Know the Risk: Digital Transformation's Impact on Your Business-Critical Applications REGISTER >
Of course, there are many obstacles to complete transparency, and some of these are valid. There are trade secrets and other proprietary information rules. Much of the financial-services industry is based on opacitybanks are intermediaries between customers and those with money or sources of capital, and if customers really knew that there was very little value being created in the middle, they'd find a way to disintermediate banks. Look at E-Loan, a dot-com survivor. It turned profitable in the fourth quarter of 2001. It ended 2002 with $393 million in consumer loans on its books. Its site lives and breathes the transparency of its lending process. In the short term, it may be possible for older companies to maintain a degree of opacity and, therefore, a viable business model, but in the long term, customers may find other alternatives.
Another problem is the limit of knowledge. People didn't really know what was going on with Enron until it was too late. Sure, you could have gone into an Enron discussion group in 1998 where someone with a handle named janisjoplin298 led a discussion about how off-balance sheet financing and opacity was going to kill Enron. But it was pretty difficult to parse out that comment from tens of thousands of glowing, breathless comments about how Enron was going to be America's corporation for the next three centuries. Even in this open world, some of the most important messages are going to get lost.
Another barrier is the cost of openness. Borland Software, a company with $245 million in sales, claims that complying with Sarbanes-Oxley will cost it $3 million a year, which is more than 10 percent of earnings. And that's just Sarbanes-Oxley. It's just a drop in the bucket compared with what's going to be needed to make entire corporations and enterprises fully and actively transparent.
There's also the problem of our lawsuit-crazy society. Bill Watkins, the president and COO of Seagate Technology, told us that he wants to have the most transparent company in the world. The main people fighting him on this are his own lawyers: the hypercritical media and others may not have a firm's interests at heart. Gordon Nixon, CEO of RBC Financial, told us he's a big supporter of transparency, but sometimes he feels like a politician standing up in the Senate, and no matter what you say, somebody's going to take it out of context and jump all over it.
So there are problems. Our society is not yet literate about transparency. We have a lot to learn, as Amazon did in 1999, when it introduced purchase circles, which disclose book preferences for its customers. The circles began revealing information, such as whether employees at Microsoft were snapping up anti-Microsoft books. All of that really crossed the line, and can be chalked up to a lack of literacy about how to handle transparency. Amazon had to back off, learning the hard way that transparency can be a double-edged sword. Amazon still has purchase circles, but has stopped disclosing consumer information without first getting individuals' consent, a change resulting from privacy groups' complaints.
Yet, despite challenges, there's no doubt which way this transparency revolution is all moving. The horse is out of the barn. The train has left the station. Transparency is an unstoppable force. New kinds of leadership, new kinds of management styles, new kinds of workplaces must inevitably result.