How to Out-Behave Your Business Competitors

June 4, 2007 — -- Business consultant Dov Seidman says in a new book "How: Why How We Do Anything Means Everything … in Business (and in Life)" that companies that are managed with greater integrity and openness than their competitors will find greater success.

Seidman says that in our hyperconnected world, prosperity, security and lasting achievement are found not in outperforming the competition but in outbehaving it.

Memos, financial reports and the inner workings of companies can be dissected easily in chat rooms and broadcast online. With at-the-moment, worldwide news coverage and increasing numbers of avid "whistle-bloggers," almost nothing goes unreported.

The book provides practical advice on how to bring this transparency and integrity to your business. You can read a chapter below.

Chapter 1: From Land to InformationWhere is the wisdom we have lost in knowledge? Where is theknowledge we have lost in information?

-- T. S. Eliot

Sometimes, to look ahead we must look back, in this case, way back,to feudal Europe circa 1335 A.D. In the 1330s, England needed wine.It needed wine because in the century before, Norman fashions hadbecome all the rage and your average noble Joe had given up his dailypint of beer for a glass of vin rouge. It needed wine because wine providedvitamins, yeast, and calories to get the English through the longwinters. And it needed wine because, well, wine is fun. Given that Englandwas too cold to grow a decent grape, the English required a systemof foreign exchange to get their spirits from France. They traded Englishfleece to Flanders for Flemish cloth (the good stuff at the time), thenbrought that to southern France to trade for the fruit of the vine. Luckily,the English controlled both Flanders and Gascony (on the west coast ofFrance) at the time. Thus they were able to trade freely, transport safely,and drink to their hearts' content. For these reasons, and a million otherfeudal details, the French hated the Brits. In 1337, they attacked Flandersto regain control of the mainland, beginning the Hundred Years' War,which really lasted 116 years until 1453, when the Brits were finallyexpelled from continental Europe and went back to drinking beer, ahabit they largely retain to this day.1

What does all that have to do with us, doing business in a high-technologyinformation age? Well, beer is not the only habit that hashung around since the Middle Ages. Back then we were a land-basedworld, and the people who controlled more high-value land than anyoneelse ruled. Land is a zero-sum game: The more I have, the lessyou have; and the more I have, the more powerful I am relative toyou. Land meant crops, and land meant rent from serfs -- tradesmen,farmers, and craftspeople -- who created the goods and consumablesthat drove the economy. There was a one-to-one correlation betweenthe most powerful people and the ones who had the most land. Tothis day, Queen Elizabeth remains one of the richest people in theUnited Kingdom based on her family's landholdings.2 In a time of finiteresources, feudal nobility learned that to succeed and gain morepower, they needed to protect and hoard what they had. They builtcastles with moats around them to protect their fiefdoms, conqueredeverything they could, and built their wealth one furlong at a time,habits that served them well for centuries.

Fast-forward a few hundred years to the birth of the industrial revolution.The invention of machines, powered mainly by the steam engine,brought a host of innovative ways to make things. The rate andscale of manufacturing increased exponentially. A savvy entrepreneurcould suddenly mass-produce goods efficiently and bring them tomarket at lower prices than his craft-guild cousin. Machines created asystematic way to get rich relatively quickly. One no longer needed alifetime to amass wealth or had to risk a dangerous voyage in searchof treasure. Anyone with money to invest could identify cutting-edgeinventions, build an efficient factory to make them (or make withthem), and take market share from his old-world rivals. Initiative andinnovation became wealth, and old gave way to new, all powered bya new investor class able to make money with money. In 1776, AdamSmith wrote "The Wealth of Nations," and capitalism was born.3 Theword capital, by the way, comes from the Latin word capitalis, meaninghead. Under capitalism, you could use your head to get ahead.

As we shifted from land to capital as the engine of wealth, however,the zero-sum mentality of feudal times remained. Capital, too, is finite,and the more capital I had the less you had. With more, I could innovate,expand, and do things that you could not. Capitalists developedhabits of power, certain rules of thumb about how to succeed in the neweconomy. When we had stuff, we hoarded it; we did not share. We didnot give it away; we meted it out and only for high returns. We extractedinterest. For hundreds of years, assets meant power, and to succeed wecontrolled them zealously. Generally, we built a fortress around ourholdings and defended them against all invaders. We dominated markets,protected trade secrets, and made sure everything we did receiveda patent or copyright. We could also control information flow to the market,and so developed a host of one-way communication habits to controlhow it viewed us. We invented the press release, perfected the artsof messaging and spin, and learned to divide and conquer, telling onething to Customer A in one market and something different to CustomerB in another. Company structures mirrored these impulses withcommand-and-control structures and top-down hierarchies. The habitsof fortress capitalism soon permeated every facet of enterprise.

