1、 2023 Boston Consulting Group1A mere four years aer its founding,Airbnb was operating in 89 countries and had just become aSilicon Valley unicorn.Then came a ra of property-trashing incidents.In response,the companyradically upped its host-property guarantee to$1 million.Since then,with every new fo

2、rm of mishap,transgression,or breach,whether by hosts or guests,Airbnb has steadily amended or expanded itssafeguards(including age restrictions,identity checks,and reviews)and its ground rules(which aredesigned to ensure fair play and accountability and offer recourse for repeat offenders).Safeguar

3、ding Trust in Your DigitalEcosystemJUNE 12,2023 By Marcos Aguiar,Jeff Kiderman,Harsha Chandra Shekar,and Oliver SchilkeREADING TIME:15 MIN 2023 Boston Consulting Group2Consider the converse:In Ubers early days,to fend off mounting competition from Ly and to growthe business faster,the company saw th

4、e need to expand capacity and lower prices.To attract moredrivers,the company waived the commercial drivers license requirement.While controversial at thetime,relaxing this safeguard transformed the shape of urban mobility.Safeguards are meant to protect either or both sides of a transaction or inte

5、raction in an onlineecosystem and reduce negative outcomes.Too few can hinder an ecosystems growth.Yet too manycan be time consuming and costly to maintain and potentially intrusive,stifling relationships and otherpositive outcomes that spring from a free-market exchange.So how do companies know whe

6、n their safeguards are too onerous?How many are too many?Conversely,how can companies tell when there are not enough?In designing safeguards,ecosystemorchestrators must find a sweet spot.Because trust is at the heart of digital interactions and ecosystemsuccess,safeguards should be the concern not o

7、nly of operations but also of orchestrators andparticipants.What Exactly Are Safeguards?Safeguards refer to the precautionary mechanisms that an ecosystem relies on to mandate or promotedesirable behavior and engender trust among its participants.There are many types of safeguardsincluding policies,

8、practices,and toolsand multiple types can be used to address the same concern.Safeguards may include hardware,soware,and human-enabled mechanisms.For example:Safeguards do their work at many junctures in the user journey.Depending on their type,they getbaked into operating models,the user experience

9、,marketing practices,and soware and paymentsystems,for example.Advanced digital technologies have opened the door to new types of safeguards and theirunprecedented usage,which will only continue to grow.AI-driven algorithms,for example,arefrequently used to identify and block fraudulent transactions

10、.While the scalability of theseEscrow and blockchain mechanisms that aim to foster transparency in a transactionIdentity verification tools,such as passwords,biometrics,and multifactor authenticationData controls that allow users to monitor or get information about counterparties and thatprotect use

11、rs privacyDigital reputation toolsincluding ratings,reviews,and awardsthat serve as signals aboutsellers behavior and integrityConstraints,such as policies,sanctions,and contracts 2023 Boston Consulting Group3technologies makes them powerful tools,ecosystem leaders need to actively gauge their true

12、impact(individually and in aggregate)in amplifying,neutralizing,or diminishing the desired behaviors.Why Are Safeguards Mission Critical?Safeguards are ultimately about generating trust,and virtually every ecosystemwhether it is Alibabaor Etsy,Ly or DoorDash,Google Play Store or Apples App Store,or

13、Airbnb or TrustedHousesittersdepends critically on trust.With the rise of ecosystems,and as digital interactions increasingly replaceinterpersonal dealings,trust has become a vital currency for economic successthe element thatgreases the wheels of an ecosystem,allowing it to scale.In fact,our resear

14、ch shows that amongsuccessful ecosystems,86%had actively embedded trust mechanisms(of which safeguards are thelions share)into their ecosystems and practices.An orchestrator cannot build an ecosystem and hopethat trust will emerge spontaneously among strangers.An orchestrator has to design for trust

15、.An ecosystem orchestrator cannot hope that trust will emerge spontaneously.It has todesign for trust.Importantly,safeguards enable actions and engagement by providing reassurances that participantscan trust the ecosystem even if they lack experience with(and havent developed trust organically with)

16、the counterparty.Safeguards help align expectations about processes and outcomes,thus reducing theuncertainty about the counterpartys behavior.They also provide economic incentives for a partner tobehave in a trustworthy fashion.In this way,safeguards foster trust in the overall ecosystemwhat wedeem

