Rajeev Peshawaria discusses his new book: Open Source Leadership: Reinventing Management When There's No More Business as Usual.

Open sourceThe digital age has democratized the workplace. Now employees can wield just as much knowledge and voice as their managers. It’s a profound change that is forcing an evolution in leadership. Rajeev Peshawaria, who heads the Iclif Leadership and Governance Centre in Malaysia, explores the idea in his new book, Open Source Leadership: Reinventing Management When There’s No More Business as Usual. He contends that leaders must learn to do things differently if they want their companies to innovate and survive. Peshawaria has held senior leadership positions at American Express, HSBC and Goldman Sachs, and he was chief learning officer at Coca-Cola and Morgan Stanley. He discussed his ideas on the Knowledge at Wharton show, which airs on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)  The following is an edited transcript of the conversation.

Knowledge at Wharton: How has leadership changed in this open-source environment?

Rajeev Peshawaria: If you look at what technology has done in the last five to six years with the way we live at home and at work, there are two major things. One, ordinary people today are much more empowered than ever before because everybody has a super-computer in their pocket. I can join any debate I want to. I can say whatever I want to. Ordinary people are really empowered. Leaders, on the other hand, are totally exposed to the extent of being naked.

The second thing is that the 21st century is facing both amazing opportunities as well as daunting challenges related to basic things like food, water, jobs, environment. When it comes to leadership in the 21st century in the open-source era, just showing up to work and telling people what to do is not enough. Just creating shareholder return is not enough. Leadership today has to be about a burning desire to create a better future and to not give up in the resistance that you’re going to face when you decide to do something different.

Knowledge at Wharton: You have noted that Uber, the world’s biggest taxi company, does not own their taxis. The world’s largest hotel chain, Airbnb, doesn’t own the properties it rents. From that perspective alone, businesses are dynamically changing because of technology. Do you think that change is going to continue significantly in the years to come?

Peshawaria: Absolutely. It is just the tip of the iceberg. Two things that mark the open-source era, one of which we are talking about right now, is uber connectivity. Everything and everyone is super-connected, and that is why these new business models are emerging. Old business models are obliterating at a rate faster than ever before. I think the next five to 10 years are going to be incredibly exciting. Just take cancer, for example. Right now you take chemotherapy or any other treatment, and the good cells are killed along with the bad cells. Very soon there’ll be bots running through your veins where only the bad cells will be attacked. It’s unimaginable the stuff that is coming. People have to be prepared for that.

“The problem with leadership training is we’ve been confusing followership with leadership for a long time.”

Knowledge at Wharton: These are changes that are happening in a majority of sectors, not just a couple of areas.

Peshawaria: Yes…. The question is, are large companies’ management practices keeping pace, and are they prepared for what’s coming?

Knowledge at Wharton: There has been tension at times between millennial employees and their managers, who may be in the baby boomer generation and not willing to accept what they bring to the table. Is that changing as millennials are providing more, partly because they’re the largest segment of the workforce?

Peshawaria: Correct. I hear things like, “these millennials don’t have the work ethic that our generation had. They want everything easy. They want it now just because they can have it.” When people talk like that, I ask them, “do you use Google Maps or Waze when you drive?” If they say yes, I say, “well, why don’t you keep an atlas in your car? Is it because it’s easier? Is it because you can have it? What’s the difference between when millennials want something easier and they can have it when you’re doing the same thing?”

Secondly, I look at college kids today. I don’t remember our generation having the kind of pressure that current college kids are going through with their coursework, etc. To say that they don’t work hard, to say that they don’t have the right work ethics, in my opinion, is dead wrong and not helpful.

Knowledge at Wharton: It’s not that students aren’t working hard, it’s that there is sometimes a mismatch between what they are learning in college and what they need to be the next generation of leaders.

Peshawaria: You’re absolutely right on that because we are in the fourth industrial revolution. If you look at the other previous revolutions in history, education takes a little bit of time to adjust to create what is needed in terms of skills and attitudes for the next wave. That’s the period we are going through now. We are not preparing them enough for the next generation because nobody knows, because it’s still unfolding as we speak, which is why learning agility is probably the biggest competency that’s needed in the next 10 years.

Knowledge at Wharton: You also discuss something called autocratic leadership. What is that?

Peshawaria: If you look at any literature on leadership, chances are you will find that when it talks about leadership style, most books idealize the democratic, all-inclusive style of leadership. You must get to consensus, you must love everybody, you must take everybody along with you. On the other hand, you have people like Steve Jobs, Jeff Bezos, Elon Musk, and if you go east, the former prime minister of Singapore. These people were all autocrats, and they’re the ones who rocked the history of the planet in recent years. So the question is, which one of them is true? All the books that idealize democratic leadership or autocratic?

We asked over 16,000 people in 28 countries what’s common between great leaders. We gave them a set of behaviors to choose from, half of which were autocratic and half were democratic behaviors. Without exception, all 28 countries in our global study overwhelmingly agreed that to create breakthrough innovation and success in today’s high-speed world, you need autocratic leadership. That was the most surprising part of our research. But there was absolutely no difference by country across the world in terms of people’s agreement on which of the two was needed.

“Group innovation within the company and crowdsourced innovation from outside … are going to be the way to go.”

Knowledge at Wharton: Many companies are trying to bring more groups and subsets together within their organizations to focus on innovation. Do you think this trend will continue?

