Because Hyper-Social organizations are not just the sum of their Hyper-Social parts, let’s take a more holistic view of your business. In Chapter 8, we discussed the importance of letting go of certain hierarchical structures and fixed processes and embracing the messiness that comes with Hyper-Sociality. You don’t need to do away with hierarchies, as some pundits would have you believe, nor do you have to fear that social media will destroy them—it won’t. Communities of people, what we’ve been calling tribes, will form among your employees, customers, prospects, and detractors. Sometimes they will form within the hierarchies you have, and sometimes they will form outside of them. Some will be bound by the work contract that they have with your company, but the truly powerful ones will be based on a social contract that they have with one another.
These tribes will generate knowledge based on whatever it is that binds them together. Sometimes that knowledge will be good, as when the binding force is a shared passion to wow the customer or change the future, and sometimes that tribal knowledge will be toxic, as when the binding force is a shared disrespect for your company’s management. You need some form of management structure to facilitate the flow of knowledge between these different groups or tribes. When you put it in place, however, you must find the right balance between self-organization and defined management structures. If your management hierarchies are too rigid, knowledge can get trapped in the groups in which it originated. If you do not have enough formal structures, knowledge flow might happen, but the result can be a big chaotic mess. The only knowledge flow that you don’t have to worry about is the flow of rumors. With or without your help, they will find a way to flow, because, being Human 1.0, we are preprogrammed to tune into the rumor mill. We developed this skill as a survival mechanism against freeloaders who might otherwise undermine the proper functioning of our large-scale reciprocal societies.
Unlike traditional organizations, which are mostly directed and managed, Hyper-Social organizations have both a directed component and an emergent component—and each needs to be evaluated in the context of the other. While traditionally directed businesses can be analyzed as the sum of their parts, emergent systems cannot. Complexity theory, the science that studies the behavior of complex emergent systems, teaches us that if there are not enough connections between the parts of the system, it becomes chaotic and unpredictable. If there are too many connections or too many rules between the parts, the system freezes up. We believe that the analogy holds true for emergent Hyper-Social businesses—if there is too much structure, the system will freeze, and if there is not enough, you will end up with chaos. The key to success in systems that have an emergent component is to operate at what complexity theorists call “the edge of chaos.”
Hyper-Social organizations have to think differently about their business. They cannot just focus on the parts; they need to consider the whole as well. They also have to think differently about the leadership skills that will get them there. In the next sections, we will review how Hyper-Social leaders should think differently about their business and what it takes to be a successful Hyper-Social leader.
In the old days, most companies considered their purpose to be providing products that would fulfill a customer need and to have those customers pay for it. Innovation focused on the features of those products and the processes required to get them to market. It was a very proprietary view of the world. Later, companies came up with product platforms, and that became a big breakthrough in terms of product innovation and business innovation. We could now reuse product components (e.g., a car chassis), processes (e.g., manufacturing processes), and design (e.g., engine design) across multiple brands, and we could reuse software components across multiple applications. In doing so, we were able to reduce learning curves, achieve economies of scale, and bring new products to market faster.
However, such thinking was still based on a very proprietary view of the world. More recently, product platform has come to mean product extensibility through application programming interfaces (APIs) and standard form factors, allowing vendors to bring out solutions that let outside companies develop products for those platforms. Facebook, Twitter, and even more proprietary platforms such as SAP are good examples of that. They allow other application developers to build add-ons for their products. Others can be found in the aerospace and automotive spaces, where fixed form factors enable third parties to develop accessories and replacement parts for the products coming from those vendors. Those new product platform–based innovation models are much more Hyper-Social, as they allow others to participate and co-create value in your ecosystem.
Most recently, we have seen companies start thinking about business model platforms instead of product platforms. Think of Amazon. It did not set out to build an electronic book retailing business; it built a new business model platform that could accommodate just about anything. Netflix can be thought of as a business model platform innovator as well. While it has not yet leveraged this platform itself, thredUP uses a similar business model platform in an attempt to disrupt the consignment business (http://www.thredup.com).
A number of cloud computing offerings have become business model platform innovators in their own right. Take Intuit’s Partner Platform, which we mentioned in Chapter 13—it allows any application, no matter where it is hosted, to be integrated with other applications and delivered to small businesses. Successful business model platform innovators also leverage Hyper-Sociality by having open platforms that allow third parties to participate and cocreate value in their ecosystem.
