WIKINOMICS

WIKINOMICS How Mass Collaboration Changes Everything Don Tapscott and Anthony D. Williams CONTENTIn troduction 1 Subtitles 5 1. Wikinomics 7 2. The Perfect Storm 34 3. The Peer Pioneers 65 4.Ideagoras 97 5. The Prosumers 124 6. The New Alexandrians 151 7. Platforms for Participation 183 8. The Global Plant Floor 213 9. The Wiki Workplace 239 10. Collaborative Minds 268 11. The Wikinomics Playbook 291 Acknowledgments 293 Notes 297 Index 315 INTRODUCTION Throughout history corporations have organized themselves according to strict hierarchical lines of authority. Everyone was a subordinate to someone else—employees versus managers, marketers versus customers, producers versus supply chain subcontractors, companies versus the com-munity. There was always someone or some company in charge, controlling things, at the "top" of the food chain. While hierarchies are not vanishing, profound changes in the nature of technology, demographics, and the global economy are giving rise to powerful new models of production based on community, collaboration, and self-organization rather than on hierarchy and control. Millions of media buffs now use blogs, wikis, chat rooms, and personal broadcasting to add their voices to a vociferous stream of dialogue and de-bate called the "blogosphere." Employees drive performance by collabo-rating with peers across organizational boundaries, creating what we call a "wiki workplace." Customers become "prosumers" by cocreating goods and services rather than simply consuming the end product. So-called sup-ply chains work more effectively when the risk, reward, and capability to complete major projects—including massively complex products like cars, motorcycles, and airplanes—are distributed across planetary networks of partners who work as peers. Smart companies are encouraging, rather than fighting, the heaving growth of massive online communities—many of which emerged from the fringes of the Web to attract tens of millions of participants overnight. Even ardent competitors are collaborating on path-breaking scientific ini-tiatives that accelerate discovery in their industries. Indeed, as a growing number of firms see the benefits of mass collaboration, this new way of organizing will eventually displace the traditional corporate structures as the economy's primary engine of wealth creation. Already this new economic model extends beyond software, music, publishing, pharmaceuticals, and other bellwethers to virtually every part of the global economy. But as this process unravels, many managers have concluded that the new mass collaboration is far from benign. Some critics look at successful "open source" projects such as Linux and Wikipedia, for example, and assume they are an attack on the legitimate right and need of companies to make a profit. Others see this new cornucopia of participa-tion in the economy as a threat to their very existence (has anyone bought a music CD lately?). We paint a very different picture with the evidence we have accumu-lated in this book. Yes, there are examples of pain and suffering in indus-tries and firms that have so far failed to grasp the new economic logic. But the forthcoming pages are filled with many tales of how ordinary people and firms are linking up in imaginative new ways to drive innovation and success. A number of these stories revolve around the explosive growth of phenomena such as MySpace, InnoCentive, flickr, Second Life, YouTube, and the Human Genome Project. These organizations are harnessing mass collaboration to create real value for participants and have enjoyed phe-nomenal successes as a result. Many mature firms are benefiting from this new business paradigm, and we share their stories too. Companies such as Boeing, BMW, and Proc-ter & Gamble have been around for the better part of a century. And yet these organizations and their leaders have seized on collaboration and self-organization as powerful new levers to cut costs, innovate faster, cocreate with customers and partners, and generally do whatever it takes to usher their organizations into the twehty-first-century business environment. This book, too, is the product of several long-running collaborations. In the last few years the New Paradigm team has conducted several large multiclient investigations to understand how the new Web (sometimes called the Web 2.0) changes the corporation and how companies innovate, build relationships, market, and compete. A $3 million study in 2000-2001 examined the rise of an increasingly mobile and pervasive Web and its impact on business models.1 In 2003 we raised $2 million to study Web-enabled transparency as a new force to INTRODUCTION . 3 foster powerful networked businesses and trust.2 In 2004-2005 a $4 mil-lion program explored how new technology and collaborative models change business designs and competitive dynamics.3 The conclusion from all of this work is striking and enormously posi-tive. Billions of connected individuals can now actively participate in inno-vation, 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 econ-omy 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. To succeed, it will not be sufficient to simply intensify existing man-agement strategies. Leaders must think differently about how to compete and be profitable, and embrace a new art and science of collaboration we call wikinomics. This is more than open source, social networking, so-called crowdsourcing, smart mobs, crowd wisdom, or other ideas that touch upon the subject. Rather, we are talking about deep changes in the structure and modus operandi of the corporation and our economy, based on new competitive principles such as openness, peering, sharing, and act-ing globally. The results of this foundational research are proprietary to the mem-bers that funded it, including more than one hundred in-depth reports and countless executive briefings, seminars, and workshops. However, our work with these companies inspired us to devote weekends and evenings to write a book that would take this work to the next level and inspire a broad audi-ence to apply its ideas, frameworks, and guidelines. We conducted more than one hundred interviews and discussions with key players in this revo-lution. Unless otherwise footnoted, all quotes in this book come from these conversations. In the process, we, as authors, learned something about collaboration too. We authored these pages on separate continents, with Don working