I spent two days this week at the Coach K Leadership Conference at Duke. It’s always good to get above the trees for a few days, and this experience was exactly that kind of opportunity. Jonathan Opp did a nice summary post on the conference here and you can see the live Twitter stream here.
On Wednesday, Red Hat CEO Jim Whitehurst gave a keynote entitled “Competing as a 21st Century Enterprise Among 20th Century Giants.” Jim comes at this subject from a pretty unique vantage point: he is probably one of the few people in the world who has run both a 20th century company (Delta Airlines, as COO) and a 21st century company (that would be us, Red Hat).
In his presentation, Jim covered some of the things he has learned in moving from the command and control, military-inspired corporate environment of Delta (which is pretty similar to the structure of many of the other great 20th century companies) to the open source-inspired corporate structure here at Red Hat (if you want to learn more about Red Hat and the open source way, here and here and here and here are some posts that will help). In particular, Jim gave five tips that will help your company compete better in the 21st century world– I’ve summarized them below:
Tip #1: Foster an architecture of participation
According to Jim, the 20th century company was built on a model designed for the creation of physical goods like automobiles. Yet in the 21st century, intellectual capital– ideas– are paramount. When we apply the rules of the 20th century to the new breed of corporation, we fundamentally sub-optimize the value of what could be created. The current model is holding us back.
What is the answer? Building businesses on architectures of participation, where the sharing of ideas actually creates additional value for everyone. Red Hat is certainly one example, but Facebook, Wikipedia, Twitter, even Google are all based on architectures of participation too– where many people’s collective work creates an enormous amount of value for all.
Tip #2: Back it up with a business model
Without profit motive, an architecture of participation is ultimately unsustainable as a business– after all, businesses (at least successful ones) have to make money. Red Hat is a prime example of a company that has a strong architecture of participation AND a successful business model built around it. In fact, Red Hat probably has the most successful non-advertising-based business model built on top of an architecture of participation.
Tip #3: Let the best ideas win
Jim notes that even the 20th century companies are already hiring 21st century employees (learn more on what he thinks in this post). The new generation of employees is not content with simply doing what they are told. They want their ideas to be heard. The traditional corporate hierarchy is unappealing to folks who have grown up in the flattened world brought on by the Internet.
The secret is creating a corporate culture based on meritocracy where the best ideas can win. Jim gave the example of how we created the Red Hat mission statement (a blog about it here), and how it incorporated ideas from all levels in the company.
Tip #4: Be a catalyst in communities
At Red Hat, we strive to play a humble role working in communities (more discussion on this idea here, here and in Chris Brogan’s post here). To be successful as a catalyst, you must practice influence rather than control. And this means building the right skills into your leaders so they are catalysts rather than owners.
Tip #5: When necessary, hack the model
Here’s the problem Jim outlined: Even though Red Hat is running around doing business as a 21st century company, we are still operating in a world organized around 20th century financial and legal rules. So what do you do? Hack the system to make it work for you!
One example Jim discussed is the Open Invention Network, where a bunch of companies, including Red Hat, got together to amass a stockpile of software patents. If you want to know why, go here, or read some of the recent Red Hat comments about software patents here or here.
On the financial side, Jim also mentioned the venture capital community as a “hack” to the capital markets that ensured capital got allocated to the best projects– interesting!
Jim’s overall question for the day, at least as I heard it:
How do we build business models not based on giving something away for free, but instead based on giving something freedom. If we do not figure out how to answer that question, and answer it regularly, we will fundamentally sub-optimize the value that could be created in the 21st century information economy.