Living with Translucency. Preparing for Transparency.

Tim Kitchin and James Thellusson
Glasshouse Partnership
*protected email*

It is hard to know which will have greater long-term impact on UK political life, the multi-trillion dollar opacities of the global financial markets or the expense claims of UK members of parliament (MPs).

Spring 2009 saw the detailed claims of MPs exposed by the national newspaper The Daily Telegraph. Under the scrutiny of the public, most found themselves with, at least, cause for embarrassment. Many found the scrutiny career terminal . To make things worse, their manipulation had occurred within the bounds of the MPs’ own rulebook and was sanctioned by a self-appointed committee. The requirement for expenses to be “wholly, necessarily and exclusively” in pursuit of their office was in practice interpreted to include food, mirrors, antiques, TVs and even garden ornaments. Once permission was granted to claim for such items, the MPs’ expenses shifted from being seen as ‘allowances’ that could be reclaimed, to an ‘entitlement’ that must be claimed. Those MPs who disclosed early and fully emerged with less personal reputation-loss, but institutionally the damage to status of parliament was already done.

While the MPs’ ‘corruption’ may have been of a peculiarly British form – closer to a breach of golf club etiquette than a serious crime wave – its consequences could yet prove dramatic. These concerns over governance stretch to other publicly-funded institutions including the BBC and seem certain, eventually to creep to the businesses that serve these public institutions – including PR firms.

Because of this brief moment of transparency – the leaking of documents and the publication by investigative media – public trust in the political class was shaken, and a wide debate on the quality and effectiveness of all British constitutional processes has ensued. The long-term consequences are unclear.

But the MPs are not alone in their sudden exposure, of course. This same loss of accountability – through disconnected stakeholders, weak regulation, abuse of executive power, self-perpetuating elites and a failure to uphold the spirit rather than the letter of the law – can also be found at the heart of the collapse of the financial system, and indeed, the traumas of the global automotive system. Shareholder power and customer power have proved to be ineffective levers of operational governance. Without transparency, there can be no accountability.

But what is actually to be done? As Karl Popper put it, in his 1945 critique of utopian philosophies, the vital question is now not “who should rule?” but “how do we minimise misrule?”. In answer to his question, the reform of our social systems cannot be left to the lawyers, accountants and regulators alone. Markets must be reformed by marketers. Our own profession must be in the vanguard of delivering this heightened accountability. And transparency could yet prove to be our most potent weapon.

Product Marketing: The Opacity System
At first sight it may seem preposterous to envision marketers as transparency zealots. From its earliest foundations in FMCG, marketing has looked to avoid the rigours of transparency. The process of product marketing – turning resources into products and then persuading customers to buy them – relies on the ability to conceal knowledge, rather than reveal it.

Marketing, after all, is in the business of selling dreams, lifting and separating the brand promise from the underlying reality in order to create a brand premium. Peripheral information about product sources, process variation, ingredient quality, health and safety standards, labour practices, or environmental impacts is simply a distraction from helping consumers to engage with the big ideas of branding. All of these elements, which add no marketing ‘value’ to the consumer’s experience, must be suppressed or diverted from public attention, so that focus remains on the sunlit uplands of the product’s brand promise.

This opacity-based approach was a necessary simplification in the early years of marketing. Customers too were opaque – there was no systematic means of gathering market intelligence or responding to customer input. Monologue, rather than dialogue was the norm. Products were opaque – choice was conditioned by limited material availability and mechanistic production techniques. ‘Whatever colour you like as long as its what we have in stock’ was the ethos of the time. And organisations themselves were opaque, any disclosure of social impact was discretionary and motivated by the enlightened but paternalistic philanthropy of industrialists. Finally, markets themselves were opaque. Consumers were trapped by limited distribution channels, poor transportation and minimal market information. Furthermore the opacity of markets allowed price disparities to be maintained unchallenged across different purchase environments.

