Great ResignationClimate ChangeLeadershipInflationUkraine Invasion

Designing for trust: Business lessons from an underdog ride-share startup

A HopSkipDrive driver undergoes fingerprinting during an orientation session in Denver. The ride-share startup “is unique in how it embeds trust into its operating model,” the authors write.
Andy Cross—The Denver Post/Getty Images

The ride-share company HopSkipDrive was founded in 2014 by California-based mothers to provide vehicle-for-hire services for schoolchildren, elderly adults, and other vulnerable population. The little-known startup recently made headlines when the Denver Regional Council of Governments asked the company to arrange door-to-door transportation to COVID-19 vaccination centers for older adults—selecting it over more popular companies Uber and Lyft

HopSkipDrive is unique in how it embeds trust into its operating model, in ways that far exceed the various U.S. state regulatory standards for transportation network companies (TNCs). Not coincidentally, HopSkipDrive is an iconic example of a successful ecosystem.  

A business ecosystem is a dynamic group of largely independent economic players that create products or services that together constitute a coherent solution. As of 2020, seven out of the world’s 10 most valuable companies are ecosystems, and this new governance model is disrupting more and more industries. We have discovered that trust is an essential building block for their sustainable success.

Embedding trust in a business

Defining trust as the delivery on a promise helps one see that trust is not just an abstract and elusive concept: It is concrete and leads one to make decisions or act (i.e., marking the difference between trust and hope/faith). Customers don’t necessarily trust HopSkipDrive employees (that would be relational trust). Instead, they trust in the HopSkipDrive system, where trust is actively embedded in the ecosystem’s platform governance. 

Recent research from BCG shows 86% of successful ecosystems rely on systemic trust. This embedment of trust is accomplished by using trust tools combined to address each ecosystem’s bespoke needs and issues.  

There are seven classes of tools available to establish systemic trust in an ecosystem:

  1. Access tools: Ensure that the right members join
  2. Contracts: Guarantee mutually beneficial interactions with binding agreements 
  3. Incentives: Encourage participation and positive interactions
  4. Conduct tools: Provide guidance and control over interactions in the ecosystem
  5. Transparency: Makes past and present behavior observable to all
  6. Intermediation tools: Foster interaction by establishing a neutral “middleman”
  7. Mitigation tools: Ensure a beneficial outcome even in adverse events

Given their multiplicity of issues (e.g., quality of partners, manned last mile, personal security), gig economy platforms leverage the highest number of tools, usually relying on access, conduct, transparency, and intermediation. 

Trying to convince a parent that a stranger can meet and then subsequently drive their elementary-school-age child around town after school is no easy proposition. But the HopSkipDrive team embedded trust in their ecosystem, using many of the tools outlined above, allowing the company to overcome this immense obstacle to become a preferred “caregiver on wheels.”  

Through the use of a 15-point certification process (an example of an access tool), HopSkipDrive only hires “CareDrivers” with at least five years of caregiving experience; a clean multi-agency, fingerprint-based background check; at least three years of a good driving record; and adherence to multiple ecosystem guidelines.  

HopSkipDrive uses incentives to reward CareDrivers, paying them up to $32 per hour, plus bonuses. While they are still independent contractors like most TNC drivers, HopSkipDrive enables CareDrivers to build their schedules in advance (rides are booked eight-plus hours before execution) and select the schedule that works best for them. Parents feel at ease because of HopSkipDrive’s use of process-control tools to confirm the rider’s identity. After following the rider’s pickup instructions, the CareDriver begins the multifactor verification by providing the rider with their first/last name and the secret code word. Once the information is confirmed, the driver asks the rider to provide their birthday as an added security layer.   

Transparency is key to HopSkipDrive’s growth, with regular safety reports sent to drivers and riders and published on its website that outline traffic incidents (0.029% of total rides), collision rates (140 times lower than the national average), and distracted driving frequency (eight times less than the general population). HopSkipDrive’s Safe Ride Support system (an intermediation tool) tracks each ride in real time, detecting unsafe driving behavior and proactively addressing any issues. In rare instances when something goes wrong, parents can file formal complaints that allow HopSkipDrive to mitigate the incident in a prompt manner.

