Wikinomics by Don Tapscott and Anthony Williams
Despite the name, which suggests both a me-too jumping on the Levitt/Dubner Freakonomics bandwagon and a possible reductive identification of all evolving Web technologies with wikis, this is a surprisingly good book, written at a calibrated level of abstraction, with a tasteful blend of concepts, anecdotes and statistics. It has none of the anecdotes-of-a-gunslinger-economist machismo of Freakonomics, and the wiki in the title is synecdoche, not reductive imagining.
I read the thing in one sitting at Barnes and Noble a few months ago, taking notes and annoying the staff (I conspicuously displayed my coffee cup to show I was legitimately avoiding buying the book — I now have a preprint copy via a colleague who knows Don Tapscott personally). That I could do so tells you that the content was pretty light reading. It was concise and valuable though, and about as deep as you can reasonably expect a first-to-market book on the topic to be. It’ll be a few years before we see the dense, canonical and empirically-validated book we all really want, so until then, this book is a pretty good operating manual. You cannot divorce the themes of the technology of virtualization and the culture of open innovation, and this book proves the point. It is as much about open innovation as it is about things like wikis and blogs.
Few authors summarize their key points comprehensively in the introduction, so I always appreciate it when a writer does that. You can actually get away with reading just the introduction if you want 80% of the value and are willing to accept the assertions as best-faith truths. For good measure, the conclusion reiterates the same points with some added depth. The summary is presented in the form of a few “principles of wikinomics” that almost constitute a doctrine:
- Being Open: maintaining porous organizational boundaries, working with industry standards, moving to a culture of non-secrecy, above and beyond legal needs, and being open to globalization and global trade. Well argued.
- Peering: This uncomfortable neologism is meant to capture the themes of encouraging self-organization and working with non-hierarchical organizational structures where possible. Moderately well argued.
- Sharing: To move from a win-lose business-is-war mindset to a mindset where there are win-win/coop-etition options available. The key idea here is to think about business IP as a managed portfolio that includes things you give away (including to competitors) alongside things you protect with patents or hide with secrecy. This is a slightly more elaborate conceptualization of the IP market than Henry Chesbrough’s in Open Innovation which I’ll get to.
- Being Global: This point is made a little obscurely, and I didn’t quite see where it fit in with the rest of the picture, but never mind. One must counter Tom Friedman’s annoying Flat World metaphor where possible, so this might just be called community service. There’s some resonance, so let’s leave it there.
- Generation-N Norms: The idea being that this whole culture shift is being driven by Generation N (his word for Baby Boomleters) norms, that include speed, freedom, openness, innovation, mobility, authenticity and playfulness. Yes, I too gagged a little at the primary-colored bubblegum utopia-ness of it all, but to be fair, the authors do justify the list throughout the book with substantive examples. I can just see skeptics translating that to sloppiness, lack of accountability, competitive carelessness, lack of execution discipline, ADD, disloyalty, political naivete and silliness. That set of dichotomies is a whole other post.
Some highlights cherry-picked for your edification. There’s a chapter-wise summary after this section, for those of you who must have completeness.
Rather smartly, the authors chose to start the book off with a success-story anecdote from a very traditional industry. This is the story of Goldcorp, a gold-mining concern in Canada. Goldcorp was faced with diminishing yields from its mines and an unclear idea about where to dig for more gold. The company’s traditional staff geologists failed to make much progress with their safe, ponderous way of exploring as they’d always explored before. The CEO made an incredibly bold decision to throw open the exploration problem to everyone, making all the geological data available to all (apparently unheard of in the mining industry, where this data is held very closely). An enthusiastic army of outsiders, ranging from computer scientists to mathematicians went to work (along with lots of outside geologists too, of course) and came up with a huge number of suggestions for places to dig, half of which the in-house staff hadn’t thought of. The company went from $100 million to $9 billion in the space of a few years (this was 2000-2004 I believe). Remember the famous story in The Wisdom of Crowds (a review coming up, not to worry) about the US Navy finding a sunken submarine? This is that story on a larger scale.
Stepping back, the whole darn book has this flavor. Yes, there are chapters covering Linux and Apache and Wikipedia, but repeatedly the authors emphasize the principles and non-traditional examples. They clearly know who they are trying to pitch the ideas to, and it is NOT the Linux choir.
One of the new things I learned was Coase’s law, which can be informally stated for our purposes as “Organizations exist in the form they do because of the relative costs of information per transaction” (my wording). Specifically, every action that adds value on a product/service’s path to market involves a search cost (finding someone to do/make it), a transaction cost (the cost of making a deal with the producer via negotiations) and the actual cost of doing the work.