primarily from Toronto, Canada, and Anthony based in London, England. When we were both working on the manuscript at the same time we hooked up with a Skype connection, talking, exchanging material, or being silent as appropriate. At times it felt like we were in the same room. We have also collaborated intensely with more than one hundred leading thinkers and practitioners. Their roles in bringing this book to life are graciously acknowledged at the end of the book. In one interesting twist we decided that the best way to come up with a great subtitle was to hold an open discussion on the Web. Within twenty-four hours we had dozens of great subtitle suggestions—the best of which are listed on the Subtitles page. Most notably, with Wikinomics we're making a modest attempt to rein-vent the concept of a book. You'll note that the final chapter, The Wiki-nomics Playbook, has only fifteen words: "Join us in peer producing the definitive guide to twenty-first-century strategy on www.wikinomics.com." It is our hope that this book will transcend its physical form to become a living, real-time, collaborative document, cocreated by leading thinkers. As such, we view the book as a call to arms to create a wikinomics commu-nity. And we hope that the book and community will be uniquely helpful to corporate practitioners and anyone who wants to participate in the economy in new ways. SUBTITLES B ooks have a title page. This is our subtitle page. In what we believe to be a first, we're listing a few of our favorite suggestions for subtitles gleaned from a public online discussion held the week of June 2, 2006. We received more than one hundred great suggestions in the first forty-eight hours. To our collaborators—you know who you are—we extend our most sincere thanks. Edit This Book! The Dividends of Collective Genius We the People Business (The Remix) The New World of Collaborative Production Peer Innovation in the Age of MySpace, Linux, and Wikipedia Profiting from Collaborative Anarchy Please Register to Participate The Power of Us Creating a New Page in Business History Unleashing Our Collective Genius This Book Is a Stub Harnessing the Power of Your Peers (Your Input Needed Here)* Peer-Powered Profit in Life, Business, and Individual Choice The Peer Advantage: Myth or Magic? Peer Producing the Future 1. WIKINOMICS The Art and Science of Peer Production I t was late in the afternoon, on a typically harsh Canadian winter day, as Rob McEwen, the CEO of Goldcorp Inc., stood at the head of the boardroom table confronting a room full of senior geologists. The news he was about to deliver was not good. In fact it was disastrous, and McEwen was having a hard time shielding his frustration. The small Toronto-based gold-mining firm was struggling, besieged by strikes, lingering debts, and an exceedingly high cost of production, which had caused them to cease mining operations. Conditions in the marketplace were hardly favorable. The gold market was contracting, and most analysts assumed that the company's fifty-year-old mine in Red Lake, Ontario, was dying. Without evidence of substantial new gold deposits, the mine seemed destined for closure, and Goldcorp was likely to go down with it. Tensions were running at fever pitch. McEwen had no real experience in the extractive industries, let alone in gold mining. Nevertheless, as an adventurous young mutual fund manager he had gotten involved in a takeover battle and emerged as Goldcorp Inc.'s majority owner. Few peo-ple in the room had much confidence that McEwen was the right person to rescue the company. But McEwen just shrugged off his critics. He turned to his geologists and said, "We're going to find more gold on this properly, and we won't leave this room tonight until we have a plan to find it." At the conclusion of the meeting he handed his geologists $10 mil-lion for further exploration and sent them packing for Northern Ontario. Most of his staff thought he was crazy but they carried out his instruc-tions, drilling in the deepest and most remote parts of the mine. Amazingly, a few weeks later they arrived back at Goldcorp headquarters beaming with pride and bearing a remarkable discovery: Test drilling suggested rich deposits of new gold, as much as thirty times the amount Goldcorp was currently mining! The discovery was surprising, and could hardly have been better timed. But after years of further exploration, and to McEwen's deep frustration, the company's geologists struggled to provide an accurate estimate of the gold's value and exact location. He desperately needed to inject the urgency of the market into the glacial processes of an old-economy industry. In 1999, with the future still uncertain, McEwen took some time out for personal development. He wound up at an MIT conference for young pres-idents when coincidentally the subject of Linux came up. Perched in the lec-ture hall, McEwen listened intently to the remarkable story of how Linus Torvalds and a loose volunteer brigade of software developers had assembled the world-class computer operating system over the Internet. The lecturer explained how Torvalds revealed his code to the world, allowing thousands of anonymous programmers to vet it and make contributions of their own. McEwen had an epiphany and sat back in his chair to contemplate. If Goldcorp employees couldn't find the Red Lake gold, maybe someone else could. And maybe the key to finding those people was to open up the ex-ploration process in the same way Torvalds "open sourced" Linux. McEwen raced back to Toronto to present the idea to his head geolo-gist. "I'd like to take all of our geology, all the data we have that goes back to 1948, and put it into a file and share it with the world," he said. "Then we'll ask the world to tell us where we're going to find the next six million ounces of gold." McEwen saw this as an opportunity to harness some of the best minds in the industry. Perhaps understandably, the in-house geol-ogists were just a little skeptical. Mining is an intensely secretive industry, and apart from the minerals themselves, geological data is the most precious and carefully guarded re-source. It's like the Cadbury secret—it's just not something companies go around sharing. Goldcorp employees wondered whether the global com-munity of geologists would respond to Goldcorp's call in the same way that software developers rallied around Linus Torvalds. Moreover, they worried about how the contest would reflect on them and their inability to find the illusive gold deposits. McEwen acknowledges in retrospect that the strategy was controversial and risky. "We were attacking a fundamental assumption; you simply don't WIKINOMICS . 