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Fair Advantage - The Book

We are currently witnessing the profound transformation of human society into a digitally wired, densely interconnected organism. As we reinvent the way we live, work and play, we are also seeing dramatic change in economic interactions. We are in the midst of reimagining how major industries do business and at the heart of it all is trust.

Whether you are staying at a stranger's house instead of a hotel, buying products from a housewife on the other side of the world, getting a part-time driver to ferry you to the airport in their private car or booking a helping hand online to do your groceries — trust is at the heart of this new sharing economy. The internet may do a great job of physically linking people but real connections are made on the basis of relationships. The more we participate in the exciting new opportunities that come with change, expose our private data, open our homes, share our personal belongings and so on, the stronger our need for building relationships of trust.

Technology has not resolved the dilemma of 'quis custodiet ipsos custodes?', i.e. ‘who is watching the watchmen?'. Regardless of how many layers we put in place, security measures cannot replace the need for trust.

Trust - A Condition for Value Creation 

Whether we are buying our morning coffee or acquiring a competitor, our mutual trust in an expected gain drives economic activity. Without this, value creation is impossible. As Warren Buffet says, 'Trust is like the air we breathe. If it's present, nobody notices. If it's absent, everybody notices.'

Take a 100$ note: It is valuable to you because you trust that everyone mutually agrees on its value, and is therefore willing to exchange it for goods and services. Without this trust, a currency system could not exist. We see this in historic cases of hyperinflation, which are tipping points at which society looses trust in a currency and thereby renders it worthless. Trust enables economic activity and we easily forget just how interlinked it is with value. For example, a stock price is the quantified trust in a listed company's fair valuation and future performance. 

Throughout the 20th and 21st century, management science created an abundant set of tools and methodologies to maximise every part of economic value creation, with varying foci throughout the decades. Even though trust is so crucial to economic value creation, it is an overlooked topic in the business school toolbox. There exists no simple process for building trust. But how can one be good at maximising value creation without a method for achieving its most crucial ingredient? There are signs that management is indeed no longer in a position to succeed with its existing approach.

Instead of exponential increases in value creation, our productivity, for example, is not keeping up with the times or technology available today. In a recent TED talk, Yves Morieux shares that our productivity improvement rate slowed down from over 5% annual increase in 1950 to under 1% in the current era. The problem is rooted in the absence of trust. Morieux cites managerial obsession with the ‘holy trinity' of clarity, accountability and measurement as the primary reason why we are less productive and efficient at work than we should be. In plain speak, many companies today subscribe to a deeply rooted culture of distrust and are incurring tremendous opportunity cost as a result of this, such as in the form of reduced productivity. If trust is a condition for value creation, a culture of distrust means less value is created than could (and should) be.

By establishing skepticism and distrust as the default state, management has evolved into a practice that destroys, rather than maximises, value creation.

Recently, digital and business model innovation became top management topics. The technology and infrastructure of today challenges the operating models of many major economic players, and indeed society at large. Large organisations have widely failed to effectively adapt to this new world order. The surge in corporate awareness for the need to innovate can be interpreted as a gradual admittance that what used to work no longer bears promise. Distrust is destroying value throughout the organisation: Ideas are not implemented and people are rarely given the trust they need to innovate. Many large organisations realise they are rendering themselves increasingly obsolete – and that efforts to address this are ineffective. 

Large organisations are notorious for withholding permission to execute new ideas because they don't trust in them. If you distrust what you are doing, how likely is it that you will succeed in creating new value? Would you buy from a company that did not trust its own products or services? Innovation potential is hard to measure in theory - so there is usually only one way to find out. 

The purpose of innovation is new value creation. But how can new value be created in the absence of trust? 

Distrust destroys value creation opportunities with remarkable effectiveness, and human and technological advancement are often invalidated by it. If management maintains skepticism as a status quo and distrust as its governing culture while technology advances at its current rate, this will result in major innovation opportunity cost. From what we see today, corporate innovation resembles the fable of the emperor’s new clothes – an illusion that might be painful to expose, and a failure that is systemic.

