The Leader's Guide to Radical Management

Guy Kawasaki On The New Business Imperative of Enchantment

“I travel all the time,” says Guy Kawasaki, author of the wonderful new book,  Enchantment. “It’s the little things that get to you. I go into the hotel room and I’ve got a Macbook. And an iPhone. And an iPad. And possibly a MiFi which enables me to make my own network. That’s four devices. I put my bag down. I sit at the desk and what do I see? A power outlet with two plugs, and one is already taken for the lamp. So now I have one plug for four devices. So that means I also have to carry a power strip with multiple plugs.

“But if I didn’t bring one, I end up charging my iPhone in the bathroom where it’s going to get wet. Has anyone in the hotel management ever stayed at the hotel and asked themselves would be the first thing a business person would notice? One plug for four devices. Has anyone in management ever taken a serious look at the room?”

He continues: “Or consider this: you pay $400 to stay at a fancy hotel, and they tell you have to pay another $19 a day for wireless Internet. Meanwhile across the street at a lower standard hotel chain, it’s $80 a day and free wifi. A charge of $19 a day is not going to break me. So I sign up for it and what do I get  A 1 megabit download speed. I feel like I am back in the old dial-up days.”

Kawasaki is not enchanted.

Enchantment is now a business imperative

Kawasaki’s book defines enchantment as “the process of delighting people with a product, service, organization or idea. The outcome of enchantment is voluntary and long-lasting support that mutually beneficial.

His book is one of group of new books that recognize that businesses have to go beyond satisfying the customer. If they are going to flourish in a world where the customer is the boss, they must delight them.

“Enchantment can occur in villages, stores, dealerships, offices, boardrooms and on the Internet.  It causes a voluntary change of hearts and minds and therefore actions. It is more than manipulating people to help you get your way. Enchantment transforms situations and relationships. It converts hostility into civility. It changes skeptics and cynics into believers… When you enchant people, your goal is not to make money from them or to get them to do what you want, but to fill them with great delight.”

“Enchantment is a process,” says Kawaski, “ by which you improve your likeability, trustworthiness, the quality of your idea, product, cause, whatever. It leads to relationship that is not transaction-oriented any more. It is longer and deeper and more delightful.

Enchantment may mean doing less

Enchanting your customer may mean  that doing fewer things will enchant your customer more. If you can find out what the customer really, really wants, then you may be able to focus on that and stop doing things that the customer doesn’t really care about. “Enchanting the business person in a hotel room,” says Kawasaki, “is not about putting warm chocolate chip cookies on the pillow at night. You want to do that? God bless you. It’s a cute little thing. But when I come into a hotel room, forget the chocolate cookies and give me enough power outlets!”

Which firms are enchanting their customers?

“The relationship that people have with computer companies other than Apple,” says Kawaski,” is primarily one of transactions. By contrast, Apple has delighted people and now they have Macs, and then they buy a iPhone, and an iPad. Next thing you know, it’s iTunes, it’s iBooks, you’re standing in line waiting for this stuff. That’s enchantment.”

Virgin America is an airline he looks forward to flying on.

He also sees lots of small businesses and startups enchanting people, even though they are not household names.

One that Kawasaki likes is Kogi BBQ, which offers a combination of Korean-Mexican food. The business has about a dozen trucks and around 83,000 followers on Twitter (@kogibbq). It sends out a tweet that it will have a truck on a certain street corner at a certain time. When they show up, there are 50-100 people who are ready to buy their tacos. That’s customer delight.

How do you communicate enchantment to the C-suite?

I asked Kawasaki how he goes about communicating enchantment as a serious business proposition to CEOs, CFOs, and other senior managers, for whom enchantment could mean something about kids’ fairy tales. How does he get them out of that world and persuade them that they need to be in the business of enchantment?

“The best way is to use examples,” says Kawasaki. “Wouldn’t you like to have the evangelistic base of Apple or the likeability of Virgin America? Wouldn’t you like customers to trust you the way they trust Zappo’s, so that they will buy shoes, sight unseen? Even the most hard-core pencil-pushing bean-counter  will have to say, ‘Yeah, I wish we were Apple or Virgin America or Zappo’s! That’s not such a bad place to be.’”

I asked Kawasaki what happens when he makes the sale and persuades the firm to embrace enchantment? What then?

“You need to realize,” says Kawaski,” that enchantment is like fitness. Fitness is a curve. You can be Lance Armstrong, or you can be really out of shape at the opposite end. People enter the curve wherever they are and then they can move up the curve, by better nutrition and better exercise. The same is true of enchantment. I’m not talking about ’60 days to miracle enchantment’. It’s not that easy. It starts with the CEO. If the CEO is an untrusting and untrustworthy person, you will have to overcome that CEO.”

How is the Fortune 500 doing on enchantment?

I asked Kawasaki where are companies in the Fortune 500 in the curve? He believes that most of them are towards the wrong end of the curve. That’s because they are larger. They are older. Typically the founders are long gone. Maybe a private equity firm runs the place. There are a lot of things going on, he says.

“Startups without a lot of venture capital have to enchant people,”  says Kawasaki. “Otherwise they don’t survive. By contrast, startups with a lot of venture capital can blow it continuously for quite a while. I’ve seen a lot of those. Money is often the enemy of enchantment. Even those startups that do start out enchanting people—something happens to them along the way. It’s called MBAs.”

