Date Published - Last Updated 7 Years, 213 Days, 3 Hours, 44 Minutes ago
As consumers have become more technically aware, they’ve become more willing to trust each other. This is having an impact on established providers of expertise and trust—and it’s changing entire industries. It’s vital that corporate IT departments understand this trend and what it means to them.
The CourseTable Debacle
In January 2014, Yale University, that august educational establishment, inadvertently created a big media story.
It began when two of the university’s undergraduate students found a clever way to exploit an unmet demand from the university’s student body. Yale’s students are encouraged to take a diverse range of academic courses. However, they had no means of accessing a central repository of course feedback data. The scores existed, but they’d never been presented in a familiar, comprehensive manner. Harry Xu and Peter Xu’s idea was to fold these scores into a course-planning tool. Their offering, CourseTable, quickly lured thousands of students away from Yale’s official service.
The university administration’s reaction was clumsy and aggressive: they configured their firewalls to block access to the tool. The warning message that replaced it stated that this was to "guard against malicious activity on the Yale networks."
This action triggered a wave of protest from students (online, naturally), and the story spread across mainstream news networks. The university was forced to back down. "Technology has moved faster than the faculty could foresee," explained Mary Miller, dean of students. "Questions of who owns data are evolving before our very eyes."
Of course, it wasn’t really unforeseeable. The student body in question is predominantly gathered from a generation that has grown up with a wholly new level of access to information and communication. Old trust systems and thought providers are alien to them. They have likely never opened a telephone book. Their parents’ box of consumer review magazines is a curiosity. Even the high-tech tools of a decade ago are alien to students today. In 2013, Dr. Cedrick May, an American literature professor at the University of Texas, told The New York Times that some of his students "didn’t even seem to know they had a college email account."
This matters to universities, but it also matters to businesses: Today’s students are the consumers, employees, and—ultimately—directors of the future. But these trends aren’t unique to their generation, merely concentrated within it. Across all age groups and multiple demographics, technology is driving a fundamental change in attitudes and experiences. Internet entrepreneur Christian Rudder, in the September 2014 issue of Fast Company, described the impact of technologies like YouTube on personal enablement: "You can say, ‘I wonder how the finger-picking pattern goes in "Don’t Think Twice, It’s Alright,"’ and then go and find somebody who will sit there and teach you how to do it exactly."
Technology enables everyone to have better information and to share their own views and knowledge. This is creating some huge, industry-disrupting changes, and they will transform service management.
The Huge Impact of Customer Feedback
The information that the CourseTable founders brought to their student peers was aggregated personal feedback. Data, harnessed and distributed by Internet technologies, is having a seismic effect on traditional industries. The reason for this is simple: Customers are learning how to use it and how to trust it. In doing so, they’re turning away from their previous sources of trust—typically monolithic, self-appointed experts and regulators.
The growth in the trust and effect of this type of information was studied in detail in 2011 by Michael Luca, of Harvard Business School, in a study of the impact of Yelp.com ratings on restaurants in Washington state. Through detailed statistical comparison of Yelp’s feedback scores against publicly available revenue data, he drew several conclusions.
First, Luca found that a one-star increase in Yelp ratings lead to an average increase in revenue of five to nine percent. In itself this is a significant observation, particularly in a margin-squeezed industry. Perhaps more interesting still was his discovery that this effect was only felt by independent restaurants. For branded chains, any improvement was insignificant. This, Luca argued, "suggests that online customer reviews substitute for more traditional forms of reputation."
Review sites, then, give customers a new trust mechanism—peer feedback—which is eroding the branded chains’ advantage of familiarity. Most of us have come to know what to expect from a branded restaurant. It had always been more difficult to form an expectation about the quality of an unfamiliar independent restaurant, but now there’s a powerful channel of information to help us: the views of other people.
Yelp’s rise, like that of related services such as TripAdvisor, has not been victimless. As these services have grown in usage and revenue, the more traditional guidebook industry has faced serious decline. Between 2007 and 2013, the BBC lost nearly two thirds of its £130 million investment in the Lonely Planet guidebook publisher. Sales of the leading travel guidebooks fell from $125 million to less than $75 million over roughly the same period. TripAdvisor’s revenues and visitor numbers, in contrast, are growing rapidly.
Consumer feedback brings structural advantages. A typical travel guide can only cover a small selection of businesses, whereas an online review site can cover almost everything. Books are a snapshot in time; businesses change. But the growth of consumer feedback, at the expense of expert feedback, shows that consumers are accepting the collective views of their peers as valid and useful. They are ever-more willing to accept the challenge of sorting the signal from the noise (and in fact, many services have made significant advances in helping them do this, such as ranking feedback itself using "review the reviewer" techniques). The role of the trusted expert is eroding.
This effect isn’t limited to simple service transactions. Choosing a dirty hotel or a bad restaurant, of course, is unlikely to be more than a temporary annoyance. Some purchases, though, are significantly higher risk, perhaps involving an outlay of a considerable proportion of the customer’s income, or long-term ongoing costs, such as credit or maintenance. In this context, we might expect the traditional centralized trust providers to remain dominant.
This expectation is undermined by Cisco’s 2013 Customer Experience Study for the automotive industry. Even for the high-stakes purchase of a car, only 17 percent of people stated a preference for going straight to a dealer for advice. This is hardly a casual selection of where to have lunch, yet fully 83 percent of respondents reported preferring to do their own research online.