Organisations that are built to distrust are also built to fail in their innovation efforts. They incur substantial innovation opportunity cost.

Trust - A Fundamental Condition to Innovate

The sole purpose of innovation is new value creation and the primary reason any investor supports a venture is because he trusts he will gain from his investment.

Trust enables a startup or innovation effort to transform its market; or it enables an incumbent to resist such new competition and retain its ascendancy: The most trusted player wins.

Fair Advantage: How It Works

Existing trust research provides us with some ingredients to trust, but lacks a systematic recipe for putting these ingredients together. There's a saying that the best doesn't always win. In reality, the most trusted wins, be it product, person or company.

Fair Advantage introduces a world-first, universal methodology for building trust in a systematic, stepwise and repeatable fashion.

The Fair Advantage Trust Model helps maximise value creation with a simple, evidence-based recipe for creating stuff people trust. 

Here is an overview and brief explanation of the trust model:

Stage 1: Perception

Trust begins with perceptions, e.g. of how established, reputable and liked a person or entity is considered to be. It is a subjective assessment formed on the basis of whatever information available. The more favourable the image, the more likely we are interested. Only if this perception meets our expectations are we willing to consider engaging further and transition to stage 2 of the Trust Model: The temptation stage. Chapter 4 of Fair Advantage covers strategies that lead to an optimal perception of trustworthiness.

Take Amazon as an example. Say you have never ordered on Amazon before. Many people talk about the company as a trusted platform for buying over the internet. The information you receive about Amazon (regardless whether through your own research or by word-of-mouth) is likely to create a favourable image of the company, which you will most likely remember the next time you want to make a purchase online.

Stage 2: Temptation

Once we are open to consider a person or entity interesting, we evaluate whether we would like to interact. This is driven by what we expect to gain, i.e. our needs and desires. A user-centric value proposition is paramount at this stage. Originality and uniqueness of the offer are also important factors. These make us feel that what we are about to engage with is special and scarce. The crucial ingredient here is a compelling trigger that pulls us in. Chapter 5 focuses on how to engineer a bait that demonstrates trustworthiness.

In the case of Amazon, you may be tempted by the free shipping and 30-day returns policy offered. You are ready to give it a try. After all, what is there to lose?

Stage 3: Connection

In this stage, the initial trigger is turned into a rewarding interaction that creates a sense of being on the same wavelength. This applies to trust building between individuals and companies alike. The latter often do this with the help of analytics that predict customer preferences, or simply through excellent customer service. Chapter 6 deals with how to establish such a trustworthy connection.

For Amazon, anticipating user behaviour is a powerful differentiator. Companies that demonstrate an understanding of your preferences and a willingness to help you when you need it make you feel at ease and in good hands. By now, you are either about to make, or have already made, an initial purchase.

Stage 4: Validation

Once a connection is built, the dynamics of the relationship shift as the recipient of the trust-building effort now actively invests energy in maintaining the connection. Typical trust building processes, such as those involved in commercial transactions, are driven by one side (i.e. the seller). In case of most person-to-person trust building processes, both parties simultaneously receive and extend trust-building gestures. A good example is the job interview, where each party is looking to present their best to each other. The job candidate's level of trust in his potential employer may or may not be equal to the employer's trust in his professional abilities. In such mutual situations, each individual moves through the stages of the trust cycle with their counter-party. This is why person to person trust building can be a little more complicated. The defining characteristic of the validation stage is to find evidence that justifies the trust built until here. Recipients of trust-building efforts are going to test whether or not they made the right decision in trusting the person or entity. For example, the employer may ask the job candidate for a copy of his degree to verify his qualifications. Chapter 7 focuses on how to ensure that you provide the right evidence to validate your trustworthiness.

