Wikinomics - Winning With The Enterprise 2.0 - with transcript

1

WikinomicsWinning With The Enterprise 2.0

Don [email protected]

Enterprise 2.0June 20, 2007

Transcript:

STEVE WYLIE: Out next speaker is Don Tapscott, who is Chief Executive ofNew Paradigm, a company he co-founded in 1993. Don is one of the world'sleading authorities on business strategy and organizational transformation.He's authored or co-authored over 11 books to date, and his new book is calledWikinomics: How Mass Collaboration Changes Everything. A couple offactoids on the new book, Wikinomics. It's been out for about five monthsnow, and for most of that time it's been on several best selling lists includingthe New York Times best selling list. And it's currently being translated into19 different languages. So it's a privilege to have Don joining us today. Pleasewelcome Don Tapscott. DON TAPSCOTT: Thanks, Steve. I think I'm goingto stand down here, if that's okay. It sort of feels a bit like the Politburo uphere. I'm delighted to be here, and I really mean that actually. Last night I tookthe 15-hour flight from LA to New York and arrived in New York at 4:00 am.But I think sleep is a highly overrated thing anyway, along with protein, otherstuff like that. I'm seriously delighted to be here because I buy totally this ideathat the enterprise is moving into a second generation. And it's wonderful thatthere's a conference that's exploring these issues.

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© New Paradigm Learning Corporation 2007 2

The New Enterprise

Structure

Scope

Resource Focus

State

Personnel/focus

Key drivers

Direction

Basis of action

Individual motivation

Learning

Basis for compensation

Relationships

Employee attitude

Dominant requirements

Hierarchical

Internal/closed

Capital

Static, stable

Managers

Reward and punishment

Management commands

Control

Satisfy superiors

Specific skills

Position in hierarchy

Competitive (my turf)

Detachment (it’s a job)

Sound Management

Closed Hierarchy

Networked

External/open

Human, information

Dynamic, changing

Professionals

Commitment

Self-management

Empowerment to act

Achieve team goals

Broader competencies

Accomplishment, competence level

Cooperative (our challenge)

Identification (its’ my company)

Leadership

Open Networked Enterprise

Source: Paradigm Shift: The New Promise of Information Technology, 1992

Transcript:

This idea that there's a new enterprise, of course, is not a new one. It's beenaround for quite a while. This is one of my favorite views of the shifts that areunderway. We're moving from a closed hierarchical structure where the focuswas on capital and physical goods and you tried to be a good manager and youmoved up your position in the hierarchy to a new kind of open, networkedenterprise that is modular and it's dynamic and flexible and it reaches outsidethe boundaries of a corporation. One of the reasons I like this particular viewso much is because it's from my 1992 book, Paradigm Shift. So nothing sopowerful as an idea whose time has come again. And seriously now that wehave the new web, there's a big change that's underway in the deep structuresin the architecture of the corporation. And I started studying this about fouryears ago. I did a $7-million-dollar research project. It's called the Enterprise2.0, Winning with the Enterprise 2.0. And it was inspired by a debate I hadwith a guy named Nicholas Carr, who some of you may know. He wrote anarticle on HBR called IT Doesn't Matter. And I've debated the guy probablyeight or ten times. And he's got a very slick argument that IT has become acommodity, and everybody has it, so therefore it undermines competitivedifferentiation as opposed to contributing to it. And he's a very good debater,and it's a powerful argument. I have a big advantage in these debates in thathe's wrong. But it inspired me to launch a syndicated research project. And webrought together a couple of dozen companies, and they each kicked in$200,000 or $300,000, and we did a big investigation.

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The Rise of the Enterprise 2.0

+ Standards-basedService orientedInteroperable+ Inter-enterpriseIntelligent Networks

ProprietaryMonolithicSilosEnterpriseDumb Networks

10. Technology

+ Relationship Capital+ Experiences

TransactionsProduct/Services

9. Relationships

+ TransparentReal TimeNetworked Intelligence

OpaqueAsynchronous processingTraditional BI

8. Information Liquidity

+ Global N-GenerationCollaboration+ Across the B-web

Traditional DemographicsContainerizedInternal

7. Human Capital &Knowledge Capital

External (+ Inter-enterprise Integration)ModularReconfigurable

Internal (Enterprise Integration)ComplexHardwired

6. Business Processes

Engage and CollaborateSelf-organizingPower through …Agile

Plan and PushHierarchicalPower over …Lumbering

5. Modus Operandi

+ Open+ Shared

ProprietaryProtected

4. Intellectual Property

+ Open Innovation+ Co-Creation

Closed InnovationDo it Yourself

3. Value Innovation

Focused on CoreBusiness WebContext, agency+ Fasttrack Business Models

Vertically IntegratedNon-porousContentM&A

2. Corporate Boundaries

GlobalEngine - China, India, EmergentFree Trade

NationalEngine - US, Japan, EuropeProtectionist

1. World View

Enterprise 2.0Closed CorporationStrategy Domain

Transcript:

And this investigation came to a bunch of conclusions that all center aroundthis theme that we are in fact moving to a second generation of thecorporation, and this is a big change.

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Winning With The Enterprise 2.0

Transcript:

The organizers of this conference have made one of the summary reportssummarizing all of this research available, and I think it's through the website.And so all of you would be welcome to go there. Now I'm a little bit out oforder here.

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Time’s Person of the Year

Transcript:

Let me begin by congratulating each of you personally on having been selectedby Time Magazine as the Person of the Year. Well done to all of you. In fact Ithink you should give yourself a big round of applause. Very good. Well, it'strue social networking is exploding. I was at My Space yesterday; MySpace isgrowing at 2-million members a week, new registrants. Eighty-five percent ofall college students in the United States are in Facebook. There's a new blogcreated every second of the day, 24 hours of the day, and Time says you, theonline collaborator, are the person of the year.

