Oh, Out-Behave!

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For instance, there is a donut vendor I feature in the book who trusts his customers to make their own change when making a purchase. This increases his productivity and their satisfaction, ensures customer loyalty, and wins him more customers. On a larger scale, the University of Michigan Hospitals & Health Systems made the important decision to encourage their doctors to apologize to patients when mistakes were made in their care. This act, considered legal suicide at the time, resulted in patients feeling better served, medical malpractice claims and lawsuits dropping by nearly 50%, and the per-case cost of defending remaining lawsuits dropping by 50%.

It's important to remember that how isn't just about gaining and keeping more customers. It's as important in the boardroom as it is in the classroom and living room.

MG: Leadership is a key focus of several chapters in your book. What's the call to action for CEOs and other company leaders in a how world?

DS: A leader is a model of behavior. A leader self-governs himself or herself by a set of principles and inspires others to do the same. A leader embraces the conditions of the new world and turns it to his or her advantage. I think of Bill Marriott, the 74-year-old CEO of Marriott Worldwide (MAR), who used to go from hotel to hotel with a pencil and paper taking notes for his staff. Now he blogs, embracing our new era of transparency. Instead of issuing directives for his staff to execute or regurgitating talking points from his public relations staff, he engages in true, authentic, two-way dialogue with all of his stakeholders. He is establishing a direct relationship with anyone who might want to visit one of his hotel rooms or invest in his company, building more trust and deeper connections in the process.

MG: You suggest companies can "do" culture.

DS: Just like it would be odd to think you can copy the inner workings of another family—their history, traditions, interactions—one company can't copy another's culture. Culture is the unique character of any organization of people. It is the sum of all of their hows. It is the way things really work, the way decisions are really made, e-mails really composed, promotions really earned and meted out, and people really treated every day.

Grasping how culture really works gives you the building blocks to develop a culture that can out-behave the competition. A culture of how uniquely transforms new conditions of our world into new opportunities. These cultures, which I refer to as "values-based and self-governing," keep external controls peripheral to the central effort of the group, and keep everyone inspired and propelled by their central values.

MG: How does this differ in companies with multiple locations around the world?

DS: It doesn't. The new age of connectedness has thrust us together faster than we have developed frameworks of understanding to adapt to it. Shared values can be the tie that binds different cultures and people spread far apart from one another. This is true for merged and acquired organizations, those with multiple ventures, suppliers, and partners, and those with multinational operations.

MG: Can you explain your definition of success in a how world?

DS: I believe it is virtually impossible to be inspired and generate passion unless you have an important mission. It is virtually impossible to find success directly, without pursuing something of significance. It is virtually impossible to achieve significance without being principled every step the way. It is virtually impossible to perform if you embrace profits over principles. I believe today's business leaders understand this. The people and companies that will rise to the top today and stay on top tomorrow, who will be rewarded, promoted, and celebrated, are those that get their hows right.

MG: If people want to learn more about this perspective, where can they find you?

DS: People can find me at my own blog: www.HowsMatter.com/blog or at www.LRN.com.

Marshall Goldsmwith, who writes Marshall and Friends every week for BusinessWeek.com, can be reached at Marshall@MarshallGoldsmith.com. He provides his articles and videos online at www.MarshallGoldsmithLibrary.com.