The Naked Corporation

Eli Singer writes "The web is stripping away the layers of insulation between companies and the public by giving everyday people access to massive amounts of information. Increasingly companies are finding themselves like the emperor naked and exposed. Don Tapscott, long time tech author ( Digital Capital , Growing Up Digital and Paradigm Shift ), and co-author David Ticoll ( Digital Capital ) say in their latest book, The Naked Corporation: How The Age of Transparency will Revolutionize Business , that when a corporation is naked, it is best to be buff." Read on for the rest of Singer's review. The Naked Corporation author Don Tapscott & David Ticoll pages 348 publisher Viking Canada rating 8/10 reviewer Eli Singer ISBN 0670043982 summary A guide to acting ethically in our digitized business world.

The need for a transparency strategy, as described by Tapscott and Ticoll, is born out of the massive exposure and risk companies open themselves up to when they conceal activities from the public, or live by poor values. As they say:

Customers can evaluate the worth of products and services at levels not possible before. Employees share formerly secret information about corporate strategy, management, and challenges. To collaborate effectively, companies and their business partners have no choice but to share intimate knowledge with one another. Powerful institutional investors today own or manage most wealth, and they are developing x-ray vision. Finally, in a world of instant communications, whistleblowers, inquisitive media, and Googling, citizens and communities routinely put firms under the microscope.

Using basic tools available online, interested parties and activists can discover a companys darkest secrets and publish them to the world - instantly. Transparency theory states that because the corporation risks being stripped naked in ways it cannot control, it needs to be buff. Firms that live by good values (video) do not fear exposure.

Some firms and industries still opt for secrecy in our transparent world and they often end up paying a price for it. That is because when there is little to no visibility into how firms are operating (no transparency), there is very little trust built with customers. Low trust stifles innovation and can instill fear. This in turn creates conflict as companies try to stay closed and stakeholders try to break free.

Some stakeholders community activists, nongovernmental organizations (NGOs), and the like have little or no direct power over the firm. Their main tool is transparency: the ability to learn, inform others, and organize on the basis of what they know. When community stakeholders use information to gain support of others who do have economic power like the firms customers, shareholders, or employees their power multiplies.

One example, referenced repeatedly in the book, is the Linux community. There are so many transparent elements to Linux, from the inspiration behind its conception (an alternative to closed-source software), to the GPL that keeps it open, and the overall integrity of the software and the community that develops it.

Linux's transparent nature is quickly becoming a standard component of the technology industry. In fact, what could be a better endorsement of transparent business practices than IBM shifting its business strategy to embody open values? Big blue has donated millions of dollars of once proprietary code to the open-source community, and hosts massive developer forums that blur the borders between paid developers and the community. This is all done with the objective of making IBM more transparent to its stakeholders.

The Naked Corporation is a fascinating read filled with the ideals that businesses should aspire towards this century. What makes it most enjoyable to read is that Tapscott and Ticoll ground their concepts with real-world case examples, many of them technology related.

The book is divided up neatly into three sections.

The first, The Transparency Imperative, takes three chapters to thoroughly introduce the concept of transparency, and the structure of open enterprises. Most interesting is the first chapter (available free here), which identifies and explores independently the drivers behind transparency economics, technology, demographics (the power of the Net Generation), and sociopolitical changes (the rising global civil foundation). This is a rich and inspiring study, and the authors fuse their findings at the end of the chapter, stating that:

As emerging economy firms and citizens become integrated into the global economy, they will increasingly expect and gain the ability to demand visibility into Western firms business practices Both emerging economy and Western firms will be under increasing pressure to practice what they preach about open trade and level playing fields, as well as to behave responsibly toward people and the environment.

The second section, When Stakeholders Can See, illustrates just how much information employees, partners, customers and communities can discover about a firm. Given that we live in a knowledge economy, companies cannot block information from becoming free. The ultimate exposure of poor business practices is not a question of if anymore, but of when. The whistleblowers at Enron are proof.