The three pillars of enchantment

“The three pillars of enchantment,” says Kawaski, “ are likability, trust  and product. There are various companies with various degrees of each of those. Apple is great on the product side. VirginAmerica is great on the likability side. Zappo’s is great on the trustworthy side. If you had a company had all three, you would own the world.“

“It’s a process,” says Kawasaki. “And it’s takes time. Top management has to agree to it. But it’s the middle and the bottom that are customer-facing people that are going to first execute it.

Kawasaki doesn’t want to have a CEO to buy his book at an airport and then come into the firm one morning and say, “Today, we’re going to start enchanting.” The employees’ eyes will roll and they will be thinking, “O God, the CEO has just read a new book. First, it was this. Then it was that. And now it’s enchantment. This is the latest fad du jour.” It needs to be something more permanent than that.

Where to start on enchantment?

Kawasaki suggests starting at the most customer-facing place in the organization. That may be the sales force or customer service. That’s the place that has the most contact and will have the greatest short term gain. It’s there that you will get quickest realization that it works or it doesn’t. Enchantment can’t cure everything, but it is a way to improve customer relationships.

Kawasaki believes in small incremental steps. “Let’s say that the people are skeptical as they reasonably should be of any new idea. Let’s take the case of a hotel. Then one might say, ‘Let’s look at our rooms. Are we enchanting our customers?’

“It’s the little things like giving enough power outlets in the hotel room for business travelers, or dropping the extra charge for wifi connection. You proceed step by step, perhaps trying it in one department, or one store or hotel. I’m certainly not advocating a massive re-write of the employee manual.”

A user’s guide to enchantment

Enchantment is a practical, not an academic book. It’s not a view from 50,000 feet. It’s about how to do it, like blocking and tackling. Kawasaki doesn’t see himself as a consultant, or a motivational speaker. He sees himself as a business person who happens to write. He is coming from the direction of implementation. It’s part of his personal goal of empowering people. Putting practical suggestions in people’s hands so that they can get on and make it happen.

It also happens to be a beautifully produced book, with delightful black-and-white drawings and photos. Enchanting!

Guy Kawasaki: Enchantment: The Art of Changing Hearts, Minds, and Actions (Portfolio, 2011)

BOOK REVIEW: Tell to Win by Peter Guber

Every year over 11,000 business books are published. Only a tiny sliver of those books are what I would call “real books”, that is, books that talk meaningfully and authentically about a subject in a coherent way. (Most of them are compilations of tired business platitudes, aimed at selling the author’s consultant services.)

A real book

One of the very few business books that is also a “real book” that I have come across recently is Peter Guber’s new book, Tell to Win. It’s a book about how important storytelling has been in Peter’s life. Peter has an amazing set of stories to tell: how he grew up in New York, went to Hollywood, became a big shot producer with films like Batman, Rain Man and Gorillas in the Mist, and is now the owner of an NBA team in San Francisco.

If you looked closely this last Sunday night, you could have seen Peter and his wife at the Oscar ceremony as one of the producers of the Oscar-nominated film, The Kids Are All Right.

In telling the many stories that make up his life, Peter also tells the story of storytelling. What makes this engaging is that Peter, despite his successes, doesn’t take himself too seriously. Many of the stories in the book are less about his brilliant successes, of which there are many, and more about the illuminating stumbles that inevitably occur as one makes one’s way through life.

Meeting the King of Thailand

One of my favorites is about when he was making a film in Thailand and had to see the king in order to obtain permission for what he was doing. So he followed his own advice and practiced, practiced, practiced his story to tell to the king and when he arrived at the palace he felt he was ready. When he saw the king, he taken aback at how impressively the king was dressed. He began his spiel and felt his assistant pulling on his sleeve. He ignored this and pressed ahead with his spiel. Finally, his assistant whispered in his ear, “Peter, that’s not the king. That’s the usher.”

The emotional transportation business

Peter sees himself as being in the emotional transportation business. His book shows how success is won by telling compelling stories that have the power to move partners, shareholders, customers and employees to action. As he says, if you can't tell it, you can't sell it!

The book is already #1 on Amazon. So it doesn’t need any help from me in promoting it. But if you are interested in buying it, you can order it now and get a set of digital gifts here.

Recently I put some questions to Peter about his book and he answered as follows:

1. How has purposeful story telling been central to your career?

Both telling stories for entertainment (film, TV, miniseries, etc.) and telling purposeful stories to propel my business goals (buying and selling sports teams, new media companies, real estate ventures) have been “the secret sauce” behind my career success.  The seminal elements of what makes a story great are the same whether we’re talking about story content for a movie such as Rain Man, or story content used in the room, face to face to propel the success of a deal such as acquiring an NBA franchise, securing intellectual property rights to a great estate like Frank Sinatra, becoming CEO of a corporation like Sony Pictures Entertainment, or raising money for a university like UCLA.

2. What's your favorite example of a story well told that helped you get ahead?

 It was how as CEO of Columbia Pictures just after it was purchased by Sony, I told the story of Lawrence of Arabia to inspire my employees to reclaim their heritage and pull together.  Ironically, this was the studio that made the movie 40 years earlier.

3. In what kinds of situations in business will the power of telling a purposeful story be most useful?

In any situation that calls for you to persuade, convince or manage someone or a group of people to do something, the ability to tell a purposeful story will be your secret sauce. Telling to win through purposeful stories is situation, industry, gender, demographic, and psychographic-agnostic.  It’s an all-purpose, everyone wins tool.