Silicon Valley’s Assault on Regulation
The role of auto dealers is often fiercely protected by legislation written in the name of protecting consumers. Tesla, the electric car company founded by serial technology entrepreneur Elon Musk, has sought to leverage this newfound consumer autonomy through direct sales to customers. In the process, it has met significant opposition in many states from networks of traditional, franchised car dealers. Often, they’ve sought to block its activity, trying to assert their monopolized role as sole suppliers of goods and services.
Uber, the San Francisco–based ride-sharing service, is a disruptor on multiple levels. Its smartphone applications have changed the core experience of both the taxi passenger and the person providing the service. But, perhaps more importantly, its aggressive go-to-market approach leverages consumer feedback to usurp the traditional trust provider: the taxi regulator.
Taxi regulation is an old structure. In the UK, the first controlling ordinance governing taxi services was enacted by Oliver Cromwell...in 1654. In cities and regions across the globe, similar controlling bodies exist to provide a safe, dependable framework of safety and minimum standards. New York City’s Taxi and Limousine Commission, for instance, states that its goal is to "set and enforce standards and conditions of service."
Uber’s UberX product frequently operates services outside these frameworks, with private vehicle owners able to set up and run as service providers. Uber runs up a hefty legal bill in the process, as it defends its operations and drivers from attacks by the incumbent, regulated services. It is, in effect, usurping the trust framework.
But that’s not to say its customers aren’t driven by trust. It’s simply a different kind of trust, driven by a rating system. Uber pushes its rating system hard. It pushes its drivers hard, too: Many drivers have told me they face the threat of dismissal if their ratings fall below a certain (high) level. While Uber doesn’t avoid making assurances about safety concerns such as insurance, it doesn’t make this a big part of its message, either. The core marketing is simple: You trust us because other people like us.
And the formula is working: it’s driven Uber to a valuation of $18 billion and rising. The impact on the regulated incumbent is being felt as well, with anti-Uber protests being held by taxi drivers in many cities in Europe and America.
Why This Matters to Corporate IT
These are just three examples of the huge consumer trends that are eroding the role of traditional trust structures and disrupting entire industries in the process. There are, of course, key differences between consumer services in a global marketplace and the corporate IT department providing services to company employees. But some of the parallels should be unnerving.
The example of Yale’s aggressive action against a student-authored IT service is particularly pertinent. The success of CourseTable was driven by demand for an important service, which simply wasn’t being provided by the faculty, despite the building blocks being available. Students didn’t engage with CourseTable out of any sense of rebellion against the institution. They did so because the familiar structure of peer feedback enabled them to feel more confident in their course selection decisions—decisions they might naturally feel are critical to their future life and career success.
The desire for such confidence is the key factor in the success of Yelp, TripAdvisor, and a wealth of other consumer feedback services. Uber has harnessed it to establish an entirely new type of trust in an industry that is critically dependent on it.
Corporate IT has long acted as the regulator, the central expert, and the monolithic trust provider. And it’s now faced with a new generation of personally informed and technologically empowered consumers, more willing than ever to trust each other’s opinions and knowledge over those of traditional experts.
A key example of this trend is the BYOD phenomenon. Even where IT departments have sought to prevent users from bringing their own technology into the workplace, a significant majority of employees have done so anyway. Once again, though, this isn’t an act of malicious rebellion. Last year, an APAC–focused survey by VMWare, "A New Way of Life," found that 83 percent of employees are bringing their own devices to work. However, what really stood out from the study’s results was the fact that 41 percent cited "contactability by customers" as a primary driver for their use of noncorporate devices. In a high-pressure corporate environment, employees will do whatever they feel they need to do to get an edge.
Like the taxi regulator, IT has an important role in regulating risk. But managing that risk can impose costs on users, and if users feel their own technology can alleviate those costs, they will be tempted to use it. If a user feels his company-supplied technology doesn’t make him contactable by customers, the fear of missing a sales target is likely to outweigh the less-tangible fear of a security breach from a noncorporate device.
IT is in a difficult position, then. Accountable as a custodian of digital security and safety, but also as a productivity provider, its customers are increasingly resistant to monolithic control and dictated trust structures. With limited resources, how can IT deliver the freedom increasingly demanded by customers, while still maintaining control? It’s clear a new balance needs to be found.
One potentially effective technique is to leverage peer interaction as a support mechanism. In my organization, we use technology that enables the IT department to leverage the new trust that users have in their peers, via support groups, forums, and social interaction. Internally, our company doesn’t formally support Apple computers, but hundreds of employees use them productively through self-help and peer support. IT maintains visibility and can step in as the supporter-of-last-resort, but the cost to the department is minimal.
It’s a great example of the new balance in action. Users can make their own decisions about the tools that they feel will make them most productive. The IT department can never know business users’ jobs quite as well as they do themselves.
And that is the key point: IT needs to be highly customer-centric if it hopes to make the right decisions about where to channel its resources in support of the new generation of autonomous user. We need to spend time directly working with our users. We need to observe, quantify, and empathize with the challenges they face.
By getting close to the customers, observing how their trust and attitudes are changing, and seeking opportunities to deliver autonomy in a well-framed, controlled manner, we can better shape our decisions for the new era, while still maintaining the level of control expected of us.
Jon Hall is a lead product manager at BMC Software. He has worked in the ITSM industry for seventeen years, implementing award-winning ITSM solutions and consulting with a wide range of clients around the world. Based in the UK, Jon is focused on building the new generation of social, mobile ITSM tools.