Sound wikinomic theory?


28 Feb 2008

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Mass collaboration using blogs and wikis could result in the greatest change in the architecture of business since the industrial revolution.

What do IBM and Procter & Gamble have in common? Apart from being global corporations which rely heavily on R&D, they are spear-heading and profiting from a new trend of online mass collaboration through the use of web tools such as blogs.

That’s according to the co-author of best-selling business bible Wikinomics – How Mass Collaboration Changes Everything, Anthony Williams, who is in Dublin today to address the annual Irish Software Association conference.

The book, which he co-wrote with Don Tapscott, best-selling author of The Digital Economy, explores how businesses have used mass collaboration and open source technologies to generate success.

“In 2005, we noticed a distinct change in the internet with the rise of Web 2.0. Parallel to this, there was the growth of the blogosphere, the development of Linux and the rise of user-created resources like the online encyclopaedia Wikipedia.

“This all pointed to a new trend and a new mode of production where products and services traditionally created by large firms were increasingly being generated over the internet by worldwide networks of individuals.”

Williams cites IBM’s foray into the Linux community, which began in the Nineties. “IBM had challenges of its own at the time and the bottom line was it was looking for a new way to be successful.

“While other people were questioning Linux and open source, it decided to work with Linux developers and set up a small team which spent time working with the community. They ended up building a profitable business that complements everything from software to consulting services and have bundled it in with their hardware products, resulting in $1bn of revenue being earned every year.”

Williams also cites Procter & Gamble, which found a way to expand its R&D talent pool. “Its head of innovation told me how it has 9,000 world-class researchers in-house. But for every single one of these, it knows of another 200 who are just as good. Harnessing this resource cleverly means it could have access to 1.8 million people who have the potential to influence new products and services.

“We feel every company in the world will find new ways of tapping into external sources of talent. We live in a world of seven billion people, but there are still significant gulfs between the haves and have-nots. But at the same time, there’s a large number of individuals graduating with degrees all around the world – there’s a huge labour pool out there to tap into.

“The old paradigm of hiring and retaining the best and brightest may give way to a more fluid model and businesses will start to look beyond the boundaries of their company and get a wider contribution to the development of new products and services.”

The earning potential of contributing to online communities is at a nascent stage but Williams says there are great examples of individuals already making a living off online communities.

“Large-scale communities like Facebook and YouTube are finding a way of sharing rewards with users who contribute to them. There are businesses that are thriving from eBay. Some 30pc of Amazon.com’s revenues come from third-party developers.”

Williams cites HikingOutpost.com, a third-party retailer of books solely about hiking. “But all the books and images are pulled from Amazon.com’s database. HikingOutpost created a unique customer interface on the web with forums for hikers to check routes, maps and trails. And they get a 7pc commission every time they sell a book, but Amazon does the post and packaging.”

He describes as a “stroke of genius” a decision by retail giant Toys ‘R’ Us to use Amazon’s infrastructure in a similar fashion to sell toys.

“Amazon has the world’s leading e-commerce system. That’s a source of competitive advantage and they’ve realised how to turn that proprietary asset into a saleable asset and have created an ecosystem of external developers.

“Large companies are deciding that rather than build their own e-commerce system, they’ll sell through Amazon instead.”

Williams says there are plenty of examples of how individuals are using the rise of Web 2.0 to make a living online. “The futurist, Alvin Toffler, had this notion in the Seventies that consumers would increasingly become producers involved in the manufacture and distribution of products and services.

“YouTube is already sharing ad revenue with the best producers of video on its site and people are making a living that way,” says Williams, referring to these individuals as “prosumers”.

“Second Life is the perfect embodiment of this principle. The owners of this virtual world actually only own 1pc of the content. 99pc of what’s on Second Life is created by users and they own the IP rights to their creations, from storefronts to clothing and commercial real estate.”

Traditional proprietary stalwarts like Microsoft are also getting in on the act, Williams says. The Seattle giant rocked the software world last week with the news it was publishing 30,000 pages of open source documentation previously kept top secret.

Other industries are beginning to wake up to shaking off the proprietary model. “I think the record industry shot itself in the foot by failing to proactively embrace the digital revolution. Its business model was to go out and sue the people downloading music, when it should have been finding ways to take advantage of this.

“Bands like the Beastie Boys are driving new revenue models by producing a cappella tracks for fans to remix. Nine Inch Nails are releasing individual drum and base tracks of songs for fans to remix. They’ve created a new business model for those fans who love music to the extent that they want to become involved in the production of it.

“Eventually, talented remixers will be able to sell their versions and share the proceeds with original authors and the music industry better catch on this time,” he concludes, re-iterating the DIY ethic unfolding in our midst.

“It blows your mind – again you see the creation of prosumer communities that have emerged in a totally self-organised way using the internet for sharing DIY innovation.”

By John Kennedy

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