4. Why has the need for telling to win increased?

In today’s roller-coaster economy, hyper-competitive, fear-based, flat and global world, convincing anyone to do anything at any time requires getting their attention, creating their intention and turning it to action.  This means you have to render an experience.  And telling purposeful stories in the room, face to face cuts through the cacophony in both turbulent and triumphant times.

5. What did your research about telling stories uncover that most surprised you?

As a guest professor with me at the graduate course at UCLA, titled Navigating a Narrative World, Marco Iacoboni, Professor of Psychiatry and Biobehavioral Sciences at UCLA, provided one of the most surprising insights behind the power of telling a purposeful story.  Iacobani is a pioneer in the research of mirror neurons.  Mirror neurons allow us to read each other, both functionally and emotionally, as if both the teller and listener are entering and living each other’s experience.  They make it possible for the teller and listener to imitate, learn, and intuit each other’s goals through feelings of empathy and connection.  Iacobani explained that when one tells a purposeful story in the room, face to face, they evoke the mirror neuron system of their listener to feel what they are feeling in their tell and thus mirror the same intentions. A truly empathetic and powerful experience!

6. What are the essential elements of a purposeful story?

Tell to Win reveals the key elements that tellers of purposeful stories utilize to engage their listener(s) and turn them into viral advocates of the tellers’ goals.  Purposeful stories have a goal, a call to action that tellers want their listeners to do.  But, before tellers motivate their listeners, the teller, him or herself, must first be motivated.  This means he or she must be authentic and congruent.  The tellers’ story must not just be interesting, but demonstrate that the tellers are interested in what is interesting to their audience if they want to capture and retain their audience’s attention.  Purposeful story tellers must engage the listener(s) in a dialog.  Telling purposeful stories is interactive. It’s not a monolog.  Ultimately, purposeful tellers must surrender control of their stories, creating a gap for the listener(s) to willingly cross in order to take ownership.  Only when the listener(s) own the tellers’ story and make it theirs, will they virally market it.

7.  What's the simplest way we can start applying telling purposeful stories to our own lives right away?

Practice.  Practice.  Practice.  You will tap into your inherent resource.  Be clear to yourself about what your intention is, that you want to be heard and felt and what you want as your goal, i.e., what you want your listener to do upon hearing and feeling your story.  Be sure to know what your audience is interested in rather than trying to be interesting, and set your content in a context that is important to them.  Let your authenticity and congruence shine through your story, turning “me to we,” in the process.  Embed the important facts and information inside your story while rendering an emotionally resonant experience.   Hits are born in the heart or gut and then migrate to the mind.  Aim there.  Only then will your listener(s) own your goal as theirs and act on it.

The meaning of storytelling

What’s interesting to me is that ten years ago, ten years ago, storytelling was nowhere on the radar of the business world. Clever people were using stories to be successful, but no one was explaining how it was done. Now you have books like Peter’s book, Tell to Win, that take you behind the screen and reveal the secrets of what it takes to tell a winning story.

As we look more broadly now at the revolution going on in management around the world, as organizations shift from traditional management to radical management, it is becoming steadily more apparent that one of the key ingredients in the revolution is an ability to communicate authentically with their customers or their employees.  Storytelling is not just a nice additional capability to have. It’s become one of the basics.

To learn more

Peter and I will be appearing together on a discussion panel at the Commonwealth Club in San Francisco on the evening of April 21, 2011, talking about his book, Tell to Win, and the second edition of my 2005 book, The Leader's Guide to Storytelling, which is also being published this month.

 

Read the preface to the new edition of The Leader's Guide to Storytelling

Here's the new cover for the Second Edition of The Leader's Guide to Storytelling: Mastering the Art and Discipline of Business Narrative.

It's being published by Jossey-Bass on March 7, 2011.

You can pre-order it here now.

What's new in the new edition?

Read the preface below.

Preface to the 2nd edition

Much has happened in the five years since the first edition of this book provided the basic building blocks of leadership storytelling.

Since the first edition, the importance of storytelling as a leadership tool has become generally accepted, even in big organizations. The days are gone when I would be recruited by a nervous executive to hold a storytelling workshop for a major corporation with a euphemistic label like “strategic change management”. Now executives tell me, “Let’s call it what it is: storytelling!”

This in turn reflects the fact that storytelling has gained recognition as a core competence of leadership. It is now standard practice to include a section on storytelling in books on leadership and change management, such as A Whole New Mind (2006) by Dan Pink, The Leadership Challenge (2008) by Jim Kouzes and Barry Posner, Made to Stick (2008) by Chip and Dan Heath, and Getting Change Right (2010) by Seth Kahan.

The concept of leadership has itself also evolved. Chapter Twelve of the first edition of this book argued that storytelling was more than simply a communication tool, and implied the emergence of a different kind of leader, someone who engaged in interactive conversations, rather than merely telling people what to do. It suggested that storytelling went beyond the use of individual stories for specific purposes and implied a different way of thinking, speaking and acting in the workplace.

These ideas were further developed in my book, The Secret Language of Leadership: How Leaders Inspire Action Through Narrative (2007), which examined what this different way of thinking, speaking and acting entailed. It explored in more detail how the storytelling tools described in this book could be deployed to meet the specific challenges of leadership. It showed how the leadership communication triad, “get attention >> Stimulate desire for change >> reinforce with reasons” could be used as a template to deal with virtually any leadership challenge. Chapter Two of this Second Edition has been updated to reflect these discoveries.

