How E-Book

Dov Seidman

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 640

Veröffentlichungsjahr: 2011

Beschreibung

The flood of information, unprecedented transparency, increasing interconnectedness-and our global interde¬pendence-are dramatically reshaping today's world, the world of business, and our lives. We are in the Era of Behavior and the rules of the game have fundamentally changed. It is no longer what you do that matters most and sets you apart from others, but how you do what you do. Whats are commodities, easily duplicated or reverse-engineered. Sustainable advantage and enduring success for organizations and the people who work for them now lie in the realm of how, the new frontier of conduct.

For almost two decades, Dov Seidman's pioneering organi¬zation, LRN, has helped some of the world's most respected companies build "do it right," winning cultures and inspire principled performance throughout their organizations. Seidman's distinct vision of the world, business, and human endeavor has helped enable more than 15 million people do¬ing business in more than 120 countries to outbehave the competition. In HOW: Why HOW We Do Anything Means Everything, Dov Seidman shares his unique approach with you. Now updated and expanded, HOW includes a new Fore¬word from President Bill Clinton and a new Preface from Dov Seidman on why how we behave, lead, govern, operate, consume, engender trust in our relationships, and relate to others matters more than ever and in ways it never has before.

Through entertaining anecdotes, surprising case studies, cutting-edge research in a wide range of fields, and reveal¬ing interviews with a diverse group of leaders, business executives, experts, and everyday people on the front lines, this book explores how we think, how we behave, how we lead, and how we govern our institutions and ourselves to uncover the values-inspired "hows" of twenty-first-century success and significance.

Divided into four comprehensive parts, this insightful book:

• Exposes the forces and factors that have fundamentally restructured the world in which organizations operate and their people conduct themselves, placing a new focus on their hows
• Provides frameworks to help you understand those hows and implement them in powerful and productive ways
• Helps you channel your actions and decisions in order to thrive uniquely within today's new realities
• Sheds light on the systems of how-the dynamics between people that shape organizational culture-andintroduces a bold new vision for leading and winning through self-governance

The qualities that many once thought of as "soft"-values, trust, and reputation-are now the hard currency of success and the ultimate drivers of efficiency, performance, innova¬tion, and growth.

With in-depth insights and practical advice, HOW will help you bring excellence and significance to your business endeavors- and your life-and refocus your efforts in powerful new ways.
If you want to stand out, to thrive in our fast changing, hyper¬connected, and hypertransparent world, read this book and discover HOW.

Leseprobe

Contents

Foreword

Preface

Prologue: Making Waves

Part I: How We have Been, How We have Changed

Chapter 1: From Land to Information

Lines of Communication

Getting Flattened

Chapter 2: Technology’s Trespass

The Ties That Bind Us

Distance Unites Us

Can You Hear Me Now?

The Age of Transparency

The Persistence of Memory

The Information Jinni Is Out of the Lamp

Chapter 3: The Journey to How

Just Do It

The Certainty Gap

The Limitations of Rules

Outbehaving the Competition

How We Go Forward

Part II: How We Think

Chapter 4: Playing to Your Strengths

Help

You can Judge a Book by Its Cover

Looking Out for Number Two

The Evolution of What Is Valuable

Believe It

Playing to Your Strengths

Chapter 5: From Can to Should

Rules as Proxies

Dancing with Rules

On the Tip of Your Tongue

Unlocking Should

Risk and Reward

From Can to Should

Chapter 6: Keeping Your Head in the Game

Distraction

Small Lapses, Large Costs

Dissonance

Doing Consonance

Friction

Putting it in the Whole

Keeping Your Head in the Game

Part III: How We Behave

Chapter 7: Doing Transparency

Beyond Proxies and Surrogates

ICU, UC Me

The Market Defines You

Say You are Sorry

Interpersonal Transparency

Sig, Don’t Zag

Doing Transparency

Chapter 8: Trust

The Soft Made Hard

How High Is the Ceiling?

Going on a Trip

Tripping

Doing Trust

Trust Is the Drug

Trust, But Verify

Trust

Chapter 9: Reputation, Reputation, Reputation

Reputation in a Wired World

Reputational Capital

Mismanaging Reputation Management

A Second Chance

Reputation, Reputation, Reputation

Part IV: How We Govern

Chapter 10: Doing Culture

The Sum of all Hows

The Spectrum of Culture

The Four Types of Culture

Five Hows of Culture

Doing Culture

Chapter 11: The Case for Self-Governing Cultures

Self-Governance on the Shop Floor

Freedom Is Just Another Word

Taking Culture for a Test-Drive

Closing Gaps

Values in Action

A Journey to Culture

Why Self-Governance is the Future of Business

The Case for Self-Governing Cultures

Chapter 12: The Leadership Framework

Leadership

Walking the Talk

The First Five Hows of Leadership

Circles in Circles (A Thought)

The Leadership Framework, Continued

The Leadership Framework

Afterword

Hows Matter

Acknowledgments

Selected Bibliography

Index

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Copyright © 2007 by Dov Seidman. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Seidman, Dov.

How : why how we do anything means everything / Dov Seidman.

p. cm.

“Published simultaneously in Canada.”

Includes bibliographical references.

ISBN 978-1-118-10637-2 (cloth); ISBN 978-1-118-16768-7 (ebk);

ISBN 978-1-118-16769-4 (ebk); ISBN 978-1-118-16770-0 (ebk)

1. Success in business. 2. Business ethics. 3. Values. 4. Organizational effectiveness. 5. Technological innovations. I. Title.

HF5386.S4159 2007

650.1—dc22

2006103097

To my mother, Sydelle, for my firstand lasting sense that how matters

To my wife, Maria, for the how that matters most to me

Foreword

When I was in government, everybody debated two questions: “What are we going to do?” and “How much are we going to spend on it?” After my Presidency, I wanted to bring people together to focus on a more important question: regardless of what we want to do or what amount we have to spend on it, how can we maximize our efforts and expand our impact so that our good intentions turn into real change?

