Wikinomics

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					WIKINOMICS
How Mass Collaboration Changes Everything
DON TAPSCOTT and ANTHONY WILLIAMS

DON TAPSCOTT is chief executive of New Paradigm, his own consulting firm and business think tank. He specializes in analyzing the impact of new technology on business. Mr. Tapscott is the author of ten books including Paradigm Shift, The Digital Economy, The Naked Corporation and Digital Capital. He is a graduate of the University of Alberta and Trent University and currently teaches at the University of Toronto’s school of management. ANTHONY WILLIAMS is vice president and executive editor at New Paradigm. He has researched and written a number of articles about the impact of new technologies on social and economic life, some of which have been published in Business 2.0 and Optimise magazines. Mr. Williams is a graduate of the London School of Economics. The Web site for this book is at www.wikinomics.com.

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MAIN IDEA A new and much more collaborative way to do business is emerging as a powerful force. Companies are opening up their internal processes to input and suggestions from outsiders who bring fresh ideas and new competencies into the equation. The end result is value gets created in refreshingly new and original ways. This is the essence of “mass collaboration”, and it has the potential to have a major impact on corporations of all shapes and sizes in the 21st century. One of the best-known examples of this trend is the open-source online encyclopedia , Wikipedia. It runs on a “wiki” – Hawaiian for “quick” – software which enables any Wikipedia viewer to edit the contents of a Web page. Therefore, taking a cue from this, this new wave of mass collaboration in business has been dubbed “Wikinomics”. The new age of mass collaboration in business has already arrived. You either get on the bandwagon and harness this phenomena to maximum effect or you risk getting left behind by those who do. The choice is yours. “Due to deep changes in technology, we are entering a new age where people participate in the economy like never before. This new participation has reached a tipping point where new forms of mass collaboration are changing how goods and services are invented, produced, marketed and distributed on a global basis. We call this wikinomics.” – Don Tapscott and Anthony Williams

The Concept of “Wikinomics” or Mass Collaboration in Business The Four Key Ideas of Wikinomics 1 2 3 4 Firm Successful New Models Based On Wikinomics

How To Apply Wikinomics To Do 1......þ 2......þ 3......þ 1 2 3 4 5 6 7 8 Watch your lead users Build critical mass fast Supply an infrastructure Get governance right Let others harvest value Live community norms Let things evolve over time Think collaboratively

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1 2 3 4 Peering Open Boundaries Sharing Think Global, Act Global 1 2 3 4 5 6 7

Peer Producers Ideagoras Prosumers New Alexandrians Participative Platforms Global Plant Floor Wiki Workplace

1. The Four Key Ideas of Wikinomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 2 - 3 A new breed of 21st century business enterprises is emerging. These companies create value by opening their doors to the world rather than by being secretive, by inviting anyone and everyone to collaborate rather than trying to hire and retain the best talent and by behaving like genuine global enterprises. The modus operandi of this new breed of companies revolve around four powerful new ideas: • Openness and complete transparency. • Peering to create value rather than using a hierarchy. • Sharing and pooling together all kinds of resources. • Acting like a global business rather than a smaller entity. 2. Successful New Models Based on Wikinomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 4 - 7 There are seven types of businesses which are already successfully harnessing mass collaboration to challenge traditional business models. It’s well worth considering each of these wikinomics-based models for clues about what’s likely to happen within your own industry. Change is always challenging, but if you look at this new era as an opportunity to better leverage the external knowledge, resources and talents you have to generate greater competitiveness and growth in the future, Wikinomics just might end up being one of the most interesting and rewarding business developments ever. 3. How To Apply Wikinomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8 While your forward planning will need to retain a high degree of flexibility, there are several key design principles which apply right across the entire spectrum of wikinomics models. As you learn how to operate in the new environment, try and keep these basic design principles in mind. Mass collaboration is not a panacea to every business ill but you should miss no opportunities to use it when you can.

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1.

