Notable passages from
by Don Tapscott and Anthony D. Williams
Portfolio, New York, 2006
Peering works best when at least three conditions are present: 1) The object of production is information or culture, which keeps the cost of participation low for contributors; 2) Tasks can be chunked out into bite-size pieces that individuals can contribute in small increments and independently of other producers (i.e., entries in an encyclopedia of components of a software program). This makes their overall investment of time and energy minimal in relation to the benefits they receive in return. And, finally, 3) The costs of integrating those pieces into a finished end product, including the leadership and quality-control mechanisms, must be low.
The Key Benefits of Peer Production for Business
- Harnessing external talent - Science and technology are advancing fast and individuals and companies are using and deploying new knowledge in unanticipated ways. Smart firms can harness this innovation by using peer production to involve way more people and partners in developing customer solutions than they could ever hope to marshal internally.
- Keeping up with users - [I]f you do not stay current with users, they invent around you, creating opportunities for competitors.
- Boosting demand for complementary offerings - Participating in peer production communities can boost demand for complementary offerings and provide new opportunities to create added value.
- Reducing costs - Companies must dedicate resources to filtering and aggregating peer contributions. But these types of collaborations can produce more robust, user-defined, fault-tolerant products in less time and for less expense than the conventional closed approach.
- Shifting the locus of competition - Publishing intellectual property in non-core areas that are core to a competitor can undermine your rival's ability to monopolize a resource that you depend on.
- Taking the friction out of collaboration - As the need for collaboration increases, firms are finding that problems related to ownership and exploitation of intellectual property can make proprietary collaborations difficult.... Avoiding these problems is one reason why a growing number of firms are embracing open models of collaboration innovation.
- Developing social capital - When firms join a peer production community sharing is the continued price of admission from which the firm derives various benefits. This is why firms like IBM, Sun, Nokia, and others are granting open source communities royalty-free access to their patents. In exchange, they obtain a "license to operate" in the community—a form of tacit permission to harvest some of the value created in collaboration with community members.
[ ‹ ]
This chapter describes a new model of prosumption, where customers participate in the creation of products in an active and ongoing way.... Prosumption sounds like a win-win proposition. Indeed, how could you possibly lose? Customers get more of what they want and companies get free R&D. But it's not all cut-and-dried. As prosumer communities proliferate, companies face increasingly tough choices about how to interact with them. Are customer innovations always good news? What happens when the modifications and extensions that customer develop conflict with a company's business imperatives? Should companies discourage, ignore, join, or even try to co-op prosumer communuties?
Harnessing Prosumer Communities. Prosumption is becoming one of the most powerful engines of change and innovation that the business world has ever seen. Cocreating with customers is like tapping the most uniquely qualified pool of intellectual capital ever assembled, a reservoir of talent that is keenly and uniquely enthusiastic about creating a great product or service as you are. But it comes with new rules of engagement and tough challenges to existing business models.
- More than customization - The problem is that mass customization generally entails mixing and matching prespecified components, which significantly limits flexibility and innovation for users.... True prosumption entails deeper and earlier engagement in design processes and products that facilitate customer hacking and remixing (mashups).
- Losing control - Customers will increasingly treat your product as a platform for their own innovations, whether you grant them permission or not.... Over time value migrates from your product or service to what customers do with the information. If you do not stay current with customers, they invent around you, creating opportunities for competitors. Inevitably, it is preferable to sacrifice some control than it is to cede the game completely to a more adept, prosumer-friendly competitor.
- Customer tool kits and context orchestration - Make your products modular, reconfigurable, and editable. Set the context for customer innovation and collaboration. Provide venues.
- Becoming a peer - After gaining some experience with this new world of prosumption you'll realize that your real business isnot creating finished products but innovative ecosystems.... As prosumption matures, expect to treat customers like peers, not patrons.
- Sharing the fruits - Customers will expect to share in the ownership and fruits of their creations. If you make it profitable for customers to get involved, you will always be able to count on a dynamic and fertile ecosystem for growth and innovation.
[ ‹ ]
Harnessing the Global Plant Floor. What are the lessons?
- Focus on the critical value drivers - Heightened competition and the increasing pace of change means that today's differentiating competencies can become overnight commodities, putting the entire value of your business at stake. Take note of where future opportunities for value creation are shifting and ensure that your capabilities are evolving in that direction.... Always strive to be the best at what your customers value most and partner for everything else.
- Add value through orchestration - [T]here will be handsome rewards for those who learn the subtle art of weaving together the skills and competencies of disparate players to create globally integrated ecosystems for designing and making physical things.
- Instill rapid, iterative design processes - A wide range of partners, each of whom is motivated to solve problems related to their key area of expertise, can accomplish rapid design and testing.
- Harness modular architectures - Rather than mandating how to produce products, firms can work to create standards and modular architectures that specify product interfaces and leave it up to suppliers to get the job done.
- Create a transparent and egalitarian ecosystem - The ability to create end-to-end visibility across the supply chain, on the other hand, can reduce costs, improve performance, and speed the metabolism of partnerships.
- Share the costs and risks - Sharing the risk of large development projects with partners spreads the cost and ensures that everyone is properly motivated.... As companies share costs and risks they should be prepared to share decision making as well.
[ ‹ ]
Wikinomics Design Principles
- Take cues from your lead users - Interestingly, flickr started in 2003 as on online multiplayer game in which the phototrading feature was almost an afterthought. And yet that offering took off, effectively changing the direction of the company.
- Build critical mass - The secret to successful peering is building a critical mass of participants that attracts more and more people to the ecosystem.... To extract long-term benefits from peer-production communities you need to help create and replenish this critical mass.
- Supply an infrastructure for collaboration - An important part of creating critical mass involves cooperating to supply the open standards, shared IP, legal foundations, and collaborative infrastructures that will support the innovative process.
- Take your time to get the structures and governance right - The SNP Consortium took over a year to flesh out its model of collaborative research and development.... In the end the collaborative research effort more than repaid the time and effort required to get the processes right by dramatically lowering their costs and speeding the industry toward a new era of personalized medicine.
- Make sure all participants can harvest some value - People who participate in peer-production communities have all kinds of reasons for jumping in.... Providing the right for everyone (including free riders) to enjoy noncommercial benefits keeps the barriers to participation low. Reserving the right to appropriate private returns to those who make substantial contributions, on the other hand, will reward those who put in the most effort.
- Abide by community norms - There are written and unwritten rules that govern issues such as communications, appropriation, and the form and manner of contribution.... Firms that want to participate in peer production need to understand and abide by the norms that govern the community.
- Let the process evolve - IBM strategist Joel Cawley cautions, "Keep in mind that there was no strategy to do what we did with open source. It was happenstance all the way through the journey. We started doing what made sense, and kept on doing that each step of the way."
- Hone your collaborative mind - Engaging in collaborative communities means ceding some control, shaping responsibility, embracing transparency, managing conflict, and accepting that successful projects will take on a life of their own.... It means learning new skill sets that emphasize building trust, honoring commitments, changing dynamically, and sharing decision making with peers.... Openness does not mean firms need to abandon control of their destiny. It does mean having well-developed and well-understood internal goals to guide external engagement strategies.
[ ‹ ]