Evolve! Succeeding in the Digital Culture of Tomorrow by Rosabeth Moss Kanter, Hardcover

Product Details

ISBN-13:	9781578514397
Publisher:	Harvard Business Review Press
Publication date:	02/28/2001
Pages:	368
Product dimensions:	6.37(w) x 9.43(h) x 1.24(d)

About the Author

Excerpt from

Chapter One

Online Communities and Offline Challenges

Community might seem a strange word to use in conjunction with the ever-expanding virtual world. But one of my most robust findings about e-culture is that it centers around strong communities, online and off. The community-forming potential of the Web presents both the greatest opportunity and the greatest threat to organizations and their leaders, as I will show in this chapter. One company's loyal community of empowered users is another one's biggest nemesis. One company's exciting opportunity is another company's death threat. Recognizing the revolutionary potential of the technology is a first step toward successful change. Recognizing the ways that it intersects with social institutions and human relationships on the ground is even more critical.

This poses three challenges to everyone engaged with the Internet:

2. The Internet can enable user communities to form and grow, but it can also use them to attack and deny.

3. The Internet can help build businesses and communities, but it can also destroy them.

No wonder everyone is searching for answers. But perhaps they are searching in the wrong place. As I will argue throughout this book, the answers lie not in cyberspace but on the ground, where real people make real choices.

* * *

The I-Paradox

Internet propositions scream Me, Me, Me. There are thousands of domain names beginning with "I" (iVillage, iflowers, I-traffic), with the implied triple entendre of the Internet and I, interactive. It is possible to read only MyNews downloaded on my machine with no concern for what anyone else is reading, or to visit websites called mytown, myhealth, mycar, mydog, and mycomicshop. The Web is personal, marketers tell us. It breeds intimacy with end users, and so offerings must be customized to fit them perfectly. Business buzzwords such as one-to-one marketing further reinforce individualism. Critics fear that the Internet breeds head-in-the-sand isolation. Media tales of dotcom billionaires make it seem as though individual greed powers the Internet.

Yet the hidden paradox of the Internet Age is that rampant individualism destroys the potential to derive economic value from the technology. When members of a network do not cooperate, do not pass on information, the network itself slows down. Having too many ideas, unchanneled by a common theme, impedes innovation and instead invites time-wasting, energy-draining conflict. Companies dominated by individual incentives for unit performance ("every tub on its own bottom") are slower to succeed on the Web than those with collective consciousness, as reflected in both the global e-culture survey findings and my case studies in later chapters.

It is individuals-in-community that create the greatest value—strong individuals in strong relationships. The worst of individualism involves isolation and separatism that is dysfunctional for the wired world. The best of individualism involves strong individuals with a strong sense of responsibility to others in their community. On the Web, community is an analogy more than an emotional reality. The term is often used (incorrectly) as an equivalent for an audience with the potential for interaction, but not every website that claims to form a community fosters much interaction or connects users to one another. Community is sometimes a distorted analogy because many so-called communities are just excuses for making money—attracting people for page views and then "monetizing" their "eyeballs." But the community metaphor does suggest a different attitude toward customers and users, namely, that consumers have changed from passive members of an audience to more active members of a community.

Within organizations, community must become an emotional and operational reality. Operating as a community permits speed, releases human energy and brainpower, engenders loyalty, and reaches across walls and beyond borders to include volunteers, partners, and unseen audiences. Speed comes about because people value their connection to everyone else and know how to work together to permit seamless execution or rapid mobilization. Human energy and creativity are released because of the motivational potential of feeling like a member, not an employee or a subordinate. High performance and even loyalty are engendered, even in an age of job hopping, because people are connected to the community in multiple ways beyond economic transactions—as member, citizen, helper, and recipient of help, as well as buyer, seller, or worker.

Seven elements are contained in the community ideal (even though they are not always present in reality):

2. Fluid boundaries. Communities are loose aggregations. There may be a formal core that is organized and firm, but around that core are people who come and go, move in and out, and become more active on some occasions and less active on others. Possibilities are open ended, and ties extend in many directions and for time periods after people have left the center (e.g., alumni associations). People can belong to several communities at once.

3. Voluntary action. It seems odd to talk about volunteers in the same breath as businesses, but there is a voluntary quality to the actions taken by community members. They do more than their jobs, because they want to. Leaders with new agendas are dependent on above-and-beyond contributions. Change is like community organizing, like political campaigns or mass mobilization. Leaders get people to vote with their feet for change.

4. Identity. Community is an idea, not a geographic location. A community exists because many people think it does and define themselves as part of it, whether it is a professional community, a community of interest, or a birthplace. The relationship of community identity to physical places has gradually weakened as communication media extended human bonds. China is a place; Greater China is a community. An idea—call it a "brand"—is the basis for identity as a community. (Even nations are getting into the branding game, seeking simple images to convey their attractions: Cool Britannia, New Zealand as the source of green products, and Massachusetts as the dotCommonwealth.)

5. Common culture. Shared understandings, a common language and disciplines, permit a relatively seamless interchangeability of one for another, or a relatively seamless passing of the torch. Some say that this commonality of approach is what sets the outer boundaries of community.

6. Collective strength. Communities tap the power of the many. The empowered individual consumer is a myth unless many consumers are empowered simultaneously and can push back. People bond to each other and to the community when there is a greater cause that uses their collective strength. Perhaps this is why there is so much change-the-world rhetoric surrounding entrepreneurial ventures.

7. Collective responsibility. Service to the community as a community can be a unifying force in addition to its pragmatic benefits as a workforce motivator, talent attracter, and brand builder. Becoming big everywhere often means becoming an insider everywhere, a player in many communities—real ones as well as virtual ones.

Localization, not globalization, is the term Internet companies use for creating operational bases in countries outside their home base. They are already global via the World Wide Web, so what they need is to look local to local users. Contributing to local causes produces community embeddedness to ensure on-the-ground influence.

The community analogy has limits and downsides, of course. A bad business proposition trumps all aspects of internal culture, as I will make clear throughout this book. Communities can turn into cults, closing minds instead of opening them and stifling innovation instead of encouraging it. Some ties can be broad but very shallow, making self-declared communities just fly-by-night gatherings. Superficial "community-building" bells and whistles, from parties to dress styles, may deflect attention from the serious substance of a venture. Thus it is important to distinguish community as a label from the underlying principles that make community integral to e-culture: sharing of knowledge, mutual contributions, smooth coordination, easy border-crossing, and responsibility for a shared fate. Let's turn to some unlikely bedfellows that illustrate this ideal: eBay and a set of public schools.

* * *

Dot-Communities

Online, community is only one of the three Cs said to be associated with e-business success: community, content, and commerce. Offline, the spirit of community is required in order to benefit from the changes that the Internet makes possible, such as giving customers more choices, citizens more voice, educators more capacity to improve children's learning, and businesses greater market reach and internal efficiency. Understanding community dynamics makes it easier both to create change and to live with the changes others create. The success of eBay, the world's largest Internet auction site, illustrates the interplay between online and offline community-building.

From Online Commerce to Offline Community: Ebay

In June 2000, eBay reported 12.6 million registered users, four times the number fifteen months earlier, and a huge increase from its 88,000 registered users in the first quarter of 1997. By the first quarter of 2000, annualized gross merchandise sales were about $4.6 billion, and 4 million items were listed for sale in 4,300 categories. Key to eBay's success, analysts agree, was creating a passionate, almost cult-like, community of users.

Building community was a goal from eBay's beginnings. Founder Pierre Omidyar launched Auction Web on Labor Day 1995 because his girlfriend (now wife) wanted to trade Pez dispensers and interact with other collectors over the Internet. A self-described "anti-commercial" software developer, Omidyar believed that users on his site, soon renamed eBay, should be empowered to safeguard it themselves and develop their own solutions to problems. He wanted as few rules as possible, valuing empowerment and trust. Generally eschewing advertising revenues (except on co-branded sites, such as a March 1999 AOL deal), eBay relied on listing fees and a percentage of the final sale price of each item sold. The company took pains to foster a close-knit feeling on eBay and not to appear too corporate or slick.

Ironically, that community strength gave eBay stickiness rarely found in cyberspace. CEO Meg Whitman contrasted it with other online auction sites, saying "OnSale's view of the world was auctions and economic warfare. This isn't about auctions. It's about community commerce." Many users purchased their first computer specifically to buy and sell items on eBay, according to marketing vice president Steve Westly, and eBay spawned many small businesses from users' living rooms.

Scoop 98 is one of those living room businesses. By day, Berta Maginniss is a mild-mannered executive (senior vice president of the Greater Washington Board of Trade, a prestigious business association). By night, she turns into Scoop 98, selling second-hand clothing on eBay from her home in Aldie, Virginia, forty-seven miles west of DC. (eBay's draw makes her the largest postal customer in town.) In late 1998, Maginniss, with no retail or technical background, offered Scoop's first item: a pair of Ferragamo shoes. By July 2000, Maginniss listed thirty-five to fifty items per week. "eBay makes you feel like part of the `community' from the very beginning. The sell/buy process is efficient and safe. Each product generation is better. Service issues have been handled efficiently and honestly. Instructions assure success even if you are not a `techie'" she enthused to me by e-mail. "My business is global from a small room in my house. It couldn't be easier or more fun!"

