Nilofer Merchant has a bad habit: she tends to doodle when she doesn’t want to say the wrong thing. She had been brought in as a “guest visitor” to a Fortune 500 boardroom to see if she could be a leader there. And she was doodling.
She wanted to see if the board understood that their market was shifting underneath them, and, if so, what their next move was. And there’s the chairman, leading the conversation again and again to “sustainable competitive advantage” and preserving “focus” in “core areas.”
The hours ticked by; the buzzwords stacked up; she doodled.
This board, she realized, thought their job was to build a bigger moat around their focus area, unaware that they should be building a drawbridge. They missed the memo that sharing could lead to power–and that the 40-year window of “advantage” had shrunk to five.
Getting to know the leadership team had turned into a lesson on the disconnect between MBA orthodoxy and business reality. Their thinking was, in her words, “old school,”–and she was, correspondingly, “fucking horrified.”
Merchant, a former Rubicon Consulting CEO turned corporate director (who also writes books and tweets and gives TED talks), returned to her office with an epiphany. She wanted to forward over the news that the time of traditional strategy had since passed–but she was unable to find anyone who had clearly articulated her ideas. And this was a problem.
“There’s a set of things that people are still taught in business school as true that I know to be dead,” she says. “I realize that if they don’t ever see the obit, we don’t ever get to where we need to go.”
And so, with great force (and enjoyment) she wrote the obituary for traditional strategy. That obit is the first chapter of her new book 11 Ways To Create Value In The Social Era, a manifesto on social business that reaches beyond social media. Fast Company talked with Merchant about how to what exactly the social era is, why businesses and customers are done with one-night stands, and why all this shifts the nature of leadership.
This interview–which took place over the phone and email–has been condensed and edited.
FAST COMPANY: What does creating value in the social era mean to you?
NILOFER MERCHANT: I think about value as the way we solve unmet needs, creatively solve problems, and build wealth. But most value has been defined too small–focused on the measure of profits, which is only one measure of wealth. The industrial era’s traditional strategy put the focus on profits and then suggested that they can “do good” as charitable donors afterwards. That construct makes profits the core, and things like purpose the frosting on the cupcake. But purpose and meeting real people’s needs in the community is not just the frosting; it’s the stuff that makes the core cupcake bigger and better.
How else is the social era distinguished from the industrial era and other, more recent, epochs?
The tools and processes and new ways we have of working are more than just a way to pass a buck or talk to people. It actually, taken in entirety, has a chance to organize the way we think about work entirely differently. I call the social era the context of the 21st century business.
I make a distinction between the industrial era and this. The industrial era was largely about making stuff and doing it in high enough volume that you had profit. Being big was incredibly important, scale was a big compulsion of ours–it’s the WalMarts of the world, the McDonald’s, and it’s Bank of America charging you five dollars to get our own money back. It’s giants. Center of the universe.
The web era came along and created efficiencies around that. Amazon gave us an easier, cheaper way to get our stuff. But it really wasn’t allowing any of us to work differently. And then the social era is about how to do you have connected individuals actually do work in a way that once we couldn’t do? So if the industrial era was about how a central organization was needed in order to create value, the social era is about how connected individuals–independent of an organization–can create value.
One of your truths for creating value is “co-creation.” The TED Talks are an example. But where does the money come in?
They have a community of people (who are) highly committed. As I’ve heard these TED volunteers talk about their experiences, they talk about working 600-700 hours a year and they got nothing back in terms of economic value. One of the questions I’m asking is “why do you keep doing it?” And some of them actually have adjacent business or adjacent ideas or a desire to build a community around a certain platform and they’re getting a secondary benefit.
And so the question is, how do you build systems of people you’re not pre-selecting, and then figuring out where does the compensation flow happen? It’s not necessarily a direct exchange, I make this thing, you buy this thing, or you do this thing and I pay you. How you create value and how you get compensated are going to inherently come from different places.
Where, then, do you foresee compensation coming from? With TED, compensation is a second step after this initial transaction or interaction.
It’s really interesting that you just used the word ‘transaction,’ and I think it’s insightful. I want to just kind of double-click on it for a second. What used to be a transaction is now an exchange. So it’s not a boom-boom-we’re-done, one-night stand-sort of equivalent, it’s “I am in this context, interested in this, you are in this context. You are interested in that, could we do something together?”
There’s this flow of value exchange that starts to happen. Much more relational and less of–using that terribly inappropriate, seemingly working analogy–of a one-night stand.
What you’re saying reminds me of a Jeff Bezos quote that as a company, you’re either fundamentally aligned with the customer or against them.
It’s exactly that. What most giant are still doing is thinking about there’s people who work for us in this artificial premise called our organization, and then there’s the people we “partner with” who are our channels to those customers who are out there.
It’s such an us/them archetype and yet today when you can co-create something–you can co-create a Burberry jacket today and make it the color you want and tailor it to be exactly what you want. There’s no buyer in that situation, I’m as much invested in that brand and that product that I helped co-create as Burberry is.
What is the role of leadership in this paradigm?
Leadership changes at many levels. The most obvious one is you have to invite everyone to play. You can’t think about there’s the stuff I do, the stuff I tell other people I do, and then out there is this other group of people. It’s working much more fluidly in relationship to people. And that’s going to unlock a lot of talent. That means you don’t have to be the smartest guy in the room for work to happen well. And so letting go of what we often call the command and control mentality is going to be central to how leadership changes.
So, practically, how can leaders better catalyze?
We shift from a place of knowingness and telling to a place of alignment to purpose. The leader’s number one role isn’t to figure out “this needs to happen and that needs to happen” and “you do this.” It’s not about figuring out the master plan and then telling everyone their piece.
It’s about knowing “why are we here” really clearly. Why are we here? What is our purpose? And then you guys go figure out what is the best strategy to go accomplish that purpose.
And it’s shifting power. When information is readily available, why not allow people to actually shape the direction of the organization? That means there needs to be some alignment for them; they can’t all go where they want to go. So the leader’s role actually really changes. In some ways it’s easier and some ways it’s harder, because the leader has to have a clue of where the end goal is. And it’s easier because you don’t have to own the day-to-day in the same way–you trust the team to figure out the best way to get there.
For more from Nilofer, read The Social Era is More Than Social Media.