My friend Dov Seidman has dedicated his life’s work to studying how people conduct their business and their lives. As we settle into the twenty-first century with all of its unique challenges, it’s clear that we can no longer regard success as a zero-sum game: one group rising only at the expense of another. In this new century people worldwide will rise or fall together. Our mission must be to create a global community of shared responsibilities, shared benefits, and shared values. This new focus will require all of us to think about the how, and to find new ways to take action to solve the global issues that none of us can tackle alone.

In 2005, I started the Clinton Global Initiative (CGI) to convene leaders from the public and private sectors to devise and implement innovative solutions to some of the world’s most pressing challenges—to answer that how question. At events throughout the year, CGI creates opportunities for global leaders to collaborate, share ideas, and forge partnerships that enhance their work. We encourage members to develop specific projects—what we call “Commitments to Action.” Commitments are often cross-sector partnerships among organizations dedicated to making lasting change. Physicians join forces with shipping agencies and medical nongovernmental organizations (NGOs) to deliver unused medical supplies—that would otherwise be disposed of—where they are needed most. Unemployed New York City youth are given summer jobs painting rooftops white to lower cooling costs, improve building efficiency, and in the process, raise employment levels. Our work demonstrates that by applying the how in the real world, by collaborating around shared values, we maximize the positive impact of our efforts.

I am delighted that Dov has written this essential book articulating his complete philosophy of the how, including both the necessary shared values for the twenty-first century and actionable ideas to firmly establish these values in our public, business, and personal relationships. The individuals, organizations, and businesses that understand that how we choose to do things matters more than ever before will flourish. When people from different backgrounds, regions, and sectors come together in the spirit of true collaboration, challenging each other to do more and to do better, we find answers to those how questions, answers that make the world around us better and our children’s futures brighter.

This pivotal book will help all of us who are committed to building that world and creating that future for many generations.

President Bill Clinton

Founder of the William J. Clinton Foundation and 42nd President of the United States

Preface

This is a how book, not a how-to book. What’s the difference between how-to and how? Everything. In the twenty-first century, it is no longer what you do or what you know that matters most.

This is not just true of businesses but of any organization, be it a for-profit, a nonprofit, a government, or even a nation. The same holds true for the way individuals get ahead and accomplish their goals.

In this networked global economy, it is getting harder for organizations and individuals to succeed just on the basis of what they produce or the services they provide. In fact, if you line up all the winners today, you will notice that few win anymore solely by what they make or do. If you make something new (or better, faster, and/or cheaper), the competition quickly comes up with a way to make it still better and deliver it at the same or an even lower price. Customers instantly compare price, features, quality, and service, effectively rendering almost every “what” a commodity.

At the same time, in our hyperconnected, hypertransparent world, there is no longer such a thing as private behavior. For better or worse, everything that happens can now be forwarded, tweeted, and blogged about. We all now have unprecedented power to see over the fences and through the walls past public relations (PR) departments and right into the innermost workings of organizations, even into boardrooms and into the characters of the individuals who comprise and lead organizations. We can evaluate not just what they do, but how they do it.

Yet, the drive for differentiation—personal, professional, organizational, even national—lies at the heart of all our endeavors. We all still want to stand out, to be bold, to distinguish ourselves from others, to do things others can’t copy. We want to be uniquely valuable, to accomplish things of significance, and to earn a legacy. We always will. But in our commoditized, see-through world, we are running out of areas in which to do so.

There is one area where tremendous variation and variability still exist. There is one place that we have not yet analyzed, quantified, systematized, or commoditized, one that, in many important respects, cannot be commoditized or copied: the realm of human behavior—how we do what we do. When it comes to how you do what you do, there is tremendous variation, and where a broad spectrum of variation exists, opportunity exists. The tapestry of human behavior is so diverse, so rich, and so global that it presents a rare opportunity, the opportunity to outbehave the competition and create enduring value.

Of course, how we do what we do has always mattered. But today, how we behave, consume, build trust in our relationships, and relate to others matters more than ever and in ways it never has before. The world today, powered by vast networks of information, connects and reveals us in ways that we are only beginning to comprehend. A global data cloud has put us in intimate contact with colleagues, customers, and people from very different cultures. Often, advances in technology have connected us faster than we have developed human frameworks to understand each other. As a result, many of the tried-and-true ways of working together and getting ahead no longer apply.

As we see every day, and as you’ll read later on, the most valuable innovations of the twenty-first century are coming not just in new products, services, skills, business models, or public policy programs, but from new ways to create value and differentiation through our behavior both individually and organizationally—innovations in how. Individuals and organizations that fail to meet this challenge are already being left behind. Those already getting ahead understand that the best, most certain, and most enduring path to success and significance in these dramatically new conditions now lies in behavior—getting our hows right over time. This book illuminates the power and possibility of this very simple idea.

THE ERA OF BEHAVIOR

When HOW first appeared in 2007, I argued that we were entering what I called the Era of Behavior.

I was so wrong.

Over the past four years it has become clear that we haven’t just entered the Era of Behavior. We’re way deep in it. Our behavior matters even more than I thought when I wrote this book, and in ways I never imagined. When I wrote about a New York City doughnut vendor who boosted sales by trusting his customers to make their own change, for instance, I had no idea that giving trust away would become a global business strategy used to forge deep connections in a connected world, or that even countries like Indonesia would adopt it as a tactic to fight corruption. (Indonesia has opened over 10,000 “honesty cafés” throughout the archipelago, and many “honesty canteens” in local schools. Honesty canteens have no cashiers. Instead, students take what they like from the shelves. They deposit payment in an open box and take change from another box. The theory is that honesty canteens will teach young Indonesians habits of probity that will discourage them from sliding into corrupt practices later in life.)1

When I analyzed the largest Ponzi scheme to date as essentially being about the abuse of trust, I did not anticipate the possibility of an epic abuse of trust that would reverberate globally far beyond the circle of investors that Bernard Madoff directly betrayed. When I wrote about a pro golfer who disqualified himself from a championship tournament not because he thought he must but because he thought he should as a professional and as a person, I did not anticipate that one of the greatest golfers of all time would fall from grace because he conducted his professional and personal lives in starkly different ways in a world where public behavior and private behavior have become virtually indistinguishable. And when I evoked a world powered by vast networks of information that revealed us in unexpected ways, I didn’t realize that it would take a global financial crisis to expose the real nature and profound implications of our connectedness.