During our innovation analysis, we wondered whether there might be a new wave of business innovators on the horizon, innovators who not only would leverage Hyper-Sociality as part of their business model, but would actually build their business on top of a Hyper-Social platform. Sure enough, when we looked at business innovation through our Hyper-Social lens, we were in for some interesting surprises. Threadless, a T-shirt manufacturer that produces only T-shirts designed by its customers and prospects, is one such business. Threadless has Hyper-Sociality at the heart of its business model—it’s the human customer platform that powers its business. Without it, there would be no Threadless. In a lot of ways, Zappos is also a Hyper-Social business innovator. It did not design some fancy new e-commerce platform to sell products more effectively. It put its people and its culture at the center of its business model, in effect building the company on top of a true human employee platform. Rite Solutions, an information technology company that provides engineering services to both government and commercial customers, is definitely built on a Hyper-Social employee platform. Billing itself as an “employee-centric” organization, it based its business model on the simple principle of having “meaningful” relationships with employees rather than the more transactional relationships that most companies have with them—a paycheck in return for the right skills and behaviors to get a job done. At Rite Solutions, Jim Lavoie and Joe Marino, the cofounders, also ask themselves whether employees belong in their company, and whether they are important, resulting in employees caring about the future of the company. They don’t stop there, they ask for their opinions and trust all of them—resulting in employees thinking about the company’s future. They are recognizing their employees and listening to them, causing them to contribute to the company’s future. And they make sure that people have fun, become part of the F.E.W. (Friends Enjoying Work), and feel relevant through proper rewarding—not just monetary, but also social rewards—resulting even in alumni to continue to contribute to the company’s future.
Hyper-Social platform innovators didn’t appear just yesterday. Similar to the way Hyper-Sociality has been around in pockets of business since people (mostly geeks) started using bulletin boards and UseNet groups, business models based on Hyper-Social platforms have also been around. For open-source projects like Linux, the Hyper-Social developer community is at the core of the business model. It’s what the business is built on. Some well-established companies, like IBM, have transformed themselves by embracing open-source software—and by proxy the Hyper-Social platforms on which it was built. It is worth noting that IBM went through a very challenging experience when it donated large chunks of its proprietary code base to projects like Linux and Apache, and in turn embraced those open-source solutions and processes as its own. Some would argue that without this experience, IBM could not have evolved the way it did, but no matter what you think, the end result is that not only did it weather the storm, but it emerged with tremendous advantages over other vendors who were still trying to sell proprietary software along with their hardware.
Even though Hyper-Social business models have been around for a while, we are still effectively in the Cambrian period of Hyper-Social business model innovation—a period that is seeing an explosion of alternative innovative business models, not all of which will survive. Many strange mutations will appear, and many will fail or be limited in their capabilities by the narrow blinders that traditional business thinking instilled in us. We will see variants of open-source principles applied not just in software applications, but also in physical goods. Take Free Beer (http://www.freebeer.org) as an example. The beer is actually not free, but home brewers can download and use the recipes for free—as long as they reciprocate by making their modifications available to the open-source community. It is only those who produce commercial products based on the recipes who ultimately pay royalties.
Even car manufacturing has attempted using open-source principles. OScar (Open Source car) is a German project (http://www.theoscarproject.org) that has been percolating since 1999. The Society for Sustainable Mobility (http://www.osgv.org) has over 150 engineers working on the Open Source Green Vehicle. Its first car, the Kernel Crossover, which is a contender for the Automotive X Prize, even borrows terminology from software open-source projects. In a lot of ways, the X Prize Foundation (http://www.xprize.org) fuels Hyper-Social platform innovators. The teams that assemble in projects to compete for those prizes are all motivated by much higher aspirations than having a job, a paycheck, or even access to the prize money (most do, in fact, spend much more than the value of the prizes). They are motivated by things like changing the future of spaceflight, saving the earth, uncovering the mysteries of life, and other grand dreams that allow humans to perform at much higher levels than they would under standard market contracts.
