular feature for avocations such as
scuba diving, bicycling, saltwater aquariums, hot-rod cars, or any hobby
where technological change seems to outrun understanding.
The most fanatical of user groups can be thought of as
"hobby tribes," a phrase coined by science fiction writer
David Brin. Hobby tribes are very informed, very connected, very smart
customers. They band their enthusiasms together and become the experts.
In some smaller niches they become the market, too.
Expertise now resides in fanatical customers. The
worlds best experts on your product or service dont work for
your company. They are your customers, or a hobby tribe.
Companies need user groups almost as much as users need them.
User groups are better than advertising when customers are happy, and
worse than cancer when they are not. Used properly, aficionados can make
or break products.
The network economy has the potential to enable a
civilization of aficionados. As customers get smarter, the locus of
expertise shifts toward affiliates and home-brew groups, and away from
large corporations or the solo academic professional. If you really want
to know what works, or where to find it, ask a hobby tribe. And not just
in the realm of high-tech knowledge. All knowledge is pooling into
aficionados. Because of shared obsessions among horse lovers, there are
more horseshoers working today than a hundred years ago, in the age of
cowboys. There are more blacksmiths making swords and chain mail armor
this year than ever worked in the medieval past. A network of
aficionados is already here.
The net tends to dismantle authority and shift its allegiance
to peer groups. The cultural life in a network economy will not emanate
from academia, or the cubicle of corporations, or even primetime media.
Rather, it will reside in the small communities of interest known as
fans, and zines, and subcultures. In Future Shock Alvin
Toffler setsthe stage: "Like a bullet smashing into a pane of
glass, industrialism shatters societies, splitting them up into
thousands of specialized agencies . . . each subdivided into smaller and
still more specialized subunits. A host of subcults spring up; rodeo
riders, Black Muslims, motorcyclists, skinheads, and all the rest."
That initial shatter is now several thousands of subcultures. For every
obsession in the world, there is now a web site. What industrialization
began by shattering, the network economy completes by weaving together
and serving with great attention. The web of broken shards is now the
Information shifts toward the peerage of customers, so
does responsibility for success. The net demands wiser customers.
The advent of relationship technologies on the net creates a
larger role for the customer, and it puts more demands on the consumer,
too. None of this enlargement of relationships can happen unless there
are vast amounts of trust all around. "The new economy begins with
technology and ends with trust," says Alan Weber, founder of the
new economy business magazine Fast Company.
If you send all your workers home to telecommute, youll
need a whopping lot of trust between you and your workers for that
relocation to succeed. If I tell Firefly all the books I read, all the
movies I watch, and all the web sites I visit, I will require a high
degree of trust from them. If Compaq lets me delve into its expensively
compiled knowledge database of known bugs and problems with certain
computer parts, it has to trust me.
Trust is a peculiar quality. It cant be bought. It
cant be downloaded. It cant be instanta startling fact
in an instant culture. It can only accumulate very slowly, over multiple
iterations. But it can disappear in a blink. Alan Weber compares its
accretion to a conversation: "The most important work in the new
economy is creating conversations. Good conversations are about
identity. They reveal who we are to others. And for that reason, they
depend on bedrock human qualities: authenticity, character, integrity.
In the end, conversation comes down to trust."
A conversation is a pretty good model for understanding what
is going on in the network economy. Some conversations are short, abrupt
exchanges of minimal data; some are antagonistic, some are periodic,
some are continuous, some are long-distance, some are face to face. A
back-and-forth exchange starts between two people, and then spills over
to several people, and as the conversation becomes multipronged and
divergent, it gathers in more and more players. Eventually there are
conversations between firms and objects as well as people, as more of
the worlds inanimate artifacts become connected. Increased
animation increases the number or times of interaction, and the
frequency of conversation. The more interactions, the more important
learning becomes, the more essential relationships become, the more
trust becomes a factor. Trust becomes what Weber calls "a business
But for all the talk of the importance of trust, it only
comes at a price. It comes slow and it always comes awkwardly.
"Trust can be messy, painful, difficult to achieve, and easy to
violate," writes Weber. "Trust is tough because it is always
linked to vulnerability, conflict, and ambiguity. For managers steeped
in rationalism, hierarchies, rule-based decision making, and authority
based on titles, this triad of vulnerability, conflict, and ambiguity
threatens a loss of control."
The technologies of relationships will not ease this fear or
pain. They can strengthen and diversify relationships and trust, but not
make them automatic, easy, or instant. At the forefront in the chore to
cultivate trustas a business imperativestands the rugged
hurdle of privacy. No other issue summarizes the unique opportunities
and challenges of the network economy as much as privacy does.
Privacy concerns were once exclusively aimed at Big Brother
government, but net residents quickly realized that commercial
entitiesthe little brothers on the netwere more worrisome.
James Gleick, a technology correspondent for the New York Times
put it this way: "Whatever the Government may know about us, it
seems that the network itselfthat ever-growing complex of
connections and computerswill know more. And no matter how much we
bristle at the idea, we nevertheless seem to want services that the
network can provide only if it knows."