When I described our world becoming interconnected because communication technology had shrunk the distance between people, between countries, and between cultures, I did not fully see the extent to which we also have grown interdependent, even morally interdependent. Moral interdependence is inescapable in a world where mortgage transactions in California can wipe out pension plans in rural Norway, and where global consumer demand for cell phones and videogame consoles fuels genocide in central Africa.

I’ve come to recognize that we’ve grown too comfortable describing the world using amoral terms such as flat, connected, transparent, complex, uncertain, and (full of) risk. The world is certainly all these things—and more. Roughly two centuries ago, the Scottish philosopher David Hume observed that the moral imagination diminishes with distance. It follows that the moral imagination should increase as the world becomes smaller with the globalization of information and capital. And so it has. We are no longer distant, and therefore we need to reawaken our moral imaginations.

To frame all of these trends, let me offer a formula for an interconnected and interdependent world:

Technology + Human Passion × (False Ideas + Bad Values) = Extremism and Global Dysfunction

Technology + Human Passion × (True Ideas + Good Values) = Global Stability and Sustainable Prosperity

This formula has two constants and two variables. The first constant is that the world is technologically connected. We will never be less connected or less exposed. Privacy, as we’ve known it, is over. As technology marches on, we will only become more connected and exposed. The second constant is the universal human passion for progress and a better life, and when the forces of technology and human passion combine, as they increasingly do in our interconnected world, their impacts multiply exponentially.

Now consider two variables: our ideas about the world and our values. If you multiply technology and human passion against false ideas and bad values, you get total dysfunction and extremism. You will lurch from crisis to crisis with ever-increasing frequency. But if you multiply those same constants against the right variables—true ideas and good values—you get global stability and sustainable prosperity. In short, you get the things we all want.

The stakes for getting this formula right in our lives and endeavors are higher than ever. In a hyperconnected world, local problems can quickly metastasize into global ones. Whether it’s a financial meltdown, a nuclear meltdown, melting ice caps, pandemics, or Internet-fueled terrorism, the rapid pace and global scale of our problems can make us feel that we’re facing existential doom every other day. We’re like those secret agents in the movie Men in Black, clocking in each morning to face yet another threat of annihilation by alien space invaders. However, even though our problems may feel like end-of-life crises, they are really way-of-life crises caused by the nature of the relationships that connect us to our fellow human beings and to our planet.

In my journey of connecting with people and trying to explain why things happen as they do, I often find it helpful to distinguish between way-of-life and end-of-life crises. The classic end-of-life crisis would be a gigantic comet bearing down on Earth. In that situation, it’s perfectly rational to crawl under your bed and pray that the comet somehow misses Earth and hits Venus instead. In other words, an end-of-life crisis is a cataclysm, something you can’t do anything about. That’s not true of our major social, political, and environmental problems, all of which are caused by human behavior and can only be solved by changing human behavior.

During the financial crisis, for example, many smart people genuinely believed that the world economy was poised on the brink of total destruction. (“Gazing into the abyss” was a popular phrase in those days.) As a result, they hunkered down, avoided exposure, and waited for the storm to pass. Along the way we heard endless calls for a “reboot,” “reset,” and/or “reform” of the financial system. But we really needed, and still need, a rethink of the human relationships underpinning that system. As Albert Einstein said, we can’t expect to solve problems using the same thinking that created those problems in the first place. You can solve a way-of-life crisis only by changing the way you live.

Everywhere I go, I’ve noticed a nearly universal hunger to more deeply understand our changing world and a large appetite to rethink how we should forge ahead in a world of frequent way-of-life crises. In this regard, I’ve often been asked to apply the ideas in HOW about the source of human behavior to a global economic disaster caused by stunningly complex financial transactions. For me this all comes down to the distinction between “situational values” and “sustainable values.” All behavior is guided by values. There are only two types of values: situational values and sustainable values. Too often we’ve been connected situationally, as opposed to sustainably. In the housing market, for example, banks got into the habit of providing mortgage loans that allowed consumers to buy houses they couldn’t afford. That sounds pretty unsustainable today, right? But at the time it seemed to make sense. The consumers didn’t care because they assumed that the value of their home would always go up, allowing them to refinance the loan or sell the house at a handsome profit. The banks didn’t care because they quickly packaged their loans into securities that were sold on to investors. The investors didn’t care either, because they assumed that only a few of the mortgages they bought would actually default. Nearly everybody assumed, wrongly, that the housing market could only go up, not down. But we also made a more fundamental mistake, which was to assume that we didn’t need authentic, sustainable relationships among players in financial markets because financial innovation had insulated us all from risk. We now know that this so-called innovation actually multiplied risk because it encouraged everyone to focus on short-term, situational gain as opposed to long-term, sustainable value.

There’s a crucial distinction here. Relationships propelled by situational values involve calculations about what’s available in the here and now. They are about exploiting short-term opportunities rather than consistently living by principles that create long-term success. They stress what we can and cannot do in any given situation. Sustainable values, by contrast, are all about what we should and should not do in all situations. They literally sustain relationships over the long term. Sustainable values are those that connect us deeply as humans. They include integrity, honesty, truth, humility, and hope. Sustainable values are therefore all about how, not how much.

What makes an institution sustainable is not the scale and size it reaches, as the collapse of major financial institutions demonstrated. Rather, it’s how it does its business—how it relates to its employees, shareholders, customers, suppliers, the environment, society, and future generations.

HOW GOES GLOBAL

Over the past few years I’ve been fortunate to present the how framework to business leaders and audiences all over the world. I also found myself discussing how in unexpected places and applying its ideas to unanticipated realms of life. I was invited on Good Morning America, in front of millions of groggy fellow citizens, where I was surprised to find myself talking to host Robin Roberts about the hows of parenting. Raising a child is a journey, just like building a career or an organization. In the past, we could control our kids when we needed to by sending them to their rooms and turning off the TV. Today it’s nearly impossible to disconnect children from all of the devices that give them access to a socially networked world. Once we hoped kids would naturally model their behavior on that of their elders. Nowadays behavior is in the cloud. Soon after HOW was published I became a father. My son is now three years old. As he grows up, virtually everything that he says and does can live online forever. Wherever he goes, his reputation will arrive before he gets there. It is all the more important that I inspire in him the sustainable values that will help him keep his feet on the ground and guide him on a sustainable path in this strange and exciting new world.

