This is from a podcast I did last week with Jerry Wind - one of our original We Are Smarter Than Me book collaborators and Professor at The Wharton School, University of Pennsylvania (among other things). This is going to provide some of the fodder for the last chapter of our second We Are Smarter book. If you have thoughts on this topic - please include ASAP and I'll send to our writers to include in the chapter with attribution.

I know folks don't always like to have to login/sign up to comment so if you'd prefer to comment in an easier fashion, this is also cross-posted on my Mzinga blog.

Aaron Strout: So I’d like to introduce today’s special guest.  We have Jerry Wind.  Jerry is the lauder professor and the professor of marketing at the Wharton School, University of Pennsylvania.  He’s also the editor of Wharton School of Publishing.  A busy man nonetheless.  A good friend of Mzinga’s and the We Are Smarter Project.  Welcome, Jerry. 

Jerry Wind:  Thank you.

Aaron Strout:     So Jerry, we want to talk a little bit about marketing and communities today.  And I know you’ve been doing a lot of research in this space.  And so in particular I think the first thing that I’d like to talk about is the nice crisp message you shared with Barry and me -- Barry Libert who’s our chairman and one of the authors of We Are Smarter -- out at the recent Milken Institute Conference.  You talked about companies being either firm-centric or network-centric.  Can you talk a little bit about what that means and maybe talk about some examples of companies that fall into both categories?

Jerry Wind:  Certainly.  The idea is that the tradition model that we had of the firm was the firm-centric model. The firm was basically the center of value creation.  If you talk about innovation, it was mostly internal innovation capability through R and D and the like.  In contrast, when you talk about a network-centric firm, you realize that a firm cannot survive by itself and has to be part of a network. 

And in the context of innovation we discussed before, the classic example would be the whole idea of open innovation.  The P&G example, what they have done in terms of just relying on their own R and D people they employ to open innovation concept and get hundreds of thousands of other inventors to work with them.  And fundamentally with the major shift in thinking that in today’s environment because of the globalization and primarily the scarcity of talent that most firms are concerned about and at the same time the availability of talent and competencies around the world, those unique capabilities and expertise and also many times at lower price than we have as the whole market.  The development in technology, especially Web 2.0, but also facilitating technologies and developments in infrastructure and the like such as transportation companies, Federal Express and the like. 

And the third force being empowered consumers.  The fact that consumers don’t want to be just passive recipients of information, but instead, they want to be actively involved is important.  I remember social networks.  There are co-creators of product and services, a good example being the Dell experience. 

So if you look at these three forces:  the globalization of capabilities around the world at better prices many times, the development and technology, and the empowered consumers.  These three are leading to a situation that a firm has to start looking at itself as part of a network as opposed to just, “I can be kind of the node in the center of the world.”  And this has led to the concept that we develop in our latest book on competing in a flat world to the idea of network orchestration.

To try to operate effectively in this type of network environment, the firm changes its role and becomes more often orchestrator than the traditional type of manager.  And the orchestration, the nice thing about it you can orchestrate a network without actually having ownership or the traditional control over the members of the network.  So it’s not that you need today to go the route of merger and acquisitions to try to have your network.  You can actually create networks and you orchestrate them.

So that’s kind of very briefly kind of the initial conceptualization here.  And there are fundamental differences almost on all aspect of the business between a firm which is kind of the more traditional firm or firm-centric versus the firm that realizes that they have to operate as part of a broader network.

Aaron Strout:    So great explanation.  And we like using the We Are Smarter phraseology where we talk about the firm-centric being the older “Me” model and the network-centric being the newer or “We” model.  Talk about companies.  I know you said something interesting at the Milken Conference.  I asked you if you truly believed that companies really needed to move towards this “We” model to exist going forward.  And you said you really did believe in your heart that this was going to be a critical piece for their success.  Can you talk about that a little bit?

Jerry Wind:  Absolutely.  I don’t think that given essentially the forces we discussed before, the globalization, technology and the empowered consumer, that you can continue succeeding as a “Me” type firm.  Think about marketing, the area close to my heart.  The traditional marketing models just don’t work anymore.  You cannot just kind of go and develop a commercial and try to hope that some consumers will respond to it.

Consumers are active in all aspects of the interface with the firm.  They’re active as part of co-creators of product, participating basically in the design of the product.  Think about the Dell experience of firms or others where consumers are customizing their product and services.  Consumers are involved in the marketing, kind of the word of mouth communication.  Being members of communities and interacting among themself is by far more powerful than the traditional type of one’s directed messages from the company to the consumers.

And the consumers, in many situations, don’t really trust the advertiser or the distributor.  If you talk about financial service companies, there is fairly good data suggesting a lot of consumers don’t trust financial advisory.  And at the same time they do trust their peers.  And you have the emergence of peer-to-peer networks of investors that rely on each other for advice in financial decisions as opposed to the traditional type of firm.

