The hidden power of trust and its value proposition

In an effort to restructure companies, or implement a successful business turnaround, companies are looking at their value proposition and how it aligns with:

• Consumer demand;
• The trends driving the market; and
• Stakeholder expectations.

The term agility is used quite extensively in the current market and it refers to the ability of a company to adjust when market dynamics suddenly change. While most companies claim to be agile, they are often found wanting when push comes to shove.

So how do they refocus their alignment? I recently read a publication by PwC which discusses this in detail.

The hidden power of trust

New PwC research shows that trust isn’t a fuzzy concept. It’s an intangible asset tightly linked with corporate performance.

Advanced statistical analysis of data from PwC’s 25th Annual Global CEO Survey uncovers a relationship between customer trust and financial performance that’s highly significant, with influence rivalling prominently researched variables such as industry and company size. Trust accounted for 31% of the statistical model’s variance for profit margins.

Three elements of trust are most strongly connected to performance. From analysis of the six factors comprising its customer trust index, the PwC team identified three that are most likely to influence performance. Those are CEO perceptions of their customers’ propensity to:

• switch to a competitor’s products or services;
• resist (or buy into) new updates or changes to a company’s products or services; and
• provide feedback if the company’s products or services exceed expectations.

Apple’s Chief Privacy Officer, Jane Horvath, has very strong views on embedding trust in product development. “I got a knock on my door one day. Two engineers standing at the door, and they said, ‘We want to develop a wearable, and we’re very cognizant that wearables may impact privacy. So we want your team embedded from the very start of this, because we’re really focused on health data.’ And so that is how it flows at Apple. When they have an idea, they bring the privacy professionals — not only my team, but we also have a team of privacy engineers that also embeds in products.”

The hidden  power of dynamism

Research shows that sweating the small stuff—by frequently starting and stopping projects—contributes as much to performance as big deals and enterprise-wide decisions.

Analysis of data from PwC’s 25th Annual Global CEO Survey showed that companies that redeployed resources more frequently achieved profit margins roughly five percentage points higher than companies that were less active. The PwC team looked at seven different mechanisms for resource allocation, comparing profit margins to how often they were employed; five proved to be statistically significant.

Though this regression analysis shows only a correlation between resource reallocation and performance, the researchers have strong reason to believe there is a causal relationship between the variables.

Saying “no” creates positive returns. It is often harder to stop an initiative in an organization than to start one. This analysis suggests the right no can be valuable—hitting “stop” could free up resources for a more valuable “start”—and that leaders should advise managers to avoid letting things run on autopilot.

Five ways to combat a “set it and forget it” mindset:

• Beware the red flags of excess centralization. These include approval requirements for relatively minor initiatives that bubble up to high levels of the organization, and command-and-control funding for projects that are clearly the domain of individual business units;
• Encourage bets on innovation at every level. Google at one time allowed employees to allocate up to 20% of their time to projects of their choosing. AdSense, Gmail, and Google News are three noteworthy outcomes;
• Install a kill switch. Devise “stop” mechanisms to ensure that small projects don’t get out of control. The baking company Goodman Fielder used to maintain more than 500 R&D projects. The company appointed a “project killer” who reduced that number to 200;
• Place small regular bets with M&A. Don’t be afraid of acquisitions—including smaller, lower-risk ones that likely contribute to the performance benefits uncovered in this research;
• Assess your agility.Although they aren’t for everyone, agile operating approaches—intended to decentralize authority, empower employees, and reduce barriers to decision-making—can facilitate project-level resource reallocation.

The hidden power of strategic coherence

Your strategy may be more of a wish list than a plan.

Many business strategies are incoherent, according to Business Professor Richard Rumelt, reflecting the C-suite’s overreliance on tactical response even in the face of major inflection points such as market fluctuations, geopolitical instability, and disruptive trends in technology and workforce dynamics.

Rumelt suggests that strategic coherence—a management priority championed by PwC since the 2010 publication of “The Coherence Premium” in Harvard Business Review—emerges from a quest to conquer the most important challenges facing a company: the crux. If those challenges aren’t high-stakes, then they’re not really strategic. If they contradict one another, they’re incoherent.

“When starting strategy work, avoid the language of goals and ambitions and, instead, emphasize the logic of challenges, policy, and action. I start my own search for the crux of a challenge simply by asking, ‘What makes this situation so hard?’”

Conclusion

Trust, dynamic resource reallocation, and strategic coherence shouldn’t be brand-new additions to your tool kit. But for too many companies, they’ve been taken for granted, left at the bottom of the drawer, as leaders looked past them in search of seemingly newer—or flashier—ways to manage disruption.

The fresh evidence presented here, however, suggests a renewed focus on trust, sweating the small stuff, and driving for strategic coherence will add value to your organization. It’s time to dust off those old levers and put your rediscovered powers to work. They’re right there if you choose to see them.