An entire book could be written about the fundamental
conversation between what we want to know about others and what we want
others and the net itself to know about us. But I will make only a
single point about privacy in space of an emerging new economy:
Privacy is a type of conversation. Firms should view
privacy not as some inconvenient obsession of customers that must be
snuck around but more as a way to cultivate a genuine relationship.
The standard rejoinder by firms to objections from customers
for more personal information is, "The more you tell us, the better
we can serve you." This is true, but not sufficient. An individual
cant comfortably divulge unless there is trust.
Take the trust many people feel in a small town. The
interesting thing about a small town is that the old lady who lived
across the street from you knew every move you made. She knew who came
to visit you and what time they left. From your routine she knew where
you went, and why you were late. Two things kept this knowledge from
being offensive: 1) When you were out, she kept an eye on your place,
and 2) you knew everything about her. You knew who came to visit her and
where she went (and while she was gone you kept an eye on her place).
More important, you knew that she knew. You were aware that she kept an
eye on you, and she knew that you watched her. There was a symmetry to
your joint knowledge. There was a type of understanding, of agreement.
She wasnt going to rifle through your mailbox, and neither would
you peek in hers, but if you had a party and someone passed out on the
porch, you could count on the neighborhood knowing about it the next
day. And vice versa. The watchers are watched.
One of chief chores in the network economy is to restore
the symmetry of knowledge.
For trust to bloom, customers need to know who knows about
them, and the full details of what they know. They have to have
knowledge about the knower equal to what the knower knows about them. I
would be a lot more comfortable with what the credit companies knew
about me if I knew with great accuracy what they knew about me, how they
know it, and who else they told. And Id be even more at ease if I
derived some compensation for the value they get for knowing about
Personally, Im happy for anyone to track all my
activities 24 hours a day, as long as I have a full account of where
that information goes and I get paid for it. If I know who the watchers
are, and they establish a relationship with me (in cash, discounts,
useful information, or superior service, or otherwise), then that
symmetry becomes an asset to me and to them.
We see the first inklings of this trust machinery in
protocols such as Truste. Truste was founded in 1995 as a nonprofit
consortium of web sites and privacy advocates to enhance privacy
relationships in the online marketspace. They have developed an
information standard also called Truste. The first stage is a system of
simple badges posted on the front pages of web sites. These seals alert
visitorsbefore they enterof the sites privacy
policies. The badges declare that either:
- We keep no records of anyones visit. Or,
- We keep records but only use them ourselves. We know who
you are so that when you return we can show you whats new, or
tailor content to your desires, or make purchase transactions easier and
- We keep records, which we use ourselves, but we also
share knowledge with like-minded firms that you may also like.
Those three broad approaches encompass most transactions; but
there are as many subvariations as there are sites. (To post the badges
or seal, sites must submit to an audit by Truste, which guarantees to
the public that a site does adhere to the policies they post.) But the
seals are only labels. The real work happens behind the scenes by means
of very sophisticated R-tech.
Here is a hypothetical scenario of a visit to a
Truste-approved commerce site a couple of years hence. I visit the Gap
clothing store online. They notify me that they are a level 2 site; they
remember who I am, my clothes size, and what I bought or even inspected
last time I visitedbut they dont sell that data. In exchange
for information about myself, they offer me a 10% discount. Fine with
me! Makes life easier. I visit the site of Raven Maps, the best
topographical maps in the world. They let me know that my visit with
them is on a level 3 basisthey trade my name and interests, but
nothing else, with other travel-related sites, which they conveniently
list. In exchange they will throw in one free map per purchase. Since
the friends of Raven Map look very intriguing, I say yes. I visit
CompUSA. They want to know everything about me, and they will sell
everything about me, level 3. In exchange, they will lease me a
multimedia computer with all the bells and whistles for free. Okay?
Ummm, maybe. Then I visit ABC, the streaming video TV place. They
declare that they keep no records whatsoever. Whatever shows I watch,
only I know. They keep aggregate knowledge, which they use to lure
advertisers, but not specifics. A lot of people are attracted to this
level 1 total nonsurvelliance, despite the heavy dose of commercials,
and keep coming back.
At the end of the month I get a privacy statement, similar in
format to a credit card statement. It lists all the deals and
relationships I have agreed to that month and what I can expect. It says
I agreed to give the Gap particular personal information, but that
information should go no further than them. I gave a pretty detailed
personal profile to Raven and the three companies they gave it to show
up on my statement. Those three have a one-time use of my data. Raven
owes me a map. In the end I gave CompUSA my entire profile. I am owed a
computer. The nine vendors they sold my info to also show up; they have
unlimited use of my profile and CompUSA web site activities. Ill
get junk mail from those nine for a whilebut my new computer will
be able to filter it all out! In addition, I made a deal with the New
York Times which lets them keep my reading activities, but nothing
else, for a free months subscription. Also, my statement shows
that American Airlines got my address from ABC, when they claimed level
1. Ill have to have my privacy bot contact them and sort that
Caller ID, unlisted phone numbers, unlisted email address,
individual-free aggregates, personally encrypted medical records,
passport profiles, temporary pseudonym badges, digital signatures,
biometric passwords, and so on. These are all the technologies
well be using to sort out the messy business of creating
relationships and trust in a network economy.