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Four Drivers for Change

WEB 2.0Web 2.0

TheNetGeneration

The SocialRevolution

TheEconomicRevolution

Transcript:

Well, to me that's so 2006, basically, because what's happening now is, this isnot just about hooking up online or creating a new gardening community oruploading a video onto YouTube. The web is becoming a new mode ofproduction. And it's beginning to fundamentally change the way that weorchestrate capability and society to create goods and services. It's changingthe deep structures and architecture of the corporation. And I think this is thebiggest change probably in a century, and it's appropriate to call this the secondgeneration of the corporation. So what's going on here? Well, first of all we dohave the Web 2.0, and this ain't your daddy's internet. It's a discontinuouschange from the old web.

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Web 2.0

TRUE

MULTIMEDIA

BROADBANDMOBILITYWeb 2.0

THE

THIN

G

GEO-SPATIALITY

WEB SERVICES

INTEGRATION

Web 2.0

TheNetGeneration



Transcript:

The old web, you access through a PC tethered to a desktop. And it was aboutdata and text with some graphics. And it was based on HTML, which was thestandard for the presentation of information. That's why during the dot-comperiod everybody talked about websites and eyeballs and stickiness and clicksand page views -- because that's what the web was about, presentinginformation. The new web is based on XML, and that's a standard not forpresentation, but for computation. The web is becoming a giant globalcomputer and it's enriched with services. And every time you go onto the newweb and you do something, you are in effect programming the internet. Youknow, Thomas Watson was famously to have said in the fifties that the worldwill only need five computers. Actually there's no evidence he said that, but ifhe did he would have been terribly wrong. He would have been off by fourbecause essentially we have a giant global computational platform that enablesself-organization, and that's a huge change. There are all kinds of otherchanges; I don't have time to go into them. But you don't just access the webthrough a PC; you access through billions and trillions of inert objects in ourworld that become smart communicating devices. Call it The Thing. Youknow, I'm typically covered in these things. My hotel room last night, the doorwas a smart communicating device. It has a chip in it; it has knowledge. Andin this particular hotel the door had an IP address. I actually had a camerastolen from a hotel room in Miami and the door knew about me. It knew whohad been in and out of the room. That's got the same storage capacity as thedata center where I started working at Bell Labs in the 70s. I mean, I have afriend in Toronto. Everything that's hosted has electrical power, has an IPaddress, and all this stuff talks to itself. And I'm not sure what his microwavesays to his fridge, although he says it's got something to do with cooking apork chop. But he was bragging that his fence talks to his sprinkler system, andI said, well, why would you care? And he says, well, Don, if a burglar comesover the fence, the sprinkler is my first line of defense. So this is a newparadigm. It's a fundamental change that's underway. That's point one.

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WEB 2.0

THENETGENERATION


Transcript:

Point two is the new web is intersecting with the demographic revolution. Whohere has children under the age of 29? Hands, please. Okay, those who put uptheir hands, which of those kids use a computer connected to the internet?Hands? Okay, same group puts up their hand twice. We have the firstgeneration to grow up digital, and these kids are different. And I startedstudying these kids about 11 or 12 years ago when I noticed how my ownchildren were effortlessly able to use all this sophisticated technology. And atfirst I thought, my children are prodigies. And then I noticed that all theirfriends were like them, and the theory that all their friends were prodigies,well, that was a bit of a stretch.

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The Demographic Revolution

Web 2.0

TheNetGeneration



Transcript:

So I started looking at them as a generation, and I wrote a book about ten yearsago called Growing Up Digital. And I came to the conclusion that these kidshave no fear of technology because it's not technology to them; it's like theair. And this is a huge change because this is the biggest generation ever.The baby-boom echo. Today age 13 to 28 years of age, there are 80 millionof them in the United States alone. This is bigger than the boom. The echois louder than the original boom.

Author’s Original Notes:

Engine - Asia1985 1 skyscraper - ShanghaiToday 300

1996 TodayRetail Sales 240 B 600 BCar ownership 10 M 25 MCell phone 0 300 M

1999 2004Exports 180 B 600 B

1990 Today(Shar Zhen?)POP 1.6M 12 M

350 M smokers20% of world’s ice cream#s in auto deaths66% of all ____ foods

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Digital Natives – The Net Generation

Web 2.0

TheNetGeneration



Transcript:

And furthermore this is the first time in human history when children are anauthority about something really important. I was an authority on model trainswhen I was a kid. Today the 11-year-old at the breakfast table is an authorityon something really important. And time online has not taken away fromhanging out with your friends, learning the piano, talking to your parents ordoing your homework; it's taken away from television, right. TV took away 24hours of the week per baby-boomer for their parents. And these kids watch lessTV and then watch it differently. They come home and they don't turn on theTV; they turn on the computer. And they're in three different windows andthey're listening to MP3 files and talking on the phone; they've got a videogame going and three magazines open, and they're doing their homework.And, yes, the TV may be going on in the background. But what's going on isthat rather than being the passive recipients of somebody else's broadcastvideo, what are they doing? You know, they're reading, they're thinking,they're organizing and collaborating and composing their thoughts. They'reremembering things.

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The Generation Lap

N-GenersTheir Parents

Web 2.0

TheNetGeneration



Transcript:

And rather than a generation gap like we had in the 60s, big differencesbetween kids and parents over values and lifestyle and so on, kids and parentsget along pretty well today. What we have is what I call a generation lap wherekids are lapping their parents on the info track. And if you have a teenager inyour house, you know what I'm talking about. Who does the systemsadministration in your home?