Section three, Being Open, teaches companies about the rewards earned by being transparent. Up until this part of the book, transparency was viewed as a defensive strategy. Now transparency is re-introduced as a core source of new value a firm can tap into. Like IBM is doing now, companies can earn massive profits by adopting a more open stance.

In addition to being a great read for managers, I believe this book should be on the reading lists of members of NGOs, activist groups, and socially responsible corporate watchdogs. This is because in outlining the need for businesses to adopt a transparency strategy, Tapscott and Ticoll also create a blueprint for how to expose opaque organizations.

The drawback of this read, quickly obvious to the reader, is that transparency, ethical business practices, and corporate social responsibility are all such new theories that few know how to effectively apply them. Then again, when thinking about the Web in its infancy, talking about the new possibilities was the first step to the future we have now.

You can purchase The Naked Corporation from bn.com. Slashdot welcomes readers' book reviews -- to see your own review here, read the book review guidelines, then visit the submission page.

Comments

Hmmmm.. not exactly a new book!

[SixDimensionalArray]

Did they forget to mention this book was published on October 7, 2003? Hmm - I smell an advert!!! -6d

Re:Hmmmm.. not exactly a new book!

[Frymaster]

Did they forget to mention this book was published on October 7, 2003? Hmm - I smell an advert!!!

waitaminnit... did you use the web to uncover a questionable business practice (advert masquerading as news content) on behalf of viking canada?

case made!

Good things...

[chris09876]

Only good things can come from corporate transparency. Just like 'open source is better since more eyes can look for errors', having companies share more information with their shareholders (and other people who have interest/financial stake in the company), there are more eyes to go over the decisions that the board makes. People on the board will be more accountable, but again, that's a good thing.

Re:Good things...

[k98sven]

Well, while I'd agree that transparency is good overall, it does depend on what kind of information we're talking about.

The management is appointed by the board, which represent the shareholders. Thing is, stocks don't work the way they used to, when people would hold their stock and get rich off the dividends. Today people aren't investing for stock dividends. They buy in the hopes of selling them for more. So the business has to keep growing and keep that stock price up to keep everyone happy.

The problem is, if the shareholders have down-to-the-minute information on everything the board is doing, things get short-sighted. Every single decision the board does would be cause for speculation on the stock.

This, in turn, could make it difficult for the managment to do their job, namely run the company, because any decision which could means lower stock prices, even in the short run, is going to get them into some heavy criticism from the unhappy and increasingly short-sighted investors.

In the worst case, you'd risk ending up with management looking only at what's good for the next day and not what's good for the next decade.

(Of course, it's already a lot like this. I'm just saying it might get worse.)

Seems a little fixated

[Staplerh]

Hate to say it, but there are certainly benefits to being closed. Not to society as a whole, mind you and 'stakeholders', but certainly to your CEO's pocketbook and your shareholders.

Section three, Being Open, teaches companies about the rewards earned by being transparent. Up until this part of the book, transparency was viewed as a defensive strategy. Now transparency is re-introduced as a core source of new value a firm can tap into. Like IBM is doing now, companies can earn massive profits by adopting a more open stance.

IBM may be earning 'massive profits'. So is Microsoft. And Microsoft is not being that open. Therefore, I think we should be a little cautious about seeing this causal relationship between 'open' and 'profit.' Perhaps this will emerge into two dueling schools of thought - the open vs. closed, and time will tell which prevails, but certainly the success of 'The Naked Corporation' is by no means guaranteed. Interesting review, however.

The Cluetrain Manifesto

[Saeger]

See also: The Cluetrain Manifesto. It came first.

Re:The Cluetrain Manifesto

[Tablizer]

See also: The Cluetrain Manifesto. It came first.

Now the author will change his tune and lambast the internet because it allowed somebody to not only beat him to the idea, but render his book useless.

It is similar to the irony in how the 'net allowed access to cheaper geeks in the 3rd world, rendering the 'net's pioneers' skills too expensive to be viable.

Suggestion for his next book title: How the 'Net is fucking everybody, including me.

buff

[brit74]

"...when a corporation is naked, it is best to be buff."

