Executive Thought Leadership

Forget about being better; renowned author Gary Hamel says the real challenge is to turn on the imagination.

Gary Hamel, one of the leading lights at the Harvard Business Review and a consultant on the faculties of both the London School of Economics and the Harvard Business School, helped to define management in the 1990s as the coauthor of Competing for the Future. Now Hamel has written a book called Leading the Revolution about how businesses can benefit from the Internet. In it, he urges executives confronting the challenges of the new economy to imagine the kind of future they want for their companies and then go out and create it. Not only is he an advocate for rethinking all aspects of business and leadership, Hamel is also adept at providing examples of how to make change happen. The editors at Cisco iQ spoke with Hamel to learn more about his recipe for executive success in the age of the Internet. For more information about Leading the Revolution, visit Barnes & Noble.

iQ: How has the Internet changed the way companies look at their employees?

Hamel: It used to be that human beings were valued largely for their brawn and muscle power during the industrial age. Henry Ford once said, "Why is it that whenever I ask for a pair of hands a brain comes attached?" I think we now understand that what makes human beings unique is not their muscle power—it is their capacity to bring imaginative solutions to intriguing problems.

We now live in a world where getting better is not enough, and companies have to get different if they want to thrive. It is one thing to have worked in the shadow of Renoir and be perhaps a technically better impressionist painter than he was, and it's another thing to invent cubism. This is what human beings do really well; we go beyond what has already been done. The challenge is to turn on the imagination.

So, I think the challenge for companies is twofold: First, recognize that individuals can bring more to work than new ideas about how to improve what is already there; and second, recognize that top management's job is not to create strategy, not to plot the future of the firm. It is to create the climate in which that future can emerge because people are heard, and people have the chance to pursue new ideas and experiment with new things.

iQ: What implications do you see for leadership styles?

Hamel: In a world where employees give more of their lives to their job than they give to their community, their family, or their faith, companies need to create places where people can bring all of their humanity to work, not just one piece of it.

What turns people on is a cause is that both right and righteous. It is right in that it makes sense: It is going to create wealth; there is a solid business model behind it. But it also is righteous in the sense that you can look at it and realize that it is going to change the world in a cool way, that we're going to do some amazing things for human beings.

If you're an employer today and you really want to have the best people in the world working for you, you have to be able to create an environment where they use heads, hands, and hearts—all of them, not just one or the other. In the past we've said to people, "Yes, bring your brain to work," when really what we wanted them to do was worry about how to make the call center work more efficiently or how we speed up our claims processing.

Say I go to a place like Charles Schwab and ask, "How do you guys have the courage to change yourselves again and again long before your competitors or even your customers told you to change?" The answer comes back, "We believe we are the guardian of our customers' financial dreams, and we think it is a noble calling. It's our responsibility to be the best that we can."

iQ: What common mistakes do leaders make in the Internet economy?

Hamel: They hold on to one of the basic constructs from the industrial age, the notion that the organizational hierarchy corresponds to one's accumulated experience and therefore one's capacity to add value.

If I'm high in the organization, I say it's because I understand the business better than the folks beneath me, that I have a broader perspective, that I can add more value. But this is true only as long as experience is more important than imagination, as long as accumulated wisdom is more important than a rule-busting idea. It's not that deep industry experience is not important; of course it is. But it's not everything anymore.

iQ: How have the rules of competitive advantage changed?

Hamel: I like to conceive of a company as having four layers:

• 1. Structural capital: on the bottom, the factories, networks and telecommunications infrastructure, sales offices, and physical plant
• 2. Intellectual capital: the patents, intangible assets, brands, competencies, and knowledge-management system
• 3. Imagination capital: the ability to conceive of entirely new uses and applications for your structural and intellectual capital, and then to imagine how to combine your capital with that of other companies
• 4. Entrepreneurial capital: the capacity not to imagine, but to do. This is where you need the activists, the people with enormous passion who have the courage to act on ideas and take risks

I don't think there are very many companies today that are managing either their imagination capital or their entrepreneurial capital in any kind of a systemic way, but that's where competitive advantage comes from.

I hope you enjoy this issue of the Executive Thought Leadership Quarterly .