Back to the case of Amazon. Your purchase may have arrived in the mail by now, and after unpacking it you decide that you would actually prefer to get something else. So you decide to test-drive the free returns policy. In the case of Amazon, you will find a simple and straightforward returns procedure with fast reimbursement. Once you see the purchase value credited back to your account, your level of trust in the company naturally increases - after all, they practice what they preach!

Stage 5: Attachment

Once the trustworthiness of a company or individual is initially established, people are likely to form a corresponding habit involving the entity or person. We naturally tend to stick to things we trust, and this can be an effective driver of customer loyalty. Chapter 8 concentrates on the connection between trustworthiness and habitual decision-making.

After your positive first experience with Amazon, you are likely to give it another go soon - just like the many repeat purchases made by habitual Amazon customers.

Stage 6: Affiliation

Whilst habitual behaviours are passive in nature, affiliation is more proactive in nature. In this stage, the trusted relationship with an individual or entity is strong enough that you are open to affiliate yourself with it. You effectively become an ambassador and testimony for the person or company in question. This means you trust them enough to believe that doing so will not taint your reputation in any way. In this stage, you will be likely to share your positive experience with your social circles. The more you share, the more you contribute to the favourable perception of what you are promoting. This brings us back to Stage 1 of the Trust Model, after one complete flow through the cycle.

Running through one full cycle of the Fair Advantage Trust Model's stages can take from a few minutes to several months, depending on the situation. 

The model is perpetual, i.e. each revolution establishes a higher level of trust. You can think of this like an infinite spiral staircase, taking you from an existing trust level x (the ground floor) to trust level x+1 (i.e. the first floor) with one revolution of the cycle, then to trust level x+2 (second floor) with another revolution, and so on.

The Fair Advantage model applies across business contexts. For instance, it enables large corporates to reorganise value creation around principles of trust, both to innovate and protect themselves from incoming threats. At the same time, it is a good resource for startups looking to establish a product or service from scratch. 

In a nutshell, Fair Advantage is a manual for entrepreneurs and intrapreneurs to gain the essential trust of users, investors and other key decision makers.

The trust model is based on conducting many year's research to uncover the science behind trust – from supporting a conference on Trust Management, to academic literature reviews on trust in business contexts, case-study research on 30+ trusted companies, extraction of 80+ individual trust drivers from primary research, and first-hand experience on advisory projects in financial services. 

The Fair Advantage Trust Model is particularly relevant in three areas: Innovation leadership (people), innovation processes (methodology) and innovation outcomes (impact). Its purpose is to maximise new value creation by maximising trust.

The Trust Model also comes with a scorecard, including 60+ guiding questions for the purpose of benchmarking and increasing the trust levels in a given context.

Fair Advantage: The Outline

This section lists all standard chapters planned for inclusion in the final book. For bonus content added upon reaching pre-order milestones, please have a look at the next section.

Chapter 1: The Resurgence of Trust

From airbnb to etsy, TaskRabbit to UBER, a lot of successful startups in recent years have built billion-dollar platforms around the nucleus of trust. Trust is experiencing a major comeback, and this chapter explains the how and why.

Chapter 2: Defining Trust

To paraphrase Einstein, you only really understand something if you can explain it well. Existing definitions of trust fail to do this in my eyes (feel free to have a look at major dictionaries' definition of trust and you will know what I mean). In this chapter, I propose a radically simple, logical definition and explanation of what trust is, and how it works.

Chapter 3: The Trust Model

In this chapter, I introduce the six-stage Trust Model and foundation of the book with the help of examples. Also, this chapter will take a look at the potential long-term effects of trust killers and what influences them.

Chapter 4-9: Stages of the Trust Model

Each chapter is a deep-dive into the six respective stages of the Trust Model, illustrated with case studies and useful practical tips for applying each one.

