Wikinomics

I just finished reading Wikinomics, by Don Tapscott and Anthony Williams. This is certainly an interesting and thought provoking read. It's interesting from various perpectives, including the structure of current and future businesses, the future of education, and how to think of one's own career (at whatever stage you may be). Certainly, as with many books of this sort, the same message could have been conveyed in fewer pages (this applies especially to the first 40 pages or so), but overall, it's very worthwhile.

The main thesis of the book is that mass collaboration changes some fundamental aspects of running a business. Three forces have recently come together to create the perfect storm that facilitates Wikinomics: (1) technology (basically, Web 2.0 where anyone can contribute to anything), (2) the Net-Gen -- the generation of people who grew up collaborating (think: kids who view email as a thing only their parents do), and (3) the global economy, where companies are forced to reach out and collaborate to produce additional value (i.e., The World is Flat).

Perhaps the most succint description of the principle underlying Wikinomics is a rephrasing of Coase's Law (which was coined around 1937 by an English socialist). The law says that a firm will expand until the costs of organizing an extra transaction within the firm become equal to the costs of carrying it out on the open market. For example, if you're a car company, if it's cheaper to manufacture your own tires than use an external supplier, then you will do so in house.

The observation is that the internet has lowered the transaction costs so significantly, that now the right way to think of Coase's law is that nowadays firms should shrink until the cost of performing a transaction internaly no longer exceeds the cost of performing it externally.

The book then goes on to illustrate examples of the different aspects of Wikinomics:

Peer production: examples of great achievements created by large collections of collaborating peers: Wikipedia, Linux (and more importantly, IBM's embrace of the open-source community as an example of a firm doing the right thing).

Ideagoras: essentially, using the open market for research into your specific problems. The observation being that no matter how many researchers you employ, the person with the best ideas for a particular problem is likely not in your lab (the authors still emphasize the importance of internal R&D though). Here, the main examples are InnoCentive, a company that acts as an eBay for ideas, and Proctor & Gamble, that was in quite a bit of trouble, but managed to tap external ideas to make a comeback.

Prosumers: companies that benefit from their consumers essentially developing their products. The big example here is SecondLife, where the consumers create more than 99% of the content being transacted (and the consumers get the IP rights to anything they create!) Another example is Lego that lets users create and share their Mindstorm creations. An interesting example is that of consumers tinkering with iPods (and Apple not standing in the way, as opposed to Sony not taking that approach).

The New Alexandrians: the creation of new data banks that enable research to proceed faster (the Human Genome Project). One of the interesting discussions there was about reshaping the relationships between universities and companies. The recently created Intel Lablets are an excellent example of that (and I predict this is one we'll see more of).

New platforms: Google Maps, need I say more? Ok, I will. Actually, Amazon was way ahead on creating platforms for others to build on, and today Yahoo, eBay, Google and Amazon are creating exciting platforms for others to create additional services on.

The Global Plant Floor -- companies changing the way they interact with suppliers. Instead of Boeing sending exact specs for each part of a new plane, they let the suppliers design and innovate as much as possible. They also let them assemble much more of the components, and therefore, it now takes Boeing 3 days to assemble an airplane once all the parts have arrived, rather than 30. BMW is another example described here, along with Lifan, a Chinese company that is making waves in the motorcycle industry.

Finally, there is a discussion of how wikis really changed the possible interactions in corporations.


A few thoughts.

First, there is no doubt that there is a lot of evidence of the power and presence of Wikinomics presented in the book. While the examples were very good, they were still few. This leaves one with the feeling that Wikinomics may remain a fringe rather than mainstream in business.

Second, one may wonder whether we didn't hear all this in The World is Flat by Tom Friedman. Certainly, there are many interesting relationships between the two books. I think Friedman addressed a narrower aspect of the picture: basically that companies can distribute themselves across the world and work more aggressively with partner companies. Wikinomics goes one step further and discusses how companies should leverage the masses, not just partners, and how that affects the way we think of IP rights and communications within corporations.

Third, as a computer scientist, I wonder what CS has done about all of this. While we've been responsible for many of the technologies that created the tools mentioned in the book, I'm not sure we leveraged the tools ourselves to benefit our own research. Certainly, in education we haven't. In fact, Don Tapscott argues that are very few industries that have changed very little in the past century, but education is one of them. It's still mostly built around teachers standing in front of students and lecturing. Food for thought.

Finally, there is a lot of discussion in the book on IP issues and generally, on how business relationships between companies should be structured. I think every lawyer should read this book, and hence, am moving the book to my wife's side of the bed.