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Charlene Li on business through relationships, not transactions

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Marketing Strategy

Ben Whitford, a contributing editor to SmartBrief on Social Media, recently interviewed Charlene Li about her new book, “Open Leadership.” Charlene Li will be the keynote speaker at Buzz 2010, with a discussion of the impact of open leadership for running trade associations and nonprofits in Washington, D.C. To learn more about this June 16 breakfast with Charlene and to register, visit

How did you move from your previous book, “Groundswell,” to your new book “Open Leadership”?

In conversations with companies about  “Groundswell,” half of the questions were about how to implement a social strategy, but the other half were about a great discomfort with the sense that they were “out of control.” I also saw executives struggling with the whole concept of sharing and engaging. And what I found most interesting was the repeated question: “How open do I need to be?” I saw that the adoption of social technologies was causing people in leadership positions to rethink their entire perspective on power — the source and use of it.  The benefit of letting go of the need to be in control is that you have the opportunity to enter into a true relationship with your customers and employees. The biggest benefit of open leadership is looking at business through the lens of relationships, rather than that of transactions.

Is this a one-size-fits-all process?

While there’s something to be said for jumping in and experimenting, you need to move quickly into planning your open strategy so that it is oriented to achieve your strategic goals. For example, if you want to enter a new market, how much information does your new customer need and expect from you? Or if you want to manage a strategic change in your organization, how do you need to change decision-making and information-sharing to bring that shift about? You have to think through how being open in 10 different areas of information-sharing and decision-making will help you achieve your strategic goals. If you don’t, you run the risk of not being open enough to achieve your goals, or you are being too open and not realizing enough benefit to justify the risk. Your excessive openness may also dampen the organization’s appetite for openness because you’ve moved too quickly for leaders to adapt.

In the book, I describe “The Apple Factor,” which is that Apple’s level of openness is appropriate for its business strategy. They are in a highly competitive industry and also benefit from the buzz that comes with its legendary secrecy. Apple has legions of loyal customers who provide insight, marketing and support for free. And their innovation engine is so strong that they don’t need to go outside. But they are open to allowing developers to publish on the iTunes and iPhone platforms — as long as they stay within the boundaries [Apple] set up.

So if you create amazing products, have a fanatical customer base and can create an ecosystem of partners, you too can afford to be less open. The danger is that when — and this is not an “if” — Apple stumbles, they will need to be more open — and they will not have created a culture of sharing that will allow them to easily do this.

What traits mark a good “open leader”?

Emotional intelligence is important because we’re talking about relationships that need to be nurtured over a period of time. Curiosity is at the core of many open leaders’ mindsets — they constantly seek out new ways to think about the world around them and are eager learners. And they also have a strong sense of humility, that they have and will continue to make mistakes and that they are surrounded by multitudes of people smarter and more capable than themselves.

I describe four archetypes of open leaders, ranging from “Worried Skeptics” and “Cautious Testers” to “Transparent Evangelists” and “Realist Optimists.” In the book, I lay out why Realist Optimists are essential for moving an organization toward greater openness–and inevitably, people want to see themselves as the one who fill that important role. But there is no absolute “goodness” when it comes to being an open leader — an accurate self-assessment of our innate mindsets is more important than landing in the right category! That’s because an honest evaluation of how you view openness is needed if you are to accurately plan out how you will be open. If you fundamentally have a pessimistic view of what people do when they have power, you will need to put in place more guidelines and processes — basically, more closely define the sandbox covenant — than a more optimistic leader.

What risks are involved in open leadership?

The biggest risk is that people in the organization are being too open or not open enough. For that reason, written policies are essential because they spell out the rules of engagement for everyone and set expectations. But the two ways to come up with these policies — either dictated from above or crowdsourced from below — are not mutually exclusive. Policies created by committee tend to result in bloated documents that are rarely used, while policies created by a single entity or group find few supporters. Instead, I encourage leaders to set a foundation of open principles based on strategic reasons. From there, the broad organization can provide input on how those principles are expressed in best practices and guidelines. Being open is an ever-changing dynamic that pulses with the life of the organization. As such, the policies that express how that organization engages in relationships also need to change.

Can you explain why a tolerance for failure is so important to good open leadership?

Open leaders recognize that they are in a relationship with their followers — and that meaningful relationships are never perfect. Things go wrong, failure happens and the strength of that relationship is seen not in the good times, but in how it weathers the bad times. Forgiving failure develops trust, which is essential in strong relationships.

One thing leaders can do to make it easier to fail is to anticipate what failures are likely to happen, and to put in place appropriate contingency plans. This isn’t about making sure that failure never happens, but rather, making sure that the organization is resilient enough to deal with and withstand the consequences of failure. Having confidence in the organization’s ability to recover allows the organization to take on the risks of being open.

One example of this is Barry Judge, the [chief marketing officer] of Best Buy. He had recently begun blogging when a premium loyalty offering went out to 6.8 million customers instead of the intended 1,000 recipients. Barry immediately apologized on this blog for violating customer trust and also asked for feedback on additional steps Best Buy could take to rebuild trust. The result: Best Buy stayed ahead of this becoming a major crisis by quickly acknowledging and addressing the problem.

How can leaders use social technologies to improve openness?

I would never dictate that every executive needs to be on Twitter or have a blog! Executives should understand how being more open can help them achieve key strategic goals — and then consider if any social technologies can help them become more open in those areas. For example, if a key goal is to develop greater customer loyalty, the CEO may feel he or she needs to give regular updates on the company’s direction and use a blog or video podcast to help with this.

So linking the use of social technologies to a specific goal is crucial to success. But many executives have undeveloped or flabby “sharing muscles” — they simply aren’t very good at it! Authenticity in particular is a hard to develop because you can’t just “be authentic” — you have to earn it. For example, Chris Pratley was one of Microsoft’s first bloggers, but nobody perceived him as being authentic because he was a product manager at Microsoft — and they couldn’t possibly be authentic about wanting to develop a real dialog! Chris had to earn his authenticity by demonstrating his intent. He sought out and accepted criticism. He incorporated suggestions into the product he managed. And participated honestly and openly with commenters on his blog.