The Four Key Ideas of Wikinomics

A new breed of 21st century business enterprises is emerging. These companies create value by opening their doors to the world rather than by being secretive, by inviting anyone and everyone to collaborate rather than trying to hire and retain the best talent and by behaving like genuine global enterprises. The modus operandi of this new breed of companies revolve around four powerful new ideas: • Openness and complete transparency. • Peering to create value rather than using a hierarchy. • Sharing and pooling together all kinds of resources. • Acting like a global business rather than a smaller entity. In 1999, a small Toronto-based gold mining company called Goldcorp faced an uncertain future. The company was besieged by strikes, lingering debts and the high cost of mining for gold. Goldcorp appointed a new CEO, Rob McEwen, who had a background as a mutual fund manager but no background whatsoever in mining. He attended an MIT conference where the story of Linux – the open-sourced operating system – was discussed in some detail. Inspired by this example, McEwen went back to his head geologist and said, “You know, if we can’t find where the gold is, there must be someone out there who can. I’m going to put all our geological data from the last fifty years on the Internet and ask where we should look next.” Accordingly, in March 2000, Goldcorp launched what it called the “Goldcorp Challenge”. The company posted 50-years of proprietary geological data on its Web site – more than four hundred megabytes – and offered $575,000 in prize money to whoever came up with the best methods and estimates. News of the contest spread rapidly and soon more than one thousand virtual prospectors got busy analyzing the data. So what happened next?
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Internet era of business. Many people are already familiar with the examples of an open-source encyclopedia (Wikipedia), operating system (Linux), game producer (Second Life), video sharing system (YouTube) and search engine (Google). But the Goldcorp story shows what can happen even in mining, one of the world’s oldest and most secretive industries, when the power of external knowledge, resources and capabilities are harnessed. In simple terms, mass collaboration has the power to influence how all goods and services are developed, produced, marketed and then distributed on a global basis. Millions of people are willing to organize themselves and help develop dynamic new goods and services. All they require are a few basic tools and an opportunity for their collective voice to be heard. Companies that adjust their business models to integrate collaborative capabilities will flourish while those which fail to do that risk being rendered irrelevant by the marketplace. Wikinomics is based on four powerful principles: 4 Key Ideas of Wikinomics 1 Peering

Peering is when large groups of people self-organize into groups which achieve something useful. Participants all have their own motivations for participating and there is no single person who is directing what goes on. Peer production requires some underlying principles to function but generally these structures are reasonably simple. Some examples:
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Australian biotech research institute CAMBIA was concerned that patents for genetic food crops were being granted to multinational firms meaning the people who need these crops the most can’t afford to pay the licensing fees. To avoid that, CAMBIA researchers release their results under public BiOS (Biological Open Source Licenses) which are free for anyone to use. Anyone who wants to participate can pick up on what CAMBIA is working on and add their own input under the same BiOS license arrangements. Marketocracy has recruited more than 70,000 traders who run virtual stock portfolios in a competition. The top one hundred performers are then ranked, and their trading strategies are then emulated by Marketocracy’s own real-world mutual fund. Marketocracy’s mutual fund commonly outperforms the S&P 500. 4 Key Ideas of Wikinomics 2 Open Boundaries

Within a matter of weeks, prospecting proposals came flooding into Goldcorp These proposals were submitted by graduate students, mathematicians, consultants, military officers and complete novices to the mining industry. A variety of novel ideas and techniques were used. Around 110 new prospecting sites to look for gold were suggested. Around 50-percent of these were sites Goldcorp’s own geologists would never have suggested themselves. When Goldcorp tried test excavations at the suggested sites, over 80-percent yielded substantial quantities of gold.

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In all, Goldcorp ended up extracting an astonishing eight million ounces of gold since the challenge was launched, catapulting the company from being a $100 company into a $9 billion juggernaut which is now widely regarded as being one of the most innovative and profitable companies in the mining industry. Rob McEwen estimates the Goldcorp Challenge has shaved at least two to three years off the company’s exploration time. This open-source approach to mining exploration has also hugely successful for his investors. One hundred dollars invested in Goldcorp in 1993 is worth over $3,000 in 2006. Overall, the returns on that investment of $575,000 as a prize in the Goldcorp Challenge have been impressive and far reaching. This example highlights the fact collaboration on a mass scale will be the economic engine which will drive value creation in the

At one time, most corporations invested heavily in “trade secrets” and therefore there was a real motivation to keep any know-how very close to the chest. This is the complete opposite of that mind-set. Open boundaries means companies make their internal systems open to anyone who is interested. Being open means you let others come along and use what you do as a building block for their own products and services. If you’re lucky, a number of other entities may use what you have to offer as a platform for their own work. This is what Amazon.com, eBay and Google excel at. They have opened up their own applications and business infrastructures to third party developers. The end result is there has been a substantial boost in the speed, scope and overall success of innovations in these areas. Amazon alone can harness the power of more than 140,000 active developers and the company currently generates nearly 30-percent of its annual revenue from third-party sellers leveraging its e-commerce engine.

