In the wake of the global financial crisis, everyone from Capitol Hill to Wall Street agreed on one goal: restoring confidence in the nation's financial system. New regulations and business decisions to reduce operating leverage and align compensation programs with customers' long-term interests were all developed with the singular vision of restoring confidence. However, the antecedents to the crisis, deteriorating values and wanton greed, reflected a dearth of integrity, not confidence. In fact, the crisis of confidence didn't occur until after Lehman Brothers fell and credit markets froze.
At that time, in the fall of 2008, I led a team of writers at a financial services firm. Our role was principally brand communications, educating investors and informing them about the company's products and services. On Monday, September 15, 2008, our role changed dramatically. Markets around the world were down sharply that morning on news that Bank of America had acquired Merrill Lynch and Lehman Brothers had filed for the largest bankruptcy in U.S. history. The Dow Jones Industrial Average fell 504 points on that one day, signaling a panic that would define the weeks and months to come.
Customers didn't want to hear about our products; they wanted our help. Instead of demonstrating our expertise with the company's products and services, we needed to become experts about our customers. We needed to see them as more than an extension of our distribution model, but as thinking, breathing, emotional human beings who had just witnessed their home values, retirement portfolios, and college savings accounts take a nosedive. In short, we were no longer in the business of communicating brand; it was time to communicate trust.
Uncertainty takes a toll
I've worked in communications since the mid-1990s, starting in film and video in New York City and eventually progressing to corporate communications. In all those years, I've never seen the promise of trust so overtly displayed and sought after as it is today. There's a reason trust has become a palpable issue, and the reason is what matters. Ten months of stress and uncertainty, from September 2008 to the summer of 2009, took a toll on Americans. It eroded confidence in institutions and undermined trust in people who lead those institutions.
As a result, Americans today often put their trust into the hands of total strangers through a wide range of products and services broadly referred to as the Sharing Economy. AirBnB, for example, is a service that enables homeowners to rent out their house or apartment to someone they've never met. In 2012, AirBnB claims to have booked more stays than the entire Hilton hotel chain.
The membership-based Carefree Boat Club with locations along the east coast boasts a value proposition that would have been unheard of just ten years ago. "Boating without owning. . . It's about time." Imagine explaining that concept to a 1980s yuppie.
There is a fundamental shift in our social and economic values. The hubris of mass consumerism has given way to a society in which customers want to be seen as people, not consumers. To win customers, businesses need more than impressive products; they need a business model that can overcome deep levels of distrust and cynicism.
Restoring integrity
The role of trust also affects how companies interact with customers. When JCPenney decided to win back its disenfranchised customers, the company asked for forgiveness. During Hurricane Sandy, when car service Uber doubled prices in New York City to correspond with an increase in demand, customers voiced their outrage through Twitter and blogs until the company reversed its decision.
And Netflix, the most enduring case study in this category, says it doesn't plan to make customers unhappy again. CEO Reed Hastings describes the company's recovery as ". . .a partially healed bone. It's still quite fragile. Were we to make a similar mistake, we'd be right back in the penalty box."
Like many CEOs before him, Hastings had let success go to his head and believed that if his product were superior, customers would follow. He didn't realize how far Americans' values had shifted. To survive, Netflix is learning to value people, not just products.
These are valuable lessons because the process of restoring trust is decidedly different from restoring confidence. Confidence is actually a subset of trust. It refers to a person's competency or ability to perform a task. The other dimension of trust is morally-based; it means a person won't deceive us. When we say a person is trustworthy, we're usually referring to this dimension of trust and expressing our belief in that person's honesty and integrity.
Confidence, a way of expressing competence, lends itself more readily to business discussions because it is measurable. Confidence can be objectively assessed and quantified.
Restoring integrity, however, involves changing culture, which is far more difficult than adjusting compensation structures. Once a winning-at-all-costs mindset becomes instilled, even structural changes can't wipe it away. Many businesses, and the financial sector in particular, have yet to adapt to customers' changing values. Until that happens, they shouldn't be surprised by the success of emerging competitors.
Just a month after the market hit rock bottom during the crisis, in April 2009, Kickstarter was born. Since that time, Kickstarter has helped people fund more than 100,000 projects to the tune of $642 million dollars.