Trust & Competitive Advantage: An Integrated Approach to Governance, Risk and Compliance

Trust and Competitive Advantage: 1
An Integrated Approach

Executive Summary improve relations with stakeholders and, ultimately,
facilitate trust and competitive advantage.
BURNED BY ENRONESQUE ACCOUNTING scandals,
investors and governments are imposing rigorous
reporting requirements to keep companies on the straight 1.0 Corporations Need to
and narrow. Rebuild and Strengthen Stakeholder
These reactions are a symptom of a fundamental force Trust
in the economy: a crisis of trust among stakeholders of
corporations. Stakeholders are not only a company’s In business, “trust” is the twofold expectation that the
shareholders, but also customers, employees, business other party will deliver value and that they will behave in
partners and communities, and in recent years their trust a way that’s consistent with four core values (see
has been profoundly shaken. Naturally, they are now Figure 1):
trying to protect themselves, often via legislation. • Honesty. The company is truthful, accurate, and
But companies that scramble reactively to implement complete in communications with stakeholders.
one-off responses to each new set of compliance • Accountability. The company makes clear
regulations won’t rebuild stakeholder trust—they’ll just commitments and abides by them.
spend a lot of money on shortsighted solutions.
• Consideration of others’ interests. The company
Companies committed to gaining stakeholder trust, as well
as better planning and decision making are, instead, taking understands and shows regard for the interests,
an integrated approach to the related issues of governance, desires, and feelings of others.
risk management, and compliance (GRC). The approach • Transparency. Stakeholders have access to
comprises of people, processes, corporate culture, and company information that affects their interests.1
especially systems. Technology provides affordable
Transparency, which underpins the three other core
mechanisms for information sharing that can scale
values, has been an important trigger for the current crisis
globally. Automation not only reduces expensive “human
of trust. The expression “What are they hiding?”
middleware” but also offers entirely new collaborative and
demonstrates the relationship between transparency and
analytical possibilities. Integrated GRC solutions help
trust. As I’ve argued, “trust depends on transparency and

Figure 1 The Four Core Values

Master Data Management Understanding customers and
Better visibility into the firm Honesty forecasting markets
Single version of the truth Fair labor relations through
consistent compensation
Enterprise planning
Accountability
Ensuring integrity across the
business web
Effective scorecarding
Performance management
Consideration

Transparency
Better, more accurate reporting
Valid non-financial information
Supply chain transparency
Employee portals
Customer relationship applications