Since 2005, a massive rethinking of management itself has also gotten under way. In 2009, the The Shift Index quantified with startling clarity the long term decline of management—the rate of return on assets of US firms is now only a quarter of what it was in 1965;  the life expectancy of a firm in the Fortune 500 has declined to less than 15 years and heading towards five years unless something changes; executive turnover is accelerating; only one in five workers fully engaged in his or her work.[1] The dysfunctionality of traditional management was further underlined by the discovery by the Kauffman Foundation that established firms in the US created no new net jobs during the period between 1980 and 2005; virtually all net new jobs were created by firms that were 5 years old or less.[2]

The standard practices of management are thus increasingly seen anachronistic. “Tomorrow’s business imperatives,” Gary Hamel wrote in Harvard Business Review in 2009, “lie outside the performance envelope of today’s bureaucracy-infused management practices… Equipping organizations to tackle the future would require a management revolution no less momentous than the one that spawned modern industry.”

Chapter 11 of the first edition of this book began to explore through the lens of disruptive innovation what this management revolution might involve. It argued that leadership storytelling was part of the answer. Since then, I have come to see more clearly what management actions in addition to storytelling are needed to create an organization that promotes continuous innovation on a sustained basis. In effect, storytelling is not just a core competence of leadership: it is also central component of management itself. My new book, The Leader’s Guide to Radical Management: Reinventing the Workplace for the 21^st Century (2010) spells this out in more detail and Chapter Eleven of the current book has been updated to reflect these insights.

The current book thus provides the building blocks of storytelling, from which my two subsequent books are constructed. The Secret Language of Leadership (2007) shows how storytelling is a central component of leadership. The Leader’s Guide to Radical Management (2010) shows how storytelling is a core competence of management itself.

The importance of storytelling in branding and marketing has also been reinforced by the explosion of social media. In 2005, when the first edition of this book was published, Facebook and YouTube had only just been created, and Twitter did not exist. Today, these three Web sites have hundreds of millions of participants, who are telling stories about their lives and the products and services that they use. This phenomenon has had a dramatic impact on practices in branding and marketing, as the ongoing shift in power from seller to buyer has dramatically accelerated. Understanding and mastering the elements of interactive storytelling in this sphere has become even more important than before. Chapter Five of the current book has been updated to incorporate the implications of these developments.

Stories are trapdoors, escape hatches, portals through which we can expand our lives and learn about other worlds. They offer guideposts to what is important in life. They generate meaning. They embody our values. They give us the clues from which we can discover what ultimately matters. In the last five years, I have learned much from studying both the power and the limits of storytelling. I am happy to have the opportunity to share those learnings here with you.

Washington DC.
November 2010

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[1] Deloitte Center for the Edge. Measuring the Forces of Long-Term Change: The 2009 Shift Index. 2009. http://www.edgeperspectives.com/shiftindex.pdf.  

[2] Friedman, T. “Start-Ups, Not Bailouts” New York Times, April 3, 2010 http://www.nytimes.com/2010/04/04/opinion/04friedman.html?hp

BOOK REVIEW: Radical management: "one of the truly great management books"

Wayne Hurlbert of Business Blog World has issued a review of my new book. The conclusion is:

I highly recommend this seminal and must read book The Leader's Guide to Radical Management: Reinventing the Workplace for the 21st Century by Stephen Denning, to business managers seeking to reinvent their workplaces and approaches to the evolving marketplace. This book provides the techniques and strategies to address change in both the workplace and with customers.

Read the thought provoking and destined to become classic book The Leader's Guide to Radical Management: Reinventing the Workplace for the 21st Century by Stephen Denning, and take the crucial steps toward reinventing your workplace and customer relationships from the ground up. Instead of the outmoded management practices utilized by your competitors, your company will be on the forefront of management techniques for the twenty-first century.

Read the full review here.

I highly recommend the seminal and must read book The Leader's Guide to Radical Management: Reinventing the Workplace for the 21st Century by Stephen Denning, to business managers seeking to reinvent their workplaces and approaches to the evolving marketplace. This book provides the techniques and strategies to address change in both the workplace and with customers.

Read the thought provoking and destined to become classic book The Leader's Guide to Radical Management: Reinventing the Workplace for the 21st Century by Stephen Denning, and take the crucial steps toward reinventing your workplace and customer relationships from the ground up. Instead of the outmoded management practices utilized by your competitors, your company will be on the forefront of management techniques for the twenty-first century.

Tom Gilb's review of Radical Management: "I love this book!"

Tom Gilb is one of the inventors of Agile thinking in management and hence also of radical management. His work in evolutionary project management is set out in his landmark books, Principles Of Software Engineering Management (Addison-Wesley Professional, 1988) and Competitive Engineering: A Handbook For Systems Engineering, Requirements Engineering, and Software Engineering Using Planguage (Butterworth Heinemann, 2005).

Tom's work provided the earliest published foundations for the appreciation of iterative and incremental feedback, the core of current  Agile software development techniques, and also radical management. Tom's wonderful pioneering work is saluted on pages 129-130 of my book, The Leader's Guide to Radical Management.

Tom's review of my book (January 4, 2011) now appears in Amazon and on his website, and is reprinted here:

Rapid feedback management

I love this book!

I would heartily recommend it to my professional friends and especially my client managers.

Let me give my take on the essence of the book - there are a lot of possible views.

