Though disruptions are not inherently negative – if I disrupt what you’re doing to present you with a check for $1 million, I think you would deem that disruption positive – they typically present challenges before they surface opportunities (remember going from A to chaos to B). The three major disruptions in the news today, I would say, are: global warming, the presidential election in the United States (although this is primarily a domestic event for us in the US of A, indubitably our choice will impact world events), and the financial crisis. Leaving out global warming for now, let’s see whether digital technologies are involved in the other two.

New Media and New Campaigns
Unquestionably, the US presidential candidates had to embrace the digital disruption presented by online New Media (New Media is a disruption in the Digital Disruptions report) or risk falling behind in raising money and getting their messages out, as well as risk being deemed out of touch with their increasingly tech-savvy constituencies.

Obama jumped on the Internet early but McCain has come back strong, according to an article in Online Media Daily:

Barack Obama trounced John McCain in online media and advertising during the first six months of the year, according to a new comScore study. The Web ratings service found Obama’s online display ads drew 92 million views monthly on average from January through June 2008, compared to just 7.3 million for McCain.

The Obama campaign appeared to ramp up online efforts in May and June as ad impressions surged to 150 million and 244 million, respectively, while McCain’s fell to a low of 3.2 million in June.

Obama also outstripped McCain in the average number of monthly visitors to their respective campaign sites (2.2 million to 583,000) and searches of “Obama” versus “McCain” (5.3 million to 1.3 million). . . .

One area where McCain turned the tables was video. His site had more than triple the video views of Obama’s at 2.1 million to 612,000. ComScore attributed the Republican presidential nominee’s online upset to video being featured more prominently on the home page of JohnMcCain.com than on BarackObama.com.

McCain has also been closing the gap more recently in video views on YouTube, where Obama has far more ads and original shorts. In the last month he had 6.5 million views to Obama’s 9.8 million, according to video tracking site TubeMogul.

Though one could argue that this does not represent a shift to a new grassroots political model as was initially thought – after all, we increasingly purchase online, so online donations merely reflect that trend (see article) – no one would dispute that New Media technologies represent one of the fastest, most effective ways to bolster a campaign.

Information Transparency and Financial Transparency
As for the financial crisis, I would argue that it was created in part by digital technologies, and I think it will be resolved by them as well. In the late 80s and early 90s I worked on Wall Street for Bankers Trust – often credited with inventing derivatives: customized, complex securities such as mortgage-backed securities and collateralized debt obligations.  I managed the design and implementation of C-Trac, the first collateral management system for these exotic offerings and learned that without powerful computers it would have been impossible to craft, value, pool, strip into traunches, and mark to market all but the simplest of these, not to mention track the collateral that was being rehypothicated on a daily basis – i.e., passed around institutions to back whichever deals’ change in net present value required additional risk mitigation.

What was lacking then is lacking now: information transparency (another of our digital disruptions).  When Bankers Trust’s clients started to lose money on these initially highly lucrative deals that turned corporate treasury departments into huge profit centers, they claimed they didn’t understand the risks they had been taking. Very few outsiders were aware of the huge risks to which the increasingly unregulated investment banks and hedge funds exposed themselves and their investors, and many of those who were aware were profiting handsomely from the risky transactions and weren’t about to blow the whistle.

This is changing. The New York Times started a blog on Merrill Lynch, Lehman Brothers and the bailout. Web sites like factcheck.org and glassdoor.com, which aggregates insights anonymously provided by employees and is consulted by the press and, it is hoped, the Securities and Exchange Commission, are exposing in real time what CEOs and CFOs may be withholding from their shareholders and the government.

Last week the Federal Reserve Bank of New York met with Eurex, NYSE Euronext, CME Group/Citadel, IntercontinentalExchange/the Clearing Corp., representatives from the major dealers who sell Collateralized Debt Securities contracts, buyers of the contracts, and representatives from the SEC, the Commodity Futures Trading Commission, and the European Central Bank to discuss setting up a clearinghouse for the hitherto unregulated $55 trillion market for credit derivatives.  (See article.)

