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Norbert Schwieters Global Leader, Consumer and Industrial Products & Services,
PwC Germany Dec 04, 2015
We live in an era where technology is changing our lives at a rate that every part of society
is grappling to keep up with. Technology creates enormous opportunities and new risks
alike. Many people are worrying about their privacy; companies are seeing their business
models come under attack from new digital entrants and their corporate behaviour
magnified in real time through social media; and governments are facing diminished control
as new forms of communication empower their citizens to mention only a few chan
Its not just the challenge of keeping up to speed with technological developments. Its
whether and how the current design of our private and public institutions needs to adapt to
cope with these changes and to restore the trust of society digital trust. In June, to mark
the 800th anniversary of the Magna Carta, we looked at how institutions (organised and
purposeful interactions of people based on contract, law or culture) must create and
maintain trust through legitimacy, effectiveness and transparency, and how global
megatrends like technology are driving the need for a design transformation and a bold
new charter for our digital world.
Here we take a look at 10 digital trust issues that in our view institutions must grow new
capabilities to address. These issues centre around the ethics and control of data access
and use, interaction through the Internet, digital risk resilience and value creation in the
digital age. The emergent and interconnected nature of these issues and the regulatory
response to them highlight the challenges organisations face. How and how quickly will they have to adapt their design to create trust against this backdrop of digital
transformation? We consider a few questions below in the context of the three pillars of a
trustworthy institution.
Legitimacy
Effectiveness
Will new public institutions have to be created in order to ensure digital trust?
Transparency
How will institutions need to monitor and report on digital trust, both internally and
externally?
Is auditing required and how should it be done?
In this brave new world, organisations must fundamentally rethink how they create value.
The explosion of digital data and the new and innovative ways its being leveraged have
huge implications for the economic value chain. In a world of (near) zero marginal cost of
production and rising relative value of intellectual property, classical cost-based business
models and the implications for income generation and distribution, in short social welfare,
need to be re-examined.
insights, affecting how this data is used. The public has been slow to realise just how much
personal information companies are collecting and using, but as they become more
informed, managing and protecting privacy and data use will become an important
barometer of how much companies are trusted by their wider stakeholders.
Is it sufficient to legitimise data access and analysis through the legal terms and conditions
of a customer application for goods or services, for example? What level of transparency
should the customer be entitled to? With personal information now an economic
commodity in its own right and potentially the solution to some of society's greatest
scourges like disease, how can we achieve an acceptable balance between individual
privacy rights and the wider interests of society? The ethical use of data is another issue
that needs to be addressed and something that regulators are increasingly calling to
question. And what measures are needed to educate the public on risks and benefits of
technology and actions that individuals can take to manage their technology footprint? As
the privacy debate is reframed by digital disruption, organisations must look at which
direction and to what extent they evolve their information governance strategies and
capabilities, and ensure that the mechanisms chosen to balance competing interests are
ones that generate trust and confidence amongst their stakeholders and in the general
public.
Take wearable technology for example, which can exponentially increase the amount of
information available about employees. How much of this information is necessary or
acceptable? Or consider how difficult it is nowadays for employees to keep their personal
lives separate from their working existence: employers are using personal information
shared via social networks to make character decisions when hiring and to evaluate the
Without transparency, how for example can we be sure that decisions are based on causal
relationships as opposed to correlation? Or consider the blockchain public ledger
technology which underlies cryptocurrencies like bitcoin: the technology creates data that
by the nature of its origin can be trusted, but is trust based only on effectiveness enough?
Or take the sharing economy. Its new business models enable better use of existing
capacity but have also fuelled debates, in particular the clash between legal regulations
that bind existing service providers versus the algorithmic regulations (based for instance
on feedback loops) used in these new digital service offerings. How can trust and
reputation, so vital to sharing economy, be maintained when some users are wary about
how some of these rules are defined and implemented? Transparency is also important
from the viewpoint of governance, risk and compliance: to what extent can we trust
machines to control machines? Should we regulate algorithms with algorithms, or have
humans doing the job and do they have the right technical skills in sufficient numbers and
speed to regulate effectively? This is particularly relevant given for instance the rapid
development of flash trading in the financial markets.
the growing role of machines as an essential tool to improve everyday life, such measures
will be vital in building a greater degree of trust.
example. On the macro level theres the spectre of global cyber warfare targeting crucial
energy or security infrastructure, commercial assets or mass transport for example with
businesses caught in the crossfire of rising geopolitical tensions. With the lack of
international conventions around this type of warfare, what happens if you deploy a cyber
weapon?