1. Focus on your stakeholders
2. Focus on delivering real value on each small iteration of change to those stakeholders.
3. Learn what is real by the early and frequent realistic feedback you will get from the value delivery
4. Keep in mind the whole real system, not just some part of it like software.
5. Use the above to delegate decision making power to small teams.

These just happen to my own core professional beliefs! So of course I love the book!

Stephen has a website that gives blog length summaries of his ideas: http://www.stevedenning.com and http://stevedenning.typepad.com/

The revolution will take a long time, but Denning makes the interesting point that we can start it ourselves, wherever we are, and try to get it to spread. I know this works, I do it.

If there is one thing I would have wanted to convince Stephen of, and I will have a go, that is the idea that one powerful form of story is a numeric story, like "I think the time has come to get one order of magnitude better in the quality of all our products and services within the decade" (John Young, CEO HP, the 10X story. it worked!*

Stories are powerful tools, but for setting multiple improvement objectives a numeric story is often the most powerful and aligning inspiration, as was 10X at HP.

PS Declaration: I'm in the book too p 129-130, and so are a great many interesting thinkers with interesting insights. I found myself consistently reading his reference notes, they were very interesting, and far more than just references. They really added to the books value for non academic readers.

 

* No need to convince me of the power of the numeric story, Tom. I'm already a believer!

Matt May selects The Leader's Guide to Radical Management among the best books of 2010

Thanks to Matt May, author of The Shibumi Strategy, for selecting my new book, The Leader's Guide to Radical Management as one of the best 20 books of 2010.

Matt writes:

"Big idea: Once a company sees itself as being in the business of delighting customers and users, radical change can occur."

As there are around 11,000 business books published each year, it was nice to receive this recognition.

Read about the other books that Matt selected here.

And read my own review of Matt's engaging book here.

My book was also selected by 800-CEO-READ as one of the best five books on management in 2010: here.

Make talent development your obsession: Ram Charan's The Talent Masters

In an interesting interview in the Wall Street Journal with Joann S. Lublin, Ram Charan talked about his new book, co-authored with Bill Conaty, The Talent Masters: Why Smart Leaders Put People Before Numbers.

Some key points:

• You will see defections in critical positions in leadership teams. If you are in consumer electronics, product development is critical. Professionals and leaders are going to go where they can exercise their potential.
• Among Fortune 500 CEOs, the intent to put people as a key item is high. But in actual practice, the percentage really doing a thorough job is less than 25%.
• The biggest risk is top management not knowing explicitly whom they depend on lower in the organization for success. CEOs like Apple's Steve Jobs have figured out how to have more people working together despite corporate "silos.'' That is central to winning in the marketplace.
•   Do CEOs need to change their team? It depends. Look at Ford. The company was declining. They bring in Alan Mulally. He still has essentially the same management team, except for a marketing group vice president recruited from outside. He rotated some of the rest or redefined their jobs. He delivers results. He is going to leave superb strength behind him when he goes.

Read the full article here.

The revolution brewing in the world of work: Q&A with Rod Collins

I spoke recently with Rod Collins about his fascinating new book about reinventing management: Leadership in a Wiki World: Leveraging Collective Knowledge To Make the Leap To Extraordinary Performance (Dog Ear Publishing, 2010). It is one of a number of books discussing the revolution that is brewing that will end the world of work as we know it in the Fortune 500 companies. Rod’s book adds important new insights.

Steve: The title of your book indicates that this is a book about leadership. Is it also about management? Is there a distinction between the two?

Rod: The book is actually about both leadership and management. I used leadership rather than management in the title because there seems to be more interest these days in leadership over management. Perhaps this is a result of the popular notions that leadership is "in" and "management is "out" and that leaders "lead people" while managers merely "manage things." However, I believe that this is a false dichotomy. Leadership and management are two sides of the same coin. In the best of organizations, great leaders are usually great managers. Leadership is about the role of the catalysts in organizations who influence and shape both strategy and execution, while management is the discipline that guides how large numbers of people efficiently accomplish complex work. Organizations need both catalysts and discipline.

What is happening today is not the replacement of management by leadership, but rather the reinvention of both leadership and management. For the last 150 years, the work of large organizations has been about mass production and making centralization effective. In this context, leaders have been bosses and their defining characteristic has been the authority to issues orders and to expect compliance. When leaders are bosses, organizations naturally adopt the disciplines of top-down hierarchies to assure that the individual intelligence of the leaders is properly leveraged across the work of large numbers of people.

However, with the rapid emergence of the new and very different Digital Age and its revolutionary technologies, the work of large organizations is now about mass collaboration and making decentralization efficient. In this new context, leaders are facilitators and their defining characteristic is their ability to enable connections that drive effective collaboration among large numbers of people. When leaders are facilitators, organizations adopt the disciplines of self-organized networks that are designed to leverage collective intelligence. As the rapid developments in digital technologies continue to demonstrate that networks are far smarter and faster than hierarchies, the biggest challenge for traditional organizations will be whether or not they can reinvent both leadership and management and transform themselves from top-down hierarchies to peer-to-peer networks. This is the essential message of the book.

Steve: The title of the book says we live "in a wiki world." What do you mean by that?