This is a first step in exposing to players, investors, industry and government the day-to-day market value of these complex assets, and the leverage that players and investors have taken on. I envision something like a software RFID-like tag for securities that allows the world at large to track every detail of what is going on in the financial markets, in the same manner that Wal-Mart tracks products from initial order to production, sale and restock. This follows, too, the much publicised example of information transparency, the Goldcorp turn around.

When in March 2000 the mining company Goldcorp exposed all of its geological data to the world and launched the Goldcorp Challenge, with prize money for those who provided the best methods and estimates for mining Goldcorp’s property, it was a huge success.  More than 1,000 virtual prospectors from 50 countries helped propel the “under-performing $100 million company into a $9 billion juggernaut while transforming a backward mining site in Northern Ontario into one of the most innovative and profitable properties in the industry.” (See article.)

Similarly, by leveraging some of the technologies reviewed in our Digital Disruptions report, and others, a new level of information transparency and collective expertise can be brought to bear on the financial markets, making them once again the safe and liquid engines that finance and reward innovation.

In this blog I expect we will come up with some guidelines for understanding the plethora of digital disruptions we are facing and will face, as well as for managing them to advantage in our respective businesses. When we do, let’s highlight the former in bold at the latter in italics. I’ll start us off.

You can’t stop disruptive technologies. About five years ago, the price of powerful hardware dropped so precipitously, and a myriad of software productivity tools became so widely available through consumer channels that, while employers struggled to evaluate and integrate it all, employees quickly outfitted themselves with state-of-the-art home offices and leading edge communications gear. These very tech-savvy employees, many of whom never knew a world without the Internet or cell phones, were not content to leave their gadgets at home, and brought them into the corporation, policies prohibiting them notwithstanding. These technologies – instant messaging, Internet e-mail, cell phones, PDAs, flash drives, GPS, portable hubs and MP3 players,* to name a few early ones** – were helping employees get more work done faster, and get it done anywhere, anytime. If the corporation was withholding support for all this unauthorized equipment, so be it. The employees could and did support it themselves. What’s a corporation to do?

One of our clients decided to decouple tried-and-true-but-slower-moving IT from early-adopter employee purchasing by giving employees a budget to buy their own equipment, with the provisions that a) they could not call the help desk for support; b) anything that disrupted the corporate network would be shut down, and c) employees were required to sign an agreement saying that to the best of their ability they would use the technology securely and responsibly. This arrangement, they say, has been working well. Lesson learned: Plan to give up some control, and trust your employees to move your company forward in the digital age – though stay involved to make sure the infrastructure you do provide is not compromised.

Again, expect some chaos as you move from business model A to business model B. For example, commenting on the illegal use of a laptop in Notre Dame’s coaching box, the New York Times reported, “…the N.C.A.A. appears more reluctant than professional sport leagues – and even some high schools – to welcome the latest available technology.” The article observed, “In many aspects, football keeps technology at arm’s length, particularly at a time when it might be most useful – on game day.” You can bet this will change. You can’t stop the technology, so be creative in figuring out the best way to harness it.
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*Note the blurring distinction between entertainment equipment and productivity tools.  MP3 players, first used to listen to music, were quickly adopted to replay corporate briefings and seminars.

**See the Digital Disruptions report for the latest innovations you can expect to see soon.

I hope you’re watching the announcements about security as they fly onto your workstation through email, RSS and various postings.  Every week there is a new “discovery” about the need for security services and technology to help create value for the enterprise.  Just this week there are two powerful reminders (and it’s only Tuesday)!  In both cases, the message of Digital Trust is echoed over and over.  In particular, these announcements reinforce three of the four strategic conclusions of the Digital Trust research program as reported in Volume 8, the final volume of the Digital Trust report series:

* First, digital trust is real. The presence (or absence) of digital trust has real, direct impact on the ability of the enterprise to achieve competitive advantage and “make business happen.” The findings of the third quarter 2008 Online Customer Respect Study of life insurance industry Web sites has a specific warning about the impact of a lack of (digital) trust for this industry.

* Second, aim high and first with a digital trust strategy to get the payoffs. In a summary report from the Security for Business Innovation Council, published earlier this year by RSA, 10 security leaders from different industry sectors have declared that security teams must now become “full partners in the business innovation process.” When you read further, you will discover that this is their way of saying “apply a digital trust strategy.” In the words of the press release, “In this landscape, the security focus must move from solely mitigating risk to also maximizing business reward.”