Meg Whitman describes eBay as "of the people, by the people, for the people." Empowerment and trust show in many ways. Users rate one another based on the quality and reliability of their trades or sales, with ratings appearing on-screen. Volunteers among eBay users form "neighborhood watch groups" to guard against abuse—an example of online community policing. Users are involved as the company makes adjustments, updates, and changes to its website. "eBay has changed time and time again, but in a very comfortable way and with the input of the user," Maginniss commented. "The `new' homepage is the fifth that I remember. Each time, we, the community of users, had the opportunity to live with it in a beta area for several weeks and to offer comments and suggestions. By the time it is introduced on the screen, the change is seamless." Users even became employees. During its first two years, eBay hired respected users for customer support; these users responded to e-mails and answered questions posted on bulletin boards from home. (As eBay grew, users were augmented by professionals in San Jose and then a dedicated service group in Salt Lake City.)

To users, eBay is more than an auction site. "I thought people would simply use the service to buy and sell things" Omidyar said, "but what they really enjoyed was meeting other people." Online features (including category-specific chat rooms, bulletin boards, a monthly newsletter, e-mail, and the opportunity for users to create their own home pages free of charge) make eBay a 24/7 forum for trading, talking about trading, and discussing common interests. An official eBay magazine was launched in May 1999. As eBay grew, special-interest groups emerged, and personal relationships developed offline. There were reports of eBay users holding picnics, taking trips, working together, and assisting each other in the real world—even helping with home repairs. Executives frequently compared this to the growth of a small town. "People on eBay feel like mayors of their own little cyber towns," Westly said.

eBay wants employees to understand the importance of community as a social value, not just as a way to extract economic value from aggregating an audience. Trust, respect, and empowerment are expected to extend offline within the company as well as online among users. In choosing Whitman as CEO in March 1998, eBay board members liked not just her brand-building skills but also her quick grasp of community values. Her initial changes responded to the needs of a growing organization: segmenting sellers by type and frequency, and clarifying internal responsibilities now that it was no longer possible for everyone to be involved in everything. But eBay still tries to foster a feeling of community among its paid employees. Whitman encourages them to be collectors themselves and to think like customers. Most desks at eBay corporate offices hold a collection of some sort—a reminder of eBay's origins as the site started selling big-ticket luxury items such as cars and yachts. Whitman and Omidyar speak about the company's values at employee orientations.

Remaining a community governed largely by users is difficult when growth requires controls. After a New York City Consumer Affairs investigation of fraud on eBay in January 1999, the company announced it would toughen up its antifraud measures with its SafeHarbor program, which consisted of a twenty-four-member team who worked to remove illegal items and suspend users for inappropriate behavior. Such changes had to be made with a light touch, because internal staff and users would bristle at any seemingly top-down or heavy-handed corporate changes in rules, including safety measures. When eBay decided early in 1999 to eliminate all auctions of guns and ammunition, the move was applauded by analysts and investors, but opposed by some in the eBay community. One user wrote on the bulletin board, "I am DISGUSTED."

Members of the eBay community generally deal directly with each other, with eBay as a facilitator; they rarely deal directly with the company. Omidyar mused, "So how do you control the customer experience? We can't control how one person treats another. We can't say, `you're fired' or `go back to training.' The only thing we can do is to influence customer behavior by encouraging them to adopt certain values." Sharing values in an online community is difficult enough, but added to that is the challenge of exponential growth—more new people using the service in a quarter than the total number of people who had been using the service in the previous quarter. "In the past, those values [of the community] were communicated person-to-person; most users would come on as buyers and interact with an experienced seller. But as more new people interact with one another, they have no basis on which to communicate values," he said. So eBay relies on tangible signs of intangible values, with offline community service as the visible manifestation of online community values.

In June 1998, eBay used pre-IPO stock to establish a foundation to ensure that "people are not only empowered to do business in a trusting environment, but they are also respected for what they contribute to the community," as its website said. A volunteer committee of eBay employees set priorities and made grant decisions, guided by quarterly themes. The first two grants were for organizations near eBay's home base outside San Francisco. By January 2000, under a Global Impact theme, the eBay Foundation gave grants for food security, workplace mentoring, antipoverty initiatives, and services for the blind in Florida, Washington, Michigan, and California. The foundation declared itself to be "clever, unique, passionate, and eclectic," just like eBay itself, but what really set eBay apart was not corporate giving but a truly unique user initiative, the Giving Board.

During the 1998 holiday season, eBay introduced the Giving Board, a bulletin board on its site for posting stories about people in need. Users were known for their generosity. At one point, a group of doll collectors tracked down another collector after she disappeared from the site. They discovered that she had lost her computer in a divorce and could not afford to buy a new one. So they pooled resources and bought her a new machine.

Response to the first Giving Board was so enthusiastic that users formed a committee of volunteers to coordinate a permanent one on eBay. The charitably minded could surf through messages and find an appealing cause. Requests for help in July 2000 included books for a lending library serving low-income parents, costumes for a youth drama group, and personal pleas—"I am a single mom of 2, husband left when youngest (7mons) was born w/Pfeiffer Syndrome and was not perfect. Now father is not paying child support & we live on youngest's SSI." Auctions in the general section of the eBay website can elect to contribute to a specific Giving Board request by donating 10 percent or more of their receipts, posting the notation ^i^ to indicate that it is an "angel" auction for a specific cause.

The only official guideline is "common sense," instructions on the board explain. "The members who assist with fulfillment of requests are individuals with families and obligations of their own. We are unfortunately, not equipped to solve monumental problems. If you have found yourself with an emergency (layoff, illness, surgery, accident, death), then we would invite you to let us know how we can help make your life a little less stressful, and to put things back in order." The instructions also admonish people to be honest, because "there is no way to know if a request is a scam." Though it is nearly impossible to track donations, 325 people reported donating to at least 1 of over 1,600 requests for help in early 2000. The numbers are small, but the symbolic value to eBay people is huge.

The eBay community saga illustrates many of the conditions for e-business success that form the core of this book: frequent, rapid upgrades with user feedback; a network that is stronger and stickier because it is based on multidirectional connections among all members and not just one-way ties to the company; and a set of values that unite employees and help them avoid turf battles, eBay operates both as a business with management controls and as a self-regulating, helping community of independent entrepreneurs that empowers its members while enriching its investors. It sounds almost too good to be true, and perhaps the model will prove unsustainable at larger size, with bigger commercial partners and more high-ticket luxury items.

Still, the eBay story makes clear that when the community metaphor online can reverberate offline, it improves the business in the process. What about the other direction, from offline to online? Let's examine the role of the Internet in building high-performance communities in an unlikely setting, public education in troubled urban districts in the United States.

Read an Excerpt

Chapter One

Online Communities and
Offline Challenges

How the Internet Affects All of Us

I thought people would simply use the service to buy and sell things, but what they really enjoyed was meeting other people.

—Pierre Omidyar, Founder, eBay

The Internet is the uninvited guest that crashed the party.

—Pete Blackshaw, CEO, PlanetFeedback.com

Searching ... searching ... reads the message at the bottom of my screen. It seems emblematic of the state of the world. Everywhere I turn, I find people who want to know what the Internet really means for their future and what they must do to succeed.

The Internet is a revolutionary technology that cannot be ignored or avoided. New economic and organizational forces stemming from the rise of the Internet affect more than just those people and companies whose work centers around the World Wide Web. These forces have an impact on workplaces of all kinds, reaching non-computer users as well as avid techies. The Internet has the potential to transform every economic and social institution, from business to education to health care to government. The power of the Internet goes well beyond the simple question of whether businesses should engage in e-commerce. Internet phenomena reshape markets, but also reach far beyond them to society itself, in several ways:

* Network power. Everyone is potentially connected to everyone else. Network reach is more important than the size of individualcomponents. There is a greater reliance on partners in order to get big everywhere fast.

* Transparency and direct communication. Information access is rapid, open, direct. There is greater exposure and visibility.

* Fast feedback, easy protest. Competitors can become partners, but there are opponents lurking everywhere that can mobilize quickly.

* Constant change and reliance on new knowledge. There is fierce competition for talent with the newest skills. New knowledge earns a premium. Rapid innovation creates the need for still more change.

* Large audiences and crowd behavior. Messages reach wider audiences. To coordinate complex networks, larger groups must share information and spread it further.

To master this environment requires evolving to a new way of working, a new way of doing business, a new style of human relationships that together constitute e-culture. The Web rewards organizations that are nimble and innovative, with a freer spirit of creation, ones that can move quickly because all the right connections are in place. That need for agility has been noted frequently. What has not been examined is the Web's hidden secret: that it provokes a shift toward more collaborative work relationships, ones that resemble open, inclusive communities more than they resemble secretive, hierarchical administrative bureaucracies.