Rod: A wiki world is the new world we suddenly find ourselves in today where networks are far smarter and faster than hierarchies. "Wiki" is the Hawaiian word for "fast" or "quick." We now live and work in a permanently fast forward world where the capacity to keep pace with the speed of accelerating change separates the winners from the losers. What's different about today and what's bringing on this new wiki world is the digital revolution, which has created the unprecedented capacity for large numbers of people to work directly and effectively with each other without the need to go through a central organization. This is the remarkable power behind open source platforms. These innovative ways of orchestrating the work of large numbers of people now make self-organized peer-to-peer networks much more efficient than top-down hierarchies. This explains why the leadership and management revolution is inevitable. In a wiki world where forming networks is easy, cheap, and available, hierarchical bureaucracies like the Encyclopedia Britannica can't keep pace with collaborative communities like Wikipedia.

Steve: The subtitle says that the book is about "leveraging collective knowledge"? Could you elaborate on what you mean by that? Is that what the book is about?

Rod: Inside every organization is an incredibly rich resource. In fact, for many companies, it may well be their richest resource. Unfortunately, this powerful asset also happens to be the most untapped resource in traditional organizations. What is amazing is that this untapped rich resource requires no financial investment because it's already fully paid for. What it does require is a radical shift in management and leadership practices. This rich abundant resource is the collective knowledge of an organization's own workers.

Top-down hierarchies are designed on the premise that an organization's intelligence resides in a select number of star performers who leverage their expertise through the power to direct and control the work of others. Self-organized peer-to-peer networks, on the other hand, are built upon the principle that an organization's intelligence resides in the diversity of its members who leverage their collective knowledge through the power to connect and collaborate with each other. The sudden and rapid emergence of peer-to-peer networks as a more efficient management alternative is accelerating a major shift in the way organizational power works. Increasingly, the power to connect trumps the power to be in charge. That's why organizations that want to manage at the pace of accelerating change need to learn how to leverage their collective knowledge.

Steve: Your book indicates that the boss is no longer the boss: the customer is now the boss. What are the implications of this in the workplace?

Rod: For most of the 20th century, bosses dominated market economies. Mass production equaled market power, and the greater their capacity, the more the bosses had the sense that they were in control. Thus, bosses didn't concern themselves with customers; rather they worried about the other bosses in their industry who might deprive them of their coveted market share.

With the digital revolution and the dramatic increase in the flow of information, customers are no longer passive recipients of corporate offerings. They are now educated, knowledgeable, and discriminating consumers who have lots of options and choices. It's not uncommon to see a customer in an aisle at Wal-Mart, using her iPhone to find a better price on Amazon and completing her online purchase before leaving the store!

Bosses now longer control the flow of information. The customer’s power of choice has supplanted the bosses' power of capacity, which is why, everyone inside an organization better understand that, in the wiki world, we work for the customers, not the bosses. This has significant implications for how we arrange the workplace. It means organizations need to eliminate the sovereignty of the supervisor by putting in place practices that hold people accountable to their customers and their peers, as well as their supervisors. Customer satisfaction data should be part of everyone's performance evaluation. Companies need to recognize that the fundamental relationship in their organizations is no longer supervisor-to-subordinate; it's now peer-to-peer. That's important because, in peer-to-peer networks, everyone is a customer of everyone else. This means not only do the supervisors evaluate the workers, but also the workers evaluate the supervisors and each other. If you want to create a customer-focused company, it starts by defining managers and workers alike as customers.

Steve: You say that there's a revolution brewing that is about to end the world of work as we know it. Could you tell us about the nature of this revolution?

Rod: Three sudden developments have come together to create what we know as the digital revolution, which is rapidly propelling us from the Industrial Age into the new and very different Digital Age. The first development is the incredible accelerating pace of change that has overtaken every industry over the last two decades. Today the increment of time for market change is now faster than the increment of time for moving information up and down a chain of command. This means that command-and-control organizations are unsustainable because they cannot keep pace with the speed of change in today's faster moving markets. If they could, the recording industry would have recognized that digital downloading is the new distribution system for music and, perhaps, they would have bought Napster, instead of putting it out of business.

The second development is that the Internet has created the unprecedented capacity for mass collaboration. We now have the capability for large numbers of geographically dispersed individuals to effectively and directly work together in real time - and they can do it smarter, faster, and cheaper. Who would have believed just 20 years ago that you could build a successful computer operating system using only volunteers, working without a plan or assigned tasks to produce a quality product that garners a 25 percent market share? Yet that is the incredible story behind Linux.

The final development is that knowledge networks are supplanting facilities and equipment as critical economic assets. This third development is a game-changer in two ways. In our new wiki world, the primary means for creating economic value has morphed from the means of production to the means of collaboration. In the Industrial Age, because the corporate bosses owned the means of production, they had the wherewithal to command and control. In the Digital Age, however, the workers now own the primary means for creating economic value because it is the workers, and not the corporations, who own the knowledge in the networks. The second game-changer is, for the first time in history, the prime economic asset is an abundant rather than a scarce resource. Knowledge can't be managed in the same way as plant, property, or equipment. Knowledge doesn't depreciate with use. Quite the contrary, using knowledge appreciates its value, especially when it is commingled with other knowledge. This is why open source platforms are so successful and why there is a significant "free" component on the Internet. The only way that knowledge grows is by giving it away. By making large portions of their platforms free, Google, Linux, and Wikipedia create sustainable business models.

The most significant consequence of these three developments is that, because command-and-control is unsustainable in our new wiki world, the biggest challenge facing traditional organizations is whether or not they can transform themselves from top-down hierarchies to peer-to-peer networks before someone else comes along, creates a competing peer-to-peer network, and puts them out of business.