© 2006 New Paradigm Learning Corporation


transparency depends on trust. Indeed, as people learn to a variety of dimensions (see Figure 2)—and lack the
collaborate well over time, transparency and trust coherence needed to engage in consistent trustworthy
reinforce each other, generating a virtuous cycle.”2 Until behaviors towards ever growing collections of
recently though, the ability to be transparent has been stakeholders. An integrated approach to fulfilling the core
limited to small business ecosystems. Think of it this way: values that facilitate trust allows everyone across the firm
many rural businesses extend credit to locals. Word gets to act in concert and live up to internal and external
around in a small community, and everyone knows who standards (see: “An Integrated Approach to Transparency
can be trusted to pay their tabs and make good on their is Essential,” below).
promises. It’s not blind faith, because everyone’s behavior
Corporations must combat the fragmentation that
is visible (i.e., transparent). But village community
separates their people, processes, and data. Three
systems don’t scale easily to big cities. In places where
significant challenges stand out:
participants’ behavior isn’t easily visible to others,
businesses traditionally ask for guarantees: a letter of 1. Think and act globally. Accustomed to setting policies
credit or a lien on an asset, for example. And for other locally, companies now juggle complex regulations
stakeholders (consumers, suppliers, communities), it’s that vary from one country to the next. Imagine that a
been a matter of gathering whatever information was European distributor has asked its manufacturers to
available and hoping for the best. eliminate all lead soldering circuitry in a product to
comply with environmental standards like RoHS. The
manufacturers willingly comply, but no one tells them
“If you’re going to be naked, you’d that they also need to eliminate cadmium coatings on
better be buff.” components. The distributor and the manufacturers end
up stuck with piles of product that neither can sell. Or
But now, thanks to exponentially greater access to consider currency risks—mitigation often requires
information, we can track information, rules, global coordination to carefully manage local contracts
accountabilities, processes, and behaviors on any scale. and commitments.
Stakeholders of all types now have unprecedented
2. Bridge corporate silos. A corporation is an
visibility into the behavior, performance, management,
increasingly complex body of moving parts: assets,
and operations of companies. The optimistic old adage,
products, employees, relationships, information
“you do well by doing good” is coming to life. It used to
systems, contracts, and transactions. In the absence of
be that a lot of companies did very well by being bad—
integration, many day-to-day actions and interactions
creative accounting, unfair labor practices, and shady
are at best suboptimal—and at worst create openings to
environmental behaviors could help beef up the bottom
illegal or even criminal behavior. Does design know
line. But thanks to increasingly sophisticated
the impact of materials substitutions on warranty costs?
communication technologies and the interconnectedness
Does legal know the cost of a day’s delay in finalizing
of business webs, stakeholders now quickly uncover the
a contract? Is the sales team aware of how contract
rogues—and warn others against them. Like it or not,
terms affect the ability to book revenue? Silos make it
corporations are becoming naked, and as I’ve said before,
difficult to determine who has ultimate responsibility
if you’re going to be naked, you’d better be buff. Fitness
for compliance or overall risk management.
is no longer merely optional.
3. Use technology to improve information flows.
2.0Pervasive Fragmentation
Organizations are locked into the technology of the
past, running collections of incompatible systems that
Complicates the Pursuit of communicate imperfectly with one another.
Disconnects multiply with the volume and complexity
Stakeholder Trust of the information within and beyond the enterprise,
At the same time that stakeholders have the means and and the tools have not been able to cope. As recently as
interest to scrutinize corporate behavior, fast growing a decade ago, the computational enormity of analyzing
global firms find it ever more challenging to build and all this information was overwhelming. Glenn Wegryn,
maintain trust. These firms are typically fragmented across Associate Director, Global Analytics at P&G, says,



Figure 2 Fragmentation Inhibits Consistent Approaches

People Data

Global
disconnects
Corporate
silos
Technology
islands

Processes

“we didn’t have the technology to really harness and on its own—can accomplish little. Royal Caribbean Cruise
optimize the capability ten years ago.” Computers at Lines learned this the hard way. In 1998, the company
the time were inadequate.3 pled guilty to conspiracy and obstruction of justice and
had to pay fines of $9 million for repeatedly dumping
Fragmentation is hard to fix. Every day, people make
enormous quantities of waste oil into the ocean. Its
bad decisions because of bad information. When people or
employees had been bypassing waste water filtration
departments don’t trust the data or can’t get the data they
equipment and deliberately dumping the contaminated
need, they create their own versions or make suboptimal
water into the ocean. Jack Williams, the company’s new
choices, which not only wastes effort, but also further
president, issued a statement saying the company accepted
fragments information across the organization. Stranded
full responsibility for its acts and promised that it would
information islands, from corporate databases and design
never happen again.
drawings to Excel spreadsheets, create a tangled mess of
untrustworthy information that impairs customer service, A month later, another Royal Caribbean ship was caught
destroys market opportunities, and exposes the dumping untreated waste water. Williams blamed a group
organization to risk. of employees who refused to comply with company
policy, and argued that the company’s enforcement was at
Convinced yet? Most executives are: they see the
fault, not its commitment to environmental laws. The
importance of building and maintaining trust; they agree
courts were not moved by the distinction. The company
that transparency is essential; and they understand that
was slapped with another $18 million in fines.
geographical, organizational, and systems fragmentation
complicates the problem. These leaders are committed to This example shows that espousing a set of values
making sure that their company isn’t the next Enron or means nothing if the company isn’t structured to fulfill
WorldCom. those values. In Royal Caribbean’s case, it turned out that
compensation policies and environmental policies weren’t
Unfortunately, commitment isn’t enough: a company
integrated—in fact, they were in conflict. It costs the
may have the best intentions, but fragmentation on the
company hundreds of thousands of dollars a year to filter
scale we’re seeing today means that the will to change—