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Some other good examples of the power of open boundaries:
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Procter & Gamble was widely known for its dislike of anything-not-invented-here. In early 2000, the company’s sales were well down so the its CEO suggested an initiative to source 50-percent of P&G’s new innovations from outside the company. As a result, the company was able to launch hundreds of new products, some of which turned out to be tremendous hits. The Massachusetts Institute of Technology (MIT) is very highly regarded. Many people in developing countries dream of going there. The university has launched what it calls OpenCourseWare which enables aspiring students anywhere in the world to access the university’s entire curriculum without paying any tuition fees. People can go to a Web site (www.ocw.mit.edu) where they can study anything from aeronautics to zoology. MIT offers this as an educational resource for people to enjoy and benefit from. 4 Key Ideas of Wikinomics 3 Sharing

integrated partners and less and less like vendors. The new norm today is for everyone in a supply chain to share information freely so the ecosystem as a whole can act efficiently and effectively. Some examples of this are:
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General Motors actually grew up as a collection of standalone companies gathered under the one corporate structure. That meant each brand had its own staff, procedures, agendas and legacy systems. It also generated excessive costs because there was loads of duplication of effort. GM is currently in the process of changing all that by developing a best-of-breed operating model which will be used to link all GM’s activities into a seamless global operation. Apple has actually done a reasonable job in building a business web for music. The company sources its chips from Motorola and others, has them manufactured into an iPod which is assembled by Foxconn, hires programmers to develop iTunes and then provides access to digital music created by publishers and artists from anywhere in the world. Although much of the money in this global business web goes to the music publishers, Apple can increase its share of the value by becoming a music publisher in its own right.

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Smart firms today are intent on sharing what they know rather than locking their intellectual property away in patents and filing cabinets. They know that by doing this, these firms are positioning themselves at the center of a vast system for wealth creation. They encourage others to take what they’ve done and build on it so everyone can benefit from customer-driven innovation and creativity. Admittedly, there are some critical trade secrets which firms are smart to keep proprietary rather than share, but companies cannot collaborate effectively with others if everything they have available is kept hidden. Sharing what they know builds a vibrant business ecosystem which will help everyone achieve growth through further innovation. Some noteworthy examples of the power of sharing:
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Skype, an Internet based telephone service. Skype grew to 100 million registered users in two years without any capital investment whatsoever. The company’s reach expands because its users are willing to share their computing power with each other. Skype was acquired by eBay for $2.6 billion in September 2005. The California Department of Education open sources its textbooks for students. Not only does this put high quality educational material within reach of everyone who wants it but doing this also saves Californian taxpayers more than $400 million per year. 4 Think global, act global

In sum total, wikinomics is about mass collaboration on a global scale. This is an entirely new way for people to come together to do business. It means that the concept of an inward-focused and self-contained corporation has been superceded by self-organizing peer-to-peer networks and communities where people with diverse skill sets work together to develop something impressive. “Billions of connected individuals can now actively participate in innovation, wealth creation, and social development in ways we once only dreamed of. And when these masses of people collaborate they collectively can advance the arts, culture, science, education, government, and the economy in surprising but ultimately profitable ways. Companies that engage with these exploding Web-enabled communities are already discovering the true dividends of collective capability and genius.” – Don Tapscott and Anthony Williams “For smart companies, the rising tide of mass collaboration offers vast opportunity. As the Goldcorp story denotes, even the oldest of old economy industries can harness this revolution to create value in unconventional ways. Companies can reach beyond their walls to sow the seeds of innovation and harvest a bountiful crop. Indeed, firms that cultivate nimble, trust-based relationships with external collaborators are positioned to form vibrant business ecosystems that create value more effectively than hierarchically organized businesses. For individuals and small producers, this may be the birth of a new era. We are becoming an economy unto ourselves – a vast global network of specialized producers that swap and exchange services for entertainment, sustenance, and learning. A new economic democracy is emerging in which we all have a lead role.” – Don Tapscott and Anthony Williams

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4 Key Ideas of Wikinomics

Once upon a time, the ultimate in business was to grow to become a multinational firm. Today, however, savvy companies are going in the opposite direction by attempting to become truly global firms which access the best-in-class know-how and competencies from hundreds of specialist companies spread across the globe. Instead of trying build big hierarchies, companies today are hard at work establishing a global network of partners who will share the risks and rewards of undertaking big projects. One of the truly interesting phenomena attached to this transition is the fact small firms can act globally just as readily as large firms can. Global firms, whatever their size, harness the know-how which exists in their web of suppliers. More and more, suppliers in every industry imaginable are acting more like tightly

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Successful New Models Based on Wikinomics

There are seven types of businesses which are already successfully harnessing mass collaboration to challenge traditional business models. It’s well worth considering each of these wikinomics-based models for clues about what’s likely to happen within your own industry. Change is always challenging, but if you look at this new era as an opportunity to better leverage the external knowledge, resources and talents you have to generate greater competitiveness and growth in the future, Wikinomics just might end up being one of the most interesting and rewarding business developments ever.

