How Do We Adapt, Innovate and Lead: Lessons from Red Hat

In a world where organisations are rapidly transforming themselves to address the challenges of a post covid-19 era of business, there’s one company that has a significant advantage over its competitors. Red Hat is a fantastic example of what’s possible when people move at the same speed as technology.

Key Takeaways:

1. Technology has always been an enabler of productivity but in today’s hyper-competitive world, technology is about amplifying capability to move at the speed of opportunity. 
2. Organisations need to invest as much into people development as they do technology upgrades so that their workforce can activate their full potential to thrive 
3. Red Hat’s real competitive advantage comes from its human-centric approach to business and other companies can follow their example.

According to KPMG’s CEO Outlook Pulse Survey, 74% of business leaders are focusing on digitization, however EY’s CEO Imperative Survey reveals only 35% of CEOs believe behavioural change skills will be important to drive growth. Despite the differences in survey methodologies, these two key reports indicate an alarming gap between technology upgrades and people development. 

Technology has always been an enabler of productivity, so it’s easy to see why business leaders prefer to upgrade their systems instead of activating human potential. However, in today’s hyper-competitive world, technology is now an amplifier of capability. The businesses that will win this season of the infinite game are those that have a human-centric approach to business, amplified by technology. 

Red Hat is an example of such a company.

Red Hat is an American software company that specialises in Open-Source enterprise software. They made headlines around the world in 2018  when they were acquired by IBM for US $34 billion, making it the fourth-largest technology acquisition to date. I believe the real secret to Red Hat’s success and their competitive advantage moving forward, comes from their hyper-focus on community and collaboration. 

To understand the brilliance of Red Hat’s approach,  you have to appreciate the adversity they overcame in order to become the company they are today. If you already work in technology, please feel free to skip ahead to “Lessons from Red Hat” but if not, allow me for a moment to take you into the software development world of the 80s and 90s. 

Building Value from the Shadows

Software vs Software

Since the development of the personal computer, there were two schools of thought on software development. Proprietary software was developed by employees that worked for a software company such as Microsoft, Adobe etc. Their software code was a closely guarded secret because it was a part of their intellectual property and valued accordingly. 

In contrast, Open-Source software meant the code was accessible to anyone and it was free. Anyone, anywhere could develop software or create modules to contribute to existing software. 

Big companies gravitated towards proprietary software because of the traditional command and control philosophy. The narrative went that software developed by a reputable company with in-house developers and secret code was much more stable and secure than something that was cobbled together by randoms that shared their work openly. So Open-Source became this underground community full of “geeks” that operated in the shadows.

Challenging the Status Quo

The thing about underground communities is that they have this weird way of growing organically through the passion of their members, which in turn attracts others to want to be a part of their movement. Over time these communities build enough momentum to present a sizable challenge to the mainstream status quo. Then the game changes. To give you an example of how this works, take one of the most popular musicians today, Ed Sheeran. 

Ed started out as a busker on the streets of London. It allowed him to hone his musical skills and style in those backroom venues that smaller artists frequent in the hope of making it big one day. If you see Ed’s concerts today, he’s still that same busker, just on a much larger stage. What’s remarkable about Ed’s success is that those big venues were only ever played by bands or artists supported by other musicians. The gatekeepers of these venues would never allow a solo artist to perform at them because in their minds there was no way an artist like that could put on a performance that would hold the audience’s attention. Ed was the first musician to shatter that thinking because of the fan base that he built up over time in the shadows. 

Red Hat did exactly the same thing. The secret to their success is built upon their culture of community-based thinking and exponential collaboration, honed over time, away from mainstream eyes.

Show Me The Money

I mentioned earlier that a key difference between Open-Source and proprietary software is that Open-Source is free. So how does one commercially benefit from something that is free? Well, the business model is built around free software but paid services. You still need installation, maintenance, training and consulting services that support the free software. This is how Red Hat was able to gain financial momentum. 