It is a neat phenomenological law to help think about the dynamics of creative destruction in the sense of Schumpeter. Traditional organizations are large not just to achieve economies of scale, but also to ammortize the first two kinds of cost over many instances of the third kind of cost. The reason this is important for Wikinomics? When the search and transaction costs plummet (think Google+eBay or eLance), tasks can drift around in the economy, in and out of porous boundaries, to find their least-execution cost homes. The implication is that traditional organizations are structurally irrational in the present day, and mostly need to shrink to achieve their right size to reflect the new cost-of-information dynamics. The leaking function gets out there into a brave new frontier of intermediate markets.
Global Plant Floor
Okay, so we’ve all heard the classic open-source success stories, ranging from Linux to the Wikipedia. Can a similar philosophy build physical products? Can you create an open-source Boeing 747 purely through a mob refining a design on the public Internet and using commoditized manufacturing shops for fulfillment?
Second question. Can the process truly invent new ideas? After all, the biggest open source successes are clones or minor variants of previous commercial products, not totally new ideas in software — yes wikis and blogs are cool ideas that could be said to have open origins, and yes, Richard Stallman did invent emacs, but still, there isn’t a compelling radical innovation story in the open source world.
The book offers little insight into the second question, but for the first question, the book provides a tentative answer: Yes. China’s motorcycle industry (Lifan) is offered up as one example (though it is a swarm economy that mainly rips off Japanese original designs — innovation without invention). The more impressive example is the Boeing 787, contrasted with the Airbus A380, which is a logistics and manufacturing planning disaster (and possibly a design integration and multicultural disaster as well). One way to assess the A380 is to call it a disaster of waterfall planning of the Windows Vista variety. Contrasted with this, the Boeing 787 dreamliner has been developed with a very carefully calibrated open-market approach where the entire supply chain of subcontractors has been brought into the design phase with a “the guys who will manufacture it should design it” philosophy. Boeing has only retained the critical-to-design features like the tail fin.
This would be an impressive example if the 787 were already in the market, beating the A380 hollow. We’ll have to actually see how that battle plays out.
The critical value drivers of the ‘global plant floor’, per the authors are:
- Orchestration (what Boeing is doing)
- Rapid iterative design processes (obvious for software, but hmm… maybe we don’t need a decade long gestation for complex hardware systems either).
- Modular architectures (the The Age of Modularity is now on my reading pile)
- Build an innovation ecosystem (let’s all develop Amazon S3 clones)
- Share costs and risk with partners
Wikinomics Design Principles
Now this is another interesting list from somewhere in the book. I’ll defer a discussion to after I post about disruptive innovations and open innovation, since deconstructing this list requires analysis beyond the scope of a book review.
- Take cues from lead users
- Build critical mass
- Produce an infrastructure of collaboration (open standards, legal foundations)
- Make sure value is shared by all prosumers
- Abide by community norms (the N-gen ones?), including IP sharing.
After the introduction chapters, there are 8 chapters, each with a cutesy name. The overall structure is one of ‘Let’s collect the high concepts’ — don’t expect a business model recipe. In brief:
- Peer Pioneers: Covers Wikipedia, Apache and Linux. Some new points here, even if you’ve already heard these stories
- Ideagoras: Play on Pythagoras, I presume, is about open economy broker outfits like Innocentive (biochemical industry), Nine Sigma and a bunch of industry leaders. Some interesting statistics here: Proctor and Gamble discovered it used less than 10% of the patent IP it generated. Now it gets 50% of its IP needs from outside and cheerfully trades stuff it doesn’t use. IBM gets $1 billion from IP sales. More when I talk about Open Innovation.
- Prosumers: Includes coverage of Second Life, the “hack this product” story from Lego Mindstorms (they tried to close the API and sue hobbyists who tried hacking it, and then realized that was actually a good thing and opened the product up). Steve Jobs’ iPod is in there too, as a story with mixed lessons.
- New Alexandrians: Is an attempt to get at the research culture of Wikinomics, and there is a discussion of Intel’s university-lab strategy, as well as arXiv (the physics preprint clearing house), MIT’s open courseware, Merck releasing 15,000 formulas and the human genome project. This is a weak chapter — there is a rather forced air of trying to fit too many not-quite-appropriate examples into the conceptual framework.
- Platforms for Participation: This covers the open-API+innovation-ecosystem-around-us represented by Amazon web services and the Google API. Also includes a discussion of the crowd-coordinated work in the aftermath of Katrina and the opening up of that famous piece of closed software, SAP.
- Global Plant Floor: I covered this as a highlight, so let’s ignore this one.
- Wiki Workplace: The money chapter for most of cubicle dwellers, but with surprisingly little value for understanding how the workplace is changing (either for workers or management). You want to understand wikis and blogs in your daily world, use them there and find out for yourself. Books full of ambitious abstractions is the wrong way to learn that game.
- Perfect Storm: Ties the whole book together and weaves all the themes into a narrative of looming seismic shifts in culture. Hard to summarize this chapter. Suffice it to say, this will be the watershed chapter. You’ll either walk away saying the chapter is too timid in its predictions, or believe it is all hype.
The book has its own website, with some sample chapters, in case you want to get the story straight from the source.