Thursday, June 01, 2006

review The Naked Corporation: How the Age of Transparency Will Revolutionize Business, by Don Tapscott and David Ticoll, Authors of Digital Capital


Found content: check the subject line….not found so much as requested as freebie from lady handing out the books at Informatica World 2006 last week in San Francisco….had time on the flight back home to read this one…thank god for air traffic control delays….underlined a lot of stuff…wrote comments in the margin…totally defaced it in the act of commenting on it….something I rarely do with books

My take:

Cut to the chase: I can’t process long texts until I’ve zeroed in on the thesis statement, and then passed once at high speed through the outline, and then through a chapter-by-chapter eyeballing of the pages to see if the author has done at least a perfunctory job of substantiating the thesis.

Tapscott and Ticoll put their thesis statement—actually, a full thesis paragraph—two-thirds of the way into the introduction. Here it is:

“Corporations that are open perform better. Transparency is a new form of power, which pays off when harnessed. Rather than to be feared, transparency is becoming central to business success. Rather than to be unwillingly stripped, smart firms are choosing to be open. Over time, what we call ‘open enterprises’—firms that operate with candor, integrity, and engagement—are most likely to survive and thrive.”

Boil that down to its essence. What the authors set up is the following core argument:

Transparency is directly correlated with performance.

Then the reader has to slog through almost two dozen pages of text to get to the authors’ definition of their core concept:

“Transparency…we define as the accessibility of information to stakeholders of institutions, regarding matters that affect their interests.”

So there you have it. There is no further breakdown of how to operationalize the various metrics of transparency so that organizations can be measured, scored, and rated, in terms of comparative levels of transparency. Instead, the authors reserve the right to use the term as an all-purpose praise word for companies of whose practices they approve.

Now, then, I skittered through the next 300 or so pages to find any primary quantitative research that supports their thesis that increasing stakeholder access to information that affects their interests contributes to superior business performance.

I didn’t find it, and that wasn’t simply from inattention due to lack of sleep. I didn’t even see the most basic research regarding how going public—the most obvious form of “transparency,” as regards regularly divulging reams of financial and operational data to the public—correlates to corporate performance.

Do companies perform better when they transition from private to public, and does their performance deteriorate when they decide to go private again? Sure, there are lots of other ways to operationalize the term “transparency,” but this is the most accessible and easiest to do the number crunch on.

Are the oldest companies (the ones that have “survived and thrived”) also the most transparent? Is their longevity due entirely or in large part to their transparency? No mention of this.

I didn’t even see any basic data on how Sarbanes-Oxley compliance—another loose metric of transparency—contributes to performance. All I see, at various points in the discussion, are tallies of the cost of complying with SarbOx.

What I found was plenty of anecdotal evidence drawn from the authors’ consulting work with large US corporations, primarily in high-tech, and primarily describing the dire legal consequences of public companies not being as transparent as they want you to believe. In other words, the punitive consequences of lying, deception, fraud, stonewalling, manipulation, and bad-faith bargaining. That’s not exactly the positive spin—“transparency is becoming central to business success”—promised in the thesis. Instead, the book is permeated by the “you’ll go to jail” post-Enron hardball lesson.

Part of the problem with the book’s anecdotal evidence is that it’s not in the form of structured case studies. Instead, the authors provide, chapter after chapter, a verbal scattergram of bulletized factoids on particular companies’ transparency successes and failures. This unstructured approach to their topic makes it difficult for the reader to tie these details to any coherent thesis.

Another part of the problem is that the authors use the terms “transparency,” “openness,” “accountability,” “social responsibility,” “corporate ethics,” “corporate integrity,” and “good governance” interchangeably, and blur the distinctions among them. For example, here’s evidence that the authors cite as to the success of British Telecom’s “transparency” commitment: “In the area of the environment, for example, the company has scores of programs that demonstrate its commitment to ecosensitivity, including details such as prohibiting advertising on pay phones that are located in areas of outstanding natural beauty, national parks, open countryside, or World Heritage sites.” Ummm…all of that is well and good, but how does it evidence “accessibility of information to stakeholders of institutions, regarding matters that affect their interests”? And how does it translate into better corporate performance from the standpoint of the most critical stakeholders: shareholders and employees?

And the authors are too quick to buy into the sort of kneejerk “we’re good citizens” public-relations boilerplate that corporations everywhere churn out night and day. Here’s the sentence immediately following the one that I just quoted, re BT: “With respect to supplier relationships, the company pledges to ensure that all dealings with suppliers—from and consultation to recognition and payment—are conducted in accordance with the principles of fair and ethical trading.” I don’t deny that BT is committed to all this, but it would have been more interesting to see if a reputable, qualified third-party had audited and attested to the company’s performance on this and other “good citizenship” metrics.

None of this is truly “transparency” in any meaningful sense of the word. BT is simply pledging not to dirty the environment or lie to its business partners. It would be “transparency” if BT had also pledged to provide stakeholders with ongoing access to a broader, deeper set of financial, operational, engineering, and product data of interest to them. In other words, if BT had pledged to expand stakeholder access to its business intelligence (BI), business activity management (BAM), business performance management (BPM), and other analytics and reporting tools. And if BT had pledged to expanding its B2B collaboration environment and activities with stakeholders, so as to engage them more directly and continuously in operations, at all levels in company.

All of which BT may be doing. But I can’t tell from Tapscott and Ticoll’s book. There are a lot of interesting ideas and discussions in the book, but none that directly and systematically develop the thesis.