water and carry oil waste back to port for disposal. The remove the guard for better visibility and freedom
bonus structure rewarded cost control, and therefore of movement anyway. The manufacturer doesn’t
rewarded employees for bypassing the oil-water separators hear about this product defect and is unaware of the
and dumping dirty water at sea.4 The president could product liability it poses.
make a commitment to change, and mean it sincerely, but
• A director of corporate social responsibility has
the company’s DNA countered that commitment. As a
made remarkable progress forging relationships
result, Royal Caribbean had to go back to the drawing
with NGOs by striking frank and honest dialogue on
board and make fundamental changes to its processes,
difficult issues. In 2005, one of the employee’s
systems and culture to ensure its values drove the behavior
well-intentioned editorials published misleading
of everyone. Today it is a world leader in this regard.
data about CO2 emissions (the internal sources he
used turned out to be estimates, not actual data).
3.0Beyond a “License to Unfortunately, the editorial counts as “commercial
speech” (see: Nike Inc. v. Kasky)7 and places the
Operate”: Trust Contributes to company at considerable legal risk.
Competitive Advantage • After months of negotiation, a star salesperson
Building trust is expensive—AMR Research estimates finally receives the go-ahead on a major deal.
that in 2007 companies will spend $27.9 billion5 on Excited to seal the deal, a contract template is
compliance, and 32% of that will go to technology.6 But modified to reflect the negotiated terms (with
it’s not all bad news and cautionary tales—trust makes approval from legal). Unfortunately, the terms of
business sense. Organizations that invest strategically in payment included a seemingly trivial concession
compliance not only protect their “license to operate,” but that, it turns out, will delay booking of revenue for
also gain competitive advantage over companies that take accounting purposes.
a haphazard approach to compliance. It all goes back to
• A circuit board manufacturer negotiates component
the essential ingredient of trust: transparency—and,
pricing with suppliers and builds the project at
specifically, information liquidity, which I define as
razor-thin margins. Because the manufacturer
access, by those who need it, to integrated, accurate, and
doesn’t maintain an inventory of the board’s
timely organizational data in a manner that respects the
components, they’re unaware of the regulatory
interests and privacy of stakeholders. It’s about visibility
issues affecting them (e.g., material/contents or
that cuts across the organization, and it increases your
export restrictions), and aren’t tracking the impact
corporate metabolism.
of changing market prices (e.g., suppliers could be
making huge margins following drops in component
“It’s not all bad news and cautionary prices).
tales—trust makes business sense.” • Third parties sometimes take existing products and
innovate in unexpected ways (e.g., BASF foam
Internally, organizations are already asking for the same insulation, FedEx boxes, the Toyota Prius
transparency that reporting and regulatory requirements diagnostics port, Apple’s laptop motion sensor).8
demand. But the internal demand has less to do with WiFi fans even use coffee cans and other product
compliance and more to do with competitive advantage. containers to create powerful home brewed
Within the firm, transparency is a strategic imperative— microwave antennas.9 Is this a potential marketing
easier access to information facilitates continuous opportunity, or time to print a warning label about
improvement, innovation, and collaboration. Information hazardous microwave exposure? Unaware of how
liquidity can have a significant business impact, as these their products or services are being consumed, many
examples demonstrate: companies fail to react at all.
• A customer purchases a table saw that’s prone to Information liquidity helps bind enterprises more tightly
jamming whenever she uses it. But when she calls and creates a path for continuous improvement. From the
the store they say it’s a common problem with the introduction of the assembly line and Just-in-Time
blade guard and that many woodworkers prefer to manufacturing to Triple Bottom Line reporting and the