When I first read this I thought it said "...when a corporation is naked, it is best to be in the buff." To which I thought, "Well, you don't have much of a choice, do you?"

It's a two-way street

[ScentCone]

In addition to being a great read for managers, I believe this book should be on the reading lists of members of NGOs, activist groups, and socially responsible corporate watchdogs.

Which makes it sound like activists, NGOs, and other entities (like local PTAs, homeowners associations, and the like) are somehow not impacted by the same issues. Entities like the Nature Conservancy sometimes get caught with their financial pants down in odd real estate dealings, and all sorts of non-profits (the United Way, among others) have seen huge problems because of their opaqueness.

The drawback of this read, quickly obvious to the reader, is that transparency, ethical business practices, and corporate social responsibility are all such new theories that few know how to effectively apply them

Actually, the thing that's quickly obvious, here, is that the authors/posters/editors involved in what I'm reading here think that there's never been such a thing as a decent company of more than 10 people, or that running an ethical business is somehow a new invention of the anti-corporate camp, which they've strong-armed onto an unwilling business sector.

Our economy is powered by thousands and thousands of businesses. Hard work, dilligence, and giving a damn about customers and investors is far and away the custom - no matter how much capitalism's philosophical opponents like to trot out the recurring handful of idiot CEOs and boards that smell otherwise.

Where's the rag-tag group of watchdogs watching the crazed HOAs and litigous NIMBYs that actually make more of a direct impact on most people's day to day lives? Those groups are more manipulative, and conduct their decision making in far more nefarious ways than most companies trying to keep their customers, employees, and investors loyal.

Re:It's a two-way street

[ScentCone]

but non-profits are generally beholden to their ideological base and are judged by their effectiveness in advocating for their causes

Boy oh boy, if that were more than only occasionally true. I happen to consult (IT stuff, web stuff) in the DC area. Everyone assumes that the only thing in town are giant corporate defense contractors, but believe me: it's non-profits that litter the Beltway. Every conceivable trade association, think-tank, and activist organization on every part of the political spectrum.

After years of working with the management, boards, and communications people in these organizations, I've come to draw some conclusions about them and the people that staff them. First and foremost: it's an industry. Meaning, it's a professional arena, to which people aspire, or in which people find themselves thriving. I've actually gained new clients because of the gypsy-like behavior of that universe's people - they tend to wander from association to association, and often take with them their favorite web tech guy.

So that you know, I'm talking here about associations representing current and veteran military people, those representing environmental activists (both pro- and anti-industry, and pro- and anti-hunting), those representing parts of the oil industry, and those pushing bicycles in lieu of cars. I've seen them all... and the have one thing in common. The people that work for those groups (and here, we're talking mostly about professionals - the fundraising campaign managers, the communications specialists, the directors, the general managers, the CFOs, the attorneys, etc) tend to stick with groups that have a particular Red/Blue affiliation, but otherwise don't seem very picky at all. The exception to this might be the particularly loopy religious bunch, or the truly crazy Marxist types, but both are fairly rare.

These people - career association/PAC employees - are, more than most anything else, shopping for jobs that look that much better on their resumes, and of course, which have a fatter paycheck. They generally want to prop up the political party that they adhere to, but are astoundingly ambivilant about which specific cause or movement they find themselves working for. After enough years in this groove, these folks are far more interested in triumphs of process, fund raising, and performance bonuses than they are the rise and fall of a particular advocacy effort. In trying to put another notch on their 501(c)(3) scorecards, they routinely resort to exactly the sort of corner cutting, obfuscation, and oily maneuvering that you are attributing to large corporate entities. And, when you're dealing with associations that have 200,000 members (or ten times that many), there's a lot of cash moving around, and a lot of events, people, campaigns, and other things to spin and work in one way or another. I've been expressly tasked with building systems that don't leave much of a detailed trail after a particular event has wrapped up, or after donor perks have been dolled out, etc.

My earlier comments about these organizations needing to practice what they preach are based on my personal observations of unethical skullduggery, sham communications, bad bookeeping, outright graft, and more importantly: daily operational/career decisions that absolutely, positively would horrify the average contributer/member of these groups (or, at least require such people to publicly act apalled, anyway).