LINES OF COMMUNICATION

Let's pause in our brief rush through history to note a couple of specificindustrial age events whose significance to our discussion will becomequickly apparent. With the coming of the telegraph to the UnitedStates in the mid-1850s, some savvy entrepreneurs tried to strike it richby stringing up thousands of miles of copper cable connecting both theestablished mercantile centers of the East and the rapidly developingMidwest. In their helter-skelter pursuit of wealth, the enterprise produceda glut of transmission capacity without the market to sustain theinfrastructural costs of its installation. Prices collapsed, as did the fortunesof those who invested. Call it the dot-dash explosion. Suddenly,the cost of transmitting a word of text dropped to a then-unheard-ofpenny per word. This leap in connectivity and economy had some unintendedconsequences, as journalist Daniel Gross reported in Wiredmagazine: "Reporters could file long stories from the Civil War battlefields,fueling the great newspaper empires of William Randolph Hearstand Joseph Pulitzer. Likewise, the spread of the ability to send cheaptelegraphs spurred a national market in stocks and commodities andmade it much easier to manage international business."4 These wereworld-altering developments. Half a century later, American Telephoneand Telegraph extended that network dramatically when it introducedthe telephone, although they were savvy enough to protect themselvesby soliciting monopoly protection from the U.S. government in 1913,thus assuring profitability. The telephone was the telegraph onsteroids, and its impact on business was similarly huge.

Fast-forward to 1994, and reflect on the birth of the information age.Technology again allowed multifold leaps in the way we did things. Opportunitywas everywhere, and though few had a clear vision of where itwould lead, inventions, products, and processes made things possiblethat were previously only a dream. Once again, entrepreneurs jumped inall over the place. A host of entrepreneurs (seemingly ignoring the lessonsof the dot-dash era) invested heavily, laying fiber-optic cablearound the world. Fiber-optic cable provided a quantum leap in transmissioncapacity from the copper cable originally installed by Ma Belland her telegraph brethren. A single pair of optical fibers can carry morethan 30,000 telephone conversations for distances of hundreds of kilometers,whereas a pair of copper wires twice as thick carries 24 conversationsabout 5 kilometers. When you apply new technologies likewavelength division multiplexing (WDM), fiber capacity increases by upto 64 times. With the new technologies on the horizon, scientists believefiber-optic cable's theoretical transmission capacity to be infinite. Layingfiber-optic cable was like replacing every bathroom faucet with somethingthe size of a missile silo. Suddenly, total global electronic communicationsconsumed just 5 percent of transmission capacity. Transmissionprices again collapsed (along with a lot of the companies hatched withthe idea of getting rich quick on the back of this new technology), andwe found ourselves in a world in which information flowed around theworld instantly and cheaply like light through a darkened room.

GETTING FLATTENED

This changed everything. Information, unlike land and capital, is notzero-sum; it's infinite. The more I have, the more you can have, too.And, unlike money, it is elastic; a dollar is worth a dollar no matterhow much you desire it. Knowledge, in contrast, becomes more valuabledirectly in proportion to your need or desire for it. If you weretold that you had a disease, for instance, you would pay much morefor the information to cure it than you would if you were healthy.

In the days of fortress capitalism, a professional class of lawyers,doctors, accountants, and other gatekeepers of knowledge took advantageof information's elasticity and profited from it in two significantways: They hoarded knowledge (like any other commodity) andmeted it out in small doses for high fees (typically, to people who reallyneeded it because they were in trouble, ill, or their metaphorichouses were otherwise on fire). Simultaneously, they built indecipherablyspecialized language and complex codes -- like legalese, the taxcode, and other "fine print" -- as barriers to keep people from gainingeasy access to what they knew. This increased their value. The moresomeone needed certain information, the more they were willing topay a specialist to explain it.