Not long after, I sat in a darkened New York studio with Charlie Rose, who asked me how the ideas in this book differed from the Golden Rule. That’s a fair question, and the answer is that treating others as we want to be treated always mattered. But how we do so today matters in ways that it never did before. So many more people can see how you behave or be impacted by it. I suggested that we must scale our values to match a world where millions can “friend,” “unfriend,” and “outfriend” each other with the click of a mouse and gain “followers” in 140 characters or less. It’s no coincidence that our rising generations are eschewing social status through conspicuous consumption in favor of gaining currency through conspicuous expression and behavior.2

The more I traveled, the more I came to realize that the ideas in this book are universal. I learned a great deal from each audience’s unique and creative interpretation of how. At a Saturday morning speech in Beijing I made the mistake of telling an audience of Chinese university students that I would stick around after my talk until all their questions had been answered. Four hours later, we were still debating how the theory of sustainable behavior related to classical Chinese philosophy. (The answer: Very closely. A central tenet of Confucian thought, for example, is that laws control the lesser man, but right conduct controls the greater man. If you substitute company for man, Confucius becomes a contemporary-sounding theorist of organizational management.)

At an international business conference in Europe, I asked a roomful of global CEOs to raise their hands if they could confidently name their top-performing employees. They all raised their hands. Then I asked them to keep their hands up if, with the same certainty, they could name their most principled employees—the ones who most personified the company’s core values and best exemplified achieving the right results in the right way. All their hands dropped. Continuing the CEO calisthenics, I then asked if they would be running a better, more sustainable company if they could answer the second question as well as the first. Their hands shot skyward. I finally asked them to keep their hands up if they agreed that the global dynamics now called for them to urgently develop this answer and then embed it in their operations. Their hands remained aloft.

In 2008 I proposed “outbehave” as a new idea at the Ideas Festival, a gathering in Aspen to exchange ideas considered to matter most to our world. I noted that the term outbehave is not found in dictionaries, unlike outperform, outfox, outsmart, outmaneuver, outproduce, and so on. Language is important because it shapes our thinking. These terms are in the dictionary because they express common habits of mind and behavior. The idea that we can excel in our behavior and that principled behavior can be a source of advantage does not yet have a word for it. We’re like bodybuilders who rip their arms and torsos but ignore their legs. We have become top-heavy. We know how to outspend and outsmart our rivals, but we know relatively little about how to outbehave them. Figuratively speaking, it’s time to hit the gym and work on the behavioral legs that will both ground and propel us to more meaningful and sustainable lives.

Along the way, I’ve noticed that a growing community of people, including thinkers and leaders I admire, have adopted and amplified the concept of how as an ethic of human endeavor and a platform for creating enduring value. In this vein, they’ve adopted my use of how as a noun (e.g., “getting your hows right”; “it’s the how that makes the difference”) instead of an adverb (e.g., “how much market share we can take”). President Bill Clinton has announced that he plans to spend the rest of his life in “the ‘how’ business” and that he will “leave ‘what’ to others.”

New York Times columnist Tom Friedman added how as a “rule” of the flat world in the updated version of his seminal book, The World Is Flat. In his next important book, Hot, Flat, and Crowded, he embraced the how framework of sustainable values as the keystone of a sustainable world. He has also emphasized how-based leadership—inspirational leadership—as the key to innovating and thriving in a world marked by increasingly frequent political, economic, and environmental change and upheaval.

HOW VALUES SCALE

I earn my living by running a for-profit company that operates in the open global market. Over the past couple of years I’ve occasionally found myself debating the merits of capitalism with critics who blamed the recession on greedy bankers, clueless regulators, or incompetent automakers. I would invariably start my answer by noting that economic behavior has always had a moral dimension. In fact, Adam Smith, author of The Wealth of Nations, was a moral philosopher and was not trained as an economist. Then I’d argue that in a capitalist society, we naturally tend to assume that economic growth is good for everybody. More growth equals more jobs, more money, and more security for businesses and citizens alike.

Throughout the twentieth century, we saw a pattern of industries consolidating into fewer and fewer huge companies. The assumption here was that growth was good because big companies were ipso facto stronger than small companies. All businesses aspired to become “too big to fail,” to use a term that acquired a very different meaning during the mortgage meltdown. An entire ecosystem of business schools, investors, capital markets, business media, and companies grew up and still measures success around this principle. Venture capitalists still ask young entrepreneurs how they plan to scale their start-ups and create hockey-stick growth. Markets still reward companies that grow rapidly, and punish enterprises that do not. But in business, size alone can’t guarantee long-term survival. To the contrary, the aggressive pursuit of scale—whether it’s more revenues, profits, customers, or stores, or a bigger market capitalization—tempts companies to lose sight of the values that create true sustainability. Show me a venture capitalist that asks entrepreneurs “How do you plan to scale your values?” and I’ll be interested in investing in their fund. Show me a company that’s “too sustainable to fail” and I’ll be interested in buying shares.

If you retain nothing else from this book, remember this: In the twenty-first century, principled behavior is the surest path to success and significance in business and in life. If that seems counterintuitive, it’s because we’re used to thinking that business and life are somehow different spheres that are governed by different rules. According to this logic, social and environmental responsibility is at best peripheral to the core purpose of business, which is to maximize economic profit. Popular culture reinforces this message in spades. I spent my early career in Los Angeles, love movies, and tend to draw social lessons from them. Think of the Mafiosi characters in The Godfather, who justify appalling acts of treachery and violence by defining business impersonally: “This was strictly business. Tell Michael I always liked him.”