The association/advocacy/"movement" industry is every bit as competitive (for scarce donated dollars) as the for-profit corporate world, if not more so. At least a large company is completely honest about what they're their to do: reward investors by profitably satisfying customers. But these NGOs and other non-profits are, first and foremost, career paycheck engines for the people that work there, and producers of their marketed message, influence, and advocacy second. In that setting, transparency is rare, and would shock a lot of people.

Full Disclosure doesn't apply for workers

[dougermouse]

When companies must give employees full disclosure on wages of co-workers so they can appropriately value their own work, then transparency will be acheived.

The widest canyon capitalism has is the rules are all one way. Submit salary history with resume? How about submit salary history of potential team members so you can make an informed decision?

I find it interesting that most pro-capitalism libertarians, like the authors are all about access to imformation for the investor and other corporations, but not for the workers.

Re:Full Disclosure doesn't apply for workers

[Brandybuck]

I find it interesting that most pro-capitalism libertarians, like the authors are all about access to imformation for the investor and other corporations, but not for the workers.

As a pro-capitalism libertarian, I would have to say that this is not the attitude as well. There are two important points missed by your statement.

The first missed point is that the employment transaction is private. Bob's wages are not disclosed because Bob's wages are private to Bob and his employer. But don't let that discourage you. Finding out what the market price is for your position and experience level is not that difficult. You might not know how you stand with regards to Bob specifically, but you will know how you stand with regards to your industry as a whole. If another firm offers you a higher salary, and you accept their offer, then your previous salary was too low. If on the other hand, your present firm replaces you with Bangalore contractor, then your salary was too high. Crying that capitalism doesn't work because Bob won't tell you his salary, is silly.

The second missed point is that no libertarian wishes information to be coerced. I realize that much information is indeed coerced today, but that is not a result of libertarianism. Do not confuse the current state regulated corporatized capitalism for free market economics.

Re:Full Disclosure doesn't apply for workers

[The Beezer]

Submit salary history with resume? How about submit salary history of potential team members so you can make an informed decision?

Simplest response is "Like your company, my previous employers consider that information confidential."

Same trend for those in power everywhere

[Cryofan]

From the school principal to the president to the CIA to corporations.

THe Net is returning us to a type of tribal, village society, one where everyone knows everyone else's business. In that kind of society, the powerful have less leverage when it comes to propaganda and knowledge. In that kind of society, they can only rely on force.

As America has become atomized, it has isolated us from the urban, unionized neighborhoods of the Northeast and midwest, and the grange halls of the great plains. Our political information now comes from the mass media, i.e., CorpGovMedia, meaning it is as much disinformation and propaganda as anything else.

But the net does not suffer bullshit or propaganda gladly, and instead skewers it on innumerable web forums (you're soaking in it now!).

Once broadband becomes cheap, look for America to become more like Sweden or Denmark--more united against the rich and powerful....

Re:Same trend for those in power everywhere

[ScentCone]

type of tribal, village society ... more united against the rich

Right. If you go back long enough before the internet, that's all you had. Whether or not the rich people existed (what, some lords and ladies with rotten teeth, living if they were lucky until their 35th birthday?), their standard of living was nothing compared to what we have now. We didn't get where we are because we were united against rich people. We got here largely on the coat tails of the sort of hard work and risk taking that does, sometimes, also produce rich people. Being against them means being against the things that allow them to exist at all, and that means being against risk taking and the passionate sort of ambition that gets us things like refrigeration, cheap anti-biotics, and airplanes (so that we can fly to Sweden and Denmark to observe village life devoid of rich people).

Oh wait, here are some rich people:


Birgit Rausing & family, Swedes, 32nd richest in the world
Hans Rausing, Swede, 41st richest in the world
Jorgen Clausen & family, Danes, in the top 200 richest in the world
Kjeld Kirk Kristiansen, Dane, in the top 200

I could go on. They're all worth multiple billions, and employ many of their countrymen and others around the world. Why haven't those forward-looking countries simply voted them out of the village? Because people like that are what fund, through huge taxes, the over-the-top costs of the social programs in those countries. Just check in with the flood of un-employed folks from the middle east that are swamping those two countries for free educations and dinner. It's easier when there are billionairs handy to cut the check.

