Lessons learned from Wikipedia can be applied to most other businesses. How can you harness the spare-time or self-interest of thousands to build something better for everyone?
Goldcorp story : couldn't find any more gold in their mines, though geologists said it was there somewhere, so as a last-ditch effort they put up all data since 1948 free online, and launched the "Goldcorp Challenge", paying $500k in prizes to participants with the best methods and estimates.
"You simply don't give away proprietary data. It's so fundamental that no one had ever challenged it."
The uniquely qualified minds to make new discoveries were outside the boundaries of his organization.
Harness the new collaboration or perish. Those who fail to grasp this will find themselves ever more isolated: cut off from networks sharing, adapting, and updating knowledge to create value.
Firms that cultivate nimble trust-based relationships with external collaborators are positioned to form vibrant business ecosystems that create value more effectively than hierarchially organized business.
This threatens entrenched barriers to entry, including the high costs of obtaining the financial, physical, and human capital necessary to compete.
Firms can no longer depend only on internal capabilities or a handful of business partners to meet external needs.
Companies that make their boundaries porous to external ideas and human capital outperform companies that rely solely on their internal resources.
When companies are open, customers respond by giving their trust.
Marketocracy: 70,000 traders to manage virtual stock portfolios in a competition to become the best investors. Marketocracy indexes the top 100 performers, and their trading strategies are emulated in a mutual fund that consistently outperforms the S&P 500.
A truly global company has no physical or regional boundaries. It builds planetary ecosystems for designing, sourcing, assembling, and distributing products on a global basis.
Winning organizations will be those that tap the torrent of human knowledge and translate it into new and useful applications.
This utterly decentralized and amorphous force increasingly self-organizes to provide its own news, entertainment, and services.
Losers innovated internally. Winners innovated with their users. Losers jealously guarded their data and software interfaces. Winners shared them with everyone.
APIs create an environment where anybody who wants to develop on top of their platforms can do so. No need to send you a formal request, just take those APIs and innovate. Then, if someone builds a great new service or capability, we'll work out a commercial licensing agreement so that everyone makes money.
Internet : This is the first time when children are authorities on something really important.
The marketplace is theoretically the best mechanism for matching supply with demand, establishing prices, and extracting maximum utility from finite resources. So why don't all individuals act as individual buyers and sellers, rather than gather in companies with tens of thousands of coworkers?
A firm will expand until the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction on the open market. As long as it is cheaper to perform a transaction inside your firm, keep it there. But if it is cheaper to go to the marketplace, do not try to do it internally.
Or, backwards : firms should shrink until the cost of performing a transaction internally no longer exceeds the cost of performing it externally.
The most skilled and experienced members of the community provide leadership and help integrate contributions from the community.
Peering helps assign the right person to the right task more effectively than traditional firms. The reason is self-selection: when people voluntarily self-select for creative, knowledge-intensive tasks, they are more likely than managers to choose tasks for which they are uniquely qualified.
As long as communities have mechanisms for weeding out weak contributions, then large self-selecting communities of people in constant communication have a higher probability of matching the best people to the right tasks.
Collaborative outsourcing works best in areas that are not core to your product or central to your business model. Weaknesses. Areas where your market efforts have floundered.
Look for opportunities that attract customers or have industry disruption potential.
Attaching yourself to existing movements that have momentum will create the best results.
Someone outside your organization knows how to answer your specific question, solve your specific problem, or take advantage of your current opportunity better than you do. You need to find them, and find a way to work collaboratively and productively with them.
Shoe designer taking designs from the world : promised to adorn any shoe design he adopts with the name of the designer.
Generate vibrant customer ecosystems where users help advance, implement, and even market new product features.
Mark Vidler, Go Home Productions: "You don't need a distributor, because your distribution is the internet. You don't need a record label, because it's your bedroom. You don't need a recording studio, because that's your computer. You do it all yourself."
Mashup artists typically spend an extraordinary amount of time producing extremely creative stuff that has one effect: to promote the underlying music. (And are often shut down for it.)
Are editors really in a position to best the collective judgement of the audience? If the community is the best arbiter of relevance, do we really need editors?
Offer a parallel front page, edited by readers.
As long as the media thinks they know what's right, they'll never be in a position to harness people's collective intelligence.