Over time they built upon their collaborative culture to make several technology acquisitions that strengthened their value proposition in the industry. In 2012 Red Hat became the first Open-Source software company to reach US $1 billion in revenue and in 2015 they reached US $2 billion. Finally after 25 years of building value, Red Hat was acquired by IBM for US $34 billion in 2019.

So how did Red Hat do it and what lessons can other companies learn from them to build value? 

Lessons from Red Hat

The easiest way to understand Red Hat’s strategy is to examine their approach to business using the Heart Centered Innovation™ framework - a model developed to activate human potential by reshaping the way we think about innovation, creativity and entrepreneurship at work. The four pillars of “Care”, “Commit”, “Create” and “Connect” are the overarching themes required for any company wishing to build a human-centric approach to business. Here’s how Red Hat embodies these principles. 

The Care Pillar - How Does Red Hat “Care”?

The Care Pillar is the most important pillar in the model because, “If people don’t care, nothing happens anywhere.” Red Hat have an extraordinary level of care about their people and their mission because they grew within that underground community. The Open-Source way isn’t just a random vision, mission and values statement. As former Red Hat CEO Jim Whitehurst articulates in his book “The Open Organisation”, the Open-Source way is a set of guiding principles for a way of life where community and collaboration take priority over anything else. How this philosophy plays out in the real world is quite unique. 

As a Speaker and Business Strategist, a big part of bringing value to my clients involves me connecting and building relationships inside other companies to learn new ideas. To achieve this I use LinkedIn and I’ve never encountered any other company whose employees have been so willing to accept my connection requests and communicate so openly and honestly to share their work with me. It’s almost as if their passion is to help me succeed in my mission, even though I’m not a customer of theirs. 

Key lesson from Red Hat here is: Care more about the wider ecosystem that your business operates in and add value beyond your customers and employees.

The Commit Pillar - How Does Red Hat Inspire Its People to “Commit” to Achieving Results? 

It’s usually hard for people to genuinely commit to achieving results in everything they do because they are so time and energy poor from working long hours on multiple projects. Instead, they get involved in a whole bunch of things and end up burning out.  

Red Hat gain commitment from their employees by practising Inclusive Leadership. To explain what that is exactly, Alexandre S. Duarte, Vice President of Consulting and Training Services Latin America, shared his experiences with me:

“Before working at Red Hat I had worked for seven other information technology companies. I have always been trained and polished to be a strong manager, an avid decision maker, focused on surpassing goals at all costs aiming to climb the corporate ladder quickly and aggressively. Red Hat taught me in practice that it is possible to walk the same path of professional growth and success by being a human leader and bringing out the best in each employee. I've learned that being a leader is a state of mind. You need to like people and understand that the success of your collaborators is your greatest success.”

Alexandre isn’t alone in his love for Red Hat’s culture. Here’s what newly appointed Chief People Officer, Jennifer Dudeck said when asked why she joined Red Hat:

“I knew Red Hat was the right next step for me because of the company’s culture and values. The values of courage, commitment, freedom and accountability are integral to my leadership philosophy. Anyone who has worked with me knows that I’m also not a hierarchical person. I believe in open and transparent dialogue. I believe that everyone can be a leader, and that we’re more likely to reach innovative solutions when we engage across the full spectrum of diversity. That’s one of the reasons I found Red Hat’s open culture, where we strive to include all voices and ensure the best idea emerges, so compelling.”

Red Hat is unlike any other enterprise organisation because of this incredible culture of collaboration and community. It’s how they inspire people to commit to showing up every day at work, being the best they possibly can be, and pursuing a mission greater than themselves and their company.

Key lesson from Red Hat: Inspire your people to commit to achieving results by practising inclusive Leadership. 

The Create Pillar - How Does Red Hat Create Value?

Like every other business, Red Hat creates innovative products and services but unlike every other business, they do something special with regards to how they deliver this value through their channel partners. 

Technology companies that engage in channel sales usually develop partner programs that resemble glorified sales training material. Essentially they provide partners with all the resources and training to sell their products and services, but never directly invest in the business success of their partners. I find this practice bizarre. As motivational speaker Zig Ziglar says, “You can have anything you want in life if you will just help enough other people get what they want.” To me, if you want to grow your business, help your partners grow their businesses. Luckily Red Hat adopts the same philosophy. 