Keeping up with your users will keep you at the cutting edge of new developments in your field – which means there will be less openings for competitors to enter your market. If you don’t stay current with your users, that leaves an opening for someone else who is. Participating in peer production networks boosts demand for your complementary offerings – because you’ll be able to identify where the opportunities are to create added value. By being part of the network, you’re in effect doing market research on what else you can sell to like-minded people. Peer producer networks reduce the direct costs of new product development – because of the contributions of others. Admittedly some money must be spent on filtering and aggregating what is contributed but these expenses are much lower than bearing the full cost of development. As an added bonus, what is produced in a collaborative peer network also usually ends up being more robust and fault-tolerant as well. Peer-to-peer networks can shift the focus of competition – which means in some cases you can undermine your rival’s ability to generate revenues. Many pharmaceutical companies contributed to the human genome project because their business models are based on discovering new drugs rather than patenting genes. In a similar vein, when software companies help Linux move forward, they are making it harder for Microsoft to succeed with its own proprietary offering. The competitive dynamics of the software marketplace are changed. Open collaborations reduce potential ownership disputes – because it’s clear everyone owns the intellectual property which emerges. That means less money can be spent on lawyers and more resources can be devoted to productive uses and applications of whatever is developed. Participating in peer networks builds social capital – because you’re seen as giving something back to the community rather than being narrowly focused on your own business model. In effect, participation in peer-to-peer networks strengthens a company’s license to operate within that community.

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7 New Wikinomics Models

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Peer Producers
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Peer producers are where highly dispersed volunteers work together to produce something as a joint collaborative effort. In many instances, the combined efforts of thousands of volunteer contributors who self organize their work actually turns out to be better than many larger and more structured or even better financed projects run by individual firms. Some of the more prominent examples of peer producers are:
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Wikipedia – the largest encyclopedia in the world. Wikipedia has more than four million articles in over two hundred languages. The company is managed by its founder Jimmy Wells and a staff of five people. Everything else gets done by volunteers who can submit articles, change and edit existing articles, and even tidy the material up and make it look good. The fact anyone who reads Wikipedia can also edit the content may seem to suggest many inaccuracies would creep in but there are also a lot of Wikipedia enthusiasts who work hard to protect the integrity of the database. Inaccurate edits are often reversed and corrected reasonably quickly. This fluidity also means breaking news events can be added rapidly. When London suffered a terrorist bomb attack on July 7, 2005, within twenty-four hours Wikipedia had a comprehensive fourteen-page account of the event which was more detailed than the information which was provided by any single news outlet. Linux – a simplified version of the Unix operating system which was developed by Linus Torvalds in 1991. Torvalds posted his software on a bulletin board and later a Web site with a general public license which allowed anyone to use it as long as they shared any changes or improvements they made. Linux is used by a large number of companies because it is reliable and free. Today, major corporations like IBM and Google dedicate vast amounts of resources to developing this operating system further. Linux services and hardware also generate billions of dollars in revenue for IBM and other large companies like Motorola, BMW, Philips and Sony.

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It’s correct to stay peer production is not just some sort of oddball economic rarity but is here to stay. Peer production is now taking root as a viable way to organize work. It will continue to grow as access to computing power becomes more widely dispersed throughout more countries. It is aligned with transparency, globalization, the ongoing democratization of knowledge and skills, all of which are trends which will continue to grow and strengthen in the future. “Having gone through the journey, we are comfortable with open source and all the things which are connected to it. We see open source as part of the kit bag of strategy now. We understand that if you don’t do it your competitors will. And then where will you be?” – Joel Cawley, IBM strategist “All firms need to take stock of how self-organized innovation and production might be introduced into their industries and what the economic impacts will be. They need a new strategy agenda that includes, at a minimum, an ongoing analysis and audit of the potential vulnerability of current models to self-organizing competitors, and an examination of opportunities for the firm to leverage peer production communities to lower costs, drive innovation, and gain competitive advantages.” – Don Tapscott and Anthony Williams

The key advantages of peer production from a business perspective are reasonably easy to identify:
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You get to harness external talent – rather than being limited to your own human resources. This is good because it allows you to take advantage of the ideas put forward by some very smart people in the science and technology communities. In practice, peer production lets you involve more people and more partners than you could ever marshall internally, even if you were a very large entity.