Chapter 10: From Trust to Value

This chapter covers how trust in innovation leadership, processes and outcomes is achieved with the Trust Model, and its implications for organisational design.

Chapter 11: Creating Fair Advantage

This chapter is dedicated to helping you implement the Trust Model with a scorecard and probing questions that cover its six stages.

Chapter 12: (Publishizer Exclusive) Trust in Singapore 

How did Singapore emerge as the world's most trusted place to do business? An inside look into the nation's trust-building efforts and Fair Advantage over the decades.

Chapter 13: FAQs

Shifting from skepticism to trust comes with a host of challenges. Perhaps you will have some questions at this stage. This chapter answers the most common queries to help remove any potential obstacles to implementation of the Fair Advantage model.

Appendix: Trust Drivers

This chapter takes a look at individual trust drivers underlying the trust model. It explains how each contributes to building trust.

Bonus Content

Fair Advantage will include additional content for the funding milestones it reaches:

250 pre-orders: Bonus Chapter 1 'Social Capital, the Currency of Trust'

500 pre-orders: Bonus Chapter 2 'Building Trusted Brands and Customer Experiences'

750 pre-orders: Bonus Video Interview 'Applying the Fair Advantage Trust Model'

1000 pre-orders: Bonus Chapter 3 'Building Trust in Yourself'

The Context - Complementary Books


Complementary books to Fair Advantage include:

The Human Brand by Chris Malone and Susan T. Fiske

A great book about the rising importance of personal connections in the way we trade. Just like in the good old times, people today aspire to know who designed their sofa, farmed the cotton in their t-shirt or cured their ham. The digital revolution is enabling customers to be well-informed about what they buy, and this has lowered trust in the goodwill of the producers behind goods and services we procure. The need to trust who you do business with is a major driver of this humanisation of commerce, and a crucial factor in building successful brands today.

Hooked by Nir Eyal

A real eye-opener on how to build habit forming products. Of course, trust underlies habit formation. The book proposes a four-stage habit design cycle, describing what companies need to do in order to get users 'hooked'. Trust is implied in the habit formation cycle, and this makes both books mutually relevant to each other.

Mobile Ready by Scott Bales

There are many reasons why established companies shy away from a serious mobile strategy, and certainly skepticism is one of them. Trusting in media one still knows little about is challenging, yet the validity of that excuse expires the moment shareholders notice its effect on the bottom line. The digital shift is a major driver of community- and trust-based commercial interactions, and a good environment to study its mechanisms.

The Lean Startup by Eric Ries

Corporates and startups alike need to learn a simple, but crucial lesson: Trust customer response to your value proposition. The tools in this book establish that experimentation is key when value often comes from unexpected places. Flexibility requires ample trust, as most companies and people are not built to repeatedly change their approach (yet they may still have to).

Zero To One by Peter Thiel

This landmark book proposes that the most profitable businesses are monopolies, and that every entrepreneur should aspire to create one. Technology becomes one's main ally in doing so, but trust also plays an essential role. The most trusted player in an industry has great potential for value creation. Thiel advocates that a start-up effort is most worthwhile if it achieves more than globalisation (implementing something that already exists in a new part of the world or market, i.e. moving from 1 to n), instead creating something that is actually new (i.e. moving from 0 to 1). This requires a lot of courage, especially if you are running a profitable, but undifferentiated startup. Trust in moving away from safe havens and in the direction of original value propositions is tough to build, yet the rewards can be exponential: Start-ups that do succeed at it fetch valuations other companies can simply dream about.

The Plan

The good news is that much of the book's research and materials already exist - all that is needed now is time and funding to tie it together into a tight resource that distils the essence of trust into a fast but game-changing read. The target publishing date for this book is September 14, 2016.

With your support, I imagine it will be possible to get additional great case studies and leading voices on the subject involved in the project. If you are interested in pre-ordering Fair Advantage in larger quantities, or start the conversation, I would like to hear from you: pk@philippkristian.com