Radical Transparency

September 10th

Daniel Goleman, the author of Emotional Intelligence and other related works, has written a new book Ecological Intelligence: How Knowing the Hidden Impacts of What We Buy Can Change Everything. He wrote about his ideas in a Harvard Business Review blog (“Winning in an Age of Radical Transparency” May 27) on the dynamics of the competitive marketplace in coming years.   Given the new transparency that is made possible by technology Goleman argues, everything will change.

The theory, Goleman notes, is that the more transparent a market the healthier it will be.  Giving customers the benefits of social welfare, holding back prices, enforcing consumer protections with competitive services and growing a more concerned and aware consumer constituency for the products that they purchase – all of these are the benefits of the open market and information symmetry.

In seeking to remedy the ills that lead to the financial crisis, there has been a great deal of discussions of using transparency to facilitate the self-regulation that was missing leading to the market crash.  When President Obama took office, he asserted that his administration would use transparency to improve the ethics of government and the performance of programs.  Government-wide there is more access to the inner workings of federal program expenditures and acquisition in ways that has never been possible in the past.

In his new book, Goleman explores the implication for consumer markets of the parallel between transparency in financial regulation and revealing the ecological impacts of consumer goods.  “There are signs of a trend toward greater marketplace openness about the environmental and health consequences of products.”  He notes that the launch this year of Goodguide.com is a significant departure in giving consumers inside information.

Goleman envisions a world of radical transparency in which Life Cycle Assessments are not only available to consumers but are required of future companies.   As secrecy is rendered ineffective by such trends as the obligation to publish the contents of the product, the competitive advantage that could have been gained from surprise will be lost.  Competitors will find it far easier to benchmark the high performing enterprise in their markets.  They can accelerate their movement to the high performance frontier and take away any performance related competitive advantages that their competitors might have enjoyed.

Quoting from Andy Grove’s book, Only Paranoids Survive Goleman notes “When Intel faced its first Valley of Death — the drying up of its market for chips — the company survived because it had a ready alternative: a small microprocessor business it had built on the side.”  The examples of Intel suggest a lesson for companies today, “companies would be prudent to have a strategy ready for an era of radical transparency.” Goleman argues.   “Remember, revolutions that seemed impossible will, in retrospect, seem inevitable.”

Comments

  1. JoshR says:

    This is an interesting and timely post! Just last Friday the Times had a story about a group of major food companies hilariously failing to self-regulate with their voluntary ‘Smart Choices’ labeling program.

    I am curious about the mechanics of how the trend becomes an obligation. The Good Guide seems like a great example, but I’m guessing their readership is a teeny segment of the market. Is government mandate the only way to have effective standards?

    Also I don’t know enough about Intel’s transition from whatever came before to its current microprocessor business. How did transparency factor in?

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