17、 as systemic trustmaking trust between counterparties less crucial.Yet well-designedsafeguards can also work to foster relational trusttrust between two partiesnot just systemic trust.Are More Safeguards Always Better?An under-reliance on safeguards raises the risk of undesirable behavior,negative o

18、utcomes,and evenfriction.Friction is anything that makes participants wait or hesitate to act or that causes confusion orfrustration.Uber Eats,for example,recently discovered that many restaurants were listing multiplebrands on the platform with the same menubrands coming from online(virtual)storefr

19、onts.2023 Boston Consulting Group4Customers were thus seeing dozens of versions of the same menu on the app,which made searchesannoying.Such friction can lead to churn or,worse,failure.On the contrary,an excess of safeguards can stifle the interactions that make trust flourish organicallyamong parti

20、cipants and that spark innovation,creativity,and other oen unexpected benefits.Inaddition,too many safeguards almost always come at a cost.Apart from the direct costs involved inimplementation and enforcement,an excess of safeguards can make the user experience morefrustrating,bureaucratic,and gener

21、ally less enjoyable.An overabundance of safeguards can alsomake participants suspicious;they wonder why there are so many constraints.That reactionundermines the very purpose of safeguards.As a result,participants may become circumspect,lessloyal,and more likely to go elsewhere.The trick for ecosyst

22、em orchestrators is to strike the right balance between control and autonomy.Theright balance depends on several factors,including the ecosystems purpose,participantscharacteristics,the nature of the goods or services being bought and sold,and how high the stakes are.For instance,a marketplace offer

23、ing handcraed artistic goods may reasonably require each seller toprovide a variety of unique high-quality product images,whereas an e-retailer selling commoditizedgoods may allow generic images.A platform for long-term housing rentals may require a credit scorecheck on prospective tenants,while suc

24、h a safeguard wouldnt be necessary for a one that rentsvacation homes short term.The trick for orchestrators is to strike the right balance between control and autonomy.Whether to err on the side of having more or fewer safeguards can be one of an orchestrators mostchallenging and consequential desi

25、gn decisions.To illustrate,an orchestrator of a peer-to-peermarketplace might consider asking these questions:Should sellers be able to sell whatever they want?Should the company verify that the sellers ownthe products they are selling or document sellers credentials?Should sellers be able to set th

26、eir own terms for pricing?Should buyers be allowed to negotiate theprice?Should sellers be able to take as long as they want to deliver purchased items?2023 Boston Consulting Group5These decisions dont apply to just retail ecosystems;every ecosystem orchestrator,whether managingrelationships between

27、 hosts and guests,artists and patrons,or any other set of counterparties,hashundreds of decisions to make along these lines.What Factors Should Orchestrators Consider?When deciding which safeguards an ecosystem needs and what constitutes the optimal mix,anorchestrator should consider a number of par

28、ameters.(See the exhibit.)Should buyers have full access to sellers contact information?What are the return limitations for buyers?Should the company release payment when a seller indicates that an item has been shipped orwhen the buyer acknowledges receipt?2023 Boston Consulting Group6Here are a fe

29、w of the more important ones.The Power Asymmetry Between a Seller and Buyer.A classic example of a safeguard to addressasymmetric power is the use of escrow:a marketplace orchestrator withholds payment to sellers(especially new ones)until they submit proof of shipment.Another is offering a guarantee

30、 to buyers,such as a 30-day free-return policy,or imposing a penalty on sellers who dont adhere to theecosystems policies and practices.In addition to transaction-oriented power asymmetry,there is theinnate relationship-oriented type.An orchestrator needs to serve as a regulator for both kinds of po

31、werasymmetry,ensuring that the more powerful actors dont abuse their natural advantage.An orchestrator needs to ensure that the more powerful actors dont abuse theirnatural advantage.In contrast,when power dynamics are less one-sided,fewer safeguards are typically needed and maybe counterproductive.