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The Net Generation

Web 2.0

TheNetGeneration



Video available for viewing online at www.newparadigm.com

Transcript:

So this is a panel -- I chaired this panel. It was at the World Congress ofInformation Technology last year in Austin, Texas for kids, and this was infront of several thousand people. And this by the way was the highest ratedsession of over 100 at the conference. Got an emotional standing ovation. Outof the mouths of babes. You can just go there and watch the panel. I don't havetime to tell you about it, but I'll give you one little snippet. On the left there isRahaf Harfoush. She's a 20-year old Syrian studying in Paris, the Sorbonne.Her boyfriend's in Toronto. To keep their relationship going, they turn onvideo Skype all day long. They cook together and do their homework togetherand stuff like that. She doesn't have a Sling Box, so he turns on the web camonto Desperate Housewives so she can watch her favorite show. So I askedher, I asked her, do you kids use email? And she said, well, not really; that'skind of like yesterday's technology. And I said, well, what do you use? Shesays, well, we use Skype and instant messaging and Facebook. I mean,everybody's on Facebook. And I said, well, if you used email, what would youuse it for? And she said, gee, that's kind of like a formal technology, say, forsending a thank-you letter to one of your friend's parents. That would be agood use of email. On the extreme right is Michael Furdyk. He's the grand-daddy of them all. He's 24. I've known Michael since he was 12. When he wasa 12-year-old, he was the project manager on my website,growingupdigital.com. They made him the project manager because he was theoldest and most experienced on the team. When Michael was 16 he had hisown site, and he was getting 20-million page views a month for that site. So hesold it for an undisclosed seven-or-eight-figure sum. And one of the newsreports said it was only a million dollars, and so I sent him an email, Michael,you sold it for a million dollars? You should have called me. And he wroteback and he said, Don, legally I can't tell you how much I sold it for, but I cantell you I'm very happy. And he didn't want the money to buy a Ferrari,although he bought a cheap little car, but his mom had to drive around withhim because he only had his learner's permit. He wanted the money to invest inhis next new venture. It's called takingitglobal.org, 130,000 kids active in 70countries on a daily basis. It's a social network for kids who want to change theworld. So 80-million of them in the US alone, they're wired differently. Theirbrains are actually different and they process information differently.

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WEB 2.0

THENETGENERATION

THESOCIAL

REVOLUTION


Transcript:

You put those two together and you have this social revolution. But there'ssome things going on here that you might not know about.

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vs.

The Rise of Collaborative Communities

Flickr.com beats WebShots.com

Web 2.0

TheNetGeneration



Transcript:

I could show you 30 charts and they all look like this. They all show the oldHTML website that thinks that content is king, and the web is about thepresentation of information being eclipsed by the XML-based community thatthinks content collaboration is king, and that the web is about creating acontext whereby you can build a community. So Flickr displaces WebShots.


This is a great slide to show the power of community. Craigslist.com andMonster.com both had a job ad history. Monster looked a lot flashier, had a lotmore tools. Craigslist let the power of community and self organization lead asite with very basic functionality. Community trumped tools.

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vs.


Digg.com beats Slashdot.org

Web 2.0

TheNetGeneration



Transcript:

Digg is now beating Slashdot. Harness is self-organization better.


This is a great slide to show the power of community. Craigslist.com andMonster.com both had a job ad history. Monster looked a lot flashier, had a lotmore tools. Craigslist let the power of community and self organization lead asite with very basic functionality. Community trumped tools.

16


vs.


Craigslist.org beats Monster.com, Match.com

Web 2.0

TheNetGeneration



Transcript:

Craig's list is the place to find a job on the web, not Monster or Match.

17


vs.


Myspace.com beats MTV.com

Web 2.0

TheNetGeneration



Transcript:

MySpace is killing MTV. See, MTV says, no, we provide content, right, rockvideos and so on, music, whereas MySpace says, no, we create a platformwhereby people can self-organize. There are 40,000 bands that are availabletoday on MySpace including my band, Men in Suits. So, I mean, this is a bigchange.

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vs.


Wikipedia.org beats Britannica.com

Web 2.0

TheNetGeneration



Transcript:

Wikipedia is killing -- oh, sorry. This is hardly fair. For those of you at theback of the room, there's a little red line along the bottom there; to any of youmedical people, that'd be called a flatline.

19


vs.


Blogger.com beat CNN.com

Web 2.0

TheNetGeneration



Transcript:

We've got Blogger beating cnn.com, right? Content versus contentcollaboration.

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vs.


Epinions.com vs ConsumerReports.org

Web 2.0

TheNetGeneration



Transcript:

We've got Epinions beating Consumer Reports.

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Alex Tapscott’s Wikinomicists Community

Web 2.0

TheNetGeneration



Transcript:

So what's going on here? Well, a humbling story. It was Christmas day and Igave my son Alex -- he's 20 years old, a junior -- an advanced copy ofWikinomics. And he said, thanks Dad; he went off and starting reading it andhe came back and he said, hey, Dad, this is actually a good book. Anyway sohe said, I think I'm going to create a community on Facebook. So I said, doyou mind if I watch? Fifteen minutes later he's created the Wikinomicists ofthe World Unite community on Facebook. Another 15 minutes later he's gotsix members. By the time we're eating turkey on Christmas day, he's got 120members in seven countries, a president, secretary, chief information officer,seven regional coordinators. They've sent out a PDF of the first two chapters ofthe book. I've got kids writing in saying, ah, Mister Tapscott, we found errorsin your book. And the community is placing demands on me to create value.So, Mister Tapscott, how exactly will you be contributing to our community?And, like, what is this? Well, you know what it is? Think about it. Self-organization -- that's been around throughout human history. Language wasdeveloped in a self-organized way. There was no central committee that said,this will be called a pen. It just kind of happened, for English. But what used totake place over a millennia can now happen on Christmas day.