Under the opacity system, branding was effectively the art of making money by concealing knowledge from customers. These opacity premiums were then multiplied by power of mass communication. Advertising campaigns for fizzy orange, “You know when you’ve been Tango’d”, for lager, “I bet he drinks Carling black label”, for boxed chocolates, “All because the lady loves Milk Tray” and beauty products, “L’Oreal, because you’re worth it” all constructed elaborate emotional promises in consumers’ minds, in a drive for differentiation. The aim was to drive emotional loyalty, shoring up brand premiums, and building trust required for market dominance and laying the foundations for future brand extensions. Costs could stay permanently low in the opacity systems as changes in supply-chain practices could be readily obscured. Suppliers could be outnegotiated or simply ditched.

The opacity system was not without its weaknesses, of course. Fundamentally, this knowledge-destroying approach to marketing is anti-customer. It relies upon, indeed cultivates, customers’ ignorance of brand inputs, outcomes and choices. The ‘loyalty’ it generates is often only wallet-deep and masks customers’ hidden resentments of pseudo-monopolistic behaviour. Financial services in particular remained heavily reliant upon opacity, as customers were forcibly deterred from switching products, channels and brands. In a highly regulated sector it is still possible to sustain this behaviour, but in an ultra-competitive market like FMCG, the emergence of retailers’ own label offering cut like a scythe through manufacturers’ grocery brand portfolios. The emotional value connoted by product packaging and advertising proved to be highly vulnerable. If brand value is not grounded in testable distinctive claims it will always vulnerable to copycats.

Secondly the opacity system is dangerous for brand owners. Pinning a brand to a single feature, benefit or slogan is fundamentally risky, removing room for manoeuvre. Atari TV games consoles, Nimble white sliced bread, Spangles boiled sweets, Banjo chocolate wafer bars to name just a few. Brands perish when the idea behind them is too narrow to evolve.

Finally, the opacity system can blind an organisation to alternative value propositions. British Telecom’s Cellnet mobile network brand was completely outmanoeuvred by Hutchinson’s entry with the UK with ‘Orange’ and a more translucent, service-based offer. So much so, Cellnet was eventually spun off and rebranded as O2. At a more structural level, the major branded manufacturers failed to foresee the growth of retailers’ own label products and their ability to develop premium as well as economy ranges and continue to suffer from squeezed negotiating power and curtailed consumer access.

Corporate Marketing: The Translucency system

The greatest threat to opacity, of course, is translucency. Give customers, or citizens, or employees, a glimpse of the truth and they are reluctant to remain in the dark.
The translucency system began in earnest in the 1980s and gathered strength and momentum through the nineties and into the 21st century. Rather than looking to conceal information from nosy customers, translucent branding looks to reveal information – albeit selectively – to create much richer forms of brand differentiation

The marketing context for translucency is also different. In the 21st century, customers themselves are translucent. They are no longer unknown ‘segments’ but are extensively datamined and targeted through customer relationship management (CRM). Genuinely personalised interaction is still a pipe-dream but, relevance is dramatically improved. Likewise products have been transformed from a sealed black boxes into a rich, multiply-labelled information source, complete with nutritional information, allergy-warnings and even government health messages. Instead of ‘white sliced’ bread, we now buy ‘wholegrain, batch-baked, gluten-free, low fat, in-store burger buns, made with British grain’. And this information is not spurious compliance or marketing jargon. AccountAbility’s 2006 report “What Assures Consumers”, revealed that packaging was the number 1 channel through which citizens seek corporate information. (fig 1). The range of promises, positionings and implications evoked by such products is incomparable with the brand narcissism (Nicholas Ind et al 2003) of the opacity system.

Most notably, perhaps, organisations themselves have become translucent. The growing expectation of corporations as civil corporations (Zadek 2001) has ushered forward an era of environmental, social and governance reporting and broad-based corporate responsibility programmes designed to demonstrate social relevance and commitment.

Finally, markets themselves have become translucent. The fixing of prices by suppliers through retail price agreements has been widely challenged and widely, though not universally, overturned. Simultaneously, infomediaries like pricerunner.com, gocompare.com and thousands of others now offer pricing and need-matching services which bring information to the point of purchase.

