Thursday, March 15, 2007

Four Themes of Wikinomics - Don Tapscott at IDC Directions07

I'm really fired up after attending IDC Directions07 in Boston yesterday. Key themes of the conference were: innovation, hyper-disruption, and opportunity.

Don Tapscott, Chief Executive of New Paradigm and author of "The Naked Corporation" and more recently co-author of "Wikinomics: How Mass Collaboration Changes Everything" gave the closing keynote address, which summarized the four themes of Wikinomics.

1. Peering
2. Being Open
3. Sharing
4. Act Globally

1. Peering - Economist Ronald Coase was awarded the 1991 Nobel Prize in Economics for his earlier work on Transaction Cost Theory to explain why corporations exist. As Henry Ford built his automobile company, he integrated steel, rubber and glass processing operations. The vertical company included stamping, forging, and machining and assembly operations. Ford also encompassed a trucking operation to move material and components and numerous other disciplines that are frequently outsourced in today's environment. The reason vertical integration made sense at the time was because it was less expensive to do those operations within the confines of the corporation than it was to purchase each item or service separately. Today the web enables collaboration reducing transaction costs to the point where open entities and individuals are collaborating to produce on scale that was previously the sole domain of corporations. Examples include Open Source Software, Boeing's development of the 7E7 Dreamliner and decentralized motorcycle manufacturing in China. This doesn't mean that collaborating individuals will replace corporations anytime soon, but it means that innovative upstart competitors are able to disrupt markets in ways never before possible.

2. Being Open - There is a huge potential to harness global expertise by sharing data and encouraging non-traditional collaboration. GoldCorp, an under performing mining company in Ontario turned itself around through the GoldCorp Challenge, an online contest where geologic data that was previously considered highly proprietary was published on the web for analysis by global scientists with over half a million dollars in prizes made available to entries that were able to identify where the gold was.

Synopsis of a May 2002 "FastCompany" article about the
GoldCorp Challenge:

Rob McEwen, chairman and CEO of Goldcorp Inc., based in Toronto, triggered a gold rush by issuing an extraordinary challenge to the world's geologists: He showed the world all of the geological data on GoldCorp's Red Lake mine online offering outsiders a prize to outsiders tell GoldCorp where they were likely to find 6 million ounces of gold.

The mining community was flabbergasted. Nick Archibald, managing director of Fractal Graphics, the winning organization from West Perth, Australia said, "The mining community was flabbergasted. "We've seen very large data sets from government surveys online, but for a company to post that information and say, 'Here I am, warts and all,' is quite unusual indeed."

For McEwen, the contest was a gold mine. "We have drilled four of the winners' top five targets and have hit on all four," he says. "But what's really important is that from a remote site, the winners were able to analyze a database and generate targets without ever visiting the property. It's clear that this is part of the future." McEwen knew that the contest was risky. But the risks of continuing to do things the old way were even greater.

3. Sharing - Give up on conventional wisdom about intellectual property. The new philosophy is "Give and ye shall receive." Companies need a portfolio of intellectual property, some of which they own and protect, and some of which they give away to build communities around their IP. IBM's investment in Linux is a prime example. In 2000, IBM announced a one-billion dollar investment in Linux. By January 2002, IBM had nearly re-couped the investment. By 2003, IBM was doing two-billion dollars per year in Linux related services (see The Wealth of Networks by Yochai Benkler chapt. 2, p. 47.) A key concept of sharing is turning consumers into producers.
4. Act Globally In the US, Europe & Japan, corporations behave as multinationals. Multinationals think globally, but act locally. In China, India and other emerging economies, rising companies are adopting truly global business models. They think globally and act globally.

Don punctuated the talk with a few humorous quips such as: God may have created the world in 6 days, but he didn't have an installed base." He wrapped up with a bit of philosophy. We must welcome the future, remembering that soon it will become the past, and we must respect the past, remembering that once it was all that was humanly possible. I thought Don attributed this quote to French aviator Antoine de St.-Exupery, author of the Little Prince, but my research indicates that this quote should be attributed to George Santayana.

I enjoyed Don's presentation so much, I stopped at Barnes and Nobel on the way home to buy the book. I couldn't wait to start reading it.

I'm here to serve,

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