Or consider the slogan “Greed is good,” made famous by the corporate raider character that Michael Douglas plays in Oliver Stone’s movie Wall Street. Stone did not mean for us to conclude that greed really is good; Wall Street was inspired in part by his father, an old-school stockbroker who believed in serving customers honorably. Isn’t it ironic that several generations of young capitalists have interpreted Stone’s cautionary tale as a rallying cry to get out there and be, well, greedy? The thing is, slogans like “Greed is good” and “This was strictly business” make perfect sense in a disconnected world where people can create a separate sphere—first in their own minds and then in their behavior—in which they relate to one another situationally. The business world, for one, became that sphere. All those subprime mortgages—they were “strictly business.” The idea was that there was an amoral space, where as long as you were not breaking the law, your only responsibility was to shareholder value and pursuit of profit. Sadly and painfully, too many of us failed to realize that technology not only interconnected us; it also made us morally interdependent. “Greed is good” and “too big to fail” are rational strategies for a world in which business and personal lives are separate. But they are the absolute worst strategies in a connected world where everything is personal because everyone’s behavior affects everyone else.

I think that’s why the how view of the world is resonating in forums that were traditionally dominated by economic perspectives. The annual World Economic Forum gathering in Davos, for example, was historically about bringing business and political leaders together to gauge the state of the global economy and generate ideas to drive economic growth in order to improve the state of the world. But the title of the 2011 Davos conference was “Shared Norms for a New Reality”—norms as in normative behavior, that which we should do. The conference brochure stated explicitly that the meeting would focus on “the question of how.” And Fortune, the magazine that helped create the too big to fail business ethos through its annual ranking of the 500 biggest American companies, took a break from its more typical how much focus to profile the how philosophy in an article titled “Why Doing Good is Good for Business.”

Too big to fail logic has always been prevalent in international affairs, where countries race to pile up arsenals and currency reserves in the belief that size equals power and security. But does it? Here again, this book proved predictive in ways that I certainly didn’t imagine when I wrote it. The Prologue starts off by describing the spontaneous Wave that stadium crowds perform at big sporting events in order to encourage their favorite team. For me, the Wave is a great metaphor of the kind of human energy and behavior that will thrive in the twenty-first century. And not just at football games, either. The Middle East experienced a series of dramatic, globally televised waves during the early months of 2011, when popular revolutions confronted despotic governments in several Arab countries. Not unlike Wall Street, the politics of the region had long been governed by a too big to fail ethos. We assumed that the autocratic regimes of the Arab world would last forever because they had power and money on their side. Many also benefited from U.S. support, extended not because these regimes shared our values but because we thought that only strong dictators could fight terrorists and keep the oil flowing.

And then something amazing happened. Like millions of other people around the world, I was glued to my TV screen during the Arab Spring of 2011. In Tunisia and in Egypt, peaceful demonstrators armed with cell phone cameras rose up against the state, using social media channels like Facebook and Twitter to organize their protests and transmit their stories to the world. The protesters wanted the things we all want: justice, dignity, and freedom. And although they didn’t have tanks or torture chambers on their side, they quickly succeeded in forcing the old regimes from power. In other words, they created situational freedom, or freedom from tyranny. The road ahead is uncertain, and nobody knows whether this situational freedom will lead to sustainable freedom, the freedom to live according to their values. But at the very least, we now know that popular movements inspired by sustainable values can triumph against the forces of violence and repression. No dictator is too big to fail.

As I watched thousands of ordinary Egyptians demanding their rights in Tahrir Square, I felt that we received final confirmation that being too big to fail is a myth. Whether on Wall Street or in Cairo, it has certainly proved misguided as a strategy. Instead we need leaders, companies, and governments that are too sustainable to fail, too principled to fail, and too good to fail.

Why? Because in a hyperconnected world, more individuals and small groups can be a stronger force for more good or more evil. One individual can steal millions of personal identities, and one individual can spark revolutions for freedom across the Arab world. Essentially, we’ve democratized the production of good and evil. The closer we’re all connected, the more frequently we should expect the unexpected to happen. In a world of constant, radical change, we all need a bulwark that will act simultaneously as propellant and guide. We need to root ourselves in what we know should never change—our values. That’s why now more than ever we need people and organizations rooted in sustainable values. Such values do double duty by keeping you from lurching from crisis to crisis, from greed to fear. They guide you on a sustainable path of progress.

THE RISE OF INSPIRATIONAL LEADERSHIP

If too big to fail is the wrong strategy for a hyperconnected world, then how should we structure our lives and our organizations to make them too sustainable to fail? The short answer is that we need to rethink the nature of leadership itself. Here’s why. In today’s knowledge economy, the sources of power—information and ideas—are infinite. Google gives them away for free. Because we can’t hoard information or have more of it relative to others, the command-and-control leadership habits of the Industrial Age are increasingly less effective. When we look at the world through the lens of how, we see leaders shift, and others even transform, their habits of leadership from “command and control” to “connect and collaborate.” It’s a move from exerting power over people to generating waves through them.

These inspirational leaders have come to understand that as the source of power shifts, how they elicit and guide behavior must shift accordingly. This, too, is quite simple. There are only three ways to generate human connection and conduct: You can coerce, motivate, or inspire.

Coercion says: “Get me the memo by five o’clock. My way or the highway. Just get it done—I don’t care how.” Motivation says: “If you get it done, you’ll get a bigger bonus.” Coercive and motivational leaders use systems of external rewards (carrots) and punishments (sticks) to extract performance out of people, generate connection with them, and otherwise get them to play by a set of rules. But in our interconnected world, we are quickly discovering the limitations of carrots and sticks, and that we can’t write enough rules to get the behaviors we want for every situation we can imagine, much less for all the ones we can’t. We are also seeing the limitations of carrots and sticks as the source of strong connections in a world that readily exposes our connections for what they really are. If the only reason I work at a company is for a paycheck, I’ll leave when I’m offered a bigger one. If the only reason I buy something from one company is its price, then I’ll switch my loyalty if someone else sells it for less. Motivation also turns out to be an expensive way to propel behavior and generate connection, particularly in hard times when there are fewer carrots to go around.

