Like it or not, your business model speaks to your ethics

Business is about exchanging value. Crime is about taking value. Somewhere in between is a value exchange that lies in the gray area; legal but sordid. The gray area is where sleep is lost, or at least should be.

We recently discussed the value of understanding at least 85% of a problem before starting work. As part of developing a business strategy, organizations should be scoping the ethics and risks associated with any data collected or products offered with the model they choose. Just as companies engineer up-front risk management plans as they identify opportunities for success, business leaders should consider the ethical consequences of their business models.

Why? The answers are all around us, written in almost daily reports of new insights into the consequential behaviors of companies like Facebook, Equifax, and Uber. There are plenty of examples in the technical business world of these ethical shortcuts and their results both on companies' reputations and bottom lines. Consider the business drawbacks Facebook is dealing with as of spring 2018.

Mark Zuckerberg and his team positioned Facebook with the promise of community and connection. They made it possible to bring networks of people together. They allowed the elderly and the infirm to participate socially outside the bounds of their physical confinement. They helped estranged family members find each other again. In hundreds of ways, they made social connections possible. This was always their message as they grew from the dorm room to a global commodity and they gave this to their customers for free as part of their vision of doing good.

However, as Facebook transitioned to an application platform, they failed either to take into account or be concerned with the knowledge that blending features of their ad platform with their app platform brought danger to their users, who are ultimately not their business customers. The lack of transparency into what they were making possible, the unwillingness to acknowledge the damage they had contributed to, and the lack of clear, centralized controls for users to manage their data access allowed bad actors to pay to put this data to ill use.

Other public companies are in the same position; Google and Twitter both have public-facing statements of good intent but find themselves in similar ethical binds. Facebook represents a class of these companies, but one which has had the most visible and damaging effects.

Business leaders can learn from these mistakes, intentional or otherwise, by building into their business models a value system and adherence to an ethical approach right from the start. Think of it as an investment bulwark against the negative outcomes that would otherwise come from legal and publicity fees, lost sales, and decline in employee morale and retention, to name a few. An ethical foundation to business planning allows a company to focus all its energy on positive growth and success.

Now Facebook gets to learn whether they can recover from their errors in judgement and their disregard of ethical concerns in their business planning. The question is whether they built enough of a financial buffer to allow them to rework their business plan such that their users are partners in success rather than being exploited for success, and whether Facebook is able to implement a management and control system to enforce its platform policies. They are discovering the resulting dollar costs (opens in a new tab).

Facebook might currently be the most newsworthy, but it's not alone in its example of how failure to plan for ethics can negatively affect the bottom line. A whole slew of startups rose and died a few years back, modeling the penny auction example of Swoopo (opens in a new tab), which auctioned off, among other goods, literal gold bars to consumers who didn't understand they were gambling. Startups rushed into the fraudulent space, substituting other front items, such as expensive hotel suites, in an inevitable race to the bottom following a business model that depended on a steady stream of new users to replace the fleeced but newly educated previous customers.

Equifax recently admitted (opens in a new tab) that its data breach affected millions more people than it had previously reported. The company trapped millions of unsuspecting users (opens in a new tab) who never had any sort of business contract with the company, forcing consumers into their sphere without notice or recourse, accumulating financial data and through sheer incompetence exposing that data to criminals.

The lesson today's business leaders should learn from the current mood of the technical industry is that the chances for long-term success are enhanced when companies plan ahead to avoid ethical pitfalls. A customer-centric approach means reviewing the ramifications of every decision for how it may adversely affect consumers, users, and anyone who engages with a business at any level.

We believe that business success is measured by longevity and the sustainability of profits and revenues. This sustainability is firmly tied to a company's ability to connect business needs to ethical and transparent business models by clarifying how a product is built and monetized. The founders and associates at Hyperfine are determined to help their clients achieve this success while incorporating ethical considerations into each step of their work. We believe in business as an exchange of value, where the value is open, explicit, and without deceit. We invite you to join us.