These are stunning developments. This new translucent context has ushered forward a new generation of brand leaders. Brands like Green & Blacks (organic chocolate) and Body Shop (ethical beauty products) or Patagonia (clothing) and Starbucks (coffee) are the poster-children for the translucent business generation. They are the master storytellers, competing on passion and authenticity. For these pioneers, embracing translucency is a way to create new value from the abstractions of corporate purpose, it puts buried organisational assets like sourcing policy or labour practice or recycling front of house and makes them profitable. Translucency also enables brands to enter multiple markets where they appear to have no expertise. Virgin (from airlines to bridalware), and more recently innocent (from smoothies to pre-prepared meals) have taken their brands across multiple segments by fusing their corporate marketing and product marketing. My embodying a corporate ethos at the heart of the product they have gained rapid legitimacy and high market share, even in markets that are already saturated.

So successful have these efforts been that opacity-system experts are rapidly learning these integration and storytelling lessons and running successfully to catch up. Nestle’s Health Nutrition and Wellness programme, and the supply-chain behaviours that its commitment implies, are just one of many attempts to develop a narrative of translucency across its entire brand portfolio. Its commitment to wellness most recently extended to asking employees to ensure they move around to get exercise during internal meetings.

The great advantage of translucency is that it offers much more defensible value than opacity. Supply-chain practices, environmental achievements, leadership and corporate culture – the backstory of products – is much harder to replicate than product recipes and ad campaigns. And the more these competence-based assets are moved ‘front of brand’, the more value they can generate. With translucent brands there is simply more to believe in.

The final advantage of translucency is the opportunity it presents for stakeholder engagement. Whereas opacity system brands can manufacture emotional engagement through the rituals of advertising and repeat contact, translucency can breed something deeper – a commitment to a cause which lies outside the product itself. The brand thus becomes both more important – as a trusted validator of personal values – but also less important, as it doesn’t deliver value itself, but ‘merely’ signals a pathway to deeper self-actualisation. Translucent brands grow through alliances with other brands and practices. In the translucency system, the more value a brand creates the less attention it needs to command. Paradoxically, translucent brands grow through ‘brand modesty’ not ‘brand narcissism’.

Translucency, however, is not a panacea for marketers. It remains fraught with challenges.
Firstly, just as opacity brands can fall victim to producing ads rather than innovating value, translucency brands can get carried away with their storytelling at the expense of purpose and impact. Too much branding; too little translucency. Starbucks was widely deemed to have fall into this trap in the early 2000s and still faces a recovery challenge to deliver its promised experience.

Secondly, because translucent brands have many of the characteristics of a corporation, they can run out of ideas, just like a corporation. Many translucent brands have started with a charismatic leader, but the departure of that leader can cause a collapse of credibility. Ben & Jerry’s, while financially successful and now under careful corporate ownership, has a limited mandate for purposeful innovation without hands-on founder-presence. Its story may entering the final chapters even as the profit rolls in.

Thirdly, the risks of translucency are far greater. By ‘betting the bank’ on a single organisational purpose, many translucent organisations actually find it harder to reposition and reengineer to changing market conditions. In many organisations, strong culture stands in for formal process and the result can be a spaghetti-like organisation in which the infrastructure for future transformation is left to rot.

The translucency system builds powerful, resilient and socially meaningful brands which create value by ‘telling truer stories’. However, just as opaque brands can be outmanoeuvred by translucent brands, so today’s translucent megabrands and their opaque wannabe competitors will both be destroyed by those brands who understand truly understand the emerging transparency system and its implications for marketers.

Social Marketing: The Emerging Transparency System

As we write, in 2009, there is now growing evidence that the translucency system is itself giving way, albeit slowly and sporadically. The opacity system supported the industrial economy by branding products; the translucency system supported the service economy by branding experiences. Now, heading into the second decade of the 21st century, the network economy is ushering forth its own system – the transparency system – which is the only mechanism to successfully brand conversations.

Just like its forbears, the transparency system is multi-layered. Increasingly transparent people are seeking out transparent, information-based products. These transparent products in turn must be supplied by transparent companies, and these companies will trade in ever more transparent markets.