As leaders, we need to rely more on inspiration and less on coercion and motivation, especially because we now are asking more of our employees and their conduct than we ever did in the past. We want them to relate to colleagues around the world who come from different cultures and speak different languages. We want them to push beyond merely serving customers to create unique, delightful, and genuine experiences. We ask employees to honorably represent their company and nurture its brand, not only when they’re on the job, but whenever they publicly express themselves in tweets, blog posts, e-mails, or any other interaction. We ask employees to be resourceful with fewer resources and resilient in the face of unimaginable uncertainty. We increasingly ask employees to go beyond continuous improvement by conceiving and implementing disruptive innovations that deliver the step changes our companies need to thrive amid global competition. These are not only big asks; they are numerous asks. If you think further about these asks, you will notice that we’re asking for distinctly human qualities and behaviors. Carrots and sticks are largely inapplicable to the responses we need.

So what kind of leadership supplies the big answer to these big asks? Connect-and-collaborate leadership that inspires the best in people! Ironically, no industry illustrates this more than professional sports, a realm where too big to fail thinking once reigned supreme. In sports you try to be bigger, stronger, and faster than the other team so that you can outscore them. It’s all about peak performance, winning year after year until you’ve built a dynasty. As you might expect, successful coaches have often been martinets who got results by being highly demanding and screaming at their players. Think Vince Lombardi, Bobby Knight, Tom Coughlin, and a host of other harsh disciplinarians associated with winning in the past. And then consider the Spanish national soccer team, which bounced back from a classic way-of-life crisis sparked by the team’s shocking first-round loss in the 2010 World Cup. The Spanish coach, Vicente del Bosque, is the opposite of a screaming drill sergeant. After the loss, he did not impose extra practice drills or other punishments “for the sake of it or to make a show of strength that I am the one in command.” Instead he held a series of short team meetings where he reminded his players that selflessness and teamwork had gotten them this far. Del Bosque’s quiet leadership apparently united and galvanized his players, who went on to win the World Cup.3

If you’re a National Football League (NFL) fan, you know that del Bosque is hardly an isolated case. Football is perhaps the ultimate “power over” realm, yet many of the most successful American football coaches today are embracing collaborative leadership styles. One of them, Coughlin, led the New York Giants to an improbable victory in the 2007 Super Bowl thanks in large part to his leadership transformation. Despite Coughlin’s long tenure as a pro football coach, critics often attacked his inability to connect with players. They referred to him as an “autocratic tyrant” and a “distant, dictatorial figure.” He was nearly fired. So he changed his leadership habits. Rather than screaming more loudly at players, Coughlin sought to forge meaningful connections with them. He began to regularly huddle with the players to gauge their concerns and to learn about their families and lives away from football. His goal of winning the Super Bowl remained the same, but his methods changed dramatically. Coughlin enlisted his players in shared beliefs about being champions and in values that would guide how they worked together. An old dog, so to speak, not only learned a new trick, but he also had the courage to transform himself, and he transformed his team in the process.4

Am I saying that Coughlin and del Bosque are saints? Not at all. Like many of today’s most forward-thinking CEOs, they are smart leaders who have found new ways to elicit peak performance in a world where traditional forms of power are rapidly losing sway. It’s all about rethinking the strategic significance of behavior, moving it from defense to offense.

I’ve presented the how philosophy to many corporate leaders. In the past, quite a few of them would listen attentively and then refer me to their “goalies” (i.e., their general counsel, chief ethics officer, chief risk officer, or external affairs officer). CEOs have always wanted to employ the best goalkeepers on the planet, the ones who give up the fewest goals from the perspective of avoiding impeachable conduct and preventing compliance failures. But historically, most business leaders have been less interested in playing goalie than in scoring goals. They have tended to view behavior as a defensive tactic, used to prevent bad things from happening or to demonstrate contrition after their company misbehaves.

This mind-set is understandable. Our initial introduction to the term behavior may remind us of the scoldings we received as children. We were admonished to “Behave!” in response to our objectionable actions. From that age onward, most of us developed a perception of behaving as something we need to do only after acting badly. If you’re convicted of a crime, for example, you might get sent to prison. And how do prisoners earn reduced sentences? Good behavior.

In recent years, however, I’ve been heartened to see that many CEOs have stopped referring me to their goalies. Beyond setting the right “tone from top,” they have become more directly and deeply involved in shaping their company’s culture and their colleagues’ behavior. Why? Because these how leaders now recognize that sustainable behavior is an offensive strategy that you need to deploy over the entire field. They are also listening carefully to their chief legal or risk officers, who increasingly tell them that there are simply too many shots on goal for them to block, and that therefore the best defense is to keep the ball or puck on offense. Behavior has become a powerful source of excellence and competitive advantage. In the past, bosses could get away with telling subordinates, “Just get it done—I don’t care how.” The more progressive ones would implore their people to think outside the box, which in their minds was a compliment. In my mind, it’s an insult. If you trusted your people, you wouldn’t put them in a box in the first place. In our radically interconnected world, leaders need to flip the switch and replace task-based jobs (which are about what people must do) with values-based missions. In short, it’s about how we should get things done.

Think of it as a shift from valuing size to valuing significance. Conversations about “how much” constantly echo throughout business, politics, and our personal lives: How much revenue can we squeeze into this quarter? How much debt can we tolerate? How much growth can we generate? How big should government be? But “How much?” and “How big?” aren’t the right questions. Instead we should be asking how we can create organizations and societies that mirror our deepest values. Consider the Himalayan Kingdom of Bhutan, which has long measured its economic and social progress by the yardstick of “gross national happiness,” as opposed to gross national product. Today, policy makers in Britain, France, and even Somerville, Massachusetts (where census takers now ask citizens, “How happy do you feel right now?” to help guide future public policy decisions)5 are debating how similar indexes might measure public happiness and welfare. The fact that governments are increasingly trying to measure happiness as well as material prosperity tells us something about the way the world is going. We are moving from how much to how.

This leads me back to the third and, I believe, most powerful form of human influence: inspiration. The first syllable of inspiration is in, signifying that the conduct is internal and intrinsic. Whereas coercion and motivation happen to you, inspiration happens in you. Inspired people have a deep purpose greater than themselves. They are guided by values they deem to be fundamental—values that sustain their relationships with others in pursuit of shared visions worthy of their dedication and commitment. In other words, inspired behavior starts and ends with people. After all, how is an anagram of who.