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WEB 2.0

THENETGENERATION

THESOCIAL

REVOLUTION

THEECONOMIC

REVOLUTION


Transcript:

This is a powerful new force, and it sets us up for a new model of theenterprise that's leading to an economic change. Now you may have beenreading in the press recently the speculation that this is another bubble -- dot-com all over again, Web 2.0. Well, there's a British economist named CarlottaPerez. And she's studied great innovations throughout history -- electricity,internal combustion, telephone, radio, television, whatever. You knowsomething? They always, according to her, take the same path. You getexperimentation, you get excitement, you get investment, you get speculation,you get a bubble and the bubble bursts. And then you move into decades oflong-term deployment where the real impact of the technology becomesunderstood on the economy and on business models. That's what's happening.We had the bubble; now we're moving into decades of long-term deploymentwhere we're beginning to understand the contours of this new enterprise -- howthe institution of wealth creation is changing fundamentally.

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Digital Conglomerates

Web 2.0

TheNetGeneration



Transcript:

Exhibit A, the digital conglomerate. What is Google? Well, people say they'rean internet company; they call themselves a technology company. They'rereally an ad agency because that's how they make money is selling ads. ButGoogle is also a media company. They bought YouTube, and they'd like tomove all media onto the web. Google is a high-speed networking companyproviding high-speed wireless in San Francisco, and soon throughout theworld. And if you want to see an interesting video, go onto YouTube and justtype in my name. You'll see an hour conversation with me and Eric Schmidtwhere he basically confirms that, yes, they're moving into all kinds ofbusinesses. I mean, what is telephony? Telephony is just an application on awireless network, right? Google is a retail company because they're sellingstuff. Once you're a retail company you need a payment system. So eBay hasPayPal; Google has GBuy. Once you have a payment system, you're a financialservices company. But they say, well, we're not a software company.Somebody asked Eric, do you compete with Microsoft? And he said, I can'tanswer that; I'm not Microsoft. Every week they release new web servicestargeted at the heart of Microsoft. Google is now the fourth largest hardwaremanufacturer in the United States, maker of servers. They have one customer -- themselves. Football-field-size server farms that are eating up the power gridof California. And forget about ISO 9000; these things are held together withduct tape. You know, it doesn't work, you yank it out and stick another one in.This is a new species of business. We've never seen anything like this before.

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The Economics of Collaboration

Industrial AgeCorporation

Value Creation

Critical ResourcesPhysicalFinancial

Knowledge

Self-Organization

TraditionalHierarchy

Web 2.0

TheNetGeneration



Transcript:

So what's happening? Collaboration is beginning to change the architecture ofthe corporation. Let me explain. Seventy years ago there was a Nobel-Prize-winning economist. His name was Ronald Coase, C-O-A-S-E, and he asked adeceptively simple question. He said, why does the firm exist? He said, ifAdam Smith is right and the open market is the best mechanism to determinehow goods and resources and materials are allocated in the economy, why isn'teverybody an independent contractor at every step along the way inproduction? And he said, the answer is -- and he won a Nobel Prize for sayingthis -- the answer is transaction costs. But when you look at how he defined it,he was really talking about collaboration costs. The cost of coordination, hesaid. The cost of search. This is 70 years ago. He said, the cost of search, offinding all the right information out there in an open market, the right people,the right materials, totally prohibitive. So we moved all this capability insidethe boundaries of a corporation. Henry Ford had, within the boundaries of theFord Motor Company, you know, a power plant and a steel mill and a shippingcompany and glass factory. Why? Because the cost of collaboration in an openmarket were way greater than the costs of doing things inside the boundaries ofa corporation.

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ExtendedEnterprise


Value Creation


Knowledge

Self-Organization


Web 2.0

TheNetGeneration



Transcript:

Along comes information technology. And in Paradigm Shift, back in '92, Isaid, well, just a second. I think the boundaries of this corporation arebecoming more porous because of IT. And back then I called it the extendedenterprise.

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ExtendedEnterprise


Value Creation


Knowledge

Self-Organization


BusinessWebs

Web 2.0

TheNetGeneration



Transcript:

Then we saw the first internet, and that further dropped collaboration costs. Sothe vertically integrated companies continued to unbundle into focuscompanies. So Cisco figured this out; its competitors didn't. Cisco wassuccessful because it had a better business model. My wife has a little SUVfrom BMW; it's called an X3. It's not made by BMW. The final assembly ofthe vehicle is done by a partner in the BMW business web called Magna.BMW focuses on what it does best.

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ExtendedEnterprise

MassCollaboration


Value Creation


Knowledge

Self-Organization


BusinessWebs

Web 2.0

TheNetGeneration



Transcript:

And now we're ready for the really big one because collaboration costs aredropping so much because of the Web 2.0 that now peers outside theboundaries of traditional corporations cannot only social network, they cansocially produce. So if you can create an encyclopedia with a bunch of peoplethat you've never met -- thousands of them -- and the quality is just as good asBritannica, only it's ten times bigger, in dozens of languages, and it's real-time,it's a superior thing, what else could you create? Could you create an operatingsystem? Well, it's called Linux. Could you create a mutual fund through peercollaboration? It's called Marketocracy. Could you create a physical good likea motorcycle? Well, you'll see in a sec that we can. So peers outside theboundaries of corporations, or corporations acting as peers rather than asparticipants in a traditional supply chain where -- They were hierarchies, right,and there was always someone at the top. Or peers within the boundaries of ahierarchy now collaborating across hierarchical structures in ways that werepreviously really unthinkable.