Balanced Scorecard, firms have looked for ways to individual firms and among enterprises—depends on
improve their coordination. These tools strive to maximize reliable shared data. Erik Degn, Novo Nordisk’s vice-
transparency and the flow of information (assembly lines president of IT System Management, says, “it’s a lot
share information via tight synchronization that quickly easier to collaborate in a model where you have consistent
exposes bottlenecks or fragility along the production line; data that is integrated and accessible and trustworthy.
Balanced Scorecards map the causes and effects that We’re starting to see the benefits of having one shared
contribute to enterprise value creation). And just as a information source for business intelligence, and that’s
conveyor belt closely synchronizes the activities of a very valuable in steering the business today.”13 At eBay or
production line, information technology and transparency any other organization, the trust that accrues from
can unite the activities of the organization. transparency drives down the risk and cost of
collaboration.
• Novo Nordisk uses Triple Bottom Line accounting
to balance economic performance with
environmental and social considerations. The “Just as a conveyor belt closely
company now publishes an integrated report that synchronizes the activities of a
merges a CSR report and traditional annual report production line, information
into a single document.10
technology and transparency can unite
• P&G uses an ERP system to share information that the activities of the organization.”
improves inventory management. In the past, each
store of inventory was managed autonomously, but
now advanced analytics and visibility into multiple Better information flows between an organization and its
inventory stores allows new inventory reductions. stakeholders are the key to minimizing transaction costs:
Says Glenn Wegryn, “We're applying advanced not production or transport costs, but the costs of entering
analytical techniques to how we analyze those into and managing relationships, which some economists
multiple piles of inventory. To reduce total estimate account for up to 50% of GDP.14 Where
inventory you must replace uncertainty with the transactions provide opportunities for misrepresentation,
visibility of information.”11 Today, similar analytics noncompliance, or fraud, mutual trust reduces the
can also be performed to optimize tariff treatment contracting costs associated with formal agreements.15
through savvy logistics, or even model complex Today, every percentage of efficiency counts, and
regulatory, labor, product approval, materials information-enabled collaboration is a powerful way to
pricing, and tax considerations to support drive out inefficiencies. Lower transaction costs also allow
investment decisions (e.g., choosing a site for a new firms to expand their networks and to unearth new talent
manufacturing facility). and new opportunities for innovation. In the business
web—the emerging collaborative business model—
• Steve Swartzenberg, Business Review Lead at individual companies are a part of a business system, and
manufacturer NIBCO, explains that information the system’s success depends on every participant’s ability
systems have helped expose fragmentation within to deliver. Success or failure affects everyone, so it’s in
the firm: “What you find out is no part of the every participant’s best interests to share critical business
organization is disconnected from another. It’s all information. You can’t innovate in silos, says Dell
connected; the processes are all integrated. If one Chairman Michael Dell: “Collaborative R&D between IT
part falls out, it doesn't link up.”12 buyers, vendors, and partners is central to future
In short, information technology can help connect and innovation.”16 Often, critical information sharing doesn’t
harmonize stranded enterprise data, people, and processes. happen soon enough. For example, AMR Research has
found that by the time a product is designed,
Trust and transparency are essential for any type of approximately 70% of its costs have already been
collaboration. At eBay, feedback ratings from other users determined. Says Samsung CEO Jong-Young Yun, “It’s a
improve the buying decisions of auction participants. In cooperation between product development, product
the stock market, confidence in the accuracy of financial planning, and marketing from the very beginning, which
statements helps remove uncertainty for investors. adds speed overall.”17
Collaboration—increasingly important both within