"Stakeholders" dont' make the quick money

[paul7e]

Using Enron or any other corporate scandal as an example in favor of transparency is silly. The "stakeholders" for those companies bear no relation to the people making the very non-transparent decisions.

And those decision makers didn't care about the future of the companies, they just wanted to extract enough money out of them to buy their judgement-proof giant houses in Texas or Florida.

So the issue isn't that well-run corporations should be voluntarily transparent, they already are well-run. The issue should be how to force evil corporations, run by thieving robber barons, into some level of transparency before they've emptied the cookie jar.

paul

Blogs

[CGP314]

Don't forget that aside from companies choosing to go naked, bloggers are also pulling down their companies pants in public and feeling the repercussions.


-Colin

Trust

[starm_]

I said it before and I say it again. People really are starting to trust the free and open source software community more than commercial software companies. This is no surprise since private companies act as your enemy as soon as you buy something from them. They try to extort money from you by pushing upgrades that patch vulnerabilities and making sure your product only stays compatible for a short period. They make you subject to small prints, EULAs with mysterious and suspicious content, advertisement that is manipulative, misleading and dishonest. They give you poor quality support for their products and even worst support if the product is more than a year old. They push expensive insurance on everything you buy. Before the advent of opensource/free software consumers had no alternatives so they had to deal with unethical deceitful entities. But now open source has proven to be much more competitive on the ethical and honesty front. If private companies want to keep their market share they are going to have to earn the trust of the consumers. They will have to stop trying the fsck everyone in the behind all the time by pulling charlatan licensing tricks on everyone otherwize consumers will slowly move away from them. -- My posts are copyleft.

What I'd Like to See

[albamuth]

I'd like to see some sort of internal professional relations software (open source, universal standards) that would be used by all corporations to publically document things like promotions, reports of sexual harassment, grounds for dismissal, payroll reports, and the like. I mean, it's already to the point where private investigators or subpeonas can get all that info anyhow--so why not open it up so everyone can review it at any time?

Don't get me wrong, I'm as anti-big-brother as the next person, but in a society where privacy cannot be garunteed, the next best thing is to have as much as public as possible. Therefore the things that get entered into records would be done under the understanding that anyone could log in and check up on it instantly.

Examples:

You're trying to unionize your workplace and your boss finds out about it. They want to fire you by citing other reasons (attendance issues or something trivial). Any person in the world could check the data and see that you had an outstanding personnel record and that the firing is totally inconsistant with past relations to the company, making it obvious that they were firing you for union activities (firing for that reason is illegal) and they know that.

The company wants to make shoes in Indonesia for a total material and labor cost of $20/pair and sell them in the USA for $120/pair. The consideration of this would be documented and available online (the internal cost analysis report, for instance). Any fool could see that this a profiteering rip-off. Consequences: shoes get cheaper or anti-sweatshop activists lobby the company to keep production local (and union!).

Corporate execs like would have to document all decisions and so forth on the system so there is a big incentive for them to not make shady deals (or at least disguise them better).

I guess what I'm getting at is that transparency builds trust, but it has to be TOTAL and there needs to be some sort of expected standard of corporate transparency, not like the blackboxes they are today. It would be like a public ISO 9000 test. No more non-disclosure agreements!

I hope I live to see it happen, but I suspect that corporations themselves will go extinct before they adopt such structures.

Re:Nor exactly one that bn.com has in stock either

[MightyMartian]

> Some friendly advice: Look for it at the bargain
> table. In fact, first search the carts of 3 for $1
> books and the 'Free' bin that are usually right
> outside the front doors of most used book stores.

And if that doesn't work, check out the public washroom next to the used bookstore.

Naked and exposed...

[Dante Shamest]

Increasingly companies are finding themselves like the emperor naked and exposed.

Do not and I repeat DO NOT imagine Steve Ballmer naked and exposed.

