Tuesday, November 12, 2019

New INC Magazine Blog Post by Kaplan Institute Exec Director Howard Tullman


Amazon is Getting Tangled in the Trust Economy While Airbnb Embraces It
If customers stop believing you, they'll stop buying. While Amazon struggles with fake products, Airbnb is raising the bar to give guests, hosts and even neighbors more confidence in its service.

Executive director, Ed Kaplan Family Institute for Innovation and Tech Entrepreneurship, Illinois Institute of Technology

The most critical enabler of e-commerce and so many other tech-centric businesses today is the emergence and continued growth of the "trust" economy. We're surprisingly comfortable putting ourselves (and often our offspring) in cars with drivers whose training, credentials and even honesty are mainly a mystery. Their principal qualification is showing up --usually on time and hopefully sober.  And we buy products and services from sellers worldwide without a moment's hesitation, in the good-faith belief that they are what they're represented to be and that they will be delivered on time and as promised.

While sites like The RealReal aggressively stress the authenticity of their used luxury goods and the extent to which they go to verify that fact, most e-commerce sites, and most of us, just take largely for granted the fact that what you see is what you'll eventually get. Of course, with the dramatic growth of third-party sellers on Amazon and the frightening rise of knockoffs and counterfeit goods on the site, our uncritical reliance may be increasingly misplaced. The Wall Street Journal recently uncovered 4,152 unsafe items for sale on Amazon. Given what we're finding out, how much longer can Amazon hang on to the title as the most trusted brand in America?

Seems to me that even a golden reputation based primarily on execution and cost considerations is more than a little vulnerable when the goods that are promptly and economically provided turn out to suck or are actually harmful. Cost is what you pay, but true value is ultimately what we're looking for. As I used to tell my car dealer clients, customers don't care how fast you fix their cars if you don't get the job done right. They'd rather wait a while longer than have to bring the beast back to be repaired again. Amazon needs to clean up its Fulfillment by Amazon (FBA) business, which continues to grow explosively, because shoddy quality control is killing a lot of legitimate players who can't compete with all the fakes, while slowly impairing our faith in the company as well.  

Airbnb just raised the bar in the trust economy, and it will be interesting to see how soon all the others step up their game as well. They will probably have a much heavier lift than did Airbnb and, in some cases, not much interest or appetite to open that particular Pandora's box. I can understand why.  Brian Chesky, an Airbnb co-founder and its CEO, announced last week at the DealBook Conference that Airbnb will roll out four service enhancements to provide far greater comfort to all stakeholders.  Not just to the guests and the landlords, but also to the residents and regulators in the communities where the business operates as well. The four changes include:

(1)  All seven million Airbnb listings will eventually be verified
(2)  Unsatisfied guests will be rebooked or refunded
(3)  There will be a 24/7 hotline for unhappy neighbors
(4)  High-risk reservations will be screened to eliminate potentially disruptive "party" houses

Chesky's simple statement, contained in a company-wide email, that "trust on the internet begins with verifying the accuracy of the information on internet platforms" was especially telling in the context of today's conflicting approaches by the major tech players.  Twitter has opted for veracity, banning blatantly false political advertising, while Facebook sticks to its controversial hands-off position. (Google is on the sideline, trying to figure out how to play the issue.)  

And, even more importantly, the changes and the challenges that so many of the other tech companies are going to face in upping their "honesty" will be much greater than those faced by Airbnb because basic trust was a critical component of the Airbnb business and a central part of its culture from the beginning. Not that Brian, Joe and Nate are exceptionally honorable and sincere guys--although maybe they are. But they really had no choice, because delivering the right experience was the whole essence of their business, so they made accuracy, honesty and integrity all key components of their corporate culture. When you invite someone into your home to sleep in your bed, you'd better get a lot of things right from the get-go including, but not limited to, the breakfast. Where you start the startup journey has a lot to do with where you ultimately end up and what kind of business you build. If you don't care where you end up, any road will take you there.

And, if your North Star is "breaking things" or "asking forgiveness rather than permission" or selling a "raised state of consciousness" instead of speculative real estate space, you can end up building a morally bankrupt business that no one trusts or ultimately believes in.  The examples of how to do it wrong are just about everywhere today. There aren't any real shortcuts to sustainable success and there never have been. The miracle workers and people selling any other story are just shipping snake oil.

Airbnb is biting off a big chunk, betting a bunch of its own credibility, and taking on a set of tasks that will require not simply its own efforts, but a great deal of support and participation by their community and stakeholders as well. This is a leap of faith to be sure, but in listening to the guy who has led the charge for over a decade and done about as well as anyone could (especially in dealing with the occasional serious bumps in the road), you have to believe that he may have the right stuff and the strength and character to get the job done because he's coming from the right place. If it's you against the world, it makes a lot of sense to bet on the world.  

All these guys want to be appreciated and admired - a key part of what drives every entrepreneur.  Who doesn't want to be loved? But trust is a much bigger challenge. Being trusted is a lot harder to achieve than being loved.



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