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7 New Wikinomics Models

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Ideagoras

7 New Wikinomics Models

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Prosumers

“Ideagoras” are marketplaces where companies can list the scientific challenges they are having problems with and offer cash rewards for anyone who can suggest a better way to solve those challenges. The idea is that someone somewhere in the world just might have the right unique combination of expertise and experience to come up with a solution which is not at all obvious to the development team itself. Ideagoras take their name from the bustling agoras which sprung up in ancient Greece. These agoras were the center of politics and commerce for Athens. The modern-day equivalents tend to be Internet based so they can make ideas, inventions and scientific expertise which exists anywhere on the planet available to innovation-hungry corporations. Some examples of ideogoras already in action:
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Prosumers are customers who actively participate in the creation of the products and services they wish to buy. This is more than customization or personalization. It involves the consumer actually co-innovating and coproducing the products they consume. Some notable examples of successful prosumer communities:
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Lego Mindstorms – user programmable bricks and robots. Apple’s iPod – which has spawned a plethora of applications well beyond simply being a digital music player. People today are using their iPods to distribute their own programs or “Podcasts”, to view pictures, to act as a mini recording studio and much more. Second Life – a massively multiplayer online game where more than 325,000 participants spend time socializing, entertaining and making transactions in a virtual environment totally fabricated by its users.

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Innocentive – a Web site where more than thirty-five Fortune 500 companies such as Boeing, Dow, DuPont and Procter & Gamble post problems and offer cash prizes for solutions. Prizes typically range from $5,000 to $100,000. Other online companies which offer a similar kind of matchmaking service include Nine Sigma, InnovationXChange Network, Eureka Medical, YourEncore and Innovation Relay Center. Yet2.com – where companies can post details of underutilized assets they are wanting to license externally. As at the end of 2006, yet2.com lists more than $10 billion worth of technologies looking for licensees from some five hundred clients who together have access to roughly 40 percent of the world’s R&D capacity. The existence of this and other similar marketplaces of solutions looking for problems to solve has allowed a number of companies to build their licensing activities into significant revenue streams.

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The point is prosumers are people who are passionate enough about something they actually roll up their sleeves and get their hands dirty. They don’t want to just buy the generic products which are made available by the manufacturer. Instead, they want to develop something which is uniquely their own and which they can share with like-minded people who will appreciate what they have achieved. To embrace and encourage prosumers, there are a few things you can think about doing:
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In some ways, ideagoras can be viewed as being like an “e-Bay for innovation”. They are a powerful concept because they work in both directions:
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Try providing them with developer toolkits – which will make it easy and legitimate for them to take your basic product and add their own tweaks and embellishments. If your product’s architecture is open and well disclosed rather than being kept closed, that also sends the signal users should feel free to innovate. Feel comfortable about the idea of losing control – because that’s the only way customers will treat your product as a platform for their own innovations. It’s probably going to happen whether you like it or not so rather than having your customers invent their way around you, work with them. Stay current with what they want. It stands to reason you’re far better off ceding some control now rather than having everyone move to your competitor’s product. Make your products modular and reconfigurable – so people can reconfigure them at will. If you supply the raw materials people need to add value to your product, you stay in the loop rather than forcing them to find their way around you. Look on your real business not as delivering finished products but at providing an innovation infrastructure – and you will be aligned with the prosumption trend. Make it profitable for customers to get involved – by sharing the fruits of their efforts. This will be hugely motivational.

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On the one hand, ideagoras allow companies with extensive portfolios of patents and other intellectual property to generate some revenue from those assets. Science and technology now evolve so rapidly that it isn’t at all unusual for companies to develop intellectual property they never get around to using themselves. Ideagoras allow companies to list these underutilized assets and find applications and buyers. This improves the liquidity of R&D activities. In the reverse direction, when companies list their problems and invite others to solve them, this provides access to ideas, inventions and scientific expertise from around the planet. When a problem actually gets solved, it can provide a boost for both parties in the transaction. It isn’t unusual for research scientists to try and solve some of these problems in their own time and when successful to set up their own business consultancies funded by the prize money awarded.

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“Increasingly, the corporate R&D process must look two ways: toward its internal projects and competencies, and toward the external marketplace to leverage new IP and capabilities. Innovation must extend beyond the boundaries of the firm to the very fringes of the Web, where companies will engage with customers and a dynamic network of external collaborators. Ideagoras are the place where companies can tap a wealth of new ideas, innovations, and uniquely qualified minds.” – Don Tapscott and Anthony Williams

“Customers want a genuine role in designing the products of the future. It’s just that they will do it on their own terms, in their own networks, and for their own ends. In fact, they will do so increasingly without you even knowing about it. Products that don’t enable and invite customer participation will be anathema – staid, old-fashioned remnants of a less customer-friendly era. If you expect to be around in the next decade, your organization will need to find ways to join and lead prosumer communities.” – Don Tapscott and Anthony Williams