Today, there’s little competitive advantage to be gained resolve their issues of concern. As he points out, funding
through physical assets but tremendous benefit to having decisions are often the result of sudden senior panic:
the best customer relationships, the most efficient “somewhere at the top levels of the executive ranks they
coordination, and the most accurate business intelligence. realize that if they have a problem related to compliance
David Newman, research vice-president at Gartner, sees it’s a catastrophe.”20 But this approach is ad hoc and
corporate data issues as “a symptom of a much broader reactive. The company hasn’t worked through the business
problem: how to use information and how to manage case for transparency—it’s simply about crisis avoidance.
information more strategically.”18 While many compliance Executives in the organization see governance, risk
initiatives started out as burdens, many companies have management, and compliance as costs, rather than
found that their compliance efforts have forced them to opportunity to trump the competition. The irony is that
improve data quality. For many organizations, better this approach is both enormously inefficient and less
information management has improved business effective than an integrated approach. After all, narrowly
intelligence and optimized decision making.19 focusing on each new set of regulations doesn’t lead to
better business practices any more than hitting the brakes
4.0An Integrated Approach to when you see a police car makes you a better driver.
An integrated governance, risk management, and
Transparency is Essential compliance strategy becomes in itself a differentiator.
To achieve transparency and the competitive benefits that Companies that bake integrity into their bones grow faster
accrue from it, organizations must embed the appropriate because they have better trust and better reputations,
behaviors into the organization’s culture, processes, and which lead to lower transaction costs and overall lower
systems. To do so, they need a comprehensive approach to cost structures. A study published in the Quarterly
governance, risk management, and compliance. Let’s Journal of Economics analyzed data from 1,500
clarify what we mean when we use these terms: companies and found that companies with the best
governance (shareholder rights) performed 8.5% better
• “Governance” refers to rules, systems, processes, annually than their poorly ranked counterparts. The study
and structures that ensure the corporation operates concluded: “firms with stronger shareholder rights had
in accordance with its defined policies and higher firm value, higher profits, higher sales growth,
procedures, and engages with legitimate lower capital expenditures, and made fewer corporate
stakeholders to meet their expectations. acquisitions.”21 According to institutional investors
• “Risk Management” refers to the systems and surveyed by McKinsey, shares of well-governed
procedures in place to proactively evaluate risk and companies can also be worth a premium—in the U.K. and
to minimize or mitigate losses. U.S., investors were willing to pay 18% more for shares of
these companies.22
• “Compliance” refers to the tactical approaches to
following the rules—the systems and processes that
enable stakeholders to evaluate the extent to which “Narrowly focusing on each new set of
companies conform to their interests. regulations doesn’t lead to better
In a networked economy, these three elements are as business practices any more than
interdependent as the legs of a stool. But we’ve hitting the brakes when you see a
traditionally had different languages, taxonomies, and police car makes you a better driver.”
semantics for each one, which makes it nearly impossible
to determine who is responsible for making governance,
risk management, or compliance decisions. Such an integrated approach requires a company-wide
effort, and if we go back to the four values that make up
Potentially even worse is the non-strategy of reacting to trust, it’s clear that there’s an important role for integrated
reporting rules piecemeal. Many companies, motivated by IT and information sharing:
an overwhelming need to comply, jump on each new issue
• Honesty. Leaders can’t be sure they’re being honest
as it arises. George Young of professional services firm
Kalypso deals with companies that are struggling to if they don’t have access to a single version of the



truth. Honesty means not only having “true” data, While integrating governance, risk management, and
but also avoiding mixed messages—a mistake compliance may require more time and effort up-front, it
Royal Caribbean made when orders from the top offers several significant long term advantages (see
contradicted a compensation system that encouraged Figure 3):
dysfunctional behavior.
1. Avoids the expense of a piecemeal approach. While an
• Accountability. You can’t fulfill commitments issue-by-issue approach may suffice for companies
unless you know what they are and you track dealing with just a few regulatory issues, all signs point
them—integrated strategy needs scorecarding and toward more, not less, regulation. And as compliance
performance management systems that link strategy requirements multiply, companies will find themselves
and execution. Accountability ensures that tackling the same issues over and over again. A
commitments are captured and acted upon. Clear coordinated approach today can help reduce duplicated
lines of responsibility make it harder to pass the effort.
buck.
• Consideration of others. It’s hard to consider the 2. Leverages your existing information technology
interests of others without engaging them to learn investments. Information sharing is critical to business
who they are and what they want. If you’re running performance, and integration within and beyond the
dozens of fragmented legacy systems, it’s difficult walls of the firm simply makes good business sense. In
to assemble a complete picture of stakeholders and cases where integrated systems and processes exist, it
act upon their needs. makes sense to “plug into” this infrastructure to help
coordinate your GRC efforts. Baking these practices
• Transparency. The organization can’t be transparent
into regular business activities is easier and less
unless it has systems that enable the communication
disruptive to your business.
of pertinent information to stakeholders in an
accessible format.