Community might seem a strange word to use in conjunction with the ever-expanding virtual world. But one of my most robust findings about e-culture is that it centers around strong communities, online and off. The community-forming potential of the Web presents both the greatest opportunity and the greatest threat to organizations and their leaders, as I will show in this chapter. One company's loyal community of empowered users is another one's biggest nemesis. One company's exciting opportunity is another company's death threat. Recognizing the revolutionary potential of the technology is a first step toward successful change. Recognizing the ways that it intersects with social institutions and human relationships on the ground is even more critical.

This poses three challenges to everyone engaged with the Internet:

1. The Internet can greatly empower and connect people, but it can also isolate and marginalize them.

2. The Internet can enable user communities to form and grow, but it can also use them to attack and deny.

3. The Internet can help build businesses and communities, but it can also destroy them.

No wonder everyone is searching for answers. But perhaps they are searching in the wrong place. As I will argue throughout this book, the answers lie not in cyberspace but on the ground, where real people make real choices.

* * *

The I-Paradox

Internet propositions scream Me, Me, Me. There are thousands of domain names beginning with "I" (iVillage, iflowers, I-traffic), with the implied triple entendre of the Internet and I, interactive. It is possible to read only MyNews downloaded on my machine with no concern for what anyone else is reading, or to visit websites called mytown, myhealth, mycar, mydog, and mycomicshop. The Web is personal, marketers tell us. It breeds intimacy with end users, and so offerings must be customized to fit them perfectly. Business buzzwords such as one-to-one marketing further reinforce individualism. Critics fear that the Internet breeds head-in-the-sand isolation. Media tales of dotcom billionaires make it seem as though individual greed powers the Internet.

Yet the hidden paradox of the Internet Age is that rampant individualism destroys the potential to derive economic value from the technology. When members of a network do not cooperate, do not pass on information, the network itself slows down. Having too many ideas, unchanneled by a common theme, impedes innovation and instead invites time-wasting, energy-draining conflict. Companies dominated by individual incentives for unit performance ("every tub on its own bottom") are slower to succeed on the Web than those with collective consciousness, as reflected in both the global e-culture survey findings and my case studies in later chapters.

It is individuals-in-community that create the greatest value—strong individuals in strong relationships. The worst of individualism involves isolation and separatism that is dysfunctional for the wired world. The best of individualism involves strong individuals with a strong sense of responsibility to others in their community. On the Web, community is an analogy more than an emotional reality. The term is often used (incorrectly) as an equivalent for an audience with the potential for interaction, but not every website that claims to form a community fosters much interaction or connects users to one another. Community is sometimes a distorted analogy because many so-called communities are just excuses for making money—attracting people for page views and then "monetizing" their "eyeballs." But the community metaphor does suggest a different attitude toward customers and users, namely, that consumers have changed from passive members of an audience to more active members of a community.

Within organizations, community must become an emotional and operational reality. Operating as a community permits speed, releases human energy and brainpower, engenders loyalty, and reaches across walls and beyond borders to include volunteers, partners, and unseen audiences. Speed comes about because people value their connection to everyone else and know how to work together to permit seamless execution or rapid mobilization. Human energy and creativity are released because of the motivational potential of feeling like a member, not an employee or a subordinate. High performance and even loyalty are engendered, even in an age of job hopping, because people are connected to the community in multiple ways beyond economic transactions—as member, citizen, helper, and recipient of help, as well as buyer, seller, or worker.

Seven elements are contained in the community ideal (even though they are not always present in reality):

1. Membership. Customers, users, partners, employees—when they are members, differences disappear, and connections transcend the role-of-the-day. People feel an obligation to fellow members that they do not feel to, say, fellow customers. Membership implies a kind of citizenship, with the right and obligation to speak up.

2. Fluid boundaries. Communities are loose aggregations. There may be a formal core that is organized and firm, but around that core are people who come and go, move in and out, and become more active on some occasions and less active on others. Possibilities are open ended, and ties extend in many directions and for time periods after people have left the center (e.g., alumni associations). People can belong to several communities at once.

3. Voluntary action. It seems odd to talk about volunteers in the same breath as businesses, but there is a voluntary quality to the actions taken by community members. They do more than their jobs, because they want to. Leaders with new agendas are dependent on above-and-beyond contributions. Change is like community organizing, like political campaigns or mass mobilization. Leaders get people to vote with their feet for change.

4. Identity. Community is an idea, not a geographic location. A community exists because many people think it does and define themselves as part of it, whether it is a professional community, a community of interest, or a birthplace. The relationship of community identity to physical places has gradually weakened as communication media extended human bonds. China is a place; Greater China is a community. An idea—call it a "brand"—is the basis for identity as a community. (Even nations are getting into the branding game, seeking simple images to convey their attractions: Cool Britannia, New Zealand as the source of green products, and Massachusetts as the dotCommonwealth.)

5. Common culture. Shared understandings, a common language and disciplines, permit a relatively seamless interchangeability of one for another, or a relatively seamless passing of the torch. Some say that this commonality of approach is what sets the outer boundaries of community.

6. Collective strength. Communities tap the power of the many. The empowered individual consumer is a myth unless many consumers are empowered simultaneously and can push back. People bond to each other and to the community when there is a greater cause that uses their collective strength. Perhaps this is why there is so much change-the-world rhetoric surrounding entrepreneurial ventures.

7. Collective responsibility. Service to the community as a community can be a unifying force in addition to its pragmatic benefits as a workforce motivator, talent attracter, and brand builder. Becoming big everywhere often means becoming an insider everywhere, a player in many communities—real ones as well as virtual ones.

Localization, not globalization, is the term Internet companies use for creating operational bases in countries outside their home base. They are already global via the World Wide Web, so what they need is to look local to local users. Contributing to local causes produces community embeddedness to ensure on-the-ground influence.

The community analogy has limits and downsides, of course. A bad business proposition trumps all aspects of internal culture, as I will make clear throughout this book. Communities can turn into cults, closing minds instead of opening them and stifling innovation instead of encouraging it. Some ties can be broad but very shallow, making self-declared communities just fly-by-night gatherings. Superficial "community-building" bells and whistles, from parties to dress styles, may deflect attention from the serious substance of a venture. Thus it is important to distinguish community as a label from the underlying principles that make community integral to e-culture: sharing of knowledge, mutual contributions, smooth coordination, easy border-crossing, and responsibility for a shared fate. Let's turn to some unlikely bedfellows that illustrate this ideal: eBay and a set of public schools.

* * *

Dot-Communities

Online, community is only one of the three Cs said to be associated with e-business success: community, content, and commerce. Offline, the spirit of community is required in order to benefit from the changes that the Internet makes possible, such as giving customers more choices, citizens more voice, educators more capacity to improve children's learning, and businesses greater market reach and internal efficiency. Understanding community dynamics makes it easier both to create change and to live with the changes others create. The success of eBay, the world's largest Internet auction site, illustrates the interplay between online and offline community-building.

From Online Commerce to Offline Community: Ebay

In June 2000, eBay reported 12.6 million registered users, four times the number fifteen months earlier, and a huge increase from its 88,000 registered users in the first quarter of 1997. By the first quarter of 2000, annualized gross merchandise sales were about $4.6 billion, and 4 million items were listed for sale in 4,300 categories. Key to eBay's success, analysts agree, was creating a passionate, almost cult-like, community of users.

Building community was a goal from eBay's beginnings. Founder Pierre Omidyar launched Auction Web on Labor Day 1995 because his girlfriend (now wife) wanted to trade Pez dispensers and interact with other collectors over the Internet. A self-described "anti-commercial" software developer, Omidyar believed that users on his site, soon renamed eBay, should be empowered to safeguard it themselves and develop their own solutions to problems. He wanted as few rules as possible, valuing empowerment and trust. Generally eschewing advertising revenues (except on co-branded sites, such as a March 1999 AOL deal), eBay relied on listing fees and a percentage of the final sale price of each item sold. The company took pains to foster a close-knit feeling on eBay and not to appear too corporate or slick.

Ironically, that community strength gave eBay stickiness rarely found in cyberspace. CEO Meg Whitman contrasted it with other online auction sites, saying "OnSale's view of the world was auctions and economic warfare. This isn't about auctions. It's about community commerce." Many users purchased their first computer specifically to buy and sell items on eBay, according to marketing vice president Steve Westly, and eBay spawned many small businesses from users' living rooms.