* Third, security governance structures prevent digital trust strategies from being used more widely. A more recent companion report also published by RSA tries to develop and explain a “risk/reward equation” based on a foundation of enterprise information risk management.  Once again each of the 10 council members offers his or her advice about how to maximize the returns from such a strategy.  Compare this to the foundation equations of digital trust presented in Volume 1 of the Digital Trust report series (see “Not Your Father’s Information Risk Management” on p. 6), and to the results shown over and over in each of the succeeding volumes.  (All Digital Trust volumes can be found here.) There are some important differences between the two in just what “value” is targeted, but both insist on an organizational and governance structure that makes security teams aware of business objectives (not just operational objectives) and assigns them the responsibility for attention to value in prioritizing security actions.

Ten “thumbs up” for digital trust
RSA established a Security for Business Innovation Council in 2008.  The membership was selected by RSA from among security executives representing companies that had extensive security programs, regulatory issues, substantial investment in intellectual property, and an acknowledgement that “information security needs to be part of their business innovation process, ” as the summary report said.  Interviews with each of the 10 executives led to the conclusions of the first (summary) report and recommendations about risk/reward in the second report. 

In quote after quote from each of the 10 members in their first report, obligations to recognize business impact and (at least) not hinder business operation unnecessarily are promoted.  It’s a very tiny step between the words of the council members and the conclusions and recommendations of Digital Trust.

In the second report, the council members promote an “information risk management” methodology as a way of balancing risk/reward for information security.  While it does move security service away from being an innovation inhibitor, it still falls short of the digital trust reality (and equations) that include and account for enterprise value creation with security services and technology rather than incremental (even cost justified) reductions in risk exposure over enterprise value that already exists.  Despite this difference, there is strong and compelling agreement on the need to rearrange IT security/risk governance so that the security teams are directly connected to business objectives and value targets.  Only then can they more fully contribute to innovation within the enterprise.

A digital trust deficit for the life insurance industry
The Customer Respect Group “measures and reports on the behavior of corporate websites in relation to the treatment of the online customer and their personal data.” (www.customerrespect.com) As part of this measurement, the Customer Respect Group has invented a Customer Respect Index (CRI) rating.  For the past five years, the Customer Respect Group has reviewed and measured corporate Web sites, including life insurance industry Web sites.

While this latest study indicates that at least some life insurance Web sites have begun to improve their performance according to the CRI, the study also lists two items as its “most surprising results.” One has to do with the speed of innovation.  The other, however, is listed as “not enough emphasis on trust.” Since the study is based on an examination of Web sites (in this case insurance company Web sites), the kind of trust deficit being declared is a digital trust deficit.  And, that deficit is penalizing life insurance companies by limiting leads for offline business.

Despite the generally weak CRI scores of life insurance companies, five companies were noted as making good improvements. The top five life insurance Web sites and their CRI scores (10 is best) are:

-- Western & Southern Life (7.7)
-- Nationwide (6.7)
-- Metropolitan Life (6.7)
-- New York Life (6.4)
-- Principal Financial (6.4)

In the Digital Trust report series, Volume 7, “Transparency and Assurance,” examines how digital trust can be created, conveyed, lost and reclaimed.  Although four main techniques for the creation of digital trust are explored, special attention is given to the topic of digital trust creation for Web sites.  Even though the five insurance companies listed have begun to rise on the CRI ranking ladder, digital trust creation techniques are readily evident in only two of them (Nationwide and Principal Financial).  Even then, their use of those techniques falls short of the best applications as described in the digital trust reports.

There’s sure room for more value creation with digital trust in insurance company Web sites.  I wonder what the rankings could be if digital trust techniques were applied thoroughly?!

The sound of digital trust on the move
Can you hear it?  The sounds of digital trust and digital trust strategies are getting louder and louder as they move forward into more widespread application, with the recognition that security services and technology can, indeed, create value for the enterprise.  Be sure your enterprise “hops on board” before the last digital trust cars leave the station.