Wikinomics at the vanguard

Donald Tapscott sniffs yet another dramatic paradigm shift in the eddies and currents of today’s business and social trends: from traditional, closed, stale economics to open, orchestrated, transparent “Wikinomics.”

The media darling and CEO of Toronto-based New Paradigm Learning Corporation, dazzled the audience last Wednesday at the Speakers Forum: The Leaders Lecture Series luncheon held at the InterContinental Center in downtown Toronto. (New Paradigm is a think tank that analyses the current technology trends and their business impact).

Wednesday’s event was well-patronized by some 200 attendees – captains of industry all – summoned from the glittering steel and glass towers in Canada’s business heartland to hear the visionary speak.

There were a few grumbles before the lecture, off the record, that Tapscott’s ideas were growing repetitious of late. But the audience quickly sat in rapt attention as the famous IT strategist warmed to his topic: an overview of the central ideas culled from his as yet unpublished book, Wikinomics.

Due in the fall, the book is based on a $3 million research project examining transparency.

“Tapscott’s genius is noticing all this stuff that is happening under your very nose, and assembling it into a coherent whole,” said Vasudha Seth, general manager of corporate projects at steel products manufacturer Dofasco Inc. headquartered in Hamilton, Ont.

The boundaries of the traditional corporation are shifting ever outwards, said Tapscott, and organizations are increasingly orchestrating external knowledge and resources to generate wealth instead of relying on internal, proprietary and hierarchical models.

Savvy organizations are transforming themselves into open, networked enterprises by collaborating with experts and customers globally, he said.

As its name suggests, Wikipedia is a prime example of the workings of the Wikinomic model, one that is giving its traditionally-organized rival, the encyclopedia Britannica, a run for its money.

Experts from around the globe collaborated to create the online reference site. No need to hire and pay researchers, writers and fact-checkers, said Tapscott. Dog-breeders around the globe, for example, keep a watchful eye out for doggy entries created on Wikipedia. These experts correct any errors made directly within minutes.

Global communication is the primary driver for Wikinomics, said Tapscott. The Web is morphing from a presentation medium, where marketers worried about eyeballs and stickiness in the past, to the next-generation Web 2.0, a giant computational platform that provides tangible services. The explosion of bandwidth is turning the Web from a three-foot road to a highway a mile wide and deep, he said.

Another driver is inert devices that are interconnected so they become “smart”. “My hotel door has an IP address,” he said. Portable devices are also becoming smart.

“Most business people on the go do the Blackberry prayer,” he joked, alluding to the surreptitious fashion people check these devices: on their laps, with their heads bowed in contemplation. But the multi-functional gadgets are their lifeline, being a diary, camera, online library and GPS unit in addition to a communications device.

To understand how these trends will affect corporations and how they compete, Tapscott looked to historical precedents. Ronald Coase, a Nobel-prize economist, researched some deceptively simple questions: Why do firms exist? Why don’t people instead contract independently for the products or services they want? The answer: the collaboration costs are prohibitive. Organizations organize the resources needed more cheaply and efficiently than individuals.

But the organizational model can change. In the early years of the 20th century, a major company such as Ford Motor Co. owned many businesses peripheral to car manufacture – steel manufacturing, glassworks and power generation – because it was cheaper to be organized in this fashion. As the economy developed, this model changed in the late 20th century to one that allowed organizations to focus on core areas by contracting or purchasing non-core supplies and services.

But even this model is no longer necessary or desirable, said Tapscott. Savvy organizations are figuring out how to harness the true value of the Internet, now cleansed and purged of dot-com hype. “Many firms will be unrecognizable within 10 years,” he said, and trotted out some compelling examples of companies that are opening their boundaries and making the transition via external collaboration.

Proctor & Gamble (P&G), he said, now finds about 20 per cent of its innovations outside the organization, and these have worked so well that it plans to increase that to 50 per cent. In a recent example, the company wanted to create a compound to remove wine stains from clothing. It offered the challenge to chemists globally, and offered a prize of $50 million for the best one. A winning compound was found in short order. P&G harnessed the best minds globally instead of “owning” a few in-house, said Tapscott, with the added benefit that this approach is a true meritocracy that rewards the best solution.

Another example he cited of a company embracing instead of fighting emerging Wikinomics is toy manufacturer Lego. The company has been increasingly focusing on high-tech robotic toys, and introduced a line called Mindstorms in 1998. But tech-savvy kids – Lego’s primary customers – soon hacked the code on their site to reverse-engineer and reprogram the systems.

“What are you going to do, sue a bunch of kids?” joked Tapscott, and growled disapprovingly at the music industry’s litigious response to a similar problem, illegal music downloads. Instead, Lego created a Web site that allows its customers to co-create products, thereby collaborating directly with them to create value in its product line to their exact specifications.

He said Linux represents the most successful example of free and open collaboration created by “digital Rotarians”. In the past, IBM spent about $1 billion each to develop its proprietary operating systems. By collaborating with Linux and innovating on top of an open source platform, the company is now saving about $900 million in R&D, he said

The leaders of the old are always the last to embrace the new, said Tapscott, quoting Machiavelli. He challenged the attendees to change their mental models about organizations and their boundaries.

“These ideas are new to me,” said Lloyd Chiotti, general manager at Envision Enbridge Inc. “The Internet is maturing, and Tapscott is shedding some light on new directions.”

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