Peshawaria: I think so. I think group innovation — getting people together to put their heads together to innovate — is what it will take because the world is getting way too complex for any one person to have all the answers. I also think that the speed and the frequency of innovation is going to make a difference in terms of whether a company survives or not. Besides just creating collaborative environments within the company for group innovation, companies are going to have to get better crowdsourced innovation, opening it up to billions of people as to who has an idea to solve this problem or to exploit that opportunity. Both group innovation within the company and crowdsourced innovation from outside the company are going to be the way to go.

Knowledge at Wharton: How will this change the structure of companies and the traditional corporate ladder?

Peshawaria: Some people are predicting the death of the corporation in the next 20 to 25 years. I don’t go that far. But there will be profound changes. You will still have traditional research and development departments within organizations, and some of the work they do will still be secretive. But a huge amount will also shift to the crowd, as it is already doing in many industries. To that extent, it will have its bearing on organizational structures.

Knowledge at Wharton: Where do you stand on the state of leadership training?

Peshawaria: The problem with leadership training is we’ve been confusing followership with leadership for a long time. As parents, we love kids who listen to us and obey, and we sort of whack them into submission if they don’t. Then we reward them. In school and college, teachers’ pets are the people who do exactly what they’re told and they’re rewarded.

In big companies, my bonus partly depends on whether I get a good score on my employee engagement survey, which makes me a pleaser, not a leader. And in the boardroom when I present a great strategy, the first question they ask is, “Where is the McKinsey Report that says 10 best-practice companies have already done it?” Right from childhood all the way to the boardroom, we reward followership with leadership. That’s one problem.

The other problem is we equate title and position with leadership. The president is automatically the leader of the country. The prime minister is automatically the leader of the country. The CEO is the leader of the company. These ideas are not going to work in the 21st century. You have to have a burning desire to create a better future, and you’ve got to find inner energy, inner strength to keep going. Something that kept Nelson Mandela going for 27 years. It’s about finding that energy and not about competencies, not about case studies, not about personality tests and what have you.

Knowledge at Wharton: Do you expect more companies will open to accepting innovative ideas from the lower rungs of the corporate ladder?

Peshawaria: Absolutely. Many companies are already doing it. I also think this has bearing on how succession planning and future leaders are identified. I think the days of identifying a pool of high potentials and developing them with a special development diet, as was the case in the 20th century, are over. Let me give you some psychometric tests and assessments and then decide whether you’re a high potential or not. And if you are, we’re going to treat you special. Those days are over.

“Let me give you some psychometric tests and assessments and then decide whether you’re a high potential or not. And if you are, we’re going to treat you special. Those days are over.”

I think today we have to open it up to everybody to say, “Who has a good idea? Who wants to contribute in what way? Submit your projects.” Then make it no barrier to entry and see where the innovation comes from. The people that raise their hands every year and come up with great ideas and are able to back it up with their energy, they’re your future leaders. Your innovation takes places in an organic way, and future leadership development takes place in an organic way. The cream rises to the top naturally.

Knowledge at Wharton: What are the greatest changes you expect to see in leadership?

Peshawaria: We were talking about autocratic leadership before. The biggest change that I see is the fact that leaders are totally exposed and naked, and ordinary people are really empowered. The big dilemma is that our data says that you’ve got to be autocratic if you want to create quick and breakthrough success. The time for consensus is over. But how can you be autocratic in today’s day and age when everybody is so empowered, and somebody can destroy your reputation in just a matter of seconds? That’s the 21st century leadership dilemma.

I think the big change is going to be for leaders to understand what it means to live in the open-source era totally exposed and naked, and practice what we call positive autocracy. You’re going to have to earn the right to be autocratic by living the right values and by pursuing a purpose at all times. You’re going to have to master what we call the dance of a naked autocrat, which means to be completely autocratic about your values and your purpose because you thought through that very deliberately and slowly, at the same time being completely compassionate and humble and respectful with people.

Third, provide freedom within a framework. Don’t just box people up into rules, policies and procedures because the world is working too fast these days. Instead, build a culture based on values. If United Airlines employees had acted according to values rather than procedures, they probably would not have dragged David Dao off the airplane in a bloodied state. That’s the idea of creating culture based on values rather than rules, freedom within the framework.

You’ve got to keep listening and learning and reflecting continuously. That’s fourth. Learning and reflection is something that has to become part of the DNA of leaders.

Finally, if you want to create a culture of innovation, you’re going to have to create a lot more forgiveness within the organization. Why forgiveness? Not because it liberates the soul, but there’s a business reason. If you want your company to innovate, you’re going to want people to take risks and try new things. If they try new things, they’re going to fail a lot. If you forgive failure and celebrate it, you’re going to get a lot of innovation. If you are a no-tolerance culture for mistakes and failure, you can say goodbye to innovation in the open-source era.

Knowledge at Wharton: More companies are giving more employees the flexibility of working from home. How does that fit with innovation?

Peshawaria: Any extreme is not good. You cannot have every job working from home and people never interact. You need some group interaction for innovation to take place. I think what will emerge is a hybrid model where leaders will decide. The key is not whether you’re working from home, the key is how much flexibility and freedom you give to your employees.

By some estimates, 40% of the U.S. workforce is already a free agent, like an Uber driver. The kind of freedom that these people have, you cannot afford not to give a similar kind of freedom to the employees who are full time. Whether that comes purely from working from home or in other ways, leaders are going to have to invent ways in which they can give the freedom that is best suited in their environment.