Scoop 98 is one of those living room businesses. By day, Berta Maginniss is a mild-mannered executive (senior vice president of the Greater Washington Board of Trade, a prestigious business association). By night, she turns into Scoop 98, selling second-hand clothing on eBay from her home in Aldie, Virginia, forty-seven miles west of DC. (eBay's draw makes her the largest postal customer in town.) In late 1998, Maginniss, with no retail or technical background, offered Scoop's first item: a pair of Ferragamo shoes. By July 2000, Maginniss listed thirty-five to fifty items per week. "eBay makes you feel like part of the 'community' from the very beginning. The sell/buy process is efficient and safe. Each product generation is better. Service issues have been handled efficiently and honestly. Instructions assure success even if you are not a 'techie'" she enthused to me by e-mail. "My business is global from a small room in my house. It couldn't be easier or more fun!"

Meg Whitman describes eBay as "of the people, by the people, for the people." Empowerment and trust show in many ways. Users rate one another based on the quality and reliability of their trades or sales, with ratings appearing on-screen. Volunteers among eBay users form "neighborhood watch groups" to guard against abuse—an example of online community policing. Users are involved as the company makes adjustments, updates, and changes to its website. "eBay has changed time and time again, but in a very comfortable way and with the input of the user," Maginniss commented. "The 'new' homepage is the fifth that I remember. Each time, we, the community of users, had the opportunity to live with it in a beta area for several weeks and to offer comments and suggestions. By the time it is introduced on the screen, the change is seamless." Users even became employees. During its first two years, eBay hired respected users for customer support; these users responded to e-mails and answered questions posted on bulletin boards from home. (As eBay grew, users were augmented by professionals in San Jose and then a dedicated service group in Salt Lake City.)

To users, eBay is more than an auction site. "I thought people would simply use the service to buy and sell things" Omidyar said, "but what they really enjoyed was meeting other people." Online features (including category-specific chat rooms, bulletin boards, a monthly newsletter, e-mail, and the opportunity for users to create their own home pages free of charge) make eBay a 24/7 forum for trading, talking about trading, and discussing common interests. An official eBay magazine was launched in May 1999. As eBay grew, special-interest groups emerged, and personal relationships developed offline. There were reports of eBay users holding picnics, taking trips, working together, and assisting each other in the real world—even helping with home repairs. Executives frequently compared this to the growth of a small town. "People on eBay feel like mayors of their own little cyber towns," Westly said.

eBay wants employees to understand the importance of community as a social value, not just as a way to extract economic value from aggregating an audience. Trust, respect, and empowerment are expected to extend offline within the company as well as online among users. In choosing Whitman as CEO in March 1998, eBay board members liked not just her brand-building skills but also her quick grasp of community values. Her initial changes responded to the needs of a growing organization: segmenting sellers by type and frequency, and clarifying internal responsibilities now that it was no longer possible for everyone to be involved in everything. But eBay still tries to foster a feeling of community among its paid employees. Whitman encourages them to be collectors themselves and to think like customers. Most desks at eBay corporate offices hold a collection of some sort—a reminder of eBay's origins as the site started selling big-ticket luxury items such as cars and yachts. Whitman and Omidyar speak about the company's values at employee orientations.

Remaining a community governed largely by users is difficult when growth requires controls. After a New York City Consumer Affairs investigation of fraud on eBay in January 1999, the company announced it would toughen up its antifraud measures with its SafeHarbor program, which consisted of a twenty-four-member team who worked to remove illegal items and suspend users for inappropriate behavior. Such changes had to be made with a light touch, because internal staff and users would bristle at any seemingly top-down or heavy-handed corporate changes in rules, including safety measures. When eBay decided early in 1999 to eliminate all auctions of guns and ammunition, the move was applauded by analysts and investors, but opposed by some in the eBay community. One user wrote on the bulletin board, "I am DISGUSTED."

Members of the eBay community generally deal directly with each other, with eBay as a facilitator; they rarely deal directly with the company. Omidyar mused, "So how do you control the customer experience? We can't control how one person treats another. We can't say, 'you're fired' or 'go back to training.' The only thing we can do is to influence customer behavior by encouraging them to adopt certain values." Sharing values in an online community is difficult enough, but added to that is the challenge of exponential growth—more new people using the service in a quarter than the total number of people who had been using the service in the previous quarter. "In the past, those values [of the community] were communicated person-to-person; most users would come on as buyers and interact with an experienced seller. But as more new people interact with one another, they have no basis on which to communicate values," he said. So eBay relies on tangible signs of intangible values, with offline community service as the visible manifestation of online community values.

In June 1998, eBay used pre-IPO stock to establish a foundation to ensure that "people are not only empowered to do business in a trusting environment, but they are also respected for what they contribute to the community," as its website said. A volunteer committee of eBay employees set priorities and made grant decisions, guided by quarterly themes. The first two grants were for organizations near eBay's home base outside San Francisco. By January 2000, under a Global Impact theme, the eBay Foundation gave grants for food security, workplace mentoring, antipoverty initiatives, and services for the blind in Florida, Washington, Michigan, and California. The foundation declared itself to be "clever, unique, passionate, and eclectic," just like eBay itself, but what really set eBay apart was not corporate giving but a truly unique user initiative, the Giving Board.

During the 1998 holiday season, eBay introduced the Giving Board, a bulletin board on its site for posting stories about people in need. Users were known for their generosity. At one point, a group of doll collectors tracked down another collector after she disappeared from the site. They discovered that she had lost her computer in a divorce and could not afford to buy a new one. So they pooled resources and bought her a new machine.

Response to the first Giving Board was so enthusiastic that users formed a committee of volunteers to coordinate a permanent one on eBay. The charitably minded could surf through messages and find an appealing cause. Requests for help in July 2000 included books for a lending library serving low-income parents, costumes for a youth drama group, and personal pleas—"I am a single mom of 2, husband left when youngest (7mons) was born w/Pfeiffer Syndrome and was not perfect. Now father is not paying child support & we live on youngest's SSI." Auctions in the general section of the eBay website can elect to contribute to a specific Giving Board request by donating 10 percent or more of their receipts, posting the notation ^i^ to indicate that it is an "angel" auction for a specific cause.

The only official guideline is "common sense," instructions on the board explain. "The members who assist with fulfillment of requests are individuals with families and obligations of their own. We are unfortunately, not equipped to solve monumental problems. If you have found yourself with an emergency (layoff, illness, surgery, accident, death), then we would invite you to let us know how we can help make your life a little less stressful, and to put things back in order." The instructions also admonish people to be honest, because "there is no way to know if a request is a scam." Though it is nearly impossible to track donations, 325 people reported donating to at least 1 of over 1,600 requests for help in early 2000. The numbers are small, but the symbolic value to eBay people is huge.

The eBay community saga illustrates many of the conditions for e-business success that form the core of this book: frequent, rapid upgrades with user feedback; a network that is stronger and stickier because it is based on multidirectional connections among all members and not just one-way ties to the company; and a set of values that unite employees and help them avoid turf battles, eBay operates both as a business with management controls and as a self-regulating, helping community of independent entrepreneurs that empowers its members while enriching its investors. It sounds almost too good to be true, and perhaps the model will prove unsustainable at larger size, with bigger commercial partners and more high-ticket luxury items.

Still, the eBay story makes clear that when the community metaphor online can reverberate offline, it improves the business in the process. What about the other direction, from offline to online? Let's examine the role of the Internet in building high-performance communities in an unlikely setting, public education in troubled urban districts in the United States.

From Offline Bureaucracy to Online Community:
Public Schools

It's not the computer that creates community, it's the human connections. The relationships that electronic networks enable can potentially transform social institutions in powerful, beneficial ways. Consider the experience of public schools that have begun to use networks to forge new connections among teachers, parents, and students. Most people still imagine that technology in schools means computers in classrooms, but that is the least important, lowest impact, and often most counterproductive application of technology, fostering individual isolation. Networks, on the other hand, can build community and raise educational performance.

In the once-failing inner-city school district of Union City, New Jersey, a partnership with Bell Atlantic for Web access in the early days of the Internet transformed relationships. And those relationships transformed education. Then-Mayor and state Senator Robert Menendez (later elected a U.S. congressman) had envisioned making Union City the first wired city, with the schools at the center of a community network. Starting in 1992, the Bell Atlantic partnership wired a just-opened middle school for high-speed communication and put computers in the homes of innercity students and their teachers to connect with that school.

I remember sitting in the tiny library at the Columbus Middle School on my first visit in 1997 and being startled by how few books those few shelves could hold, for all those students. But the Web helped overcome the physical limitations of library space and book shortages. Classrooms became team-based collaborative learning centers, with the Internet a research tool and a way for students to work together outside school as well as inside. High school teachers such as Marian Secudas and Agnes Colinari changed their styles. "I was a good teacher within the confines of a book," Secudas said. "But when you open up the whole world on the Internet, it's very scary." She stopped lecturing and started facilitating students' Web-based research projects—morphing from the "sage on the stage" to the "guide on the side," as teachers put it. Colinari used Web-savvy students to teach fellow students—and herself—new skills. Through Parent University, teachers and children taught their parents technology skills that improved family fortunes. The Union City public libraries were linked to their schools as part of the community web, and school children created websites for community organizations. Academic performance and school attendance shot up.