Other Hyper-Social platform innovators include companies like Dopplr, Visual Bookshelf, and Last.fm. These companies give their users the ability to share their travel, books, and music in a social context. Some, like Cambrian House, used the concept of marketplaces to bring together open-source business model innovators and open-source developers. At Cambrian House, crowd-sourcing and open innovation principles were used not only for the development of the applications, but also to vet ideas and business plans. Unfortunately, Cambrian House did not make it in its original incarnation, as it could not get a high enough level of activity on the site. This could be because marketplaces mix market contracts with social contracts, which, as we saw in Chapter 4, behavioral economist Dan Ariely warned us against. Those companies that got off the ground in the Cambrian House marketplace used a community-based ownership structure to ensure that all community members got their fair share of the company. In a lot of ways, it offered a refreshing alternative to the advertising-based monetization schemes that everyone else seems to embrace.
Innovative business models built on Hyper-Social platforms are tricky for a number of reasons. You need some control, but you cannot wield too much power. You need some structure, but you cannot have hierarchies that are too rigid. That makes for interesting choices. Will you act as the benevolent dictator or rely on the wisdom of the majority? What happens if your wisdom of the majority becomes the tyranny of the minority? You see, in order for these projects to work, they truly need to operate at the edge of chaos. And, yes, that means that they are always on the brink of either devolving into chaos or freezing over. Business models based on Hyper-Social platforms also need high levels of participation, which does not happen naturally in large communities. Lurkers, who typically make up the largest participation group in your online communities, become more like freeloaders in Hyper-Social platform–based companies than they do in other online environments, where they actually deliver a lot of value.
Hyper-Social organizations need different types of leaders from those in traditional organizations. In most cases, there is a real symbiotic relationship between the Hyper-Social leaders and their tribes—not only do they influence one another, but they often define one another. Before going over the characteristics of successful Hyper-Social leaders, let’s look at Barack Obama’s presidential campaign. Presidential candidate Obama was a classic case of a Hyper-Social leader, and you do not have to agree with his political views to understand the transformative power of that leadership style.
In an interview with NPR’s On the Media, Marshall Ganz,1 who designed organizational systems for the Obama campaign, talked about how Obama volunteers were motivated and coaxed to promote their candidate and to recruit other volunteers:
What we helped them understand is that the first thing they need to learn is how to articulate their own story, in other words, what is it that moved them to become involved and engaged, because it’s from their own story that they’re going to be able to most effectively engage others. So when people leave, they leave equipped to do that. That’s sort of the foundational piece.
And in the initial series in California, we launched 200 teams in two weekends that, with the support of four staff people, built that operation out there to the point where it could make 100,000 phone calls a day. This is like an investment in civic assets, in local communities that no political campaign has done for years.
The right benefited from being rooted in social movements, which do this because that’s what social movements do. They translate values into action; they bring people in to work together. But on the progressive side, everybody had become marketers. Everybody’d been marketing their cause or marketing their candidates as if it was another bar of soap, transforming people from citizens into customers.
What we did was bring the citizenship back in and put the people back in charge, and then put the tools in their hands.
For us, the biggest difference in how the campaign empowered volunteers is not bringing the citizenship back, it’s about realizing the power of letting people be themselves—about trusting them to be human. The message becomes much stronger when people tell it as part of their personal stories, and what motivated them to join the cause, rather than by regurgitating the marketing talking points about the cause. And as this story shows, it is much harder to defeat a Hyper-Social movement than it is to defeat a strong hierarchical command-and-control-based organization.
In our travels to understand Hyper-Sociality, we found eight characteristics of successful Hyper-Social leaders. Not surprisingly, great thinkers on the topic of leadership and management—people like Peter Drucker and Warren Bennis—came up with some of the same characteristics decades ago. That is because good leadership in Hyper-Social environments, just like good marketing and many of the other behaviors that we discussed in this book, is what leadership should have been all along.
Hyper-Social people cannot behave like corporate automatons. When people engage with your company, they want to connect with other people—not faceless entities. In addition, as the Obama candidacy has shown, a story is much more powerful when people can be themselves instead of following a corporate script. Let them tell their own stories instead of retelling the corporate story. In order for people to behave like actual people, leaders need to do the same and treat their employees with respect—just like Zappos, where employees treat one another as family, or W. L. Gore, where all associates agree to behave according to the following principle: “Fairness to each other and everyone with whom we come in contact.”
Proponents of Leadership 2.0 do not suffer from what Warren Bennis2 calls the Hollywood syndrome, an arrogant and misguided belief that power is more important than talent. They understand the negative impact that power-related status symbols may have on the way people behave in companies.
As we discussed earlier in this chapter and also in Chapter 8, controlling the brand experience across multiple human touch points does not happen with the help of corporate rule books. It happens through values-based cultures that people buy into. As we’ve seen from the JetBlue example, the ability to predict how people will behave based on a shared set of values is much more powerful than having a policy manual that covers every possible scenario.
