To take full advantage of the potential in E-business, a company's leaders must lead differently, and people must work together differently
Are you an E-believer? Or are you cyberspaced out and ready to declare E-nough? Are you convinced that the Internet offers limitless possibilities and overturns conventional wisdom about how to run a company? Or do you believe that E-commerce promises more than it delivers?
Enthusiast or skeptic -- choose your side of the debate. Beneath these general attitudes about the Internet lie a series of assumptions about whether, when, and how much you should change your business to take advantage of it. But regardless of whether you're an enthusiast or a skeptic, the fact is, the advent of the Internet has forced the business world to go through a massive, unprecedented exercise in managing change. Established companies in traditional industries are just beginning to grapple with the nature and magnitude of the changes.
Today a company's success requires challenging traditional assumptions about organization, communication, decision making, operating style, and managerial behavior. To take full advantage of the potential in E-business, a company's leaders must lead differently, and people must work together differently. I call this new way of working E-culture -- the human side of the global information era, the heart and soul of the new economy.
E-culture is not yet well defined or well understood. But my Harvard Business School E-culture project, which I have recently launched, has uncovered some clues to what lies ahead.
New companies that work solely through the Internet, especially the dot-coms, have a distinctive style. Many pure Internet companies are small and new, and that alone gives them a special flavor. But strip away the chaos of a start-up -- working out of boxes, doubling up in offices, tripling the staff every few months -- and they still seem different. Some dot-coms have the flavor of a youth cult, rather than a culture, complete with preferred wardrobes and special languages. Employees take pride in pulling all-nighters that resemble communal living in the office. They are convinced that they will change the world and that no one over 30 can be trusted.
Those superficial characteristics are not the essence of E-culture, however. They do not show grown-up companies what to do if they want to succeed in a globally connected, Internet-enabled world. But there is something to be learned from companies that are born on the Internet. The fresh start that they exemplify helps illuminate why it's hard for many established companies to shift into E-business mode.
The challenge: deciding whether to embrace the Internet and understanding new requirements for running an E-business organization.
My E-culture project's initial investigations have uncovered a long list of barriers preventing established companies from embracing E-business. Some are external: resistance to sweeping changes in the supply chain or outmoded government rules and regulations, such as those governing intellectual property. But most of the obstacles involve things that lie within the company's control -- leadership, organization, and corporate culture.
In some cases, turf battles or rivalries between divisions make it hard to innovate. History also can get in the way -- a bad previous experience with new technology increases reluctance to change, or sometimes the company feels it has too many other problems to solve before tackling the Internet. Past success can be a barrier, too; why change a good thing? Or companies that do try an internal E-business start-up may find themselves with two conflicting cultures -- a new venture that consumes resources and seeks to break loose may end up warring with the mainstream business that makes all the money and prefers settled routines. If support at the top is lackluster, the company's leaders themselves can undermine E-business success.
The challenge for established companies is not only deciding whether to embrace the Internet; it is understanding new requirements for running the organization that a move to E-business involves. Six new principles are already in play at Internet-savvy companies.
Network power. E-business thrives on the strength of networks, on the connections among the entire extended family of business relationships. As geographic boundaries dissolve and companies need to reach market scale quickly, alliances and partnerships become a powerful source of advantage. The size and strength of the network matters more than that of individual components. Very small companies gain very big clout by being linked to wider networks. But companies pay a price for network advantages; they become dependent on outsiders whose behavior affects them but whom they do not control. Business executives must then become ambassadors beyond the company walls, and their employees diplomats who can manage complex negotiations and soothe ruffled feathers.
Direct communication. Managers must learn to spread information rather than hoard it. Mediated communication is increasingly distrusted when it is possible to go directly to the source or when E-mail distribution lists make it easy to copy everyone on everything. Playing "I've got a secret" is no longer a way to feel powerful. Information blockages slow down the whole system.
Opposition, not just competition. Companies have grown accustomed to watching the competition, but they're not as likely to be prepared for the speed with which opposition to their actions and offerings can be mobilized. Bad news seems to travel faster than good news in an Internet environment. The technology lends itself to guerrilla tactics, such as the rapid spread of unconfirmed rumors or messages broadcast to many lists simultaneously.
The new knowledge premium. The Internet economy values new ventures and new ideas deliberately detached from tradition. How many years a company has been in business matters less than whether it has the newest, latest offering. When it comes to talent, the prevalent assumption is that recently completed education and recently gained technical knowledge have the greatest value. Hierarchy is turned on its head. Senior people must learn from their juniors, old-timers from newcomers.
Business as improvisational theater. In an E-business environment, orders issued from the top are replaced by ideas spreading from any part of the organization. The drama of business was once like following a script; E-businesses operate more like improvisational theater. The employee-actors are given a theme or vision, and they develop the story as they interact with one another to create products and services. Mistakes and false starts are tolerated as long as response to feedback is rapid. Rather than waiting to build the perfect show, companies create ever-improving versions using audience reaction.
Managing crowds. It was considered a paradigm shift when managers discovered the wisdom of teams. With the Internet, company leaders must manage not just teams but large crowds. Teams have clear boundaries: defined membership and specific tasks. Crowds, in contrast, are larger, amorphous masses whose boundaries are unclear; they can include groups of unknown composition extending as far as E-mail can be forwarded. Leaders must understand how crowds -- from virtual protest movements to subversive employee E-mail lists to large audiences at pep rallies -- work. Leaders can't operate behind closed doors; they must play to the crowd.
Crowd phenomena are a natural outgrowth of E-business imperatives. Because power lies in the network, all parts of it must adjust their actions in light of what others are doing, and the only way to move quickly is to convene as many people as possible to make those adjustments simultaneously.
This is clearly not business as usual. The challenge for organizations and their leaders goes beyond developing an E-business strategy or a model for using the Internet. The challenge is to manage the next step in a cultural revolution that began even before the Internet became a household word -- a revolution that liberates people from the vestiges of machine-age bureaucracy and readies them to embrace and lead change.
Though there is a revolution afoot, there is still much more than these six principles that we can learn about E-culture. And it's too early yet to tell who will succeed and who will fail on the Internet in the long run. This overview of the human side of the information economy is the starting point for a dialogue in which you can participate.
Think about where you stand in the E-business debates. Will the global 2000 companies, with their market might and deep pockets, win the Internet race? Or will today's giants be outrun by nimble competitors unencumbered by history, tradition, bureaucracy, and fixed physical assets?
What about your own organization? How are you taking advantage of the potential of the Internet? What do you see as your organization's culture today? The barriers to change?
Our research project at Harvard is conducting a survey to gather businesspeople's answers to those and other questions about E-culture. You can participate by filling out our E-culture survey, which you can find at www.inc.com/ poll. We hope that the survey will focus your attention on the leadership challenges of the global information economy and stimulate your thinking about your own organization. By completing the questionnaire, you will contribute to a global conversation and ensure that the results are comprehensive and useful to your company.
Rosabeth Moss Kanter is the Class of 1960 Professor of Business Administration at Harvard Business School.
Evolve!: Succeeding in the Digital Culture of Tomorrow by Rosabeth Moss Kanter is the book that grew out of the E-culture survey.