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The Enterprise 2.0 and the Rise of Mass Collaboration

1. Peering

2. Being Open

3. Sharing

4. Acting Global

Web 2.0

TheNetGeneration



Transcript:

So this is leading to four startling new principles about how to run a company.Peering, being open, transparency is now a new force for growth. And you'regoing to be naked anyway, and if you're going to be naked you'd better be buffbasically because value comes to the fore; it's evidenced like never before. Soif you are buff, if you're a good company with good products and services,transparency is your friend. You open up the kimono. You kind of undress forsuccess, okay? Sorry. And with employees, customers, business partners,shareholders. And in doing so, all our research shows you increase themetabolism of your business model and you build a high-performance businessmodel and you build trust. Thirdly, sharing. Well, that sounds communist. It'sbeen called that. Sharing IP within the business web or even putting stuff inthe commons. Having a portfolio of IP, some that you own and some that youdon't own. Well, that sounds like a bad idea. And you can kind of understandthe criticism of this. Didn't Linux hurt Microsoft? Didn't MP3 hurt the recordlabels? Didn't Wikipedia hurt Britannica? Well, what our research shows isonly if you have a very superficial and primitive approach. So IBM, one of thesponsors of this event, rather than fighting Linux, embraced it, put hundreds ofmillions of dollars into the Linux community. They saved themselves a billiondollars a year in developing and maintaining a proprietary operating system.And they've created a platform, Linux, upon which they've built a multibillion-dollar business. And, oh yes, they got to sock it to Microsoft along the way. Sosharing is a new theme. It's not about being socialist; it's about killing yourcompetition. And finally, acting global. If you Google the expression ThinkGlobal Act Local, you get millions of hits. If you Google the expression, ThinkGlobal Act Global, you get a bunch of mistakes of people who didn't get theexpression right. It's kind of curious, isn't it? If we have a global economy,why do we want to be a multinational as opposed to a truly global corporation?So that's a bunch of theory.

29


Enterprise 2.0 – New Business Models

A 50 year old mining company peers,opens, shares its proprietary data andacts globally in a bid to transform itselfand explore the extent of a rich newfind.

-Transcript:

-Let me give you some examples, and we'll move on to the next section. Thereis a gold mining company called GoldCorp. And a banker named RobMcEwan took it over and became the CEO and the principle shareholder -- apublicly traded company. I know this guy because he's my neighbor actually;he lives across the street from me. And he was a frustrated CEO because hisgeologist couldn't tell him where the gold was on his property. He kept givinghim money saying, go get more geological data. After years of being frustratedhe was ready to shut the company down. But he's a curious guy, and he went tothis meeting where he heard about this thing called the Linux operatingsystem. And he wondered, if my geologists don't know where the gold is,maybe somebody else does. So he did a very radical thing. He took hisgeological data, which is the biggest secret in the mining industry -- it's kept insafes and high-security computer systems; it's your precious IP. He publishedhis geological data and held a contest on the internet called the GoldCorpchallenge -- half-a-million dollars in prize money for anybody who can tellme, do I have any gold, and if so, where is it? He got 77 submissions from allaround the world. They used techniques that he'd never heard of, and heselected the three winners. And for his half-a-million dollars in prize money,he found $3.4-billion worth of gold. The market value of the company wentfrom $90-million to $10-billion. And I can tell you, because he's my neighbor,he's a happy camper. What's going on here? He adopts these four principles,right, of Wikinomics. He peered. He didn't say, oh, I need a better head ofgeology and somebody who can kick butt because the uniquely qualifiedminds are inside the boundaries of your corporation. Human capital is yourmost precious resource. It goes out the elevator every night. You've got toretain it like you retain fluids or something like that. Well, no, no, no, he said,who are their peers outside the boundaries of a company? You know, some ofthe best submissions didn't come from geologists. Computer scientists,mathematicians, he had chemists giving organic solutions. The winner was acomputer graphics company that built a three-dimension model of his mine.He peered. Secondly, he was transparent; he stood up in front of the world andhe said, I'm the CEO of this gold mining company and I don't know if we haveany gold. But you can trust me because I'm going to tell you the truth. And ofcourse when they found gold, you know what happened. Thirdly, he shared hisintellectual property. He didn't hoard it like everybody else does in the miningindustry. And fourth, he acted global. He viewed the world as his geologydepartment and he increased the value of his company by an order ofmagnitude.

-Author’s Original Notes:

-File sharing programs P2P (peer to peer)-Napster was the first P2P program, then Kazaa and BearShare increased inpopularity, and know LimeWire is leading in popularity

30


WEB 2.0

THENETGENERATION

THESOCIAL

REVOLUTION

THEECONOMIC

REVOLUTION


Transcript:

So this is basically your perfect storm.

31


The Perfect Storm

Transcript:

What you're here talking about is your first category-six business, you know,hurricane or revolution, or something like that.

32


Peer Pioneers

Ideagoras

Prosumers

The New Alexandrians

Open Platforms

The Global Plant Floor

The Wiki Workplace


Transcript:

So let me close with some thoughts. Carlotta Perez, what are the new businessmodels? What does this new enterprise look like and how is it different fromthe old model of a corporation? Well, here's seven that we talk about inWikinomics.

33


Peer Pioneers


Transcript:

The first, the peer pioneers. So Linux is obviously one; this is Linus Torvaldson the right there. And I asked him, if you can create an operating system thisway, what else can you create in software? And he says, well, Don, I'm a badpredictor of the future, to which I chortled, yes, right, Linus. You just createthe future; you don't predict it. He says, no, no, I'll tell you why I say that. Hesaid, I thought no one would ever want to create an open source databasebecause, you know, databases are so boring. This would be the operatingsystem guide view of the world, you know, like the New Yorker view of theworld. But they're boring. He says, look at Open SQL. These are real growingconcerns now. There are 150,000 open source application projects currentlyunderway today. And if a quarter of them are for real, then this is a big deal.

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1. Peer Pioneers


Transcript:

And so you've got companies like SpikeSource -- And we're going to hearfrom Kim later, so I won't spend time on this. But my layperson view is thatlike Red Hat was to Linux, SpikeSource is to these 150,000 open sourceapplications that are emerging, getting them ready for the market.

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Marketocracy.com Investment Management

1. Peer Pioneers – Financial Services


Transcript:

Marketocracy, I mentioned that. The hundred best stock pickers on theweb decide who, what should go in the mutual fund that outperforms themarket.