Figure 3 The Benefits of an Integrated Approach

Lower
costs

Enhance Leverage
innovation Integrated investments

Approach

Enable Scale
collaboration capacities



3. Makes your efforts scalable. Manual point solutions route less effective and more expensive. The scrutiny
are ad hoc and difficult to scale. But an integrated itself is merited and necessary: the public’s belief that
effort helps illuminate common processes and firms can “do well by doing good” has been shaken, and
approaches suitable for lower-cost automation. That every industry must address the resulting crisis in trust.
kind of scale and integration facilitates decision
In this environment, the firms that prosper provide value
making. Normally, it’s cost-prohibitive to bring
and—most important—demonstrate the right set of values.
together all the information you need to make a
For these firms, new levels of transparency, information
decision—so most decisions, made with incomplete
liquidity, clear rules, lines of accountability, and the right
information, yield sub-optimal results. An integrated
processes are already making a difference. Rejecting
approach scales decision making, which lowers the
piecemeal “solutions,” these firms have established a
cost of information retrieval and allows users to make
holistic approach that marries business considerations with
sound decisions based on actual data.23
stakeholder interests. Companies such as P&G and Novo
4. Enables new types of collaboration. Building rules, Nordisk are as conversant with financial, social, and
information, and processes into software enables environmental considerations as they are with customer
heretofore impossible collaboration and coordination. and business needs. These companies speak a common
At P&G, complex analytics model inventory and language internally and externally, and they’ve integrated
supply chain processes in unprecedented detail. their people, processes, and systems to coordinate more
Enormous libraries of rules and policies can be effectively, reduce transaction costs, and act with
embedded in software to allow complex interaction integrity.
tracking that would be impossible to manage manually.
The result is an integrated approach to governance, risk
5. Spurs innovation. Technology can enable collaborative management, and compliance that has several benefits:
innovations by removing transaction costs, reducing lower costs, better leverage of existing investments, new
friction and increasing the metabolism of collaboration scale for information sharing initiatives, support for new
within organizations. The result is better/faster innovations, and unprecedented levels of collaboration
innovations from a much broader range of and coordination. Some say that the crisis in trust means
stakeholders. Hanne Schou-Rode, vice-president, corporations should bear down on their compliance
Corporate Relations, Business Strategy and initiatives to avoid a misstep. Our point of view: missteps
Governance of Novo Nordisk recognizes the benefit of occur because companies take too narrow a view of their
stakeholder engagement: “in terms of knowledge, new compliance efforts. A broader appreciation of all
ideas derive from interaction—especially from the stakeholder interests improves compliance and reduces
stakeholder and customer dialogue.”24 User innovation risk—plus, it just makes good business sense.
is a significant phenomenon: users in a variety of
settings are developing innovations for their own use
(depending on industry, 9.8% to 37.8% of users report
doing so).25

5.0 Conclusion
The piecemeal approach to compliance, risk management,
and governance is beginning to catch up with many
companies. It might once have been easier and less
expensive to respond to corporate and social responsibility
issues as they arose, but higher levels of scrutiny and
global competitive environments have made the “ad hoc”



I am grateful to Denis Hancock, Erin Lemon and Alan Majer of the New Paradigm Team for help in researching this paper and I
also thank SAP for their financial support of this White Paper series. However, the views expressed are my own and my company
New Paradigm takes responsibility for the opinions expressed herein.
Don Tapscott, Chief Executive and Founder, New Paradigm

DON TAPSCOTT, one of the world's leading authorities on business strategy, is Chief Executive of New Paradigm, which he founded
in 1993. He is an internationally sought authority, consultant and speaker on business strategy and organizational transformation. His
clients include top executives of many of the world's largest corporations and government leaders from many countries. The
Washington Technology Report called him one of the most influential media authorities since Marshall McLuhan. He is the author of
twelve widely read books about information technology in business and society including Growing Up Digital, which established him
as one of the leading thinkers about the Net Generation. His new book, written with Anthony Williams, is WIKINOMICS: How Mass
Collaboration Changes Everything. He is also Adjunct Professor of Management, Joseph L. Rotman School of Management,
University of Toronto. He has a master's degree in Research Methodology, and two (Hon) Doctor of Laws.