32、For Uber and Ly,for example,general contracting checks(that determine if adriver has a good driving record,for example)and customer reviews do a fairly good job of ensuringappropriate behavior.The auction site uShip,which connects those seeking discounted shippingservices with carriers(chiefly truck

33、ers wanting to avoid deadheading),provides basic tools(includinglistings,policies,a messaging center,and profiles)along with optional tools(a tracking app,forexample)and suggestions for both parties(such as creating a written agreement using their template).The Sophistication or Skill Level of Parti

34、cipants.More safeguards may be warranted forecosystems that eliminate intermediaries,that have more technically or legally complicatedtransactions,and whose users have relatively little experience.Consider ecosystems where real estateis sold by owners.The risk for participants isnt necessarily about

35、 encountering unscrupulouscounterparties.Its more about both partiesnonprofessionalsmaking mistakes in a deal ascomplex as a house purchase.Some do-it-yourself real estate ecosystems contract with third parties tooffer safeguards such as documentation reviews and process assistance.Platforms where p

36、articipantsbuy and sell heavy equipment are another example of ecosystems that may need more safeguards,since such sales have traditionally involved brokers or distributors.When most participants in an ecosystem have the necessary skills or knowledge to understand keyaspects of a transaction,safegua

37、rds tend to be less critical.In fact,for participants with advanced 2023 Boston Consulting Group7skills,too many safeguards bureaucratize a process,adding unnecessary complications,not tomention increasing costs.Consider a commercial real estate platform designed for professionals.Toomuch red tape c

38、ould cause deals to drag out,potentially causing one or both parties to lose anopportunity or possibly risking a change in transaction costs if interest rates or market prices fluctuate.The Nature of the Transaction.When creativity is central to the ecosystems purpose,less may bemore when it comes t

39、o safeguards.Patreon connects patrons and creators of all types,including visualartists,writers,videographers,and humorists.Rather than buy a specific product,users subscribe toreceive content from creators.There are relatively few safeguards surrounding these offerings,allowingPatreons 250,000 crea

40、tors the freedom to design their own packages of content and pricing tiers.Creative content is,aer all,not a commodity,and even for a single creator,the time it takes toproduce arta sketch versus a series,or a song as opposed to a sonatacan vary greatly.When creativity is central to the ecosystems p

41、urpose,less may be more when it comesto safeguards.Art is one thing;technology is another.As an open-source operating system,Linux needs to encourageinnovation.But because major institutions and businesses worldwide depend on the system,somesafeguarding is in order.A hierarchy of code maintainers en

42、sure integrity by evaluating input fromcontributing developers.This modest counterbalancing safeguard ensures that the platform allows forcreativity and collaboration among the thousands of developers in its community.The Cost of a Negative Outcome.When the stakes are relatively low,or a negative ou

43、tcome isrelatively easy to fix,theres less of a need for stringent safeguards.A food delivery app,for example,may guarantee only the price or the speed of delivery,not the quality of meals from its restaurantpurveyors.And to exercise that guarantee,a user must take the time to submit a complaint and

44、 awaitthe companys reply,an effort that many would deem too great to recoup a modest difference in mealcost or be compensated for a longer wait.A platform selling vintage knickknacks or handmadecostume jewelry may not require an upfront proof of provenance;the ability to return for a refund is allth

45、at a disappointed customer would expect with such goods.But with a high-stakes interaction or transaction,more(or more stringent)safeguards tend to bebetter.A marketplace specializing in antique estate jewelry or rare manuscripts would likely requiredocumented expert authentication of each item to p

46、rotect buyers.HopSkipDrive,a ride service 2023 Boston Consulting Group8designed to transport unescorted kids,provides multifactor authentication upon pickup to ensure thatkids and drivers find each other safely.In addition,a real-time tracker allows parents to trace thelocation of the car transporti

47、ng their child while it is in transit.Background checks for drivers areconsiderably more rigorous than for other ride-hailing services.Despite the fact that the checks mayscare off some potential drivers,thus hindering the ecosystems growth,such robust safeguards arevital for engendering the trust o

48、f customers under such circumstances.Buying a car online at eBay is a far bigger gamble than buying a steering wheel cover or replacementheadlights.EBay Motors and most other online auto marketplaces offer free Carfax reports on eachvehicles history.EBays vehicle protection program covers buyers up

49、to$100,000 and protects againstsuch risks as not receiving the title(or the car itself),an undisclosed lien,and unknowingly purchasinga stolen vehicle.The Cost-Benefit Tradeoff.Whether its dispute-resolution mechanisms or authenticity-verificationtools,implementing and maintaining safeguards may not