What is it:Marketocracy Data Services is a research company whose mission is to findthe best investors in the world and then track, analyze, and evaluate theirtrading activity. The company's affiliate, Marketocracy Capital Management,is the investment advisor for the Marketocracy family of mutual funds anduses the research generated by Marketocracy Data Services.Achieving Higher Returns With Lower Risk: Many experts will tell you it isn'tpossible to beat the market consistently, especially with lower risk. And thehistorical performance of most investors, including professional portfoliomanagers, supports their beliefs.How have we done? The Marketocracy m100 Index is an aggregate of the top100 portfolios at Marketocracy. The m100 Index has beaten the S&P 500Index in 8 of the 11 quarters since inception, with a beta of 0.53 compared tothe S&P 500's beta of 1.00.Implications:The wisdom of crowds can be harnessed to make smarter decisions.

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Zopa.compeer lending

1. Peer Pioneers – Financial Services


Transcript:

Could you create a bank through peer collaboration? Well, you got some money, I need somemoney, all we need is a trust syndication method. That's what the eBay feedback forum is. Thisis a method for syndicating trust.


What is it?Zopa is a website that allows peole to lend money to each other eBay style. From Zopa’s website: All lending and borrowing happens in the Zopa markets.The markets work just like, well, markets. Lenders put their wares on display; in this case, moneythey are prepared to lend to other people for a certain length of time. And, just like any market,different vendors may have different prices (otherwise known as interest rates). Some may picklower rates but only want to lend to borrowers who have a very high likelihood of paying it all back.Others may pick higher rates but be prepared to be more flexible, thereby taking a punt on borrowerswho might be slightly more likely to default.Borrowers can then come and have a sniff about, see what the rates are and if they're good valueagree to borrow. Because Zopa cuts out the middleman, everyone gets a great deal.Of course this would all be very complicated and risky if everyone traded one-on-one with eachother, so Zopa glues the whole thing together with its offer matching system. This divides thelenders' offers up into small chunks and distributes them around potential borrowers - at least 50 infact. Each loan a borrower gets is made up of lots of bits of lenders' offers. No one gets to borrowfrom the same person twice.All lenders and borrowers enter into a legally binding contract with their respective borrowers andlenders. Zopa manages the collection of monthly repayments and if any of that money is not paid ontime, uses exactly the same sort of recovery processes that the high street banks use.Zopa earns money by charging lenders and borrowers a 0.5% fee, and if borrowers take outrepayment protection insurance on their loan, Zopa receives commission from its insurance provider. Implication: Peer systems can help users connect with each other directly, disintermediatingtraditional intermediaries who charge a premium to broker those transactions.

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How InnoCentive works:

2. Ideagoras

Creating an eBay for innovation

How do you create a vibrant marketplace whereyou leverage other people's talents, ideas andassets quickly and move on?

P&G’s Larry Huston: “Alliances and jointventures don't open up the spirit of capitalismwithin the company. They're vestiges of the centralplanning approach when instead you need freemarket mechanisms.”


Transcript:

Secondly, you remember the Greek and Roman agora? We now havesomething I call ideagoras. These are open markets for uniquely qualifiedminds. So we're going to hear from Proctor and Gamble on the panel. P&G islooking for a molecule that'll take red wine out of a shirt. So help me with themath. They've got 9,000 chemists inside the boundaries of P&G. And there's amillion-five outside the boundaries of P&G that they can now get to becausethey're organized into ideagoras, like the InnoCentive network that has130,000 scientists. And sure enough, there's a retired chemist in Boston or agrad student in Taipei that comes up with a molecule. P&G pays them throughthe InnoCentive mechanism, say, $150,000 and you've got Tide To Go. It's afabulous product. Half of all of P&G's innovations will come from outside thecompany by the end of this year. How do you get the internal R&D people towant to find it outside? What about NIH, the not-invented-here syndrome?Well, it's called aligning interest. People at P&G get comped based oninnovation, not on whether or not they found the innovation internally. Ratherthan NIH, at P&G they call it the PFE, the PFE syndrome -- proudly foundelsewhere.


* Alan’s breakout session is on InnoCentive

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2. Ideagoras


Transcript:

So these things are popping up like crazy all over the place. We're trackingabout 60 of them right now. Open markets for ideas, for innovations, uniquelyqualified minds.


Next step in the programmable web.

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2. Ideagoras


Transcript:

Cambrian House, crowdsourced software -- the crowd comes up with an idea forsoftware. It's not true what Nicholas Carr says in the recent issue of the Strategy inBusiness, that peering only works for something that's already well-developed. It canwork for coming up with breakthrough ideas and totally new innovations as in the case ofCambrian House.


You Think ItMost aspiring entrepreneurs and armchair innovators have more ideas than resources. Why letthe fruits of your genius languish on the vine? They’re yours to grow. Put them in play.Crowds Test ItBut don’t buy that Mercedes just yet. Before we greenlight production, your freshly bakedideas run the consumer gauntlet. Flourish or flounder? The market decides.Crowds Build ItSo the people have spoken, and they love your idea. With the help of the worldwidedevelopment community, we turn it into reality. Contributors can take their pick of excitingprojects, and in return, they get a piece of the royalty pie.We Sell ItShow time! YourIdea 1.0 hits the virtual shelves with all the marketing power of CambrianHouse behind it and with a little help from Chemeleon. Every contributor - including you - hasa vested interest in helping the product shine, because every contributor benefits from itssuccessYou ProfitWhen we say “every contributor benefits”, we don’t mean warm and fuzzy feelings. We meanreal money. When you collaborate with Cambrian House, you get Royalty Points. That meansas long as the product generates profit, so will you.

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Transcript:

TopCoder, 120,000 programmers around the world that are available; it's anopen market for IT. If you need a little module that'll do something, rather thandeveloping it yourself, maybe it's out there in TopCoder and someone will sellit to you.

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3. Prosumers


Transcript:

Thirdly, what we call prosumers. How do you turn your customers intoproducers? These are some shots of a lecture that I gave in Second Life. In thetop picture there, the tall, thin, young guy would be my avatar. I didn't havetime to develop an avatar. So I had this 18-year-old designer and I said to her,make me really old, somebody who's been there and done that, and I don'twant to look like a hippy; put me in a suit. So I'm about to give the lecture andshe says, here's your avatar. And I said, what's with that? I wanted a really oldguy, and she said, yes. I guess when you're 18, 30 is like really old orsomething. But anyway this is a virtual book signing that's going on at the topthere in a virtual cocktail party. This is a kind of whacky world. The reason Iraise all this is not because of that. Here's a company called Linden Labswhere 99 percent of its product is built by its consumers. I became a prosumerwhen I had that avatar designed. How do you turn your customers intoproducers?


* Alan’s breakout session is on InnoCentive

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3. Prosumers – Case: “Music Industry–The Remix”


Transcript:

Well, the music industry is the poster child on how to do this badly. So, youknow, somebody takes the Beatles' White Album and Jay-Z's Black Albumand does a remix, creates the Gray Album. Sales of the White Album go up,sales of the Black Album go up, and he gets sued by the labels. The industrythat brought you the Beatles is suing children and hated by their owncustomers. I mean, this is like awful. So if you want to know how to do thiswrong, just look at the music industry.

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3. Prosumers – Help Us Write the Final Chapter!


Transcript:

The final chapter of Wikinomics, by the way, is a Wiki. And this is done undera creative commons license, so I can't exploit it commercially. It's called theDefinitive Guide to the 21st Century Enterprise, for the Enterprise 2.0. So mypublisher came to me a couple of weeks ago and said, hey ,Don, Wikinomicsis going really great. We'd like to do a new book version for Christmas. Let'stake all the best ideas from the Wiki and we'll put them into a final chapter ofthe book. And I said, well, I can't do that; I don't own it. It's done under acreative commons license. And they said to me, well, why would you do sucha thing? And I said, hey, you're my publisher; you should read the book. Youknow, like I figure if I create the definitive guide to the 21st centurycorporation, that's going to help my company somehow. I don't know how, butin my business I don't fear theft of my IP; I fear obscurity.

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3. Prosumers – Physical Goods

Peer Produced T-Shirts


Transcript:

So this is now being done for physical goods like clothing and T-shirts.

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SNP Consortium: APBiotech, AstraZeneca GroupPLC, Aventis, Bayer Group AG, Bristol-Myers SquibbCo., F. Hoffmann-La Roche, Glaxo SmithKline,Wellcome Trust, IBM, Motorola, Novartis AG, PfizerInc., and Searle

4. The New Alexandrians: The Sharing of Science


•Transcript:

•Number four, the sharing of science. This is unbelievablewhat's going on. The big, big one that got it going was thesharing of the human genome. Imagine if the biotechcompanies had tried to own a chunk of the genome. Theysaid, no, we'll put it in the commons and a rising tide will liftall boats. There are thousands of these mass collaborationsunderway today all around the world in the area of science.

•Author’s Original Notes:

•New collaborative platforms are making it possible toengage very broad communities of public and private entitiesin large-scale collaborative research and development efforts

•Success of open source software has encouraged a growingnumber “innovation communities” to adopt anopen/distributed model

•More resources can be applied to solve problems

•Resources are allocated more efficiently through self-selection (with central filtering)

•IP becomes common-property, which individualscontribute to in granular portions given their relativeability and expected utility

•How portable is the open source model?

Established in 1999 as a collaboration of several companies and institutions toproduce a public resource of single nucleotide polymorphisms (SNPs) in thehuman genomeInitial goal to map 300,000 common SNPs; 1.8 million were mapped uponcompletion in 2001The Consortium paid university researchers to discover SNPs and place themin the public domainThe Consortium also files patents to a) establish priority and b) obtain legalstanding to contest other filings – but applications are abandoned once theseobjectives are realized

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4. The New Alexandrians: Nature’s Google Earth Avian Flu Mashup

Source: Howard Ratner, CTO, Nature Publishing Group


Transcript:

Google's Earth avian flu mashup.

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4. The New Alexandrians: Nature’s Google Earth Avian Flu Mashup

Source: HowardRatner, CTO, Nature

Publishing Group


Transcript:

So a nurse in Hong Kong discovers the avian flu and the local authorities aretrying to keep it a secret and she puts it on the mashup, and scientists are nowtracking what's going on. This is very exciting.

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5. Open Platforms – Amazon API

Amazon.comCustomers

Developers/

Entrepreneurs

Retailers

E-Commerce

Services

Mechanical

Turk S3(Simple Storage

Service)

Alexa Services(Top Sties, WIS

and WSP)

Historical

Pricing

Associates

Marketplace

Pay for Queries >

< Access to A9.com search index

Pay for storage & data transfer >

< Provide online data storage

Provide platform for questions

to be outsourced >,>

< Provide answers to questions

Pay Developers for posting acceptable

answers >

< Developers pay to have questions

answered

Free Access to Amazon data and capability via API >

< Time, Knowledge, Innovation,

Promote and Sell Amazon

merchandise

Direct Traffic and Possible Sales to Amazon >

< Pay commission on traffic

resulting in sales

Host shopping experience and direct sales to Amazon.com for processing >

< Receive commission on sales via associate accounts

Surf Websites follow

links to Amazon.com >

Browse Amazon products

Via websites and other

online media >

Browse Amazon and Purchase merchandise >

< Ship merchandise (including that sold by associates) Provide C ustomer Service

Provide Data

From sales >

Provide Pricing and Sales Data >

< Pay fee for access to information

< Pay listing fee and commission to list goods on Amazon

Provide hosting and

transaction services >< List merchandise, provide a range of products

Facilitates listing and

payments for sellers >

Legend:

Green – Web ServicesLight Blue – GroupsDark Blue – Other services

NOTE: Missing connector from Associates to

Developers. Should read “Pay developer commissions fro sales

generated through ECS”


Transcript:

Number five, open platforms. All the world's a stage and you get to participate.Do you know that the Amazon cloud has 200,000 programmers that don't workfor Amazon that are creating value on the Amazon platform? This is now athird of Amazon's revenue. And if you're a little mom-and-pop company or abig enterprise like Target, as my daughter calls them, you can use Amazon formarketing, distribution, inventory, e-commerce, payment systems, and so on.This is a huge change in how capability gets organized.


Brendan’s Paper

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5. Open Platforms – Pikspot


Transcript:

This is a company called Pikspot that I'm using. Think of YouTube, Digg, andMySpace combined together for instantly creating rich media communities. Anopen platform -- you can create a community that uses video in three minutes.


Brendan’s Paper

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6. The Global Plant Floor

The Peer Produced Airplane

In the past, Boeing wrotedetailed specifications for eachpart and asked suppliers to buildto plan

Today, suppliers co-designairplanes from scratch anddeliver complete sub-assembliesto Boeing’s factory, where asingle plane can be snappedtogether like Lego blocks, in aslittle as 3 days


Transcript:

The global plant floor. The hardest product that I can think of to make wouldbe a new-generation jumbo jet. Boeing says, we've got to mass collaborate thisthing; we can't do it the old way. The old way was you'd create a spec of30,000 pages. You put it out to your supply chain, hierarchical, right, and theybid on it and then you beat them up and then you assemble the aircraft. Boeingsays, no, things are too complicated and you are not suppliers; you are ourpeers. You make important parts of the aircraft like the engine and the fuselageand the electronics and the interiors and the entertainment systems. Theycreate this mind-boggling global ecosystem. This plane is so fabulous, theback orders are so strong, and Air Bus, the competitor, may never come tomarket. It's not that mass collaboration is a better way of building the hardestthing I can think of to make; it may be the only way,

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6. The Global Plant Floor – Chinese Motorcycle Industry


Transcript:

and get ready for where this is going. The Chinese motorcycle industry isessentially an open source motorcycle -- hundreds of little companies thatcooperate together and they meet on the web and in teahouses to put all thisstuff together. There's no OEM; there's no Harley or Yamaha pulling all thestrings. It's a pure peer play. This is now the largest motorcycle industry in theworld, and get ready for the $1,500 open source car coming from China, too.

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7. The Wiki Workplace


Transcript:

The final theme is what we call the Wiki workplace. This is the use of Wikis,blogs, collaborative filtering, social networking, RSS feeds, jams, and so on,within corporations. So the head of Sales and Marketing for Cisco at a briefingcame up to me and said, could we Wiki our sales playbook? He says, why dowe have a bunch of bureaucrats in head office developing a sales manual whenthe people that know how to sell are the ones actually interacting withcustomers? It's a good application. You'll get it faster, the time to value'sfaster, you'll get a better sales manual, and you'll get compliance becausethey'll follow it. The Geeks, 14,000 Geeks at Best Buy use Wikis andcollaborative tools to actually design Geek Squad-labeled products, andthey've been very successful in doing that.

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7. The Wiki Workplace


Transcript:

And I think a couple of the companies up here are participating in this thingfrom Intel called Suite Two, which is a collection of the state-of-the-art toolsfor the Wiki workplace.

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Peer Pioneers

Ideagoras

Prosumers

The New Alexandrians

Open Platforms

The Global Plant Floor

The Wiki Workplace


Transcript:

So seven new models. We're starting to see how this new enterprise ischanging, what its contours are going to look like.

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Crisis of Leadership

Paradigm shifts involve dislocation, conflict, confusion,uncertainty.

New paradigms are nearly always received with coolness, evenmockery or hostility.

Those with vested interests fight the change.

The shift demands such a different view of things thatestablished leaders are often last to be won over, if at all.Marilyn Ferguson

Transcript:

My final thought for you is that this is a paradigm shift, if I may use that term.And paradigm shifts cause dislocation, conflict. They're nearly always receivedwith coolness. Or worse, vested interests fight against change, and leaders ofold paradigms have great difficulty embracing the new. How is your companygoing to find leadership for change? Well, I'm guessing that you self-selectedto come to this conference because you want to participate in this historictransformation that's underway. And the good news is leadership can comefrom anywhere in a company. I've studied thousands of companies; this is astatistical fact. Sure, it's helpful if the CEO is involved, you know, if AGLafley at P&G is driving this stuff. But it can also come from anywhere else.We documented a story of a secretary who is a key person in thetransformation of a division of Citibank, and she had what it took to be aleader. She willed it. So leadership is each of our personal opportunity if wewill it.

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Transcript:

A French pilot by the name of Saint-Exupery, he was also a philosopher. Hesays, we should welcome the future for soon it will be the past, but we shouldrespect the past for it was once all that was humanly possible. We created thisold vertically integrated, closed, insular, opaque model of the corporation, andit was pretty good and it did what was possible. But it's now possible to goforward. And Victor Hugo's right. Nothing's so powerful as an idea whose timehas come. The time has come for the new web, for a new generation for whomthis new medium of human communications is their birthright. The time hascome for a new model of the enterprise and for profound changes in how weinnovate, how we create goods and services, and how we, as companies,engage with the rest of the world. And hopefully the time has come for each ofyou to find that leader within you to change your company and, in doing so, tochange the world. Thank you.

Wikinomics - Winning With The Enterprise 2.0 - with transcript

Technology

Transcript of Wikinomics - Winning With The Enterprise 2.0 - with transcript