So when you’re dealing with this environment, you cannot just continue operating the way you did before as a “Me” type firm.  You have to start thinking in term of a “We” type firm dealing both with your customers, dealing with their employees.  How do you engage your own employees?  How do you listen to them?

Obviously if you want to be a customer centric company, you cannot do it unless you get engaged employees who are customer centric and are trying to create a customer experience where the customer is engaged with you.  So fundamentally in all aspect of the business you have to start thinking more and more as a “We” type firm as opposed to a “Me” type firm.

Aaron Strout:  So I like the fact that you’re in agreement with us.  We have a framework that we put together and we’re working through this as sort of the basis of where “We” is going forward. It’s something called SCORE.  I think Barry brought it up to you during the conference.  And it stands for socially networked, which really talks about the tools.  Social, Co-creative, Open, Reward-focused, and Evaluative.

And really what it means is you need the tools, although I’ll argue the tools are probably the least important.  You need to be willing to co-create with your clients, which you talked about earlier.  You need to have a real openness and an honesty starting at the top.  When you have people that engage in dialogue with you, you need to recognize their activities both through conversation and also potentially through some sort of reward system.  And you need to continually be evaluating your community efforts and letting your community evaluate your efforts and then feeding it back into the system.  Any thoughts on that and does that feel like that’s sort of the right model for this?

Jerry Wind:  I think it’s terrific.  I think it both identify some of the key dimensions of a “We” type company.  And at the same time it provides you both a tool for auditing your readiness if you’re willing to become a “We” type company.  Do you really have the right type of social networks?  Do you really engage your customers and partners and other in co-creation? 

Do you really have an open and transparent environment?  Do you have the appropriate reward system that rewards you for the right things?  This goes to the whole question of metrics and what are the right metrics and how do you make sure that the metrics reflect the fact that you are part of a network.  And then the ongoing continued evaluation and learning.

So I think it’s on target.  Definitely captures some of the major characteristics of a company and allow you to decide how best to improve your chances of being a successful we type company.  I would add probably to these five another characteristic, which will be the management style of the firm.  And that’s what I would argue that you need a network orchestration as the management philosophy, belief, and approach that will allow you to manage effectively the network.  Because if you think about those five terms of SCORE: the social, the co-creative, the open, the reward, and the evaluation; it really does not talk explicitly about the managerial philosophy of the firm.

Aaron Strout:     That makes sense so maybe we can add an S onto the end of that and sort of weave that in there.  Now, Jerry, there was another – there was a company that you mentioned that really fell into the we model, the network based model.  I believe you said it was an Asian company.  I want to say it started with a J.  While we were talking -

Jerry Wind: This was Li & Fung.

Aaron Strout:     Oh, Li & Fung.  Right. Can you talk a little bit about what they do and what makes them a we company?  Maybe how they embody some of these qualities.

Jerry Wind:    Well, they’re really the company that we use as the heart of the book Competing in a Flat World.  What – they’re a very large freighting company that doesn’t really own any of the factories.  So they have over 9,000 factories as part of their network.  And when they get an order for 100,00 toys or pieces of clothing or the like from any of the major retailers, they will then design a customized supply chain from the 9,000 plus suppliers they have.  It will end up that a given toy will be produced in five factories in four countries. 

And they developed basically network orchestration capabilities that allow them to deliver to the retailer the best product, the best design at the best price at the best time, the best location that they need without owning any of the factories.  So it’s a great example of a network orchestration capability that one develops.

Aaron Strout:      If someone wanted to find out more information about Li & Fung obviously they’ll be able to find out about it in your book.  Is there a website that they can go to to learn more about?

Jerry Wind:  Yeah.  They can go to – probably the easiest will be to go to the Wharton School Publishing, which is Whartonsp.com, Wharton School Publishing website.  And go there to Competing in a Flat World, which is – the authors are Victor Fung, William Fung, they’re the two brothers who run the firm, and me.  So Fung, Fung, and Wind.

Aaron Strout:     Sounds like a new legal firm.

Jerry Wind:  Yeah.

Aaron Strout:     So, Jerry, we’ve talked about marketing.  We’ve talked about innovation.  We’ve talked a little bit about manufacturing and how all of these processes can be affected by this concept of we or a networked company.  I’m gonna take you a little bit out of your comfort zone.  I have a story that I’d like to relate and I’d love to get your thoughts on this.

So recently being the fact that we are really working hard to help other companies become we companies, providing community, we also work hard ourselves to practice what we preach.  I was doing some hiring and so I wrote a blog post, it got sort of picked up by some other blog posts and ultimately US News and World Report.  And the focus was doing recruiting differently.  It’s this concept of using basically social networks things like FaceBook and LinkedIn and Twitter to really get a better picture of people.  And getting rid of things like resumes, which very often can be gamed.

I had people reach out to me through these social networks versus the traditional phone call or email.  And I found that I got some really good candidates -- granted I was hiring specifically for some positions that were involved with social media -- but what was nice for me is one, I was able to get the recruiter out of the middle.  Two, I was able to see deeper into what these people look like in terms of who their network was, who their friends were, what their writing style was like, what their organization skills were.

