What Matters Now: Passion!

Part I: The centrality of human passion

SD: In this “world of relentless change, ferocious competition, and unstoppable innovation” that you describe in your new book, how is the relationship between an organization and its customers and employees changing?

GH: Firms have to start with a profound sense of what is really in the customer’s interests, not merely how do they delight them, but also: how do they serve their interests and do the right thing by them in every setting? That has to animate everything they do.

As a result, every industry in the world is being reinvented from the customer backwards. I wrote the first cover story for Fortune magazine in 1997 on the Web. My basic argument was that the Web was going to create a fundamental shift in bargaining power between producers and consumers. This is already happening. Thus you can record a television show on Tivo. You can go online and instantly compare the prices and attributes of different products. That horse is out of the stable and it’s never coming back.

Yet I also agree with Richard Branson at Virgin, or Vineet Nayar at HCL Technologies, who would say: you really have to put employees first and customers second and shareholders third. At least as leaders, that’s the way we need to think about it. As leaders, we need employees to care about the customers. But if we don’t take care of our employees, they are not going to take care of the customers, and the returns won’t follow either. Firms often get that inverted.

Customers and employees are not mutually exclusive. We need employees working on things that they are passionate about. We need employees’ passions to be aligned with my customers’ passions.

Service is a hard concept. On most days, we are not really all that eager to serve somebody else, to put their interests first and so on. It’s hard to do it even with our own spouses, or with our colleagues. It’s even harder to do it with our customers. We need to feel that we are in service of that higher minded goal and that we share that passion.

We don’t want somebody in the airline business if they are not passionate about flying, if they don’t love the drama and the excitement of seeing a 747 take off and fly across the Pacific. If people don’t have that passion, there’s no way that they are going to do the right thing by the customer. So it comes down to making sure that there is alignment between the passions the employees have and the needs the customers have.

There’s also the issue of accounting. We have a hard time dealing with certain kinds of data in business. We’re very good at doing cost breakdowns. We can decompose a cost structure and tell you down to the last penny how much it takes to produce something. But we have a very hard time deconstructing the value structure of a customer. What do they really regard as important? What are they willing to pay for it?

You can go down Fifth Avenue in New York and see Apple’s iconic glass cube. There are obviously cheaper ways of building a store entrance than that. In most companies, you’d never get that expense through your CFO. The reason that you can do so at Apple is that Apple is trying to produce a certain kind of visceral reaction in customers: “This is cool!” So you smile as you see this beautiful I.M.Pei-like sculpture in the middle of your city and you want to come in and celebrate it. Apple understands that we are not just economic beings. We are emotional beings. We are motivated by all kinds of things. That’s something that accountants really struggle with.

SD: Is it the use of financial ratios like ROI and NPV used by CFOs that cause a focus on efficiency and cost-cutting at the expense of adding value to customers and innovation?

GH: I don’t think it’s the measures. If you’re a leader and spend a huge amount of time with customers, there’s something that you start to feel. It’s empathy. I don’t need data for that. Let me give you two examples.

I’m in a hotel. It’s 6am in the morning. I’ve got eight hours of jet lag. I’m standing in the shower and want to wash my hair. The print on these little bottles of shampoo, conditioner and so on is in a font that is so minuscule that I have to get out of the shower, dripping wet, to find my glasses and read the fine print.

Or somebody has hung a robe in the closet. As I go to take out the robe and untie the sash around it, the sash falls to the floor because somebody hasn’t bothered to put the sash through the loops on the robe. It saves a second of an employee’s time.

You could find dozens of similar examples in every kind of business. Either you have the empathy to deal with those situations or you don’t, although you can cultivate it in people. Companies like IDEO do this very well. You can get a cross-section of your employees out there, living with customers, experiencing what they’re experiencing, understanding the very annoying experiences that customers are having, and resolving them. But I’m not sure that this is ever going to be measurable. You need to have a deep, first-hand, first-person experience of what it’s like, what touches customers and what’s important to them. A lot of leaders are isolated from that. They just don’t “get it.” I’ve had that challenge in dealing with companies for many years.

SD: Your book suggests that business needs to embrace “the good, the just and the beautiful.” It also notes that Disney used to be in the “joy” business and that Apple is in the “beauty” business. Guy Kawasaki also talks about creating “enchantment” and Tony Hsieh at Zappos talks about generating “happiness”. Are these signs of progress in management towards embracing “the good, the just and the beautiful”?

GH: There is a sea change under way. Evidence shows that when you get these values in the right order, everyone wins. When you mistake the scoreboard for the game and take shortcuts to prevail in the game, you may appear to win, but it’s not sustainable. Different people talk about it in different ways. But talk is cheap.

The ultimate test is: what is the tie-breaker? When two values compete within the organization, expediency on one side and these higher values on the other side, which value wins?

Google talks about doing no evil, and in many ways, it’s a big-hearted company. Google really does care about increasing the world’s intelligence and giving people access to information. But I personally care less about whether they sponsor a conference, as they have, on combating extremism, than whether they are totally upfront with me about how the Android marketplace handles my personal data.

The real question is: do these values have boots on? Do they have muscle? Are they strong enough to win an argument in the company? Or is it just a rhetorical flourish? Southwest Airlines with their handle LUV is based on that set of principles. That’s one of the reasons why I’m optimistic.

As we move from the industrial economy to the knowledge economy and the creative economy, people are recognizing that creativity is born out of passion. It’s not something that can be commanded. Folks like Tony Hsieh at Zappos and other leaders are starting to re-conceive their job, not so much as, “How do I get the organization to serve the organization’s goals?” but rather: “How do I build an organization that deserves and merits their creativity and passion every day?”

Editor's note: This interview originally appeared on Forbes.com.