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7 New Wikinomics Models

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New Alexandrians

7 New Wikinomics Models

5 Participative Platforms

The Alexandrian Greeks tried to create a vast library where all of the world’s knowledge could be collected in the one building. They actually accumulated more than 500,000 books in the Great Library of Alexandria. When the library was destroyed in the fifth century, this was considered a major setback for the arts and the sciences. Today, the Internet has the potential to achieve what the Alexandrian Greeks set out to do. A number of companies (including Google) and librarians at institutions such as Harvard, Oxford and Stanford are currently scanning books by the thousands to create the ultimate digital library of human knowledge. When this vast database becomes widely available, a new age of mass collaboration in the scientific community will logically take place. Smart companies will also use this as an opportunity to completely rethink how they approach science and how they conduct their own R&D. Armed with a virtual library containing everything which is known about a subject, we can expect to see:
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Participative platforms are where companies offer partners an opportunity to build new businesses using their technology. Most commonly, it involves a company opening access to its software and databases through the use of an application programming interface (API). Good examples of this are the companies which integrate a Google Map into their listings. Services have sprung up which do everything from identifying the locations of celebrity houses to pinpointing crime sites or enabling fitness fanatics to measure their daily running distances all using Google Maps as part of the final product. In this way, Google is providing a platform which other companies can access to deliver products or services people are willing to pay for. Amazon, eBay and Apple have shown a similar willingness to open up their internal systems and let outsiders integrate their services into new products. The ability of one Web site to interact with other Web applications to come up with something entirely new and different creates all kinds of interesting creative possibilities. Some good examples:
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The rise of worldwide scientific communities and consortiums which come together to focus on solving specific problems like global warming, HIV/AIDS and cancer. A rapid acceleration in scientific discovery and learning. An increase in humanity’s ability to generate new ideas and knowledge because everyone will start with a better appreciation for what is already known. Increased participation in scientific discovery by those who were previously on the fringe due to their geographic location.

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The British public broadcaster BBC – invites Web developers to use its news, weather and traffic data as part of their own Web sites. By doing this, the BBC hopes it can come up with some innovative ways to offer search and navigation systems for itself. In its first year of operation, around one hundred new services have started using BBC content feeds. Amazon.com – has opened up to third parties the APIs for its own e-commerce engine. That has allowed external developers to build a variety of interesting add-ons. For example, one application allows you to organize Amazon’s catalog of CDs according to the top songs played by major radio stations. Amazon gives developers free reign to build whatever applications they want to without requiring their permission or approval. Amazon now serves as the back office fulfillment engine for a large number of specialist retailers who focus on niche markets. Amazon also has a marketplace with more than a million registered sellers who use the Amazon platform to sell a vast range of new and used goods. Scorecard – a Web site which enables visitors to the site to obtain instant access to information about pollution sources in specific regions. Potential real estate purchasers can look up how polluted the community they are considering buying in really is by combining data from more than four hundred scientific and government databases. It’s estimated around five thousand other Web sites link to Scorecard. A similar kind of project is Neighborhood Knowledge California which provides an online tool which can be used to find neighborhoods facing urban decay before it gets too late.

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In short, collaborative science promises to be a game changer on a grand scale. The potential impact of having all of the world’s scientific data and research available to every single researcher free-of-charge simply cannot be overstated. This can and must send a tsunami through the world of commerce as science scales up. Some of the early projects in this expansive intellectual landscape include:
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OpenNetWare – an MIT sponsored project designed to let bioscientists share their expertise, information and ideas. The European Bioinfometrics Institute – where scientists can access information on different species from all the world’s biological databases. The Human Genome Project – a collaborative effort to map the entire human genome. GenBank – the world’s largest public database of genetic information and gene sequences. The SNP Consortium – which has set out to identify the hundreds of thousands off chemical landmarks which are found in human DNA.
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“When fully assembled, open-access libraries will provide unparalleled access to humanity’s stock of knowledge. Improved access to knowledge, in turn, will help deepen and broaden the progress of science, giving everyone from high school students to entrepreneurs the opportunity to tap its resources. Digital libraries are only the first step in modernizing scientific research and publishing. More profound breakthroughs will come as scientists rely less on paper as the prime vehicle for scientific communication and more on tools such as blogs, wikis and Web-enabled databanks.” – Don Tapscott and Anthony Williams

“Conventional wisdom says that being open is rather like inviting your competitor into your home only to have them steal your lunch. But in an economy where innovation is fast, fluid, and distributed, conventional wisdom is being challenged. Platforms for participation represent an exciting new kind of business that thrives on mass collaboration and embodies all of the wikinomics principles: openness, peering, sharing, and acting globally. It’s a business that many managers only dream of, where hundreds of thousands of partners work together in vibrant business ecosystems. Nearly all businesses can become open platforms with enough imagination and ingenuity.” – Don Tapscott and Anthony Williams

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7 New Wikinomics Models

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Global Plant Floor

7 New Wikinomics Models

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Wiki Workplace

In the industrial era, mass production delivered superior economies of scale, and multinational companies excelled. In the network era, however, the distribution of knowledge means large manufacturing plants are not necessarily the best way to go. Instead, mass collaboration can make and provide everything humans need to eat, be mobile, be housed and clothed, and be healthy. Instead of building huge multinational firms, a better approach is to develop a globally integrated ecosystem where thousands of firms work together to get things done more efficiently. Some good examples of this approach:
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As counterintuitive as it may at first sound, the concept of mass collaboration also has the potential to revolutionize the traditional workplace with its established job descriptions, hierarchy and layers of management. The decentralization of the workplace into self-organizing groups of highly productive employees will be a defining trend in the years ahead. There are already some businesses which have found early success in this area:
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Lifan – a Chinese motorcycle manufacturer employing 20,000 people and making 700,000 motorcycles a year. Lifan achieves this with no advance product planning whatsoever. Instead, hundreds of different small local firms collaborate on how to design and then manufacture what will sell in the local marketplace using interchangeable parts. This seemingly casual approach to product planning and manufacture has seen motorcycle production in China grow to more than 15 million units a year – about 50-percent of all motorcycles sold worldwide. Boeing – which has designed its next generation 787 Dreamliner by collaborating with more than one hundred different suppliers located in six countries. The company estimates around 70- to 80-percent of the new airplane will be wholly designed and manufactured by its partners and then assembled at Boeing’s plant in around three days per plane. The 787 will be more fuel efficient and have more onboard intelligence than any airplane in the history of aviation mainly due to the fact so many external partners were involved in bringing their specialist skills and competencies to bear. BMW – which commonly has more than 70-percent of its high-performance cars designed, built and even assembled by a worldwide network of suppliers. BMW itself spends an increasing proportion of its R&D expenditure on perfecting the driving experience rather than on mechanical enhancements. The company’s real R&D tends to be carried out by suppliers, research institutes and increasingly feedback from its own customers which gets routed back to the various component suppliers. By collaborating closely with its suppliers rather than trying to stay current in all aspects of vehicle design, BMW is able to retain and enhance the value of its own brand.
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Geek Squad – a irreverently branded service company which helps customers get electronic gadgets working properly. Now owned by Best Buy, Geek Squad has 12,000 service agents in 700 North American locations and generates $1 billion in revenues and $280 million in profits each year. Employees use Web sites and multiplayer video games to organize and manage projects, swap service tips and keep in touch with each other. Ad hoc communities are formed within the organization using blogs, wikis and various other collaborative tools to do all kinds of work, including product development. Geek Squad now commonly develops new products for Best Buy which have thus far proven to be highly successful. Dresdner Kleinwort – a European investment bank which uses wikis to get collaborative projects up and running. More than a quarter of the company’s employees uses wikis daily leading to shorter meetings and decreased numbers of internal e-mails, both of which generate substantial cost savings for the company. Socialtext – a virtual company with ten employees and zero overheads which supplies social computing technologies (especially wikis) to enterprises. The company uses blogging, social networking and PR to drum up business. Employees then collaborate together on projects using Skype and FreeConference. Socialtext already has more than four hundred customers, at least thirty of which are Fortune 500 companies. IBM – which is in the throes of adopting a more participatory management model. Many of the company’s key decisions, resource allocations and other activities are now developed from the bottom-up rather than being specified from the top-down. The company has run a massive brainstorming session called InnovationJam which included input from employees in 160 countries. The company has committed $100 million to develop the ideas with the most social and economic potential to come out of InnovationJam.

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“The rise of peer and collaborative processes for designing and building physical things is not unique to the Chinese motorcycle industry, or to BMW and Boeing. These processes are emerging in industries where intellectual property is widely dispersed and production capacity is fragmented among hundreds of specialized firms. Increasingly, lead producers in fields such as semiconductors, computers, clothing and bicycles are responsible only for product concepts, final assembly, and marketing. They outsource manufacturing and many, if not all, aspects of component design. And they rely on a global plant floor to tap into dozens or even hundreds of firms to help assemble finished products. By organizing into loosely coupled networks of firms who jointly design and develop products for customers, both the suppliers and the global integrators win. Overall, this approach enables risk sharing and allows the network to tap into diverse skills and resources.” – Don Tapscott and Anthony Williams

“The bottom line is that the workplace is becoming a self-organizing entity where centralized and tightly controlled processes are increasingly giving way to more spontaneous and decentralized forms of mass collaboration. Self-organizing communities on the Web have proved time and again that they can be more effective in creating value than hierarchies – so why should it be different in the workplace? It is just a matter of shifting organizational paradigms. As self-organization becomes accepted as a viable method of production, more and more workplace processes will move from being hierarchically directed to self-organizing. A truly self-organized and distributed way of working is not far off on the distant horizon.” – Don Tapscott and Anthony Williams

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3.