9 give away proprietary data," he said. "It's so fundamental," he adds, "that no one had ever questioned it." Once again, McEwen was determined to sol-dier on. In March 2000, the "Goldcorp Challenge" was launched with a total of $575,000 in prize money available to participants with the best methods and estimates. Every scrap of information (some four hundred megabytes worth) about the 55,000-acre property was revealed on Goldcorp's Web site. News of the contest spread quickly around the Internet, as more than one thousand virtual prospectors from fifty countries got busy crunching the data. Wthin weeks, submissions from around the world came flooding in to Goldcorp headquarters. As expected, geologists got involved. But entries came from surprising sources, including graduate students, consultants, mathematicians, and military officers, all seeking a piece of the action. "We had applied math, advanced physics, intelligent systems, computer graphics, and organic solutions to inorganic problems. There were capabilities I had never seen before in die industry," says McEwen. "When I saw the computer graphics I almost fell out of my chair." The contestants had identified 110 targets on the Red Lake property, 50 percent of which had not been previ-ously identified by the company. Over 80 percent of the new targets yielded substantial quantities of gold. In fact, since the challenge was initiated an as-tounding eight million ounces of gold have been found. McEwen estimates the collaborative process shaved two to three years off their exploration time. Today Goldcorp is reaping the fruits of its open source approach to exploration. Not only did the contest yield copious quantities of gold, it catapulted his underperforming $100 million company into a $9 billion jug-gernaut while transforming a backward mining site in Northern Ontario into one of the most innovative and profitable properties in the industry. Needless to say McEwen is one happy camper. As are his shareholders. One hundred dollars invested in the company in 1993 is worth over $3,000 today. Perhaps the most lasting legacy of the Goldcorp Challenge is the vali-dation of an ingenious approach to exploration in what remains a conserva-tive and highly secretive industry. Rob McEwen bucked an industry trend by sharing the company's proprietary data and simultaneously transformed a lumbering exploration process into a modern distributed gold discovery engine that harnessed some of the most talented minds in the field. McEwen saw things differently. He realized the uniquely qualified minds to make new discoveries were probably outside the boundaries of his organization, and by sharing some intellectual property he could har-ness the power of collective genius and capability. In doing so he stumbled successfully into the future of innovation, business, and how wealth and just about everything else will be created. Welcome to the new world of wikinomics where collaboration on a mass scale is set to change every in-stitution in society. THE NEW WORLD OF WIKINOMICS Due to deep changes in technology, demographics, business, the economy, and the world, 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. This change presents far-reaching opportunities for every com-pany and for every person who gets connected. In the past, collaboration was mostly small scale. It was something that took place among relatives, friends, and associates in households, communi-ties, and workplaces. In relatively rare instances, collaboration approached mass scale, but this was mainly in short bursts of political action. Think of the Vietnam-era war protests or, more recently, about the raucous antiglobalization rallies in Seattle, Turin, and Washington. Never before, however, have individuals had the power or opportunity to link up in loose networks of peers to produce goods and services in a very tangible and ongoing way. Most people were confined to relatively limited economic roles, whether as passive consumers of mass-produced products or employees trapped deep within organizational bureaucracies where the boss told them what to do. Even their elected representatives barely concealed their contempt for bottom-up participation in decision making. In all, too many people were bypassed in the circulation of knowledge, power, and capital, and thus participated at the economy's margins. Today the tables are turning. The growing accessibility of information technologies puts the tools required to collaborate, create value, and com- WIKINOMICS * 11 pete at everybody's fingertips. This liberates people to participate in inno-vation and wealth creation within every sector of the economy. Millions of people already join forces in self-organized collaborations that produce dynamic new goods and services that rival those of the world's largest and best-financed enterprises. This new mode of innovation and value creation is called "peer production," or peering—which describes what happens when masses of people and firms collaborate openly to drive innovation and growth in their industries.1 Some examples of peer production have recently become household names. As of August 2006, the online networking extravaganza MySpace had one hundred million users—growing a half a million a week—whose personal musings, connections, and profiles are the primary engines of value creation on the site. MySpace, YouTube, Linux, and Wikipedia— today's exemplars of mass collaboration—are just the beginning; a few fa-miliar characters in the opening pages of the first chapter in a long-running saga that will change many aspects of how the economy operates. In the forthcoming pages of this book we describe seven unique forms of peer production that are making the economy more dynamic and productive. Along the way we offer engaging stories for the casual reader and great in-sights for the businessperson seeking to harness this new force in their business. Age of Participation Call them the "weapons of mass collaboration." New low-cost collaborative infrastructures—from free Internet telephony to open source software to global outsourcing platforms—allow thousands upon thousands of individu-als and small producers to cocreate products, access markets, and delight cust