If only we knew precisely what relationships were. Industrial
productivity was easy to measure. One could ascertain a clear numerical
answer. Relationships, on the other hand, are indefinite, fuzzy,
imprecise, complex, innumerate, slippery, multifaceted. Much like the
As we create technologies of relationships we keep running
into the soft notions of reputation, privacy, loyalty, and trust. Unlike
bit or baud, theres no good definition of what these concepts mean
exactly, though we have some general ideas. Yet we are busy engineering
a network world to transmit and amplify reputations and loyalty and
trust. The hottest, hippest frontiers on the net today are the places
where these technologies are being developed.
The network economy is founded on technology, but can
only be built on relationships. It starts with chips and ends with
Ultimately the worth of a technology is judged by how well it
facilitates an increase in relational activity. VR pioneer Jaron Lanier
has proposed the Connection Test: Does a technology in question connect
people together? By his evaluation telephones are good technology, while
TV is not. Birth control pills are, while nuclear power is not.
By this measure, network technology is a great deal. It has
the potential to link together all kinds of sentient beings in every
imaginable way, and more. The imperative of the network economy is to
maximize the unique talents of individual beings by means of their
relationships with many others.
That means not being connected at times. Silence is often an
appropriate response in a conversation. Privacy is often advantageous in
a networked world. The dimensions of relationship extend into not
knowing as well as into the known. It is one of many mysteries in the
human condition that will be wired into the technologies of the network
Make customers as smart as you are. For every effort a
firm makes in educating itself about the customer, it should expend an
equal effort in educating the customer. Its a tough job being a
consumer these days. Any help will be rewarded by loyalty. If you
dont educate your customer, someone else willmost likely
someone not even a competitor. Almost any technology that is used to
market to customers, such as data mining, or one-to-one techniques, can
be flipped around to provide intelligence to the customer. No one is
eager for a core dump, but if you can remember my trouser size, or
suggest a movie that all my friends loved, or sort out my insurance
needs, then you are making me smarter. The rule is simple: Whoever has
the smartest customers wins.
Connect customers to customers. Nothing is as scary to
many corporations as the idea of sponsoring dens in which customers can
talk to one another. Especially if it is an effective place of
communication. Like the web. "You mean," they ask in wonder,
"we should pay a million dollars to develop a web site where
customers can swap rumors and make a lot of noise? Where complaints will
get passed around and the flames of discontent fanned?" Yes,
thats right. Often thats what will happen. "Why should
we pay our customers to harass us," they ask, "when they will
do that on their own?" Because there is no more powerful force in
the network economy than a league of connected customers. They will
teach you faster than you could learn any other way. They will be your
smartest customers, and, to repeat, whoever has the smartest customers
Just recently E-trade, the pioneering online stock broker,
took the bold step of setting up an online chat area for its customers.
Well see more smart companies do this. Whatever tools you develop
that will aid the creation of relationships between your customers will
strengthen the relationship of your customers to you. This effort can
also be thought of as Feeding the Web First.
All things being equal, choose technology that
connects. Technology tradeoffs are made daily. A device or method
cannot be the fastest, cheapest, more reliable, most universal, and
smallest all at once. To excel, a tech has to favor some dimensions over
others. Now add to that list, most connected. This aspect of technology
has increasing importance, at times overshadowing such standbys as speed
and price. If you are in doubt about what technology to purchase, get
the stuff that will connect the most widely, the most often, and in the
most ways. Avoid anything that resembles an island, no matter how well
endowed that island is.
Imagine your customers as employees. It is not a cheap
trick to get the customer to do what employees used to do. Its a
way to make a better world! I believe that everyone would make their own
automobile if it was easy and painless. Its not. But customers at
least want to be involved at some level in the creation of what they
useparticularly complex things they use often. They can
superficially be involved by visiting a factory and watching their car
being made. Or they can conveniently order a customized list of options.
Or, through network technology, they can be brought into the process at
various points. Perhaps they send the car through the line, much as one
follows a package through FedEx. Smart companies have finally figured
out that the most accurate way to get customer information, such as a
simple address, without error, is to have the customer type it
themselves right from the first. The trick will be finding where the
limits of involvement are. Customers are a lot harder to get rid of than
employees! Managing intimate customers requires more grace and skill
than managing staff. But these extended relationships are more powerful
The final destiny for the future of the company often seems
to be the "virtual corporation"the corporation as a
small nexus with essential functions outsourced to subcontractors. But
there is an alternative vision of an ultimate destinationthe
company that is only staffed by customers. No firm will ever reach that
extreme, but the trajectory that leads in that direction is the right
one, and any step taken to shift the balance toward relying on the
relationships with customers will prove to be an advantage.