The Speed of Trust

There is an old business axiom that goes something like this: “Quality. Speed. Cost. Pick 2.”  The conventional wisdom has been that if you want something fast and good quality, you will pay a premium.  If you want something cheap and fast, you will sacrifice quality.  And if you want something high quality at a good price, you will have to wait.  Most of the time, this is probably true.

Stephen M. R. Covey authored a book that touches on this topic, and attempts to reveal a loophole in this universally accepted logic.  The book, “The Speed of Trust”, is really a reflection of the way things used to be.  There was a day that business got done on a handshake, and you could take a man’s word to the bank.  Somewhere along the way, that reality has succumbed to the new reality of dotting every “I” and crossing every “t” in a complicated world of red tape and multiple tiers of authority.     

Of course, Mr. Covey gives us no magic formula for returning to the good old days at a macro level, but he does offer insight into creating one-off business relationships that break the current mold.  The key, he writes, is creating and maintaining unusually high trust.  

Covey states that, at a minimum, trust is built on two things: 1) Clear and transparent communication, and 2) Accountability for results.  The first should be a commitment from the first handshake in the first meeting.  The second: a demonstrated and proven philosophy of your business.  Obviously, there are many more aspects of building trust embedded in the 322 pages of the book.

For all who aspire to transform your business relationships, your companies, or your industry, “The Speed of Trust” is worth the read.  If nothing else, it is a reminder of what once was, and gives us a little hope that those who embrace the principles inside are on the right track.

Lessons from the Auto Industry

It may not be intuitive how something as nebulous as “transparency” can be the cornerstone of a company.   

Consider the transformation of the auto industry.  Once, dealerships employed skilled, highly compensated sales professionals adept at negotiating the best margins on each car.  Buyers had little information to help them understand the true value of their purchase, other than what their neighbor paid or an outdated “Blue Book”.  Though many dealerships haven’t strayed from this model, others have taken a different course over the past 10 years.  Some have chosen to utilize the accessibility of information to buyers, and the trend of buyers becoming educated before they walk in the door as an advantage.  They have basically said, “OK, no more games… we’ll open up our books, show you the invoice, and win your business through a building of trust.”  Replacing high priced sales professionals are younger associates that respond to emails and internet inquiries.  With that comes lower overhead, and lower requirements on margin to make the same after tax profit.

The more significant thing that happens is a transformation of the industry.  Those that refuse to adopt a transparent model look like they are trying to hide something.  Trust is diminished quickly, and buyers flock to where they can see clearly the value of the merchandise.  Soon, the industry as a whole is held accountable.  Margins are squeezed.  Companies that were inefficient start to struggle.  The well run companies pick up market share, because they can make money with the transparent, low overhead model.

This transformation is about to happen in the energy efficiency industry.  Gone are the days when the promise of energy savings was enough to mask the true value of a conservation measure.  If an efficient light bulb costs $1, a buyer won’t pay $2 just because it will save energy.  They used to, but they are smarter and more sophisticated now.  Companies that continue to sell rolled up solutions and refuse to clearly demonstrate the economic value of each component will be faced with a new type of competition.  Like the auto industry, some will step out and say, “Ok, no more games…we’ll open our books, show you the costs, and win your business on trust.”  And that will transform the entire industry for the better.  It’s about time.