Transparency manifests itself in individuals as a form of life-disaggregation. Starting with the media tools like blogging and microblogging, individuals have now acquired the capacity to broadcast their information, ideas and passions into a near-universal media environment embracing up to 2 billion of their fellow humans and interacting with them directly. What began as citizen journalism and diary-keeping to assert individual identity, has now been augmented by social navigation tools like digg and connectivity aids like Facebook, Myspace and Twitter. Collectively, these social media have now become a rich communications infrastructure within which citizen-consumers can establish novel social identities through hundreds of overlapping interest networks. These social networks in turn become a means of navigating knowledge. In a profound sense we, as networked individuals, have become the ultimate medium (Cayley, 2009).

In the transparency system the goal of marketing is not to generate trust, which can be shattered in an instant. Instead it is to create and share trustworthiness. As transparent consumers we seek out products with ever more specificity to our needs and values. Transparent products are always on display. They must always be on their best behaviour. Just as translucency created competition around the ‘backstory’ of products, so transparency will eventually create competition around ‘frontstory’ – the social impact of a purchase, service or experience. In a truly transparent world the process-based promises of a brand like fair trade will be superseded by commitments to specific sustainable development outcomes. And these outcomes will be measured, and monitored, as an intrinsic part of the brand experience. Opacity disclosed what a product is. Translucency disclosed what a product does. Transparency discloses what it actually means.

The greatest shift within the transparency system, and by far the hardest to quantify, is the emergence of transparent organisations. Four factors are driving organisational transparency – external scrutiny, process-centric management, globalisation and a pervasive, broad-based sustainability agenda. Combined together, these factors have driven a revolution in organisational reporting through GRI, Global Compact and their equivalents. They have also triggered the emergence of ethically-led process brands like Fair Trade (Lamb 2008). They have also driven mechanisms to internalise the externalities of corporate behaviour – carbon emissions, child labour, resource depletion and environmental contamination. Often the solution to accountability on these issues comes through the sharing of risk and responsibilities.

In the UK, for example, the carbon footprinting of products and processes and disclosure of these figures through labelling continues to gather pace, despite controversy around issues of comparability and actionability for end-users.

This first wave of (explanatory) transparency was been driven outside-in, from a desire to hold organisations to account for the unintended consequences of pursuing profit. It assumes, implicitly, that organisations are ‘uncivil’. However, increasingly organisations and industries are working on transparency from the inside-out, recognising not just social responsibility but an intrinsic social purpose. This is a big culture shift, from protecting license to operate, to cultivating what we have termed ‘license to innovate’. The allegation frequently levelled at CSR programmes is that they fail to embed behaviour change. This is hardly surprising. Retaining license to operate does not require change. Cultivating license to innovate, by contrast, will always require change.

Once the civility, or social purpose, of a corporation is acknowledged, its goal is transformed. The objective becomes to externalise its ‘internalities’. From a strategic perspective, this means defining organisational purpose and strategy from the perspective of stakeholder needs and social outcomes. Operationally, it means taking a cold rational look at competences and processes and identifying areas of inefficiency, waste and conflict. It then requires corporate marketers to step in to build broad social co-alitions to address these shortfalls in social impact. Stakeholder engagement, in this paradigm, becomes less about apology and appeasement and increasingly about co-innovation with stakeholders.

The final component of the emerging transparency system is transparent markets. Even within the translucency system, we have already seen the widespread emergence of infomediaries, addressing information asymmetries between buyer and sellers. The transparency system will take us beyond disclosure of prices to share details of the inputs which generate these prices – and even the profit margins being made.

Often this transparency will create entirely new forms of value. It’s already happening. Microfinance-intermediary Kiva has embraced transparency in reporting loan repayments has created an opportunity for person to person micro-finance. The lending marketplace, Zopa has used transparency in letting individuals set their lending and borrowing rates , and by apportioning its lending in small (approximately $15) chunks to spread risk openly and painlessly among its customers. Finally SeatGuru is using transparency to disclose seat numbers on individual aircraft and has effectively created a market for specific airline seats on specific aircraft.

