Don Tapscott is chief executive of New Paradigm, a think tank and strategy consulting company he founded in 1992. He is the author of ten books, including the bestsellers Paradigm Shift, The Digital Economy, