I wrote about the underlying principles of Wikinomics when I started reading the book in June – I’ve come to the end of it now and in addition to my thoughts on the principles I discussed last time (being open, peering, sharing, and acting globally) the sheer weight of examples in the book has left me thinking that there are some pretty fundamental changes happening to the way we do business. Driving all these changes is the notion that innovation happens faster when you open up and let the whole world help you – and if you can harvest that innovation your company will win out. This is happening now because the internet provides the platform (really the virtual space) which makes mass collaboration possible.
The authors group their examples of mass collaboration in practice into six areas:
- Peer production – wikipedia and the open source software movement fall into this category
- Ideagoras (intellectual property and patent marketplaces and exchanges) – this is the notion (to paraphrase Bill Joy) that 99% of the smartest people work outside your company and if you are going to win you had better find a way to exploit their talents. Companies from BT to P&G have embraced this idea and are starting to reap the benefits. P&G have abandoned old vertically integrated notions of innovation and now target sourcing 50% of new product ideas from outside the company. Yet2.com and Innocentive operate marketplaces that help make these sorts of targets possible.
- Prosumer communities – where companies’ customers become co-innovators to the benefit of everyone else who uses it (very much including the company that makes it). Second Life is a great and obvious example of this, but it is playing out across many industries. Another example is Lego who are using the Lego Mindstorms site to encourage customers to design their own lego kits based around the mindstorms robot platform (some very cool looking stuff here – you build your own robot using their touch, distance, sound and light sensors and a servo motor unit). These designs then feed into the product development cycle for people who want to buy lego robots without designing their own.
- Collaborative science – largely a biotech and pharma phenomenon so far, this is where companies are pooling their research efforts to more quickly get the science to a level where they can get products to market. The last mile of innovation is then done in house on the traditional model. The human genome project is the best example so far.
- Platforms for participation – Google Maps, Amazon’s marketplaces and Ebay are the best examples here. All three companies have added considerable value to their core platform by encouraging third parties to innovate on top of it. This way they unleash a world of creativity and new services are created at a far, far greater pace than these companies could do in house – all of which drives transactions or traffic back to the mothership and costs them virtually nothing. The quid pro quo here is that they risk speeding the commoditisation or their core platform.
- Global plant floors – this is the trend among global manufacturers in industries like automotive and aerospace to increasingly outsource innovation and manufacturing at the product module level to their suppliers. Boeing and BMW have strongly embraced this notion.
- Wiki workplaces – the notion that use of wiki-like lightweight collaboration tools is driving big improvements in productivity at many companies. The key thing here is to encourage collaboration observe what people are doing and then provide the tools that will help them do it better. The main example in the book is of Geek Squad where these techniques have both improved the quality of the product/service and contributed to great morale by making everyone in the company a contributor to product development. Other examples they give are of retailer Best Buy and investment bank DresdnerKleinwort.
Lots of examples, lots of areas – that tells me there is a big trend here and being a good VC is all about riding the big trends. In some areas the startup opportunities are already largely behind us – e.g. open source – but I think there are many opportunities still to come. An obvious one right now is for the lightweight internet services that will make a lot of this collaboration possible. Another (about which I have thought less) builds on Yet2 and Innocentive in some fashion – finding ways to make IP more definable and tradable. Introducing these ideas to government somehow might also be interesting.
As Alan pointed out in a comment on an earlier post about this book, it is a bit rah-rah and I’m not suggesting that the whole world will move this way overnight. What I am saying is that you can already see mass collaboration making a big difference in a lot of industries and we will see more of it, probably much more of it, in the coming years.