These tools have helped HopSkipDrive expand to eight states and 15 markets across the country since beginning operations in Los Angeles. To date, HopSkipDrive has raised $61 million in funding and has served more than 1 million customers, driving them over 13 million miles.

Cautionary tale

The importance of systemic trust can be seen in other ecosystems, as demonstrated by the success of Airbnb and the failure of HouseTrip. Despite raising approximately $60 million in funding and offering around 300,000 properties, HouseTrip was eventually forced to accept a buyout offer from TripAdvisor. This demise was primarily due to a lack of trust within the system, particularly among the hosts, as only travelers could post reviews, thus heavily biasing the interactions against the hosts. HouseTrip’s failure to also provide hosts with incentives or transparency limited the trust hosts put into the system. 

Comparatively, Airnnb’s open review system (transparency) avoided the same traps by treating guests and hosts equally, building trust across all ecosystem participants. Airbnb’s use of personalized referrals (incentives) allowed it to develop its network of customers and hosts rapidly. Implementation of Airbnb’s Host Guarantee and Host Protection Insurance further engendered trust between the platform and hosts in the case of damage or safety incidents. 

Our analysis also shows that 90% of the successful ecosystems are bionic—meaning they used a combination of digital tools and non-digital, human tools (like governance, contracts, and policies) to design for trust. Digital plays a crucial role in enabling trust and, in some cases, the very existence of business ecosystems. However, there is no such thing as human-less trust. No matter how fabulous the code or how advanced the blockchain, trust cannot be created by digital solutions alone. Digital solutions cannot be universally applied and must be paired with non-digital tools in unique ways to address an ecosystem’s specific issues.  

This bionic application of the tools can be seen in the success of Alibaba’s Taobao Marketplace, which has recently been featured in the news for its livestreams and “shoppertainment.” Before Taobao became the world’s largest e-commerce platform for small businesses and individual entrepreneurs, eBay China was the first mover, holding over 70% of the region’s market share in 2003. But eBay China’s ecosystem was based on the same technology that made eBay successful in the United States and did not address China’s unique culture and needs. 

eBay China’s failure to adapt created space for Taobao to create a unique offering that was more China-focused. Taobao offered a cost-free system that incentivized Chinese sellers to set up online shops on its website, in contrast to eBay China, which charged for listing and transaction fees. Because credit cards and auction-style marketplaces were uncommon in China’s incipient e-commerce market, Taobao shifted to a mostly fixed-price model (control tool) and developed AliPay, a highly secure payment network (intermediation tool) that partnered with local Chinese banks to allow users to transfer money quickly. The combination of digital and non-digital tools, which were tailored specifically to how people interact in the Chinese culture, allowed Taobao to overtake eBay China and dominate Chinese e-commerce with an 80% market share by 2010. 

Implications for other ecosystems

Trust plays a key role in helping actors in an ecosystem self-orchestrate, leading to higher performance and enhanced resilience. Despite this fact, little focus is placed toward actively designing for trust. Successful ecosystems have undergone a mindset shift from naively believing trust will emerge in their system to actively incorporating the trust tools to build trust, thus differentiating their offering from their competition and fostering cooperation among their ecosystem’s participants. 

Ecosystems must keep in mind that current success does not determine future success. It is important to pay attention to weak signals of mistrust before they lead to failure. While each ecosystem uses the tools differently to address their unique needs and issues, successful ecosystems actively design for trust, ensuring their ability to thrive in increasingly complex and competitive markets.

Marcos Aguiar is managing director and senior partner at BCG, and fellow at the BCH Henderson Institute (BHI). François Candelon is a managing director and senior partner at BCG, and global director of the BCG Henderson Institute (BHI). Ulrich Pidun is a partner and director at BCG, and fellow at BHI. Niklas Knust and Matt Williams are consultants at BCG, and ambassadors at BHI.

Our mission to make business better is fueled by readers like you. To enjoy unlimited access to our journalism, subscribe today.