Research assistance for this report provided by Denis Hancock, Erin Lemon and Alan Majer.
www.newparadigm.com



Endnotes
Samsung Electronics.
1 18
See Don Tapscott and David Ticoll, The Naked Corporation: Interview with David Newman, research vice-president,
How the Age of Transparency Will Revolutionize Business, Gartner Group, conducted by Alan Majer, Bob Tapscott, and
2003, pp. 74-77. Brendan Peat, December 8, 2005.
2 19
Ibid, p. 77. Interview with Pamela Szabo, CIO, Stone Bond Technologies
3
Interview with Glenn Wegryn, Associate Director, Global and Gretchen Weis, Weis Communications, conducted by Alan
Analytics, Procter & Gamble, conducted by Denis Hancock and Majer, March 8, 2006.
20
Alan Majer, March 23, 2006. Interview with George Young, founding principal of Kalypso,
4
See Don Tapscott and David Ticoll, The Naked Corporation: conducted by Alan Majer and Bob Tapscott, January 12, 2006.
21
How the Age of Transparency Will Revolutionize Business, Quarterly Journal of Economics, “Corporate Governance and
2003, pp. 255-256. Equity Prices,” Gompers, Ishii, and Metrick, February 2003, pp.
5
The $27.9 billion spending on compliance is a 2007 value; 107-155.
22
however, the 32% is a 2006 estimate. The 2006 percentage has Paul Coombes and Mark Watson , “Three surveys on
been extrapolated onto 2007 spending. corporate governance,” The McKinsey Quarterly, 2000,
6 Number 4.
John Hagerty and Fenella Sirkisoon, AMR Research.
23
“Spending in an Age of Compliance, 2006,” July 25, 2007, Interview with Peter Storti, principal at Kalypso, conducted
http://www.amrresearch.com/Content/View.asp?pmillid=19239. by Alan Majer, January 6, 2006.
7 24
“Nike and the Free-Speech Knot,” Wall Street Journal, June Interview with Hanne Schou-Rode, vice-president, Corporate
30, 2003, A16, http://www.law.ucla.edu/volokh/nike.htm. Relations, Business Strategy and Governance of Novo Nordisk,
8 March 20, 2006, conducted by Alan Majer and Erin Lemon.
BASF’s Basotect® foam insulation is used in P&G’s Mr.
25
Clean Magic EraserTM, Eric von Hippel, “Horizontal innovation networks—by and
http://www.corporate.basf.com/basfcorp/img/stories/wipo/fruehj for users,” MIT Sloan School of Management Working Paper,
ahrsputz/MagicEraser_engl.pdf; FedEx boxes are converted into June 2002.
furniture, http://www.fedexfurniture.com;
<http://www.hybridinterfaces.ca/index.html> sells hardware that
taps into the diagnostic port of the Toyota Prius for new
diagnostic and display features; and Apple’s PowerBook motion
sensor has been hacked to create a new type of input device,
http://www.kernelthread.com/software/ams2hid/ams2hid.html.
9
See: “802.11 Homebrew WiFi Antenna Shootout,”
http://www.turnpoint.net/wireless/has.html.
10
See companion case study to this paper: “Novo Nordisk:
Transparency Champion.”
11
Interview with Glenn Wegryn, Associate Director, Global
Analytics, Procter & Gamble, conducted by Alan Majer and
Denis Hancock, March 23, 2006.
12
Carol V. Brown, Ph.D. and Iris Vessey, Ph.D., “NIBCO’s Big
Bang,” 2000.
13
Interview with Erik Degn, vice-president of IT System
Management, Novo Nordisk, conducted by Erin Lemon and
Alan Majer, March 20, 2006.
14
http://www.encycogov.com/B11ResearchTraditions/TCE/
Stat_Growing_Imp_Of_TCE.asp.
15
See Don Tapscott and David Ticoll, The Naked Corporation:
How the Age of Transparency Will Revolutionize Business,
2003, p. 105.
16
Stewart McKie, “Collaborate to Innovate,” Intelligent
Enterprise, March 2004.
17
Erick Schonfeld, “The Master of Gadgets,” Business 2.0,
November 1, 2005, interview with Jong-Young Yun, CEO,


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