Steve: To what extent are established organizations aware of the revolution you describe? How rapidly do you see this revolution happening?

Rod: Unfortunately, I think that many, if not most, organizations are almost completely unaware of the significant revolution that's reshaping the business landscape. Despite the many signs of the rapid ascendance of new business, operating, and management models created by leading innovators such as Google, Facebook, Linux, Best Buy or Whole Foods, most business leaders choose to ignore or explain away what's in plain sight: The companies who are most successful at managing at the pace of change are not top-down hierarchies - they're peer-to-peer networks. However, traditional leaders are challenged to make this transition because it means they have to accept that power comes more from being connected rather than being in charge. It means that leadership is no longer defined by the authority to issue order and to expect compliance. It also means they would have to learn to lead by consensus rather than by command, and many executives are simply lacking in the necessary collaboration skills.

Nevertheless, traditional leaders don't have a choice. The digital revolution is well underway, and I believe that, given our rapid pace of change, the transformation of the typical business organization from top-down hierarchy to peer-to-peer network will happen in less than a decade. In fact, I would suggest that the last large company designed as a top-down hierarchy has already been born - and there will be no more. Every new large business organization that is created from here will be a peer-to-peer network. In other words, it will more likely look like Google than like General Motors. The digital revolution really is ending the world of work as we have known it.

Leadership in a Wiki World: Leveraging Collective Knowledge To Make the Leap To Extraordinary Performance by Rod Collins (Dog Ear Publishing, 2010).

Corporate Strategy: From either-or to both-and: Doing Both by Inder Sidhu

Traditional management as taught in business schools is mainly about managing trade-offs. Do you go for disciplined execution or aggressive innovation? Do you accentuate customer focus or empower staff. You can’t do both. You have to be tough-minded and choose.

So when traditional management faces key strategic decisions, it typically applies its business school training and takes one path at the expense of another. It focuses on innovation and new business at the expense of core businesses or vice versa. It stresses discipline and sacrifices flexibility. It focuses on customers and ignores partners. Studies show it doesn’t work: the Fortune 500 are in sharp decline, as many writers and executives are concluding.

Successful management for the 21^st Century is radically different, as described in an interesting book called Doing Both by Inder Sidhu (FT Press, 2010). It’s mainly about Cisco (CSCO), which, over the past seven years, in a highly unstable global economy, doubled revenue, tripled profits, and quadrupled earnings per share. How? By “doing both”.

The book confirms that there is a better way, even for large companies. It means approaching every decision as an opportunity to seize, not a sacrifice to endure. It means avoiding false choices, reduced expectations, and weak compromises. It means finding ways to make each option benefit and mutually reinforce the other.

Of course, the hierarchical bureaucracy of a traditioinal Fortune 500 company lacks the agility to accomplish this. If you're in a hierarchical bureaucracy, don’t even bother trying. To accomplish both-and, you need to practice a reinvented management, with new goals, new roles, new coordination, new values and new ways to communicate.

Sometimes traditional managers suggest that only startups have the agility to succeed in a both-and strategy. The fact that a corporate giant lik Cisco has been successful at it, means that the Fortune 500 needs to think again: radical management is in your future.

BOOK REVIEW: The New Capitalist Manifesto by Umair Haque

The New Capitalist Manifesto: Building a Disruptively Better Business by Umair Haque (Boston: Harvard  Business Revew Press, 2011).

In his brilliant new book, The New Capitalist Manifesto, Umair Haque gives us a bold and eloquent vision of 21^st Century capitalism:

"A capitalism where companies, countries and economies reach a higher apex of advantage—one where bigger purpose rouses untapped human potential of every employee, customer and future customer, instead of deadening it. One where fiercer passion makes innovation as natural as drawing breath, spontaneously combusting the spark of creativity instead of dousing its flame with owest common denominators. One where deeper meaning replaces the drab grind of repetition with challenging and compelling work that elevates the soul. Where more authentic power flows from shared principles instead of (yawn) sweeter carrots and heftier sticks. Where greater resourcefulness means being not the natural world’s conqueror, but its champion. Where higher-quality value is created by doing stuff of greater worth. And ultimately where companies compete not just to change the rules, but to change the world." (p. xxii)

Haque gives us a scathing critique of the economic, moral and social bankruptcy of 20^th Century capitalism and its ongoing love affair with things and money. He offers us a brilliant metaphor for our situation:

“Prosperity on an ark differs radically from prosperity in a game reserve. In our metaphor of yestrday's capitalism as a game reserve, economic institutions were built to organize daily hunting most efficiently. They matched the swiftest, most powerful hunters to the biggest game to generate prosperity. But if the rules of hunting are to manage an ark, the result will repeated crisis and eventual collapse. In a big, empty, stable worlds, hunters can borrow benefits and shift costs with abandon, accumulating deep debt. Throw your bones away here. It doesn’t matter… But in a tiny crowded fragile ark, everything counts. There’s no one left to borrow benefits from or shift costs to: the destines are all inextricably interdependent… Here then is the predicament the global economy is in today. We’re using rules built for hunting to manage an ark…” (p.16)

What’s unique about The New Capitalist Manifesto is that it goes beyond a critique of capitalism and tells us what to do about it. In one sense, it’s “a journey of imagination, where we’ll envisage production, consumption and exchange through new eyes.” But Haque also gives remarkably clear guidance as to how this vision can be realized as well as telling examples of organizations that are already doing exactly that.