How To Apply Wikinomics

While your forward planning will need to retain a high degree of flexibility, there are several key design principles which apply right across the entire spectrum of wikinomics models. As you learn how to operate in the new environment, try and keep these basic design principles in mind. Mass collaboration is not a panacea to every business ill but you should miss no opportunities to use it when you can.
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Establish some clear-cut community norms – and then make sure you abide by these standards as well. Individuals may have their own motives and goals in participating but there does need to be some kind of minimum standards established in order for something useful to emerge. These standards usually specify what is appropriate, how contributions are to be communicated and what form of reward is available. These standards may evolve over time to meet new situations which arise and it is expected the entire community will have some meaningful input into those future changes. Let the project just evolve naturally in the future – rather than trying to force it go some predetermined way. When complex systems evolve, you end up with something which is much more robust and worthwhile. Managed systems always have a choke point at which pressure can be brought to bear but systems which evolve naturally are inherently more robust and adaptive. Fine-tune your collaborative instincts – and feel comfortable about ceding some control to others. Embrace full transparency with all its inbuilt advantages and disadvantages. Get used to managing conflicts and accepting that projects will just naturally take on a life of their own. Get better at building trust, honoring your commitments and sharing decision making amongst your peers. To be open may mean abandoning control to some extent but you should still have well established goals about what needs to get done. Don’t look at openness as the universal panacea to any business problem but more as a viable approach worth considering.

To make Wikinomics work for your business, there are a few things you can and should be working on right now:
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Start looking closely at your lead users – and take cues from what they’re trying to achieve. Many companies which have thrived using mass collaboration have found fringe elements of their offering have taken off and become hugely successful. Look at what your customers are currently doing with your products and services and see whether there are any viable ideas worth building on. Do whatever it take to build a critical mass of participants – because the more people you have, the greater the attraction becomes for even greater numbers to get involved. Once you have assembled a critical mass of people and systems, however, you then need to step back and let the project take on a life of its own. Provide an infrastructure people can use to collaborate – which usually involves specifying things like: • The standards of behavior everyone needs to abide by. • Specifics on the legal status of any new ideas developed. • How new ideas can be communicated and discussed. • The actual mechanics of using the forum. More than likely, your organization will need to fund and provide this basic infrastructure at first, although if you have a consortium of companies who stand to benefit, the costs may be shared. It’s likely the investment required will be small especially in comparison to the benefits which will flow, but someone somewhere will still need to meet those basic costs. Make sure you take whatever time is needed to get your structures and governance systems right at the outset – because they will be much more difficult to change when large numbers of people are involved. The results of the collaborative effort will hopefully repay this investment many times over but it’s worth getting everything set up properly from the get-go rather than addressing systemic problems later on. Sound structures will also attract more participants. Allow all participants to harvest some value – so those who put more into the project stand to benefit more than those who do not. Even though people may join the collaboration for a wide variety of reasons, there must be the opportunity at least for people to profit. This acknowledges that you value everyone’s input. It also avoids the tensions which can arise when some people or groups can make money from the group’s collaborative efforts while others cannot. That kind of imbalance sends the signal some contributors are more important than others, which cannot be helpful. Furthermore, if you make it possible for everyone to benefit, you keep the barriers to participation low.

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“Take heed. Whenever such a shift occurs, there are always realignments of competitive advantage and new measures of success and value. To succeed in this new world, it will not be enough – indeed it will be counterproductive – simply to intensify current policies, management strategies and curricular approaches. We must collaborate or perish – across borders, cultures, disciplines, and firms, and increasingly with masses of people at one time.” – Don Tapscott and Anthony Williams “Winning companies today have open and porous boundaries and compete by reaching outside their walls to harness external knowledge, resources and capabilities. They’re like a hub for innovation and a magnet for uniquely qualified minds. They focus their internal staff on value integration and orchestration and treat the world as their R&D department. All of this adds up to a new kind of collaborative enterprise – an ecosystem of peers that is constantly shaping and reshaping clusters of knowledge and capability on a global basis. Managers should treat wikinomics as their playbook and harness its core principles to achieve success. The new age of mass collaboration will no doubt seem complex and uncertain, and it’s true that collaboration and openness are more art than science. Leaders must prepare their collaborative minds. And companies will need unique capabilities to work in collaborative environments. Capabilities to develop new kinds of relationships, sense important developments, add value, and turn nascent networked knowledge into compelling value are becoming the bread and butter of wealth creation and success. Is your mind wired for wikinomics?” – Don Tapscott and Anthony Williams

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