Sometimes you have to supplement your values with policies or guidelines, but those who do this successfully always end up with policies and guidelines that are simple to understand and easy to live by. If your employees ask your legal department for clarification, you know that you have the wrong policies and guidelines.
If you still doubt whether rule books are good management tools, listen to the sages of modern management thinking. Most employees whose jobs have not been eliminated by automation or foreign outsourcing are likely to be knowledge workers, and according to Peter Drucker, “Knowledge workers cannot be managed.” And when Warren Bennis thinks about great groups (i.e., tribes), he says: “But whatever their appearance they are always rule busters. People in great groups are never insiders or corporate types on the fast track; they are always on their own track.”3
Proponents of Leadership 2.0 lead, they don’t manage. They understand the language of their culture and help create it. And as Alan Webber, the cofounder of Fast Company, told us about new leaders: “We’re seeing a change from leaders who have all the answers to leaders who know the best questions to ask.”
It’s not enough to have values; you also need to live by them. At Ritz-Carlton, there is the Gold Standard, a set of values and philosophy by which the company operates. When employees join the company, they go through a rigorous training and even get certified in the Gold Standard. But that is not all. Every single day, every one of the 25,000 Ritz-Carlton employees talks about the meaning of one of the elements of the Gold Standard with other employees for 10 or 15 minutes. That is true for the executives as well as front-line employees. This constant reinforcement of values is very important in companies. Dave Logan, the author of Tribal Leadership, reminded us of what happens when you do not do that: “Without that reinforcement of shared values, the knowledge or the visceral connection that we have to our values evaporates and then all we have, in order to get things done, is our political will. So, we start forming factions and coalitions and we start using spies and networks to get things done rather than, again, an inherent trust and belief that we’re all fighting for the same thing.”4
That is, of course, in sharp contrast with many companies, which spend considerable resources developing values, missions, and beliefs, only to live by some other rules. No company that we’re acquainted with has ever crafted a mission statement that vows to anger, disappoint, or annoy its paying customers. A look at public social media or a search engine, however, will show that some companies are routinely and consistently doing just that. Judging from a quick Google search, there are approximately 147,000 instances of people complaining that an airline “sucks,” notwithstanding the company’s stated desire to make every flight “something special.”
Without trust, Hyper-Sociality and business break down. Trust is what creates customer loyalty, trust is what reduces transaction costs, and trust is what speeds up buying decisions. You cannot expect your customers to trust you if you do not trust your employees—it just won’t happen. You have to trust your employees to do what’s best for the customer and thus what’s best for the company. Let them engage with people who are having problems or complaints in the marketplace. Empower them to own and solve customer problems the way Ritz-Carlton does. At Ritz-Carlton, whoever runs into a customer issue owns the problem (even if it’s not that person’s job). Employees also have the discretion to spend up to $2,000 of the company’s resources to fix that customer problem (without any authorization from higher-ups). Most companies require signatures for anything over $50 (or was it $5?)—how can you expect your customers to trust your employees if you do not trust them?
Did you know that 54 percent5 of companies block access to outside social networks and e-commerce sites? What is going on here? Recent studies6 have found that people who are free to surf and engage in “workplace Internet leisure browsing” are more productive than those who aren’t. So why do companies feel the need to play Big Brother when it comes to surfing habits at work? Most people will do better if they are not micromanaged. Again, how do you expect your customers to trust your employees if you don’t?
Transparency is the other side of the trust coin. You cannot have trust and no transparency. And it’s best to have that transparency extend to your partners and customers. Zappos, the online shoe and fashion retailer, permits suppliers to access much of the data that Zappos’s buyers see. Zappos’s CEO, Tony Hsieh, acknowledges that although competitors might also see the data, that risk is outweighed by the fact that another 750 people can suggest improvements to the business.
Paul Levy, the current CEO of Beth Israel Deaconess Medical Center, a large Harvard-affiliated research hospital in the Boston area, is another big believer in transparency. In a recent interview we had with him, he said: “And—little did I know that by actually publishing our numbers, virtually in real-time—that transparency itself would become a major management tool that would encourage our people to do even better than they had hoped to do in the first place. It was a way of holding ourselves accountable that I hadn’t really understood. So I like to joke that I invented a new management tool called transparency.”