The wired world, by conducting information so quickly andcheaply, in contrast removed the layers between individuals andknowledge, making the professional specialist somewhat less valuableand the information itself more so. The unit cost of informationdropped dramatically, from the $300 you might pay a private investigatorto locate a deadbeat dad, for instance, to the $50 or so youmight spend to do a nationwide online records search yourself. Powerand wealth shifted from those who hoard information to those whocould make it available and accessible to the most people.

This simple fact makes the habits of fortress capitalism obsolete.With the ascent of information as the engine of commerce, power hasshifted to those who open up, who share information freely. The youngtitans of the information economy -- Yahoo, Google, Amazon, eBay -- understand that it is no longer about hoarding, no longer about creatingsecrets, no longer about keeping things private; it is about reachingpeople. Google, now a company with one of the largest market capitalizationsin the world, trumpets its corporate mission as nothing less than"to organize the world's information and make it universally accessibleand useful."5 Think about it: a multibillion-dollar enterprise organizedaround giving stuff away. Amazon.com also gives it away: not its products --it sells books and other stuff, just like thousands of others -- but itsknowledge. Its success lies in the novel and inventive ways it has developedto share information. Wish Lists, Search Inside!, and Listmania Listsuse information to powerfully connect Amazon customers in commoninterestcommunities. EBay takes this idea a step further, organizing itsentire market into a self-governing community based on the free flow ofinformation about its users. The new information-based economy affectseveryone, not just those in the information business. Every business, inalmost every industry, has undergone a major transformation in how itaccomplishes its goals. Manufacturers no longer employ assembly-lineworkers; they employ trained knowledge workers who can keep the automatedmanufacturing systems running.

Pulitzer Prize–winning New York Times journalist Thomas L. Friedman,in his seminal book "The World Is Flat," comprehensively details theglobal effects of this newly unfettered flow of information. He describessome of the unprecedented possibilities suddenly available to us, manyof which are being exploited by the business world: new paradigms ofcollaboration, specialization, supply and distribution, and expansion ofcore competencies.6 We can partner, "plug and play," and work togetherin totally new ways because we can share information as never before.Collaboration itself -- our heightened ability to connect -- serves as anengine of growth and innovation. Sharing not only drives the relationshipscompanies maintain with customers, it also drives the companiesthemselves. Friedman details many forward-thinking companies pursuingnew business paradigms to exploit this new reality: UPS uses the efficiencyof its shipping system to run the repair center for Toshiba lessexpensively than Toshiba can itself; call centers in Bangalore seamlesslyprovide Dell Inc. computer customers vital product support; housewivesfrom the comfort of their own homes in Salt Lake City interfacedirectly with JetBlue Airways' central booking computers to take andprocess reservations. Clearly, the maglev bullet train of zeros and oneshas left the station and no one knows where it will stop.

Friedman's macroeconomic and social analysis of our newly"flat," interconnected world presents a vision of the forces reshapingglobal business in the twenty-first century. The free flow of informationsignificantly changes the way internal business units performand are governed, and how individuals work together every day.Fading away are the days of the vertical silo model, when departmentsand programs within a corporation ran independent fiefdomsorganized in top-down, command-and-control hierarchies in thespirit of feudal systems. Increasingly, our typical workday involvesrelating to people of relatively equal status in an ever-evolving arrayof teams and partnerships between units throughout the globe. Sinceknowledge allows people to act, companies that can instantly delivermore high-value information to their workers can enable more ofthem to act on it.

Companies are flattening, like our world, so that many activitiesthat were once the province of one department are now everyone'sjob. In 2005, for example, Computer Associates International, Inc., acompany struggling to rehabilitate itself after being tainted by scandal,product deficiencies, and management problems, eliminated all 300 ofits customer advocate positions worldwide.7 CEO John Swainson explainedthat the goal was to make the company's sales workers "moreaccountable," but the underlying message was clear: Advocating forthe customer is no longer the special responsibility of customer advocates;it is now a part of everyone's job description.8 In company aftercompany, managers are eliminating so-called "Centers of Excellence"and "Centers of Innovation," making these jobs the province of allworkers. Everyone now must increase company excellence and everyonemust innovate. How can you make a Wave of innovation if onlythe 20 or so people in your Skunk Works stand up?