Customer tool kits and context orchestration: Forget about static, immovable products. If your customers are going to treat products as platforms anyway, then you may as well get ahead of the game. Make your products modular, reconfigurable, and editable. Set the context for customer innovation and collaboration. Provide venues. Build user-friendly customer tool kits. Supply the raw materials that customers need to add value to your product. Make it easy to remix and share.
Your real business is not creating finished products but innovating ecosystems.
Customers will expect to share in the ownership and fruits of their creations. If you make it profitable for customers to get involved, you will always be able to count on a dynamic and fertile ecosystem for growth and innovation.
Customers won't care whether their activities make you more money (that's your job) - they'll just want a superior product and experience, and perhaps even a cut of the revenue.
The best examples are the developer communities that have built up around eBay, Google, Amazon. External partners can build tools to leverage the database information, invent new kinds of stores or applications, and generally integrate their business processes. 40% of goods on eBay are now uploaded automatically from the inventory systems of 3rd-party stores that use eBay as an alternative sales channel.
Open up your platforms to increase the speed, scope, and success of innovation.
How do I make my organization a platform for participation?
How, when, and where do I open up my business?
How do I attract an energetic group of people to share the innovation load?
Outside developer made : An instant-messaging application that enables IM users to ping Amazon with a request and have it message you back with links to relevant products.
Amazon Web Services give developers access to numerous Amazon software services, like its shopping cart, and every fragment of data they could wish for, including text for product descriptions and reviews, product images, and pricing information. AWS evangelist Jeff Barr calls these the fundamental building blocks that external developers use to construct applications.
Developers can build any application they see fit. No one has to ask for permission or await approval. No haggling over specs or schedules.
Amazon has a head start in a wide variety of areas such as pricing transparency, RSS advertising, and comparison shopping. RefundPlease uses Amazon's own pricing info to inform customers if an item they've purchased drops within 30 days of purchase. Amazon will refund the difference to boost loyalty.
The more data we're able to put in the hands of developers, the more interesting tools, sites, applications will be built, and the more of those that exist, the greater the return to Amazon. We're going to see more traffic, more clicks, and ultimately more purchases. It's not just a science experiment.
Hiking Outpost: a specialist book retailer aggregates info about trails and camping sites from around the web, and Amazon handles credit-card processing, order shipping, and returns. Referral fees are 4-7.5%, based on the total number of items shipped.
Amazon enhances its competitiveness because there is now less incentive for competitors to build a competing platform when they can leverage Amazon's for free. If you can't beat 'em, join 'em.
Om Malik blog post : "I wonder if this culture of participation was helping build businesses on our collective backs. If we tag, bookmark, or share and help del.icio.us or Technorati or Yahoo become better commerical entities, aren't we commoditizing our most valuable asset: time? We become the outsourced workforce, though it is still unclear what is the payoff. While we may gain something from the collective efforts, the odds are whatever the collective efforts are, they are going to boost the economic value of those entities. Will we share in the upside? Not likely!"
Once a platform like Google, Amazon, or SAP gains traction, there is less and less incentive for people to defect to other platforms. The trend is self-reinforcing. More developers create better offerings, attracting more customers.
Most of the free electrons will gravitate towards the biggest centers of gravity. Companies with the most dynamic platforms - with great opportunities for partners to establish a synergistic business - will have the best chance of harnessing the enormous wealth of talent that all those free agents can offer.
The bigger the ecosystem, the better, because bigger ecosystems support more raw intelligence and more requisite variety. Becoming a pervasive and continually innovative presence means becoming a magnet for innovation that attracts lots of partners, suppliers, developers, customers, and other interested participants who are willing to build on your organization's platform.
We are shifting from closed and hierarchical workplaces with rigid employment relationships to increasingly self-organized, distributed, and collaborative human capital networks that draw knowledge and resources from inside and outside the firm.
If a small underperforming company in one of the world's oldest industries (Goldcorp) can achieve greatness by opening its doors to external input and innovation, what would happen if more organizations followed the same strategy?
Couldn't just about any social or economic challenge be solved with a critical mass of self-organized contributors seeking an answer to the problem?
Wouldn't businesses be more productive if they could reach outside their walls to harness the insights and energies of a vast network of peers that converge around shared interests and goals?
If so, how would the traditional corporation change? What new business models could be built on this new collaborative approach to producing goods and services?