We are not only in the Era of Behavior; we are in the era of behaviors that can only be inspired. We are therefore also in the Era of Inspiration. Inspiration is the ultimate renewable energy resource. And today, inspirational leadership is the most powerful, abundant, efficient, affordable, and shareable source of human connection and guide of human behavior. This kind of leadership can inspire—and reinspire—over and over, without any cost and with dividends that never cease. Clearly, we need more leaders capable of inspiring the game-changing behaviors that map to the world we now inhabit.

We still have a long way to go. Engagement scores among U.S. and many global workers have tumbled in recent years. I think that’s because we’ve been spending too much time engaging workers with carrots and sticks, and not nearly enough time inspiring them with values and missions worthy of their commitment. Leaders and companies need to rethink engagement as a by-product of inspiration. And some are. For example, I recently watched how an inspired Southwest Airlines flight attendant connected with an entire planeload of passengers en route to Las Vegas. As we were getting ready to disembark, the attendant came on the speaker and cheerfully announced: “It’s a well-known fact that if you fold your seatbelts over your seat when you leave the plane, your luck will improve at the casino tables.” Everyone laughed, and then we all did as she suggested. But here’s the beautiful part: Federal Aviation Administration (FAA) regulations require seatbelts to be folded on the seats before new passengers can board. She could have taken the time and effort to fold every seatbelt herself. She certainly was not required by her company policy manual nor was she incented by her company compensation program to get us to help her do her job. Instead she was inspired to innovate in her behavior. (When this inspired attendant arrives in Los Angeles, she will likely innovate again in telling her same joke by swapping the number of celebrity sightings for dollars won at the tables.) Through how the attendant connected with and enlisted us, she helped her company comply with a regulation, gain an operational advantage in turning the plane around faster (because it would have taken her six minutes to fold the seatbelts by herself), and keep its brand promise of getting us to where we were going with “no frills, fun, safely, and on time.”

This kind of creative behavior can’t be commanded by a manager or codified in a rule book. It needs to be inspired. You can probably think of several inspirational leaders in your own life and work, but that flight attendant really sums it up for me. She got her point across by connecting with us, not by telling us what to do. She used behavior strategically, not defensively. She wasn’t the CEO, an executive, or even a midlevel manager, and yet she exhibited inspirational leadership. To thrive, our companies need to burst with daily demonstrations of inspirational leadership by every employee, regardless of his or her position.

Examples like this one help us rethink leadership. Human qualities like creativity, helpfulness, and hope can’t be commanded; they can only be inspired in people. You can’t order somebody to have a great idea. You can’t mandate rich, creative collaborations. You can’t command a doctor or nurse to be more humane and show compassion at a patient’s bedside. You can’t really motivate or coerce a teacher to be more hopeful and create a sense of possibility in the classroom. You can’t sufficiently motivate a sales representative to engender trust in every interaction. The lucky ones figure it out early on their own, but others need to be inspired to bring out these qualities.

THE HUMAN OPERATING SYSTEM

Because leadership is now more about inspiration than about coercion or motivation, we need to rethink traditional corporate governance and organization. In recent years, many successful, innovative companies have begun to deconstruct traditional hierarchies and eliminate workplace rules and approvals. These leaders understand that in an open-source world it’s no longer practical to run companies as though they were fortresses or jails. But deconstructing hierarchy and flattening the organization chart mark only the first steps—and are the easy part. Once those outdated structures are removed, organizations need to construct and foster corporate cultures that facilitate inspired behavior. It’s about moving from freedom from micromanagement and unnecessary approvals to freedom to contribute one’s character and creativity to how the organization pursues its mission.

While I don’t think human beings are much like computers, I see a strong analogy between a computer operating system (OS) and the kind of human operating systems we need in order to thrive amid business conditions of the twenty-first century. In both realms you need killer applications to spur adoption of a new system. Just as word processing and e-mail were the killer apps within PC operating systems in the late twentieth century, behavior (as offense) represents the killer app of the human operating system. To implement a human operating system (I think of it as a how os of sorts), organizations first need to build cultures that value humans and behavior at their core. Second, they need to reduce their reliance on traditional command-and-control corporate governance. Finally, they need to harmonize the two models to more effectively put humanity back at the center of business, not just inside every company but across the ecosystems that connect companies with their customers, suppliers, partners, and society.

Today we don’t need just technology innovators. We need behavior pioneers who innovate in how. One day, not too far in the future, everyone on the planet will be connected by technology. The more that happens, the more the only differentiator will be the quality and depth of your humanity—how you connect with and inspire other humans. When everyone has a smart phone, all that matters is the human content of the conversation—not that you have a phone and I don’t. That’s why more and more organizations are declaring their humanity. Chevron has become the “Human Energy” company; Dow has the “Human Element”; Cisco is the “Human Network.” Ally Bank’s slogan is “We speak human.” To be sure, some companies still honor their humanity in the breach, some confine it to their marketing departments, and others are just beginning the hard work of translating their values into corporate practices and leadership and individual behaviors that gain advantage and forge valuable relationships in the marketplace. It is not enough to proclaim your humanity; you have to live it! The winning organizations are those that deeply understand this. They are placing their humanity at the center of how they operate, lead, and govern, and not only at the center of a marketing campaign. In short, companies must be good in order to be great.

MY JOURNEY

Who am I to be telling you all this? I’m the founder and CEO of LRN, a company that helps global enterprises of all sizes win through how they do what they do. My entrepreneurial journey started modestly enough, as many such business journeys do. I graduated from high school with less then a handful of As: One was in phys ed and another was in auto shop. I got a 970 on the SAT. I took it again and my score increased dramatically to 980. Growing up, I struggled with dyslexia. Somehow I talked my way into the University of California at Los Angeles (UCLA). I was accepted very late, and because all the other classes were full I found myself taking remedial English and philosophy.