50、 be cheap.Ecosystems oen operate on slimunit economics(oen earned as a percentage of each transactions value),so it is usually unfeasible tosupport extensive safeguards.Orchestrators,therefore,need to weigh the cost-benefit tradeoffs.Its also impracticable for a massive online marketplace,such as Am

51、azon or Alibaba,to inspectvendors wares before they are shipped to customers.The user rating system substitutes reasonablywell(albeit not perfectly);its a marginal cost for an orchestrator,yet offers an easy and valuablesolution for buyers and sellers.Still,there are many cases in which the stakes a

52、re high and the benefitsjustify the costs.Uber and Ly,for example,need to ensure that their drivers are licensed and insured;the failure to do so can result in significant fines,liability,regulatory action,and bad press.Implementing safeguards is not a one-and-done exercise.It is imperative tocontin

53、uously monitor and adapt them.Competition and Change Make Adapting SafeguardsEssentialImplementing safeguards is not a one-and-done exercise.Changes in an industry,a user base,technology,or an ecosystems business model or strategy make it imperative to continuously monitor 2023 Boston Consulting Gro

54、up9and adapt safeguards.But change isnt always gradual.A disruptive innovation or major breach thatharms participants and the ecosystem itself may trigger the need to modify safeguards drastically.Many of the safeguard adjustments that Elon Musk has instituted at Twitter since buying the companyloos

55、ening restrictions in some areas,clamping down in othersillustrate the delicate balancing actthat managing safeguards can be,particularly in social media.Competitive pressures may also need to influence safeguard decisions,especially in an increasinglywinner take most(if not all)world.Uber relaxed i

56、ts initial requirement of a commercial drivers licenseto match Lys less stringent one.Safeguards can also be a means of strategic differentiation;Google,for example,opted for fewer safeguards for its app developer ecosystem than did Apple.Implementing and Adjusting SafeguardsHow does an ecosystem or

57、chestrator apply parameters in practice to achieve the right balancebetween control and freedom?First,consider the ecosystem as a whole.Identify which two or threeparameters appear to best define the need for safeguardsor their downside.In addition to theparameters weve described already,others incl

58、ude the ecosystems preexisting reputation and trackrecord and the typical nature or maturity of participant relationships.Then,break down the ecosystem into value streams of participants experiences to pinpoint wheremore or fewer safeguards would be useful.For drivers of a ride service,for example,i

59、dentify thevarious stages of their experience,including signing up,passing a background check,onboarding,setting up a payment method,receiving reviews,and resolving problems.What happens when parameters conflict?Say the need for creativity(and thus,fewer safeguards)ishigh,but the cost of a negative

60、outcome is also high.In that case,dig down to a more granular level toisolate the value stream activity with a high need for creativity and the activity with a high level ofcriticality.If they cant be separated,prioritize using safeguards in a way that benefits the criticalaspects of the activity wi

61、thout hindering its creative aspects.Aer establishing and prioritizing the trust issues,identify the appropriate safeguard or safeguardsthat are needed.Choose metrics to gauge safeguard balanceboth the overall balance and that ofhigh-priority elements.Then,monitor,test,and iterate as needed.Due dili

62、gence will be an ongoingexercise of pulling back and pushing forward to maintain that delicate balance of freedom and control.With the right mix and the right number,safeguards are a key to an ecosystems health and growth.They are not merely elements of the operating model;they are also central elem

63、ents of the ecosystemsvalue proposition and its competitive advantage.So,finding the sweet spot between control andautonomy,risk and reward,is crucial.It requires constant vigilance and tweaking,as the competitive 2023 Boston Consulting Group10landscape,technology,and user expectations evolveor get

64、disrupted.In nature,adaptation iseverything.So it is with digital ecosystems and their safeguards.The BCG Henderson Institute is Boston Consulting Groups strategy think tank,dedicated to exploringand developing valuable new insights from business,technology,and science by embracing thepowerful techn

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66、on LinkedIn and Twitter.AuthorsMarcos AguiarMANAGING DIRECTOR&SENIOR PARTNERSo PauloJeff KidermanPRINCIPAL,BCG HENDERSON INSTITUTE AMBASSADORWashington,DCHarsha Chandra ShekarPARTNER AND ASSOCIATE DIRECTORSeattleOliver SchilkeASSOCIATE PROFESSOR OF MANAGEMENT AND ORGANIZATIONS AND DIRECTOR OF THE CE

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