Consider a second, more systemic, example. IBM's Reinventing Education initiative, launched in 1994, took this model even further. Working collaboratively with teams from K-12 public schools in twenty-one sites in the United States (including cities, counties, and the states of Vermont, West Virginia, and New York) and eight other countries, IBM experts created solutions to remove barriers to excellence identified by the school districts themselves. This initiative was emphatically far more than computers in classrooms; in fact, IBM had to turn away schools who thought the program involved computer donations. Wired for Learning, a communications network connecting schools and parents, was created first in Charlotte-Mecklenburg, North Carolina; a data warehouse, with all information on one easy-to-access system, originated in Broward County (Ft. Lauderdale), Florida; electronic portfolios of students' work, designed to display much more than final grades or test scores, started in Vermont.

In some ways, schools were once like prisons—individual teachers were isolated in individual classrooms in schools that didn't communicate outside their own walls. Schools need to become better-connected communities. Once IBM helped them to achieve this connection, teachers and parents alike are empowered to help children learn. Parents can view their children's work on the Web, compare it with models, and stay in e-mail contact with teachers instead of waiting for yearly conferences. Teachers can use the Web to create and share lesson plans, get mentored by experienced teachers, submit lessons for peer review and posting, schedule training days and find substitutes who can fit right in, or tap into e-learning programs offered outside the school district. Members of the school community can create their own home pages, to present themselves as they wish to be known and get to know everyone else more fully.

Certain education fundamentals haven't changed. Teachers still look students in the eyes every day in physical classrooms. But backing them up is a virtual community of mentors, supporters, and involved parents. Ann Clark, principal of Charlotte-Mecklenburg's Vance High School, reflected, "Probably the 'ah-hah' moment for many of our teachers came when they had the opportunity to go online and see what teachers in West Virginia were doing with math, or what teachers in Vermont were doing with writing portfolios, and to really look at lesson plans and ideas. We had a line backed up at the copy machine to make copies of those plans." Electronic connections to parents stimulated other real-world changes: The building stayed open to 10 P.M., and the graduate center was made available to parents. "Technology as an enabler has redefined the hours that our school is in operation, the way we teach, the way students learn. That's how we set ourselves apart from other high schools," Clark said proudly. Two rounds of evaluations revealed that changes such as these improve educational outcomes.

(Continues...)

Introduction: The New Economy Lobotomy
Part One: Searching, Searching: The Challenge of Change: 1: Online Communities and Offline Challenges: How the Internet Affects All of Us; 2: Alice in Tomorrowland: Will the Young Lead the Way?; 3: Lipstick on a Bulldog: Why Cosmetic Change Doesn't Work
Part Two: In the Green: The Essence of E-Effectiveness: 4: Waves of Raves: Strategy as Improvisational Theater; 5: Connecting the Dots: Nurturing Networks of Partners; 6: From Cells to Communities: Deconstructing and Reconstructing the Organization; 7: People.com: Winning the Talent Wars
Part Three: Morphing: Leading Fundamental Change at Internet Speed: 8: On Track to Tomorrow: Getting Change Rolling; 9: Leadership for Change: New Challenges and Enduring Skills; 10: Changing Ourselves: Human Skills and Social Evolution
Appendix A: Cast of Characters: Company Descriptions
Appendix B: Selected Survey Findings: The Global E-Culture Survey
Notes
Credits
Index
About the Author

What People are Saying About This

Louis V. Gerstner

An effective step-by-step primer showing how to harness the power of electronic business. (Louis V. Gerstner, Jr., Chairman and CEO of IBM)

Cathleen Black

Rosabeth Moss Kanter always gets it right! She has succinctly and humorously shown us what the digital revolution really means. (Cathleen Black, President, Hearst Magazines)

Alan Dershowitz

Evolve! presents fascinating evidence and makes a powerful case for both the promise and the perils of ever-expanding Internet use. Kanter's entertaining stories show that the new requirements for success touch all of us, whether in our professional roles or in daily life. This appealing book is not just for the wealthy or the wired?it is a must-read for all who care about the future.

Daniel Vasella

Fascinating and deeply insightful. Leaders everywhere will want to grab Evolve! and apply its lessons. (Daniel Vasella, Chairman & CEO, Novartis)

Martin Sorrell

Will the dotcoms beat the wannadots? Will the young confine the middle-aged to history? Not even Rosabeth Moss Kanter knows for certain?but don't expect to be among the winners if you haven't read her brilliant and compelling guide to our digital tomorrow. (Sir Martin Sorrell, Group Chief Executive, WPP Group)

Martha Stewart

Evolve! provides leaders the frameworks they need in the emerging electronic marketplace. An indispensable tool for any company interested in pioneering in this fascinating new sector.

George Conrades

Filled with real-life examples, Evolve! is insightful, inspirational, and fun to read. While demonstrating how many business fundamentals never change, the book also enlightens us on the potential of the Internet to make all business better. (George Conrades, CEO, Akamai Technology)

Interviews

A Conversation with Rosabeth Moss Kanter

Q: What is e-culture?

A: So many people have talked and written solely about the business side of the Internet era -- new business models and organizational structures. But I was also interested in the human side of the global information era -- what I call the "heart and soul" of the New Economy. That's what e-culture is -- it's a new way of working that is both stimulated (made necessary) and facilitated (made possible) by the World Wide Web. It's founded on human relationships, networks, and communities -- not solely on technology -- and it requires people and organizations at all stages of Internet sophistication to work, live, and play together in new configurations. What's more, just as "e-business" will soon evolve from a special subset of business to the standard method of doing business, so too will we eventually drop the "e" from e-culture. Before long, it will simply be recognized as the culture of tomorrow -- the culture of the companies that lead the pack.

Q: "Community" is often still thought of as a "soft" term in business. Yet you argue that it is through community that today's organizations will derive the most value.

A: As an integrating force, the Internet makes it urgent to present one face to the customer, link separate systems for seamless connection, and meet the demand outside and inside the organization for full connectivity. Companies can't accomplish this just with technology -- they can only do it with people -- what I call "individuals-in-community." But it's important to distinguish community as a label from the underlying principles that make community integral to e-culture: sharing of knowledge, mutual contributions, smooth coordination, easy border crossing, and responsibility for a shared fate. Superficial "community-building" bells and whistles, from parties to dress styles, can deflect attention from the serious substance of a venture. And of course, a bad business proposition trumps all aspects of internal culture. The kind of community I'm talking about involves community as an organizing principle -- as an emotional and operational reality.

Q: While many pundits have argued that the Web is fundamentally new and different, you say that cyberspace is "full of reinvented wheels." Can you explain?

A: There's no question that the technology is revolutionary, network economics are different, and all the wheels must turn a lot faster. But what many hype-driven proclamations overlook is that fact that the problems of leadership, organization, and change today's leaders face are similar to those we've experienced for decades. So even though this book breaks new ground in examining a set of big new challenges, it also rests on a foundation of enduring truths about people and organizations -- a foundation that serves as a springboard for an evolutionary leap into a new, networked age.

Q: Why is Evolve! so upbeat when the dot-coms are so down?

A: In the book I talk a lot about the fact that many youthful dot-coms were doomed to fail from the start. Most of them were all "style" and no substance. But while the dot-com frenzy has died, the Internet is here to stay. And it is transforming life in all organizations, even those that do not have a dot in their name. Evolve! is not about having a web site, it is about leading, learning, and living with a new tool that can help organizations become more productive -- if they embrace the culture of tomorrow. The Web can potentially give customers more choices, citizens more voice, educators more capacity to improve children's learning, and businesses greater market reach and internal efficiency -- but only if we evolve. There are no guarantees. First, people and organizations must change.

Q: Your research for Evolve! was extensive. Can you talk about what it entailed?

A: I was interested in examining the impact of the Internet -- and the emergence of e-culture -- across all fronts and in all kinds of companies in the global marketplace. I sat at the feet of 20-year-olds and asked them to teach me -- and I sat across from CEOs of Fortune 500 companies and asked them to share with me their major challenges, their biggest successes and failures. In addition to on-the-ground investigations in the U.S., Canada, Europe, and Asia, we conducted over 300 interviews in nearly eighty companies and organizations, as well as over two dozen in-depth case studies of prominent companies in three continents. Finally, we supplemented all this with a global print and online survey of 785 organizations of all sizes and types, from technology companies to trucking companies, from consumer products to public schools.

Q: Let's talk about some of the findings from your research. What was the biggest problem with the way most "wannadots" have tried to conduct business through the Web?

A: Many traditional firms think that superficial add-ons, with no change in how the company operates, can produce Internet success. But a company is not transformed simply because it creates a web site. That might be only a cosmetic change -- what's been referred to as "putting lipstick on a bulldog." Success requires a more complete makeover, namely, rethinking the model for how to organize the work of the whole organization. It requires challenging traditional assumptions about relationships with customers, internal and external communication, decision making, operating style, managerial behavior, employee motivation and retention -- and then defining a new way.