I fell in love with philosophy, which is fundamentally a discipline that teaches you how to rethink the world using observation and logic. I was particularly drawn to moral philosophy, which addresses some of life’s deepest questions, such as the nature of happiness, the difference between good and evil, and the organization of a just society. With my professors’ encouragement, philosophy helped me overcome dyslexia. Other academic disciplines rewarded the ability to plow through lengthy reading lists. I couldn’t do that, but philosophy rewarded me for the careful consideration of one idea. As a result, my disability became a strength.

Philosophy is also at the heart of my company, LRN. Since many years b.e.—before Enron—and certainly before corporate malfeasance stories became daily headlines, we’ve been applying philosophy to the rough-and-tumble world of business. We’ve taught hundreds of business leaders how to inspire principled performance throughout their organizations. We’ve taught millions of employees how to do the right thing. So my business is an extension of philosophy. I like to think of myself as a philosopher in a suit. (And LRN’s conference rooms are named after the great moral philosophers.)

Here’s how LRN happened. After studying philosophy as an undergraduate and graduate student, I went to law school. After graduation, I took a job at a private law firm. As I was toiling away in the law library one day, it dawned on me that someone somewhere must have researched the very issue I was working on, and almost certainly knew more about it than I did (which was zero). I saw an opportunity to make legal knowledge accessible to a large number of people in business at a low price, so I built a network of the finest legal minds that could deliver expert knowledge in a far more efficient, democratic way. The business flourished, and we found ourselves helping some of the largest companies in the world confront their legal challenges and manage their risk.

I soon realized, however, that the core of our efforts lay in helping our partners put out fires by responding to legal challenges that had already arisen. I began to believe that we could be of better service by helping them design and build fireproof enterprises, so to speak, to help them develop a new approach to getting their hows right and prevent these legal problems from arising in the first place. So we evolved into a company that helped organizations build sustainable cultures at every level, from the executive suite to the shop floor.

For a while, it often felt like we were selling vitamins to companies whose leaders did not realize they could get sick. Then a series of business scandals hit, and suddenly we found ourselves in the middle of a global discussion about values. My alma mater, UCLA, invited me to give the commencement speech, convinced that the power in how was the most practical message the graduating class could hear. The U.S. Federal Sentencing Commission asked me to testify about new ways of achieving higher standards of conduct and responsibility in business as they considered revisions to the Federal Sentencing Guidelines. The phone started ringing and the e-mail began to pour in from companies that realized there was an epidemic and they could catch it at any time. I was on TV, traveling the country, and speaking to corporate boards and employee groups of some of the biggest, most venerated companies in the world. LRN quadrupled in size.

Suddenly, it was practical—even fashionable—to be principled. But I saw this as a double-edged sword. Sure, more people acting in a principled way, even if for the wrong reasons (to avoid prosecution, to minimize liability, or to build good PR), still meant more people acting principled, and that was a net good. However, I sensed that people lacked a deep understanding of why they should be principled, and why they should dedicate new energy and emphasis to how they pursue their goals and interests. From that basic notion, LRN has continued to change and expand its vision to help companies of all stripes and sizes the world over to win through principled performance and by outbehaving the competition.

One important way that can you can outbehave the competition is to “outgreen” it. This realization inspired LRN’s acquisition of GreenOrder during the depths of the Great Recession, when most companies were hunkering down rather than seeking to grow. GreenOrder was a small but highly successful consulting firm that helped big companies like General Electric develop innovative, environmentally sustainable business practices and products. Like LRN, the team at GreenOrder understood that sustainability is about more than changing light bulbs or fuel sources; rather, it is about changing mind-sets and cultures. It is fundamentally about a mode of leadership and behavior that aims to create lasting value as opposed to piling up short-term transactional wins. It’s less about wind turbines or solar panels or green buildings than about the reason we want those things: so that our companies and our world will be better off tomorrow than they are today.

Today LRN operates globally, with offices in New York, Los Angeles, London, and Mumbai and colleagues in many other states and countries. We reach, work with, and help shape winning organizational cultures inspired by sustainable values in hundreds of companies with over 20 million people who work in more than 100 countries around the world.

Many of the concepts and strategies identified in this book have been consciously tested in the trenches at LRN, which is why we also tend to view ourselves as a laboratory. We aspire to be the change that we seek in the world. We call it “Living how.” In this spirit, we tore up our old vertical org chart and designed a flat, self-governing model. We now rely on our Leadership Framework to guide our decisions and interactions, teams to collaboratively drive shared initiatives, and elected councils to provide necessary governance. We endeavor to live our philosophy that you generate trust by extending it to others. One way that we’ve extended trust has to do with how colleagues spend company money. For example, we want our people to file honest expense reports. Who doesn’t? But instead of tightening oversight, we did away with it: no approvals required. We still do random report checks and track aggregate numbers. It helps us arrive at smarter policies on booking airfares, for example. Similarly, our vacation policy is “take whatever vacation you think you need as long as you are considerate of your colleagues.” And no one reports to a so-called boss who evaluates their performance. Instead, our principled performance reviews are conducted by a network of colleagues each individual selects to help guide his or her own development. The only boss at LRN is our mission.

As a moral philosopher, I’m pretty well versed in the art of logical argument. But as LRN grew, I kept meeting executives at client companies who were really comfortable only managing what they could measure. Beyond making the philosophical case for how, and arguing from our own and our clients’ experiences in implementing how, I felt compelled to test my arguments and seek statistical confirmation and quantification of my theory and observations—how metrics, if you will. So we launched a series of major surveys on governance, culture, and leadership in companies worldwide. These studies on how companies and their people operate and conduct themselves stress-tested the how Framework, which you’ll read about in later chapters of this book. The results indicate firmly that values-based organizational cultures (those with a human operating system and inspirational leaders) much more readily adopt new ideas, are more innovative, deliver better financial performance and customer experiences, enhance their recruiting success, are less plagued by employee attrition, and find lower levels of employee misconduct and retaliation—all well-established building blocks of long-term sustainability and success.

THE PURSUIT OF SIGNIFICANCE

As I said, this is a how book, not a how-to book. How-to books tend to offer Five Rules of This, Ten Practices for That, or Seven Ways to Get More of Whatever It Is You Want