...

Too late.

US Public Companies are the most transparent

[Bill Walker]

Thanks to the SEC, you can find out a huge amount of information about any firm publicly traded on an American exchange. For example, American firms must report their income and balance sheets quarterly, twice to four times as frequently as European firms. It's emerging markets and some developed markets that need to loosen up and show their books. There's a reason American firms can't get away with the cross-ownership and favorable terms that are routine in Japanese keiretsu and Korean chaebol's.

If you want to really know about a company's practices, read the management footnotes as well as the full income statements and balance sheets in the 10-Ks and 10-Qs. Don't just look at their pro forma earnings statement. Obviously you won't catch outright fraud, but there are plenty of clues that something shady is going on.

I think that people's demand for corporate transparency is inversely related to the money the corporation is making them. Accounting scandals usually happen just after a bust, rarely during a boom. While the returns are attractive, investors simply won't ask questions.

Not Always Good

[4of12]

Like, when the 800 lb gorilla is viewing your business.

A recent Frontline piece about Walmart included quotes from suppliers getting squeezed by the retailing giant to the effect of

Walmart knew our costs better than we did - they could squeeze us into accepting razor thin margins and thereby forcing us to outsource and to relocate to reduce our costs in order to get their business

I don't immediately see why a company can't provide a friendly exterior interface without giving away the family jewels. Maybe it just takes too much work, or else customers asking for super detailed technical specifications turn out to be competitors looking for instructions on how to eat your lunch?

but there's a catch...

[rbird76]

...you may need to have a PhD in accounting to understand them. When Enron was coming down, I knew someone in the business school at OSU, taking classes in accounting. When discussing Enron's books, his professor said (approximately) "I have 2 PhD's in accounting, and I still can't understand them [Enron's books]." If the company is shady, they may use differing approximations of accepted accounting practices, and the products of those accountings may be hard to correlate to reality. Without significant accounting knowledge, you may not recognize deviations from normaity and/or how big the deviations are.

Re:but there's a catch...

[ahem]

Perhaps based on this one datapoint, the best indication of something fishy is if someone well versed in the art can't make heads or tails of a company's books.

The beauty of accounting is that it follows the second law of thermodynamics: it all has to balance in the end. You can neither create nor destroy value. It either comes in from somewhere outside the system under study, or it leaves the system under study to go into another system. Eventually, it all boils down to shareholder equity measuring the net inflow or outflow of value.

What happened in Enron was plain old misdirection. They said, "Look at all the income we have from these external and independent entities!" When they really meant, "Hmm, I'll give a bunch of my debt to this shell corporation and they'll give me a bunch of revenue in return." Just debits and credits, plusses and minuses, but the meaning of plus and minus was perverted. Enron said, "Here's two systems, System Enron and System Outside Company. Enron's doing great." What they didn't mention is that Enron really should have been reported as E+OC, which would have shown a much worse situation.

Outing Corporate Political Influence

[randall_burns]

Open Secrets publishes a lot of interesting info on how various corporation's employees and officers use money to influence the political process. You can go there and tell who they are donating too. What needs to be done is correlate that data with stuff like the ratings of groups like Better Immigration. There are a lot of congressional ratings-what we need to figure out is what are the kinds of voting behavior that really elicit funds from various corporate interests.

Going Private is as big as Going Public

[sixoseven]

When the kitchen gets too hot, major shareholders can just go private. All that's done, doesn't show up in the Fortune 500. A public corporation's dealings, especially one of any size, are so complex that there is a lot of nuance that you can never get .

As on who sat in on analyst calls in a public company, and tracked the stock price, I know there is huge gap between an understanding of the public, the market, company insiders and company employees. Due diligence is no joke, and communicating what's going on in a company is an extraordinarily difficult matter. Just publishing stuff on the web doesn't cut it. If so, nobody would have lost money in the Bubble. Raise your hand if you really know how to daytrade or read a 10Q.

Private equity firms are on the rise. Everything is not for public consumption. Given what happens to people roasted in the media, what would you rather do? Be public and open to false ridicule, or concentrate on your business?