Q: So interestingly, the biggest challenges to success in the digital age are human ones, not technological ones.

A: That's what e-culture is all about -- the human relationships that make organizations work. And whereas dot-coms are born to an Internet style that naturally values networks and community, wannadots have to morph into it. That's why leadership offline does not predict innovation in cyberspace. The transition is tough, even for the best of companies. Success requires a systemic change, a shift in the organizational way of life. That's the chore that's hardest for wannadots. And that's also why, in the early days of the Web, the pure dot-coms' "fresh start" looked like a permanent head start.

Q: You said before that you've always doubted the staying power of youthful start-ups. What can we take away from their quick rise and even faster fall?

A: The dot-com death rate proved that superficial aspects such as dress style or office-as-playground don't constitute a model for success. The right age profile is not the essence of e-culture. The real grain of truth to be learned from companies that are born on the Internet involves improvisation, quick learning, community feeling, and passion for the mission -- to change the world, if you will. The fresh start that dot-coms represent illuminates the barriers that established companies face. Large bureaucracies have the substance but neglect the style, creating tense and grim work environments.

Q: In your view then, e-culture is really about combining the best of both worlds -- the Old Economy and the New?

A: The so-called New Economy is certainly built on Old Economy roots. The young may be disproportionately represented in the dot-com universe, they may have a distinctive style, and they may even have fresh new knowledge to teach their elders. But reverse mentoring doesn't wipe out the traditional kind. Success in the New Economy stems from some of the same values and management lessons as success in the Old Economy. There is something to be learned in both directions. For example, style without the substance is all glitz and hype and game playing. But technology without a culture of play and rituals and communal kitchens can be boring and unmotivating. Substance comes first, then style can support it.

Q: What should investors look for when trying to determine which start-ups to bet on?

A: My e-culture project compared new companies such as EarthWeb, eBay, and Abuzz -- dot-coms that have all the signs of endurance and success -- with a group of others that suffer from high turnover rates and loss of investor and employee confidence. The dot-coms most likely to succeed want to be long-term businesses, not just stock sellers; they create professionally run organizations that function as integrated communities. Problem-ridden dot-coms, in contrast, have all the glitz and flash and fun without the underlying business fundamentals. That's why I am so skeptical about start-ups like therumour.com. Its founders know little about their user base; they have no unique use of technology; they lack a network of experienced partners; and they reject adult supervision. How could that kind of business possibly work?

Q: Your study also compared offline, traditional companies that have succeeded at e-business with others that have fallen behind -- you call them pace-setters and laggards. What separates the pace-setters from the rest?

A: While most traditional companies are moving slowly through predictable stages to the Web -- denial, blame, and insignificant cosmetic change -- pace-setters exhibit organizational curiosity and the desire to innovate. More importantly, they link these characteristics to culture change -- to how the business and organizational model will now be different. E-culture pace-setter companies also behave more like communities both offline and online. This community action and spirit permits speed and seamlessness, encourages creativity and collaboration, and releases human energy and brainpower -- the essence of e-culture. Along with the best dot-coms, pace-setter companies like Cisco Systems, Sun Microsystems, Williams-Sonoma, Reuters, or Tesco, the large British supermarket chain that is also a large Internet portal, serve as role models for the future.

Q: You identify four things all companies must do to implement the principles of e-culture. What are they?

A: Treat strategy as improvisational theater -- foregoing rigid "scripts" in favor of rapid experimentation and learning; nurture networks of partners -- from making deals to building relationships to forging new connections; reconstruct the organization as a community -- both online and off; and win the battle to attract and retain the best talent -- by making it possible for people to view themselves not as workers but as committed volunteers.

Q: The idea of employees as volunteers is an interesting one. Can you explain what you mean by "renewable commitment"?

A: While today's workers certainly care about making money, they care more about feeling connected to a community in multiple ways beyond economic transactions: as member, citizen, helper, and recipient of help, as well as buyer, seller, and worker. That's what renewable commitment is about. It requires offering people mastery -- things like challenging work, training, and a stake in the future; membership -- both a feeling of belonging and the feeling that one is free to express their individuality; and meaning -- a belief in a larger purpose.

Q: It's easier to see how this spirit of community can pervade start-ups. But isn't bureaucracy inevitable in large corporations?

A: In the Internet age, size does not have to limit communication, and a division of labor doesn't have to create permanent class distinctions. Cisco Systems -- which at one point called itself the world's largest e-commerce company -- is a prime example. Cisco builds an internal electronic community by using its own networks to encourage very large numbers of people to head in the same direction. Rather than dividing into too many rigid territories, or creating separate brands with their own pride of place, Cisco instead emphasizes rapid information dissemination and abundant communication. It has dazzling figures for sales per employee and remarkable feats of speed.

Q: What about the question of change -- isn't it much harder for established firms to transform -- and do it at Internet speed?

A: Many people believe that large-scale change is possible only by starting independent ventures -- whether e-commerce spin-offs, "greenfield" sites where everything is new, or charter schools. But it's premature and foolish to abandon large organizations because they are slow to change. Too much value is created in those organizations, and too much of the economy depends on them. Traditional organizations need to program a culture for change -- the platform for e-culture -- into their method of operating. Without fundamental systemic change, organizations will always revert to their basic pattern, like the default position on a computer program. The challenge will be learning how to reset this default position to one of ongoing change.

Q: But we've been hearing about the need for change since before the age of the Internet. How is this mandate different in the world of e-culture?

A: The pace, depth, and scope of change -- and how many people must get involved in coping with it. Change moves faster, and so do the reactions to change, as viral marketing spreads the good news but e-organizers and Web protesters create bad news almost as quickly. The reach of change is also broader and deeper: to bigger audiences in more places at greater distances, and into the inner workings of long-taken-for-granted institutions and daily routines. There's also a human tendency to sink into comfort and fight change -- so leaders must be more skillful at handling the human side of change than ever before.

Introduction

Introduction: The New Economy Lobotomy

We want to learn from the past. But we want our dreams to wipe away our memories.
--Christopher Galvin, CEO of Motorola

Life is now defined by where we stand with respect to the Internet. Real mail (the kind that comes in envelopes and doesn't require downloading) is called "snail mail" because e-mail has become the standard. At meetings, people cut off discussion by saying "Let's continue that conversation offline," even though they are meeting face to face, not online; "offline" is a new synonym for "in private," as though everything public were now on the Internet. We have switched from understanding screen-life by using real-life analogies-desktops, trash barrels, real estate, stores, and malls-to defining all of life in terms of the World Wide Web. A New Yorker cartoon shows St. Peter requesting user name and password before admitting a man to heaven. Another one features "The Off-Line Store"-"All items are actual size! Take it home as soon as you pay for it! Merchandise may be handled prior to purchase!"¹

You don't have to be in business to see the cultural changes wrought by the Internet, but business is a good starting point. Soon there could be only three main types of companies in the world: dotcoms, dotcom-enablers, and wannadots.

Dotcoms are the pure Internet companies, operating online businesses. Their activities tend to exist primarily in cyberspace. Many were formed in the heady last half of the 1990s, and most died fast. But successful pioneers such as eBay, Amazon.com, and Yahoo! have already transformed industry dynamics, opened new career aspirations, and become emblematic of a new workplace style. Others threaten to revolutionize industries, from Napster's attack on the recorded music business to the rapidly multiplying e-learning companies challenging colleges and universities. Already the purely digital are swallowing real-world companies, from AOL acquiring TimeWarner to Amazon acquiring warehouses.

Dotcom-enablers are the technology and service providers who spread the Internet gospel. Sun Microsystems's mission, its leaders say, is to "dotcom" the world, to be the "lumberyard for the Internet." IBM is now an e-evangelist for e-business and the world's largest e-business itself. Cisco Systems uses its own lean e-business model to convince others to buy its routers and communications products. Lucent Technologies, once the research and manufacturing arm of Ma Bell, aspires to be a venture capitalist, business incubator, and fast-moving provider of Internet infrastructure. For a time, the growth companies among consulting firms and advertising agencies were a raft of new Web strategy firms, such as Razorfish, iXL, Digitas, Mainspring, and Brand Farm. Operating in Internet time themselves, the Web technology and service companies are change agents that can succeed only if they turn everyone else into Net-based companies. Their rhetoric makes it sound like we are witnessing the Second Dot-Coming.