Diversity is key to creating vibrant environments with little risk of groupthink and echo-chamber effects. And when we talk about companies that embrace diversity, we don’t just mean gender, racial, and cultural diversity; we mean intellectual diversity—attracting people who will approach the same problem from totally different angles. As Alan Webber7 told us when we spoke with him: “You have to marry idea people with implementation people. You have to marry word people with picture people. Left brain and right brain—all of those combinations have to be at work for you to have the organization that really reflects the rapid changes that are going on in the world. And you’ve got to be able to adapt.” Most companies that are also great innovators seek out diversity; they don’t just let it happen. Companies like Ritz-Carlton, which we mentioned earlier, build diversity right into their recruiting plans.
Now, if you are doing well at marrying the right people to the right projects, chances are that people who embrace diversity will seek you out—diversity seeks diversity. As Warren Bennis said, “Great groups often tend to attract mavericks.”8 You just have to recognize it when such a person walks in the door.
You have heard the story before: A people love people who are smarter than they are, and so they will hire other A people. B people feel threatened by people who are smarter than they are, and so they will hire C people. The C people, of course, know that they are total frauds in the job and will surround themselves with unnecessary processes and procedures to hide their incompetence and protect their job. That, of course, is what chokes innovation and eventually kills companies. Just as with diversity, you need to be constantly on the lookout for this to ensure that it does not take hold in your company. The last thing you want to do is to compromise on the people you surround yourself with. Not only will it be demoralizing for the good people around you, but it could allow an otherwise healthy culture to deteriorate into a Dilbert-like environment in no time.
When we spoke with Dave Logan, he described how easy it is to get a group to degrade itself to a level 2 in Tribal Leadership, which is where the Dilbert-like behaviors happen. He also described how IDEO avoids the possibility of having people not hire someone because they feel threatened by him: “I think of IDEO up in Palo Alto, the way that they hire someone is you get lunched—that’s a verb—by about 11 people and the 11 people have to largely agree that the candidate, let’s say it’s me, that Dave has the right values, that Dave is one of us. And they probably wouldn’t be interviewing me if they didn’t think that I had the technical ability. So, they’re really looking at culture fit when they do those interviews. And so, if there’s one person there who’s threatened, they’re probably going to have ten people outvoting them.”9
True tribal leaders are constantly on the lookout for the next-generation leaders, and they do that not just in the context of their companies, but in the context of their industry as a whole. Here again, the wise management thinkers figured this out a long time ago. Warren Bennis used to say: “Great groups are inevitably forged by people unafraid of hiring people better than themselves.”10
If you want your people to behave like grown-ups, you will need to let go of control and stop treating them like children. In a recent interview we had with Jeff Hayzlett, the CMO at Kodak, he described the letting go of control as follows: “As a parent it’s tough sometimes to let go. And that’s a good example. As a marketer I have to do the same thing. I have to treat it like my children. How do I know when to let go?”
Ram Menon, the CMO at TIBCO, ran into the issue of letting go of control when he decided to turn the sales process into a social process. This decision was a response to the realization that there was no way for marketing to support all of TIBCO’s different customer configurations with the appropriate marketing materials. So the company created a sales community, in which salespeople help one another to modify the marketing materials to meet the needs of specific customers. When faced with the issue of control of the marketing content, Ram described his fears as follows:11 “When I started, I had the average marketer’s fear. I put together a positioning for the company and nobody’s going to change that because that’s going to create problems…. [O]ver the course of time I realized one size doesn’t fit all in this market when you’re selling complex products.”
In this Hyper-Social age, change happens with increasing speed and complexity. The only way you can be agile enough to respond to these changes and leverage them to your advantage is by letting go of control and empowering your employees to do what they think is right for the situation. If you have to wait for information to go up the hierarchy and decisions to flow back down, chances are that you will have missed the opportunities that presented themselves to you or, worse, be hit with a crisis that could cost you dearly.
When it comes to thinking about Business 2.0 and Leadership 2.0, you really need to ask yourself and your team some tough questions. Have we challenged ourselves hard enough in evaluating everything we do? If we could restart the company tomorrow, what would it look like? If we could redo the culture, what would we come up with? If we could elect new leaders, would they be the ones that are leading us now? Are we treating our employees the way we would treat family? Are we putting the customer at the center of everything we do when we provide guidelines to our employees, or are we focusing mainly on our organizational interests?