As cyber security threats increase its likely, if history is any indicator, that governments will
seek to access, monitor and control even more of our personal data. The same will no
doubt be true of companies as they look to protect their vast databases of consumer and
employee information along with their systems and digital operations from hackers bent on
corporate espionage or even sabotage. Should encryption of information be prohibited in
certain cases? Or should there be limits to what data can be accessed? What measures
are needed to protect institutions against leaks, losses and manipulation of data that take
into account concerns about privacy and ethics? What do governments and companies
need to do in order to regain the trust of an increasingly sceptical public thats demanding
more control over their data?
Digital resilience
(8) Resilience in the face of digital disruptions
Our reliance on technology to enable day-to-day activities has skyrocketed: we check into
flights online, access hotel rooms with our mobiles, do online banking. We dont really think
about until something goes wrong. In the past, companies could be forgiven for
occasional system interruptions. Not anymore. With so much of our lives dependent on
technology, interruptions can be disruptive and expensive. Businesses across sectors have
been shaken by the impact of several high-profile IT outages and glitches, eroding digital
trust. The ability to keep the lights on is becoming a business priority. But organisations
are challenged by the sheer complexity of their IT services, with layers of infrastructure and
multiple service and process interdependencies. Theyre also under pressure to deliver
with ever greater speed and lower cost - and to spend more time and resources on growth
and innovation. And they face the increasing frequency and sophistication of cyber attacks.
How can companies gain a holistic view of the IT landscape and all its risks, and design
the right governance and risk management processes to better manage them?
Preparedness for threats and disruptions is one aspect of digital resilience. But the speed
and effectiveness of response to a crisis, and the ability to manage the recovery process
are just as vital. Consider the power of social media, where an overnight tweet in Australia,
for example, could cause a product crisis in Brazil. How can companies ensure they can
react optimally to events even as theyre unfolding? Their ability to do so will greatly
influence their level of trust and ultimately their resilience in an ever-changing world.
The issue of where value is created also has large implications for global tax strategies, as
corporate assets become increasingly digitalised. Accusations that companies arent
paying the right amount of tax in the right places can quickly erode trust even if theyre
compliant with national tax laws. Whileproposed reform of international tax rules can help
address the issue, perhaps the immediate question is whether business simply wants to be
trusted to comply with regulation or for making decisions based on principles and values.
How can companies better understand the wider impact of their tax decisions ? Should they
voluntarily take the lead in tax transparency? How can businesses and governments work
together to create workable standards for a global economy including digital business ?
automation on employment levels and disposable incomes could affect economic growth,
as well as the very fabric of society.
As our digital society continues to evolve, business and government will have to win back
the trust of sections of society that feel marginalised by a new type of digital divide. Will it
be enough to retrain workers? Should we see education as a life-long process, with funded
schooling for all, so that workers can continually adapt their skills to the changing needs of
the economy as technology advances ? The key difference between the previous
agricultural and industrial revolutions and the coming artificial intelligence revolution is that
jobs will be displaced at a much faster pace than what it will take for humans to reskill. But
what can we learn from history about shaping new laws, charters and movements to adapt
to the social chaos wrought by innovation, as we consider an age where work (as we have
known it) may no longer be the norm ?
However, there isnt a one-size-fits-all solution across the globe. An institution can achieve
an overall level of digital trust with varying combinations of the degree to which the three
pillars of legitimacy, effectiveness and transparency are realised. The political, societal and
cultural background of its environment plays a crucial role here.
Organisations private and public - will have to become comfortable dealing with grey
areas and a constantly shifting landscape. Theyll have to find the right balance between
how they get and use data and the social consequences of those actions and accept that
the line is always moving. Theyll have to build a great deal of flexibility into data strategies
and models. And theyll have to create a foundation of values to inform compliance,
governance and ethical decision-making. Which brings us back to the need for a design
transformation.
By its very nature digital technology like its siblings biotech and nanotech has set out to
create a new dimension of intelligence that undermines the control humans had over
technology in the past like never before. Apart from the need to rapidly increase our
capability to understand the impact of technology the question arises as to whether the
catalogue of human rights needs to be amended in order to restore control and form the
constitutional basis for digital trust. As were right on our way into the machine age
this is at the core of a new Magna Carta for the Digital Age .
While technology is transforming how institutions relate to their stakeholders, digital trust is
but one aspect of trust. In the coming months well look further into how organisations can
take concrete action on embedding changes in their design to achieve greater levels of
overall trustworthiness. These will centre around the measurement of trust and of the trust
impact of incremental changes in institutional design. This will form the basis for informed
investments into trust.
Contact us
Norbert Schwieters
Global Leader, Consumer and Industrial Products & Services, PwC Germany