Wannadots are everyone else-existing businesses, schools, hospitals, and other established organizations. Corporate giants that were once the industry standard are now defined as "not-Internet"-referred to as offline, land based, or bricks and mortar (BAMs). Or they are known by how much they have embraced the Web-for example, multichannel "clicks and mortar" or "bricks and clicks" companies. They follow a variety of paths to cyberspace (and we will trace their journeys, later in this book). Cookware catalog and retailer Williams-Sonoma took several years to become convinced of the importance of e-commerce despite its direct marketing know-how. After a modest experiment during the 1998 holiday season, it launched a wedding gift registry in the spring of 1999 and a full e-commerce department six months later-but still has to work out the relationship between stores, catalogs, and e-commerce. NBC had several early starts before relaunching CNBC.com as a financial services website and now talks about how closely the website should be aligned with the television channel-where they should be tightly coupled and where they should diverge. Arrow Electronics, a leading semiconductor distributor, knew it could be driven out of business by online procurement. So Arrow approached its own online marketplace; if its business was going to be cannibalized, at least Arrow stockholders would be the ones enjoying the meal. General Electric CEO Jack Welch points to "a number of our units you could call DestroyYourBusiness.Com aimed at attacking our existing businesses."

The three types aren't pure types, of course. Dotcoms are developing land links, wannadots are morphing into multichannel hybrids, and a range of dot-orgs and dot-nets are increasingly hard to classify. The largest e-commerce companies in the world are not dotcoms, they are IBM and Cisco. In Taiwan, hardware manufacturer Acer founded more than forty software or dotcom subsidiaries between 1997 and early 2000, investing in Internet-related businesses in Greater China and Asia Pacific and forming alliances with-who else?-IBM and Cisco. In the United Kingdom, two of the largest portals through which users get their e-mail and news are Tesco.net and FreeServe, both of which are offshoots of traditional retail chains.

Still, dotcoms and wannadots, with dotcom-enablers egging them on, represent contrasting styles and face contrasting challenges, both of which I examine in this book. Ask big companies about their goals for the Web, and they are likely to reply, "Cautious experimentation." Ask dotcoms the same question, and they declare, "Total world domination."

That difference in rhetoric and attitude sums up the contrast between those reluctant to let go of the past and those hurtling into the future at warp speed. For companies that were not born digital, the big problem is change-when to change, how to change, and how to prepare people to live with the consequences of change.

Wait a minute! Before we rush off the cliff into the future, let's catch our collective breath and pause for perspective. Many discussions of the New Economy take place in a historical vacuum. Mention the Internet, and intelligent people sometimes act as if they have had a portion of their brain removed-the memory. (That's why I called this introduction "The New Economy Lobotomy.") As we search for the new and different things that occur in the wake of revolutionary communications technology, it is also important to recall what can be learned from previous waves of innovation. In earlier decades, television was going to replace radio, teaching machines were going to replace teachers, and Sunrise Semester, a set of televised lectures, was the first sign that mass media were going to replace college classrooms. The broad reach and interactivity of the Internet are much greater than that of television or other media, and so is the potential for displacement. But history demonstrates that new channels tend to coexist with old ones and sometimes even join them.

New Economy rhetoric is often extreme, at both ends of the spectrum of love-the-Web or hate it. Not since the Marxists roamed the earth has the word revolution been used so freely. Evangelists urge companies to "blow up your business model," while critics decry the "toxic excesses of capitalism" in the Internet boom. In both cases, people feel free to fling around provocative slogans without thinking about what they really mean or examining what is really happening. Media critics have faulted journalists for reporting financial news with little perspective on its meaning and little analysis of the business models of the glamorous companies they lionize. In 1999 and 2000, the press swung from being overly bullish, featuring young millionaires on magazine covers who never made a dime, a critic said, to being overly bearish after the spring 2000 market downturn.²

Because the United States was the launch site for the world's journey into cyberspace, I suppose this lack of interest in history is understandable. To tell someone they are about to be "history" (as in "You're history!") is an Americanism for impending elimination. Legacy has become a negative term in the information technology community, referring to traditional systems that now impede progress. It has long been a hallmark of American popular culture to look for the fresh face, and it has long been a tenet of American entrepreneurship to value the fresh start. The late great anthropologist Margaret Mead once claimed that America was the first culture in which the young taught the old instead of the other way around. She was referring to the children of immigrants' children who learned the language first, and then taught their parents. Today, that observation could be made about the Internet.

The Internet economy exaggerates antihistorical tendencies, offering a premium for new ventures and new ideas deliberately detached from tradition-witness the higher market valuations placed on dotcoms that separate from their parent companies. How many years a company has been in business and what its track record has been counts for less in some marketplaces than whether it has the newest, latest offering. History not only seems to matter little, but also may be seen as an encumbrance, or a sign that the company is stuck in the past. Even recent experience-"What have you done for me lately?"-is less important than "What do you promise to do next?"

As I was beginning the work for this book in 1999, popular exhortations to leaders to "forget everything you know because the Web overturns every accepted business principle" filled the air. So I tried to approach the e-world by assuming that I knew nothing. Before designing my massive research venture, I sat at the feet of twenty-year-olds and asked them to teach me. (My Harvard Business School MBA students were already influenced by their work experience; I was looking for the truly fresh new thoughts.) One weekend a set of four college students, aged nineteen to twenty-two, brought laptops and flip charts and industry statistics to my country retreat and talked through new business models. (They were then vetting business plans for a venture capital firm, while trying to find time for their college courses; one had started a Net business he sold eighteen months later.) When I suggested to a young magazine founder, who was tempted to leave the print magazine in the dust in rushing to the Web, that the print magazine was an asset that the Web wouldn't eliminate so fast, I was stung by his retort that "you're not twenty-five," so I redoubled efforts to shed preconceived notions. (P.S. I was right, as the founder has since acknowledged; the print magazine is the biggest single driver of traffic to the website and the vital lure for advertisers.)

My virtual lobotomy was illuminating, but a little went a long way, and my memory started returning to normal. I started to see that cyberspace is full of reinvented wheels. Yes, the technology is revolutionary, network economics are different, and all the wheels must turn a lot faster, but the problems of leadership, organization, and change are similar to those we have experienced for decades. So even though this book breaks new ground in examining a set of big new challenges, it also rests on a foundation of enduring truths about people and organizations-a foundation that serves as a springboard for an evolutionary leap into a new, networked age.

The research that led to Evolve! is both broad and deep, involving not only the United States but also on-the-ground investigations in Canada, Europe, and Asia carried out by my research team at Harvard Business School and augmented by conversations in Israel and Latin America. (See the Credits for the names of my terrific team, led by Daniel Galvin and Michelle Heskett.) Three pillars were used to develop and test hypotheses:

A global print and online survey included responses from 785 organizations of all sizes and types, primarily from North America and Europe but including Latin America and Africa. Survey respondents included Global 2000 companies that belong to the World Economic Forum and emerging fast-growth companies in the Inc. 500 and Young Entrepreneurs Organization.
My Harvard Business School team conducted over 300 interviews in nearly eighty companies and other organizations in North America, Europe, and Asia, using both a structured guide to identify the dimensions of e-culture and an open-ended search for best practices and object lessons. We included prominent and newborn businesses of all types, as well as a sprinkle of professional firms (law and consulting), schools, and trade associations. Interviews were augmented by e-mail dialogues and a discussion forum on theglobe.com.
Over two dozen companies from three continents were examined in depth through multiple interviews and richly detailed case studies. These included Abuzz, AlliedSignal, Amazon.com (and partners), Arrow Electronics, barnesandnoble.com, Blackboard.com, Cisco Systems, CNBC.com/NBC, Digitas and clients (Bausch & Lomb), EarthWeb, eBay, Hewlett-Packard, Honeywell, IBM, iSteelAsia, iXL, Lucent Technologies, Mainspring, Razorfish, renren.com, Reuters, Sun Microsystems, Tesco, and Williams-Sonoma. IBM's Reinventing Education initiative and Bell Atlantic's partnership with a New Jersey school system were included to extend the research beyond business to public education. For several of the United States-based companies, we interviewed at international as well as American locations. (See Appendix A for company descriptions.)

The result of all this work is reflected in the lessons of this book. I show that the Internet and its associated network technologies play two primary roles. The World Wide Web is both the stimulus for a new organizational culture (making it necessary) and a facilitator of that same culture (making it possible). I call that new way of working e-culture. E-culture defines the human side of the global information era, the heart and soul of the New Economy. People and organizations everywhere must evolve to embrace this business culture of tomorrow-no matter where they are on the continuum of Internet use.

Taking full advantage of the potential of the Internet Age requires leaders to lead differently and people to work together in new configurations. Consider these truths of e-culture as the new truths for success in general:

E-culture is about creative destruction. It means getting serious about continuous dramatic change, even if it destroys your own already-profitable business.
E-culture is like living in a glass house under a huge spotlight that's always on, 24/7. Mistakes are immediately visible and magnified. And no one wants to hear excuses. They only want to hear about what's new, what's next.
E-culture is superficial-in good ways. Communication is the core of e-culture. Internet time requires fast, cryptic communication among strangers who cannot take the time to interpret subtleties or build a deep relationship based on intimate knowledge.
Done right, e-culture protects against armed combat. It fosters a spirit of cooperation because the network requires it, despite battles over screen space or brand image or merchandizing decisions. There is no time to fight it out, no time for thorough debate. People need to get on with it. They have to learn to collaborate.
E-culture is made up as you go along. It involves emergent strategies, improvisation in response to opportunities.
E-culture is full of paradoxes. The e-world is highly decentralized and hard to control, but it forces organizations to become more integrated-even centralized. New media rely on old media that they claim to displace to promote use of the new media. The value of unproven companies can increase with the rate at which they lose money.
E-culture can be a lot of fun. Companies compete for talent by staging the goofiest games, sponsoring the most exotic trips, and stocking the most lavish snack bars.