And so I was able to sort of leapfrog some of the process.  Any thoughts on that and how that might fit into being a networked company and sort of the behaviors and maybe the SCORE model that we talked about a few minutes ago?

Jerry Wind:  I love it.  I think it’s a great approach.  You got rid, actually, also of two other problem areas.  There are some studies suggesting that interviewing tends to lead to bias.  Because you tend to basically favor people who are like you and a good interviewee might have the kind of better role-play in the interview situation.  So you avoid the interviewing context.  You avoid the kind of traditional how to develop a beautiful resume.  And you’re using the heart of what you really want to do is what is their behavior. 

Do they really practice what you are – what you need here?  And then you give them a task which is product related.  So I think it’s a great way of recruiting.  And I think – I wish that more companies will do kind of similar type approaches.  I would like, however in the human resource context, to comment here that this is still a little bit traditional view hiring people - to hire more people internally. 

In the new environment in a we type firm, you should – before hiring a person you should really ask the question, “Can I connect with the right talent somewhere in the world and engage them, orchestrate them as part of my team?”  So while the approach is great, once you make a decision, “Yes, I do want to hire someone.”  I would hope that as a “We” company you will have a preceding step that will say, “Do I want to hire someone or do I want to connect with someone around the world and link him to my network?” 

And this goes back to the philosophy of underlying a network orchestration model.  In the traditional firm, everyone focused on the core competence of the firm and much of the strategy literature for years focused on core competence of the firm.  But we’re saying that in a “Me” type firm, in a network orchestration type context, the capabilities – the only two capabilities you need are one, the capability to connect to talent and resources around the world.  And two, the capabilities to learn.

And if you have these two, if you have the ability to connect to the talent and resources and the ability to learn and continuously evolve and improve what you are doing, I think you can succeed in today’s environment in a we type company much better than the firms who will stick to the old model of the core competence of the firm.

Aaron Strout:     Jerry, I love the fact that you’re keeping us honest here and I totally agree.  I think if we think about the spectrum of “Me” to “We” maybe we’re falling somewhere around “They” in our recruiting process.  But I like that message of when you move to a truly network-centric firm, a true “We” firm, you really do look externally sort of the crowd sourcing model to be able to bring the talent that you need to the table.

Jerry Wind:  Yeah.  Because think about – apply the open innovation model here or user generated content in advertising.  You know, should you hire an advertising agency or should you hire an advertising manager in house or should you basically have someone coordinate the initiation of worldwide competition for ads for your product?

Aaron Strout:    We actually have a couple clients that are doing that as we speak so I like that idea.  Jerry, one final thought.  For companies that are trying to get started with this, any – two or three bullets on where they go?  Like what do they do to start to really get community rolling?  You know, these social media activities, these we activities within their company?

Jerry Wind:  Well, definitely what will help is if they have a CEO who buys into the idea.  So you have support for this.  I think if we learn from the whole area of corporate transformation and new product development and the experience of firms in this area, we need a champion, internal champion.  So it doesn’t have to be the CEO, but ideally the champion will be supported and protected by the CEO and other senior executives.  But you definitely need to make sure that you have a champion for this. 

Two, I would design some experiments.  You’re likely to get significant resistance to this probably from various people in the firm who will be threatened by this new approach, especially since the new approach changes the concept of control.  Traditionally an executive feels comfortable when they have control over things.  When you’re dealing with empowered consumers, you don’t have any more control over them.  They’re in fact in control. 

So you’re dealing with a situation where a lot of the people in the organization, especially middle management, may feel very threatened by these efforts.  So find an area which is critical for the firm and design an experiment that you can demonstrate success relatively easy and learn from this.  You know, also be ready for the fact that not all of the experiments will be successful.  Some of them may fail.  And accepting failure and especially trying to say, “What can we learn from failure,” is quite critical.

And don’t be afraid to experiment in a number of areas.  You may want to do a small experiment in – among your employees.  You may want to do a small experiment among your customers.  If you’re a multi-national firm you may want to experiment in different countries.  It doesn’t really have to be only in the US, in your major country. 

So I think the idea is to realize that it’s a fact.  It’s here.  The re-organization is here.  It’s not going away and sooner or later every organization will have to start re-thinking themself and re-inventing themself to deal with this new reality.  And as they do so the best way to do it is to start experimenting and learning.     So I would say don’t spend all your time analyzing whether you need it or not.  Identify area that can benefit the most from it, experiment, and go and do it.

Aaron Strout:      Fantastic advice.  We’re talking to Jerry Wind.  Jerry is the lauder professor, professor of marketing at the Wharton School at University of Pennsylvania.  Also the editor of Wharton School Publishing.  Jerry, thank you so much for taking the time to talk with us today.

Jerry Wind: You’re more than welcome.