Companies are increasingly trawling the net and the public for innovations, writes Haydn Shaughnessy
ACCORDING TO Don Tapscott, strategist and joint author with Anthony Williams of the award winning Wikinomics: How Mass Collaboration Changes Everything, the current economic malaise could have been averted if the financial sector had only opened its doors or "called over the walls" for advice.
"The subprime mess happened because big financial players hid the risks - they weren't found until it was too late. If the same players had taken the radical step of sharing information about the bets they were structuring, the best minds - including economic policymakers - could have seen what was happening and taken steps to avert it."
This netherworld of experts, Tapscott refers to as the "ideagora", or idea market place. The ideagora is the current big idea for global business and small business alike.
More and more companies are turning to ideagora and more platforms are launching to help them do so - Innocentive, Force.com, crowdspring.com, ideascrossing.
The list is growing. Common to each is the desire to cast a wide net for innovative thinking as a way of creating business advantage. But does it work?
The efficacy of looking out to a wider community of experts, rather than in to staff and executives, is a key theme for Tapscott and his colleagues. For the past two years they've been asking the question: What happens when a company taps into wisdom wherever it might reside?
The best example of a company "collaborating" with the public is Goldcorps, a Canadian gold mining company that, in 2001, posted all the mining data, maps and geological information relating to its 55,000-acre property onto its website. Goldcorps invited teams - any team that might want to submit - to suggest where its most productive drilling sites might be, offering a reward of $575,000 (€403,000) to the best suggestions.
The results were transformative. Contestants identified 55 new drilling sites and, ultimately, Goldcorps's lacklustre mine became as glistering as you'd expect a goldmine to be. The company's value jumped from €70 million to €6 billion.
Mining data is normally treated like a company's crown jewels and posting it to a website was, to say the least, radical.
A very different experience was had by Netflix, an American video-rental website. An important part of its online business is a viewer review section which has an Amazon-type recommendation engine behind it. The more accurate Netflix's recommendation become the more satisfied its customers should be - there is nothing worse for business than having customers watch a recommended film that they hate.
In a meeting of executives at Netflix in the spring of 2006 they decided to go the Goldcorps route and offer a prize for anyone (or team) that could produce a 10 per cent improvement in its recommendation algorithm.
By the summer of 2008 there have been 37,565 contestants in 30,784 teams from 173 different countries. That sounds like both a huge burden to deal with and surely the source of significant business advantage to Netflix.
However, according to Steve Swasey, who heads up Netflix communications, the competition is "not much overhead. It is pretty automated". And its contribution to business? "Nothing significantly measurable at this time."
So underwhelmed is Netflix by its engagement with its 37,565 contestants, that it does not organise interviews with executives responsible for the prize other than with American media. It has the hallmark of a damp squib and seems hardly worth the trouble to publicise further or report on, even to those countries that have taken part.
These radically different experiences both support Tapscott's contention and the attitude of executives for whom the public is too much trouble.
Explaining this is not easy. The ideagora originated in open source computing and projects such as Linux, the server operating system. This well-known public collaboration resulted in a computer operating system to challenge that of the dominant Microsoft.
But here Tapscott and Wilson's book reveals an ingredient little known to non-professional watchers of Linux.
Computer giant and Microsoft competitor IBM expended huge resources supporting Linux development, to the tune of around €1.4 billion by the end of 2001. What appears the perfect case study of public collaboration looks significantly different on closer inspection.
Nonetheless, the values of the open source movement - self-organising communities that reward contributors with enhanced reputation rather than cash - appear to have a strong future in the wider transformation of business, in the shape of the ideagora.
"The immediate benefits can generally be seen in terms of faster and better innovation cycles," says Denis Hancock, a Tapscott collaborator speaking on behalf of the Wikinomics team. To date, though, many companies that have chosen to adopt the ideagora have done so through competitions. Goldcorps and Netflix and also PG, Sloggi, Red Bull, Dorito, Lloyds TSB and many more all offer prizes.
A typical consequence of a competition is cheap idea generation for firms. This aspect of the ideagora clearly threatens the underlying principle that reaching to a wider community is a wiser and somehow beneficially more democratic way to run a business. Already bloggers have begun to warn companies against confusing democracy with exploitation.
On the other hand there are professions that have long operated in a competition environment. Architects and designers typically win business through competitions. The prize, however, is usually capable of sustaining their businesses whereas many ideagora competitions have prizes that are risibly low. Peugeot, for example, offers prize money of only €10,000 for its new concept car competition.
Clearly the reliance of august professions such as architecture on competitions suggests that the ideagora could allow companies to draw on a wider creative pool.
Denis Hancock points to the new iTunes Apps store for the iPhone 2.0 as "a great example of how a company can head in this direction, with Apple taking a 30 per cent cut on applications sold through the platform". Microsoft is also busy involving the public further with its XNA games development platform, which facilitates freelance game writing.
These steps perhaps illustrate better what a real ideagora can achieve. The final word on how we might find a way out of the current financial malaise goes to the Wikinomics team: "As ever more information flows out about the mess our financial system is in, we feel it's becoming clear that a lack of transparency was the critical issue. While there have been many calls for more regulatory oversight - sticking with the "command and control" mindset; giving more power to the people that failed to see the problem coming, and then either failed to act quickly enough and/or made it worse - we believe that a more open, collaborative solution would yield far better results."
Sounds good.