In 2020, Grant Cleary, Principal Partner Marketing Manager ANZ for Red Hat, began running business improvement masterclasses to have Red Hat’s APAC partners learn about topics outside of technology such as leadership, marketing and business creativity. A rising tide lifts all boats and Red Hat appears to be one hell of a tsunami with CRN Magazine reporting 74% of their annual revenue comes from partners. To understand how this works in practice, I spoke to one of their partners. 

During the height of the global pandemic in 2020, I spoke with Warwick Sweeney, CIO of Integral, Red Hat’s Partner of the Year for 2020 & 2021. Warwick was kind enough to share with me how Integral had developed a solution for one of their clients that turned out to be an incredible success. In fact, it was such a success that Integral decided to partner with that client to commercialise and scale the solution. This is what I call exponential collaboration and it is something Red Hat executes beautifully. 

Key Lesson from Red Hat: Create a culture where good ideas can come from anywhere… and go everywhere. 

The Connect Pillar - How Does Red Hat “Connect” With Others? 

It’s all well and good to get people to “Care”, “Commit” and “Create” but you still have to “Connect” whatever is created to the rest of the world to get them to care enough to take action. In Heart Centered Innovation™ we achieve this through strategic storytelling and Red Hat has one hell of a story that underpins everything that we’ve spoken about so far. 

It’s September ‘92 and Carnegie Mellon University student Marc Ewing is in the computer lab, dressed in t-shirt jeans and wearing his grandfather’s red baseball cap. Marc is unusually generous with his knowledge and expertise, helping fellow students understand computer science. In fact, everyone on campus knows if you want help, go see the guy in the red hat. 

Marc Ewing created Red Hat Linux in 1994, which then merged with Bob Young’s ACC Corporation in 1995 to form Red Hat Software. Throughout history the symbol of “The Red Hat” has been a source of inspiration as it represents emancipation, liberty and freedom. Embracing it as the icon for the company allows it to be a symbol for a different sort of freedom - one where community, collaboration and creativity flow without friction.

Whenever you’re on a call with a Red Hatter, they proudly display the hat behind them. Former Red Hat CEO Jim Whitehurst took it one step further after they were acquired by IBM to display a Blue Hat right next to his Red Hat as a symbol of unity between the two corporate cultures. 

You might have noticed the image of a Red Hat on top of the Heart Centered Innovation™ Model at the start of this article. Well here’s a secret - it’s not a genuine Red Hat. I was out shopping one day and ended up in one of those $2 shops when I saw the hat. Since I had a call with a Red Hatter the next day, I promptly purchased the Hat and ran around the store looking for some black ribbon. Then later that night I sat there with scissors, glue and safety pins, trying my best to conjure up my kindergarten art and crafts skills to put it all together for my meeting the next day. 

Sure, I now run the risk of being labeled as “the guy with the fake red hat” but I prefer to reframe it as someone who was inspired by a company’s story so much that they wanted to share it with everyone they met - and the hat is one tool that helps me do that.

Final Key Lesson from Red Hat: Humanise your brand so that you connect with others in a way that they want to make it a part of their lives.

As our time together is up, I predict that just as shoe company Zappos became the poster child for customer experience, so too will Red Hat for corporate culture. The businesses that will win this season of the infinite game are those that adopt a human-focused approach to business and practice Heart Centered Innovation™. Based on what I’ve already shared with you, there is no better company to learn from than Red Hat if you truly aspire to adapt, innovate and lead thrive in this new era of business. 

Stay safe. Stay inspired.

-AJ~ 

Meet The Author

AJ Kulatunga is a Business Strategist and Professional Keynote Speaker who inspires positive change in the world by reshaping the way we think about Innovation, Creativity and Entrepreneurship. Leveraging his experiences from a 16-year career in business and technology, AJ works with Business Leaders, Teams and Young Professionals to help them adapt, innovate and lead to thrive. Visit AJK.global to see him in action or download his new book “Reimagining Innovation”.