Most radically, though, transparency enables us to share the social information which sits around these economic transactions. Reselling second-hand goods, for example, is only made possible though the transparency of eBay’s participant-reputation system. And eBay is just one example of a far deeper and more pervasive change. In the opacity system we navigated decisions by economic information. In the translucency system we navigate by institutional information. But as we look to navigate markets in the transparency system we will increasingly rely on social information. Our demands for assurance will no longer be met by the promotion of brand promises or corporate special pleading. Within a social medium we will necessarily look for social assurance. It’s already happening. On Amazon.com, we buy what ‘people like me’ bought. At the travel web-site Tripadviser, we choose holidays based on reviews written by ‘families like us’. In these marketplaces, ‘reputation’ ceases to be an abstraction, managed by getting brand mentions and media retractions in broadcast media. Instead it becomes intrinsic to each transaction – specific to the product, and the context within which we need to apply it. Reputation gets atomic.

In a fully-fledged transparency system, any artefact or piece of information can be shared, and any individual can be located and contacted. It is this dual nature that makes transparency system so powerful. In the transparency system, whatever can be known must be made known, and whoever must be known can be made known. Transparency system will come into being from the collision and combination of two fundamental forces – the marketisation of everything and the socialisation of everyone. The resultant ‘social market’ will redefine the role of branding.

In the transparency system, branding is not about information concealment or disclosure, but about brokerage – the dissemination of information. In a social market, branding is the art of making money by improving decision-flow for customers. The brands that succeed within this system are those that are best able to help consumers to achieve their social goals. In the opacity system, brands were narcissistic; in the translucency system they are increasingly humble; in the transparency system they become anonymous. In the transparency system, successful brands are not those who generate most brand mentions, nor even those that achieve the greatest endorsement, but those which generate the greatest social capital across the transparency system establishing norms, networks and reciprocities among their stakeholders which reflect the brand’s social purpose. On Nike’s Nikeplus web-site (www.nikeplus.com) visitors can catch a glimpse of what transparency-system branding may look like in practice. While Nike’s community-building initiative is just one small part of their global marketing arsenal, it is probably the most significant indicator of how global brands will evolve. Ultimately, in the transparency system, the Nike brand will simply become the tick for healthy behaviour.

Social Markets need Social Communication

Today, in 2009, the world’s leading brands, even Nike, even IBM, even Nestle are still working to an assumption of translucency. Transparency is here, of course, but it is unevenly distributed. Those who can successfully envision its future impact, and act accordingly, will shape the rules of the emerging social market. And they will do so by embracing social communication.

The imperatives of social communication apply just as much to governments as they do to NGOs and corporations. Transparency is levelling the playing field for the invention of social purpose and the delivery of social impact. Our historic tri-partite governance model (Business v Civil Society v Government) is gradually collapsing into a singularity (Business = Civil Society = Government). In the face of this ever-increasing homogeneity, the traditional ‘advocacy and additionality’ of NGOs is under threat. In the UK, at national level, civil society agents like McMillan (cancer care), MIND (mental health) and Shelter (homelessness) are increasingly being leant on to act as the expert delivery arm of the state. At the international level bottom-billion charities like Oxfam, Christian Aid and World Vision are becoming an indispensible operational arm of the UN’s development agenda. Old assumptions of NGOs and media ‘speaking truth to power’ no longer hold. Power and Truth are merging.

One major consequence of this politicisation of civil society is a backflow of reliance and credibility to Multi National Corporations (MNCs). As the supposed ‘bad boys’ of corporate life (Oil, Chemicals, Mining, Tobacco) all begin to embrace a notion of social purpose beyond shareholder value, and as their critics’ voices become more muted, or simply less credible, so these industries are increasingly empowered to shape the social agenda – and to build their license to innovate within functional, ethical markets.

It is this social communications agenda that committed corporate responsibility advocates are pursuing. Far from walking away from their relationship to society, leaders like IBM, British Telecom and Unilever are embracing transparency and putting the ‘social’ back into their CSR.

Today, smart social communications practitioners reject insincere stakeholder dialogues, tokenistic social partnerships and ethical window dressing. Instead, they are investing in open door conversation, authentic collaboration and bottom-up change – with customers at the centre. By doing so, they are building a more creative form of capitalism.

