The current trials and tribulations of the stock markets notwithstanding, the Internet still rules, having changed forever the way companies do business. According to HBS professor Rosabeth Moss Kanter, however, it won't be the technology that separates the winners from the losers. Instead, it's a question of how organizations alter their culture so that people can work together to make the most of the technology and better serve their customers.

In her fifteenth book, Evolve! Succeeding in the Digital Culture of Tomorrow, Kanter delves deeply into what she describes as the "new prerequisites of success." Published by the Harvard Business School Press, the work is the result of a team-based research effort involving more than three hundred in-depth interviews in nearly eighty companies around the world, as well as a global survey of almost eight hundred established corporations and new ventures. Working Knowledge editor Jim Aisner interviewed Professor Kanter about her findings.

You write in your introduction that this book is about "a new culture, e-culture, that involves better ways of leading, organizing, working, and thinking." What do you mean by e-culture?

The Internet forces all businesses to run differently because it makes everything faster, more direct, more transparent, and more network-oriented. You also get more immediate feedback from customers, employees, and even activists who may want to organize against you. So I talk about four key elements of e-culture. The first is that strategizing has to become less like following a script, where you know everything about what you're going to do before you do it. Instead, it should be more like improvisational theater, where you have a theme. Then you develop the details of your strategy by interacting with your audience-a word I like to use to signify the broad range of people who can have an impact on your business, be they customers or critics. You learn very quickly from their reactions, you make fast modifications, and you move on to the next version of your product. You don't do long tests and slow rollouts anymore. The second element is the need to nurture networks of partners rather than focus on one strategic alliance or partnership at a time. The power of the organization comes from the strength of the whole network. Third, you have to reconstruct your business as a community, not as a set of isolated silos. By community, I mean a sense of membership that transcends the job you are doing so that you feel some responsibility for the fate of the entire group. Finally, because the Internet is all about being creative, absorbing information quickly, and making fast decisions, the need for highly skilled workers is greater than ever. These people can move very easily from one operation to another, so companies need to develop special ways to attract, motivate, and retain them.

In that regard, the first things that come to mind are often casual attire and office space spiced up with music, free food, and games. Amid all this sizzle, where's the steak?

Some of that sizzle is actually helpful in fostering creativity and helping people get their work done, because it means they can treat the office like home and work long hours. But to win the talent wars, firms have to offer what I call the three Ms-mastery, membership, and meaning, with money lurking in the background. Mastery means the ability to work on important problems, using cutting-edge tools that enable people to apply their knowledge to create results. A performance culture motivates employees. Membership comes from that sense of community I spoke of earlier. As for meaning, it's something that engages people's moral sense and even to some extent their spiritual sense. Part of that comes from the opportunity to work on projects that are important to the company and on products that make a difference in the world. Companies also need to look beyond the bottom line. IBM employees, for instance, are involved in volunteer work to help solve the problems of the U.S. educational system.

Given the importance you place on improvisation, how do companies accomplish that?

	The human element is still an important part of doing business in the Internet age.

As I examined how firms were trying to develop new strategies, products, and services, I noticed that the executives responsible for charting new waters often couldn't articulate exactly what they wanted. All they could say was the equivalent of "I'll know it when I see it"-a management approach I refer to in the book as IKIWISI. Take specialty retailer Williams-Sonoma. The CEO had to see some concepts for a Web site before he was convinced that the Internet would work for the company. Sometimes you can't talk about a new idea or write a business plan about it; you just have to show something to decision-makers. In the rapid-fire way in which business is done today, putting together the right kind of team is also an important ingredient in a company's success. The team most likely to innovate will have a mix of newcomers who bring fresh skills and perspectives, as well as some old hands who have established relationships throughout the organization.

The changes at Williams-Sonoma developed within the organization. Can improvisation also come from the outside?

Absolutely. Reuters, the London-based firm that used to transmit news and information over its private network, went through a transformation as a result of its external investments. That's unusual, because big companies have traditionally bought smaller ones and assimilated them. Well aware that it had to transform itself into an Internet company or die, Reuters went a different route. By creating its own venture capital fund a few years ago-what it called the Greenhouse Fund-it took a minority position in various companies working on the next new thing and systematically tried to learn from them. The name of the game was collaboration, and after four years or so, Reuters had turned itself into a formidable presence on the Web by nurturing several up-and-coming enterprises.

As companies face this constant need to innovate, what were some of the differences you found between the "laggards" and the "pacesetters"?

The main difference was often in their attitudes toward change. The laggards went through an initial period of denial, often followed by blame. "It's somebody else's fault that we're falling behind," they said. Then they chose to make only superficial changes-what I describe as putting lipstick on a bulldog-rather than do anything systemically different. As a result, it wasn't unusual to see a project handed over to a committee with no expertise, no accountability, and no time. The pacesetters, in contrast, showed a willingness to question their assumptions and a commitment to follow through with a feasible action plan.

Finally, with all this attention on technology, you make the point that companies also need to appreciate the importance of personal relationships.

There's no question that the Internet has the potential to isolate people from one another. But that's not happening in the best companies. They still insist on having important discussions in person and making significant decisions face-to-face. Clearly, they use technology as a facilitator and a means of spreading information rapidly throughout the organization, but it is not a substitute for human interaction. When you're attempting new things, for example, it really does help to bring employees together and have them look one another in the eye. The human element is still an important part of doing business in the Internet age.

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