Haque sees clearly that 21^st Century capitalism is not merely about producing better products and services. It’s about institutional innovation, i.e. reinventing management so that the organization systematically delivers more value sooner, rather than systematically generating products and services of dubious social and ecological value.

Clarifying the goal of the 21st Century firm

The New Capitalist Manifesto is particularly strong in clarifying the goal of the 21^st Century firm, which is to create what he calls thick value—value that matters, value that lasts and value that multiples, not the thin value of the 20^th Century firm that is artificial and unsustainable, often gained through harm to or at the expense of people, communities or society. It is about making a positive difference in people’s lives, not merely having a differentiated product.

The book notes that the linear value chains of the 21^st Century firm systematically create ecological costs.

 Instead, the 21^st Century firm needs to practice value cycles, as exemplified by Interface (carpets) and Nike (shoes) where manufacturing becomes ecologically neutral, by remarketing (reusing and remanufacturing), reproduction (even using competitors used products), and reverse logistics (to reclaim discarded products).

Haque contrasts the clumsiness and inefficiency of 20^th Century firms pushing products towards customers, with firms like Lego (toy bricks) and Threadless (T-shirts) that use the power of pull (or spinning), by incorporating the customers into the very process of decision-making as to what will be produced. As a result, the firms make quantum leaps forward in the agility of decision-making; the firms systematically make better decisions sooner.

Haque is one of the few writers--like Fred Reichheld (The Ultimate Question)--to face up to the issue of “bad profits”. To the 20^th Century capitalist, the term, “bad profits”, is an oxymoron: any profits are good. But Haque sees clearly that profits made using unscrupulous or ecologically detrimental methods are incurring costs that will eventually have to be paid, not just by society as a whole, but increasingly by the firm itself.

Haque contrasts competitive advantage (lower costs) of the 20^th Century firm with constructive advantage, i.e. an advantage in both the quantity and quality of profit. Constructive capitalists have an advantage in the kind of value they are able to create, not just its amount. Because higher quality value is "less risky, less costly, more defensible, and more enduring, it is usually worth more to stakeholders of every kind: people communities, society, future generations, employees, regulators and investors alike."

Like Ranjay Gulati (Reorganize for Resilience), Haque envisages a fundamental shift from inside-out and top-down monologues (“You take what we make”) to outside-in and bottom up conversations (“Let’s discuss how we can understand and solve your problems”). To be real, such conversations need to be participative (a right to take part), deliberative (a right to discuss not just vote), associative (space to conduct the conversation) and consensual (a right to express dissent). He notes that 20^th Century “shareholder democracy” has none of these characteristics.

Firms that are already in some ways practicing what he preaches by enabling customers in various ways to call the shots include Threadless (T-shirts), Jelli (radio), PepsiCo’s Frito-Lay (PEP - potato chips), Starbucks (SBUX - coffee) and Wikipedia (encyclopedia). Even Walmart (WMT) has incorporated environmentalists into its decision-making on environmental matters.

Yet he also notes the constraints on implementing the vision:

...for most industrial age companies, empowering the community equals disempowering layers of managers. Hence, responsiveness is more easily gained for start-ups, where there aren’t layers of middle managers fighting to retain their empires.

Haque believes in firms that have a philosophy, particularly “a philosophy that emphasizes the first, fundamental principle of value creation, rather than planning planning a strategy focused on value extraction.” There is thus a shift from an overriding preoccupation with financial value and costs to instilling real values that create the basis for generating thick value that makes a difference in people’s lives. He cites Google (GOOG) as an example of a principle-driven business with such a philosophy, with its celebrated commitment to do no evil, its preoccupation with speed (fast is better than slow) and its furious experimentation to enable continuous improvement.

How far has the revolution already happened?

“If you look closely and patiently enough, you might not discern full-blown revolution (as in “the successful overthrow of authority”)–yet. But I wager that you’d at least detect, in vivid detail, its prelude…. Examining it carefully, you might see what I see: the first tiny shoots of what scholar Thomas Kuhn called a paradigm shift—not a small step, but a giant leap from one system of thought to its successor, which recasts an art or science in a radical new light.” (p. 2)

Among the many treasures in the book is Professor Gary Hamel’s foreword, “Capitalism is dead. Long live capitalism.” His summary of the matrix of deeply held, and even canonical, beliefs of the Global 1000 companies is a dazzling piece of incisive writing.

The New Capitalist Manifesto is a short, elegant and readable book. When the book gives us so much, one is tempted to ask for more. Perhaps in subsequent writings, Haque will expand and carry his thinking forward to show us more of the specific management practices that will build “organizations that are less machines, and more living networks”(p. 41) and how organizational communications will evolve in the new conversational mode. We are also eager to learn more about what kind of processes for instance would enable Google, despite rapid and continuous innovation in its core business, to deal with its apparent difficulty in breeding startups within the firm or stemming the exodus of its best people. We are also keen to learn more about how and when that “ultra-mean Deathstar” of the corporate world, Walmart (p. 43), will match the extraordinary progress that it has begun to make in terms of ecological responsibility with comparable progress in its extraordinarily asocial practices in labor relations. 

But in a short and wonderful book that gives us so much, we can be thankful for what we already have.

Bottom line

Overall, the book is courageous, thought-provoking, profound, incisive, daring, brilliant, trail-blazing, witty and ethical. In accordance with its own principles, it gives us value that matters, value that will last and value that will multiply. For anyone who cares about the future of the human race, a must read.