As traditional job silos break down and become horizontal,command-and-control hierarchies begin to lose their relevance. A newmodel emerges: connect and collaborate. To succeed in this new model,workers and companies alike need to develop new skills and harnessnew powers within themselves. Companies -- and the people who comprisethem -- need to recontextualize how they do business. Individualsmust develop new approaches to the sphere of human relations. Bothcompanies and employees must learn to share in whole new ways.

The world has become even more like the game of chess. Everypiece on a chessboard is highly specialized, with virtues and vices,strengths and weaknesses, assets and liabilities. Some move diagonallyand some move straight; some roam free and unfettered while othersare tightly regimented. But, with a few exceptions, you can't typicallyachieve checkmate with fewer than three pieces. Most accomplishmentsin chess are team-based; only when you position pieces properly -- andin communication with one another -- do they start to win. Two rooks, ifcommunicating, are very powerful, even if they are very far apart; withoutclose communication, rooks are far less powerful. Business is nowmuch more like that. Success depends on how people of diverse backgroundsand skills communicate with and complement one another. Ina connected world, power shifts to those best able to connect.

Six hundred years ago, people succeeded with barter arrangementson street corners. Today, most business takes place in formalized organizations;a corporation, for the most part, is nothing more than a societyof individuals who share a common interest to get something done. (Thecorporation itself is for the most part a legal fiction. Many of them are incorporatedin Delaware, but few of us commute to Delaware everymorning, do we?) While not everyone works in a company -- some peopleare independents: accountants, contractors, agents, consultants, entrepreneurs,and the like -- everyone working in the world of exchangeand commerce needs to connect with others, be they customers, clients,vendors, suppliers, team members within our companies, or subcontractors.No man or woman, as poet John Donne famously said, "is an island,entire of itself"; we are all part of a larger landscape of people,because most of what we do cannot be done alone.

I cannot accomplish anything by myself. I find myself a member ofan organization. I find myself in a marketplace, competing, trying todo something that depends on other people. That is quite a place to findyourself. It stands to reason that, in such a world, your success will dependon your ability to relate to others in powerful ways. The informationeconomy places new emphasis on how we bridge the spacesbetween us. How do we reach out? How do we create strong synapsescapable of making our action potentials real? With the fundamentalshift from land to capital to knowledge and information as the currencyof business, we've seen a concurrent shift from the power ofcommand-and-control hierarchies to the power of collaborative, horizontaleffort. The necessity to work together like pieces on a chessboardplaces a new premium on our ability to conduct ourselvessuccessfully in the sphere of human affairs.

More profoundly than just getting things done, strong connectionswith others represent a value unto themselves. Relationships lie at theheart of who we are as humans; they give our lives meaning and significance.When we die our headstones seldom read SYLVIA JONES,1960–2042,

VP OF STRATEGIC PLANNING AND IMPLEMENTATION.

MADE THE NUMBERS 16 QUARTERS IN A ROW.

Instead, we write STAN SMITH, BELOVED HUSBAND, FATHER, BROTHER, UNCLE. HE MADE THE WORLD WARMER WITH HIS SMILE.

Though our jobs may make us wealthy, our relationships give uslasting value and enduring worth. Building stronger relationships, then,can lead to more than success: It can lead to a kind of significance.

Notes

1. "Revision Summaries: The Hundred Years' War -- 1337–1453," ArnoldHouse School, www.arnoldhouse.co.uk/site/pub/Pupils/history/history_rs_100yearswar.html.

2. "The Queen at 80," CBC News, April 20, 2006.

3. Adam Smith, The Wealth of Nations (New York: Bantam Classics, 2003).

4. Daniel Gross, "In Praise of Bubbles," Wired, February 2006.

5. "Google Company Overview," www.google.com/corporate/.

6. Thomas L. Friedman, The World Is Flat: A Brief History of the Twenty-FirstCentury (New York: Farrar Straus and Giroux, 2006).

7. In the interest of transparency and full disclosure, it should be knownthat I have long-standing collaborations and commercial relationshipswith some of the companies that appear in one form or another in thebook. I have tried to be fair and impartial in my analysis of them andtheir activities and to be truthful when selecting quotes and anecdotes to use.

8. Matthew Hamblen, "CA's Swainson Outlines Customer Advocate Cuts,"Computerworld, November 16, 2005.

Excerpted with permission from "How: Why How We Do Anything Means Everything... in Business (and in Life)," by Dov L. Seidman. Published by Wiley & Sons, NY. © Copyright 2007 Dov L. Seidman.