Open door conversation

Embracing social communication does not mean stripping your organisation naked in public. Instead, it means using a smarter mix of conversation techniques – some private, some public and many a blend of both – to establish a common agenda, or at least a mutual understanding with critical stakeholders.

The most exciting conversations today are those that allow stakeholders direct influence on the organisation. Significantly, the CSR standards body, AccountAbility where one of us is an adviser, chose to update its assurance standard (AA 1000) through a publicly editable wiki attracting more than 5000 visitors. Software giant SAP, meanwhile, is using social media to allow stakeholders to directly influence their CSR reporting criteria.

The old PR model of pushing messages at audiences, is waning. Open door conversations are the future. More interaction is needed, injecting insights from the marketplace directly into veins of the organisation.

Authentic collaboration

The rules of collaboration are changing too. Gone are the days when investing in a bit of philanthropy was an acceptable sop to stakeholders. Smart social partnerships now aim to do more than just paper over existing reputation risks or appease disgruntled communities. Partnerships are changing the nature of the conversations that a brand can hold with society at large: DIY chain B&Q and the Forestry Stewardship Council. Banana trader, Chiquita and the Rainforest Alliance, HSBC and WWF, IBM and the International Finance Corporation are all examples we respect, in different ways.

In today’s more transparent world, collaborations need to do even more than just change the direction of conversation. They must create new value for society by making better use of all their organisational competences.

Bottom-up change

Traditional communications thinking places enormous responsibility on a corporation’s leader to set a vision and drive the agenda forward. Many organisations, notably James Murdoch’s satellite TV company BSkyB, have come to embrace social issues in this way. But however good the leader’s intentions, transparency will eventually expose the gap between the CEO’s vision and the real impacts of the organisation. The CEO’s buy-in is necessary, but is far from sufficient to drive transparency-ready change.

Instead of relying on the CEO, social communications works outside-in and bottom-up, helping the organisation to engage with the issues that will really drive change at grassroots level – where it actually touches the world. These companies recognise that in a social market, it will not be shareholders who hold companies to account but customers. In fact, as AccountAbility’s “What Assures Consumers” report shows, this situation already exists – at least in the minds of consumers. (fig 2)

Social Communications and MPs expenses

To conclude where we started, in light of the light being shone on the MPs expenses, what can marketers teach them? How can MPs build democracy as an information market? How can they offer citizens access to participatory accountability? In other words, what lessons does social communication hold for these beleaguered public servants?

Their start-point must be to embrace bottom-up, or outside-in change. To start with, the voice of the citizen must be strengthened through an enhanced role for parliament to counterbalance an ever more powerful executive. In addition, more power should be devolved back to the people to enable a more participative democracy. In terms of expenses, this may well mean embracing local scrutiny and allowing sanctions to be applied those whom MPs claim to represent.

Secondly, there is a need for open-door conversations around policy; action-focused not process-focused consultation. The ability for affected stakeholders to interact with and even construct legislation is no longer a pipedream. In the transparency system, it could and should become the norm.

Finally, authentic collaboration. Government already partners closely and extensively with the corporate and third sectors in execution, however the governance and management of these collaborations all too frequently results in failure. The emergence of a Social Market argues for politically agnostic collaborations, formed from a thorough assessment of competences, informed by a common view of social outcomes, and governed by much more dynamic and participative forms of accountability. Citizens should increasing help to create the services they themselves need.

By rigorously applying these social communications principles, government will creates more windows onto the outside world, improving both social and economic agility. By ensuring stakeholders can see in, they will build both trust and commitment.

Our final suggestion, for government, NGOs and corporates alike, is simple:
“If you’re living inside a glasshouse, try to keep the windows clean.”

References:

Cayley, Michael http://www.socialvalueadd.com
Ind, Nicholas et al. (2003) Beyond Branding, Kogan Page
Lamb, Harriet (2008) Fighting the banana wars – Ebury Publishing
Popper, Karl (2002) The Open Society and its Enemies, Routledge – first published 1945.
“What Assures Consumers’ (20060 Accountability (Forstater et al.)
Zadek, Simon (2001 reprinted 2008) The Civil Corporation, Earthscan

Tim KitchinLiving with Translucency. Preparing for Transparency.

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