Jim Griffin on music biz : "Tarzan economics : we cling to the vine that holds us off the jungle floor, and we can't let go of the one we've got until we've got the next vine firmly in our hand."
Firms threatened by self-organizing prosumer communities face the innovator's dilemma.
The innovator taps a low-cost or no-cost volunteer production resource.
You cannot prevent the inevitable. You may be able to slow it temporarily, but the slowing just makes the ultimate endgame come faster.
Paradigms are mental models that constrain our thinking and are often based on assumptions so strong we don't notice them. New paradigms cause disruption and uncertainty, even calamity, and are nearly always received with coolness, hostility, or worse. Vested interests fight against the change, and leaders of the old are often the last to embrace the new. Consequently, a paradigm shift typically causes a crisis of leadership.
Fine-tune your radar and move quickly to seize the opportunities for influence as a new business paradigm takes hold.
Move early to participate in building a brand-new business. By joining the community of new innovators, you might even position yourself at the front of the parade.
Profound changes favor the newcomer.
A new kind of business is emerging: one that
- opens its doors to the world
- co-innovates with everyone, especially customers
- shares resources that were previously closely guarded
- harnesses the power of mass collaboration
- behaves not as a multinational, but as a truly global firm
Make a comprehensive map of your innovation eco system that positions your value creation and aasses the interdependencies that will determine the flow of benefits and your ability to capture a share of them. This is not a traditional competitive analysis or value-chain analysis, but an analysis of the participants creating knowledge pertinent to your existing and future business. While this includes business partners and competitors, it extends to academia, public research institutes, think tanks, creative communities, or communities of practice, and contract research organizations. The map needs to be global and cover all relevant disciplines that intersect with your strategy.
You're taking down your borders and opening up for no tariffs, no tax competition. You need to know that your core assets and your skill sets allow you to continue to innovate fast enough as a corporation.
Openness does up the ante - it drives real value to the fore and forces every company to compete on a level playing field.
Loose, voluntary communities of producers can self-organize to do just about anything:
- design goods or services
- create knowledge
- assemble physical things
- produce dynamic shared experiences
but don't overlook the fact that these communities operate according to well-defined norms, and have internal processes to guide the group's activities.
Debates remain on the public archive.
Sharing is about lowering costs, building community, accelerating discovery.
The growth of increasingly valuable online resources as a natural by-product of their use by self-regarding individuals. (No altrusitic sharing motives need be present, especially since sharing is the default in most online communities, including Flickr, Napster, and YouTube.)
SHARING MAKES SENSE IF THE CONDITIONS ARE RIGHT:
* - Your proprietary offering is failing and open sourcing it could inject the creativity and manpower required to make it succeed in the marketplace. (Sun OpenSparc.)
* - Opening up IP in one area could boost demand for complementary product and services offerings. (IBM WebSphere.)
* - Advantages of pooling competencies and reducing R&D exceed benefits of having exclusive rights to the knowledge produced. (SNP Consortium.)
* - You're seeking a uniquely qualified mind so you enlarge the pool of talent addressing a particular problem. (Goldcorp)
* - An open platform will encourage innovation, efficiency, and interoperability with ecosystem partners. (Amazon)
* - Sharing is necessary to establish credentials and to develop relationships with other contributors in the community. (SpikeSource)
* - Preempting the property rights of competitors shifts the locus of competition or enhances your freedom of action. (Merck's Gene index.)
* - Openness removes unnecessary friction in collaborative projects and paves the way for participants to focus on the science (Intel's industry-university partnership)
Imagine a digital age co-op, with peer-rating systems that dynamically apportion shares to contributors based on the community's assessment of the value added by individual contributors. Annual profits from sales and services could be distributed across the community of contributors.
WIKINOMICS DESIGN PRINCIPLES
Throw away some of your detailed plans.
Leaders manage chaos the way a kindergarten teacher manages her students.
Planning must allow for a high degree of learning on your part. The great examples have adopted their strategies as they learned what worked and what did not work for the overall community.
* - Taking cues from your lead users
* - Building critical mass
* - Supplying an infrastructure for collaboration
* - Take your time to get the structures and governance right
* - Make sure all participants can harvest some value. (Some do it for fun, philosophical reasons, for profit, fulfill unmet needs, reputation, career prospects.)
* - Abide by community norms
* - Let the process evolve
* - Hone your collaborative mind