The messages of this book derive from the deeper implications of those simple statements. Evolve! consists of insider stories and lessons about effectiveness drawn from organizations at all stages of Net change. It describes role models and best practices: how life is lived and work gets done in companies that lead the pack. It tells cautionary tales: why change is fumbled or resisted in those that lag behind. And it includes practical conclusions that readers can use to ensure personal and business success in their own ventures and workplaces. Evolve! explores the readiness of companies to embrace e-culture, the capability of leaders to lead within it, and the willingness of people to commit themselves to it.

The Way to Evolve!

It is common in the business world, and increasingly wherever busy people are found, to provide an executive summary at the beginning of documents. In this book, I am providing two. One of them is conventional-the verbal tour through the contents of the book that comes next. The other one is the result of the hours I spent in dotcom offices that had music on all the time-it's the song whose lyrics are found just before the table of contents.3 Take your pick.

Part One. Searching, Searching: The Challenge of Change

The three chapters in the first part of the book set forth a variety of challenges. First are the ways that the Internet affects all of us, like it or not. In chapter 1, I argue that e-culture derives from basic principles of community: shared identity, sharing of knowledge, and mutual contributions. Online, community is a metaphor. Offline, the spirit of community is required to implement the changes that the Internet makes possible-to give customers more choices, citizens more voice, educators more capacity to improve children's learning, and businesses greater market reach and internal efficiency. Understanding the dynamics of community is also required to respond to the changes the Internet forces on us-whether they work in your favor or represent communities of opposition and protest. The Web represents opportunity for some, an enormous threat for others.

To some people, it seems that only the young can master this new, bewildering environment. It is no accident that young people of the Net generation are disproportionately represented in dotcom companies. Are those youth and those companies pointing the way to the future? Dotcom culture is described in chapter 2, along with the reversal of generational roles when the younger mentor the older. There is a distinctive dotcom workplace style that my team found everywhere in the world. But that style by itself is not enough to create a viable business. In chapter 2 I introduce some young companies with the substance to succeed-that begin to reflect elements of a new culture. But it's not youth that leads the way, it is new ideas executed with discipline and traditional values.

New companies do have one advantage: the fresh start. Wannadots, in contrast, can be inhibited by their size and organizational legacy from incorporating the Internet successfully, as chapter 3 shows. They face numerous barriers to change, and they are tempted to let those barriers stop them. Some wannadots are laggards, moving slowly through predictable stages en route to the Web-denial, blame, and insignificant cosmetic change. Others, however, are pacesetters that exhibit organizational curiosity and the desire to innovate. These pacesetters share many e-culture characteristics; along with the best dotcoms, they serve as models for the future.

Part Two. In the Green: The Essence of E-Effectiveness

"In the green" means "all systems go," and it also suggests financial viability. The four chapters in the second part of the book analyze the implications for business of the advent of the Internet and identify best practices in implementing e-culture principles. Each chapter covers one of the four big things companies-and organizations of all kinds-must do to achieve excellence:

Treat strategy development as improvisational theater (chapter 4). When outcomes cannot be known in advance, the action itself creates the goal. Instead of following a script, e-savvy companies run an improvisational theater. A general theme is identified to get the actors started. Then the actors try out different scenarios, develop the story as they interact with each other, and create a different experience with each round. Because it is impossible to know which model, which standard, which concept will prevail, it is unwise to follow a script written in advance of the action; it is better to launch many small experiments and learn from the results of each-a hallmark of improvisation.
Nurture networks of partners (chapter 5). In the Old Economy, partners were an afterthought or a relabeling of existing transactional relationships with a vow to treat each other better. The New Economy builds networks through multiple partners-important not only for online links among dotcoms but also for offline links among dotcom-enablers who need complex multilateral partnerships to build the technology for cyberspace.
Reconstruct the organization as a community (chapter 6). The outlines of the "new organization model" are familiar: flatter hierarchies, more fluid boundaries, more team oriented, an emphasis on processes over structure. But often that model led to decentralization, one of the fashions of the late 1980s and 1990s, as the pendulum swung toward divisional and departmental autonomy. The Internet is a recentralizing force in that it makes more urgent the need to present one face to the customer, link separate systems for seamless integration, and meet the demand outside and inside the organization for full connectivity. But because of a legacy of decentralization, many of the battles inside wannadots ("dotcombat") involve turf and territory. This chapter deals with two overlapping issues: (1) how to get best business proposition on the Web-the face to the outside; and (2) how to work together differently because of networks in order to get the benefits of the technology and implement e-culture inside.
Win the battle to attract and retain the best talent (chapter 7). Is commitment an outmoded concept in a world of mobility, or are there new ways to build bonds between people and organizations? In chapter 7 I describe culture-building at the workplace level-how to treat people as volunteers who renew their commitment periodically through the three Ms of mastery, membership, and meaning.

Part Three. Morphing: Leading Fundamental Change at Internet Speed

The final three chapters offer a practical guide to change-how to move fast to transform a whole organization, how to lead change, and how to cultivate the human skills required for an Internet-enabled world.

Let's say you like the idea of a new organizational culture but don't know how to get there-or that you're on the road and want to make sure you're headed in the right direction. Chapter 8 is a working chapter for people responsible for big changes, especially a major overhaul and comprehensive shift to e-business and e-culture. It focuses on overcoming the common barriers we have encountered throughout the book and successfully implementing systemic change. It shows how to ensure that the organization has been transformed to a new way of working that will permit continuing successful change. It addresses comprehensive change activities-not single projects, but building the entire organizational platform. A step-by-step practical roadmap is included.

Change is not a decision; it is a campaign. So chapter 9 is for leaders-appointed, elected, or self-appointed. The stars of this chapter are entrepreneurs and innovators of all stripes-in independent ventures or within already-established organizations-who have appeared earlier in this book as the forces behind successful e-ventures and change efforts. Change in the e-world involves mass mobilization, resembling a political campaign or community organizing. Change involves shaking up thinking (like shaking a kaleidoscope), communicating with internal and external audiences, staging pep rallies and other events, and building support within and outside the organization. This chapter pulls together leadership lessons about the skills required at every stage of a change process.

In chapter 10, I encourage all of us to stand back to put e-culture in perspective. What does all this mean for individuals and society? Are we on the verge of the next stage of social evolution-a great leap forward to shared consciousness? The advent of the Internet, if guided by leaders who understand its full potential and deeper implications, can help connect people in powerful ways that build human community. But there is also the danger that unless offline communities nurture social interaction, the Internet could become an isolating force, and children could grow up without the very skills that the Internet requires to run. The best online businesses have a community element; the best e-culture companies operate like communities internally and serve the external communities in which they live. Those individuals who will be most successful in the Internet Age will exemplify this possible evolutionary leap toward shared consciousness: They will be more collaborative systems thinkers, excellent communicators, and great members of improvisational theater troupes able to make quick adjustments as they interact with their multiple audiences of users and partners.

Overall, then, this book is about change-what to change and how to change. It is about a new culture, e-culture, that involves better ways of leading, organizing, working, and thinking. Through Evolve!, I hope to help readers prepare to evolve-to be leaders who can make the right decisions in an uncertain world and execute them quickly and effectively. This involves deep systemic change, not cosmetic change, and a deeper emphasis on human skills that build meaningful community out of mere connections.

Evolve! Succeeding in the Digital Culture of Tomorrow

Evolve! Succeeding in the Digital Culture of Tomorrow

Hardcover

Hardcover

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Overview

Product Details

About the Author

Chapter One

The I-Paradox

Dot-Communities

From Online Commerce to Offline Community: Ebay

Read an Excerpt

Table of Contents

What People are Saying About This

Interviews

Introduction

Introduction: The New Economy Lobotomy

The Way to Evolve!

Part One. Searching, Searching: The Challenge of Change

Part Two. In the Green: The Essence of E-Effectiveness

Part Three. Morphing: Leading Fundamental Change at Internet Speed

Customer Reviews

Related collections and offers

Overview

Product Details

About the Author

Chapter One

The I-Paradox

Dot-Communities

From Online Commerce to Offline Community: Ebay

Read an Excerpt

Table of Contents

What People are Saying About This

Interviews

Introduction

Introduction: The New Economy Lobotomy

The Way to Evolve!

Part One. Searching, Searching: The Challenge of Change

Part Two. In the Green: The Essence of E-Effectiveness

Part Three. Morphing: Leading Fundamental Change at Internet Speed

Related Subjects

Customer Reviews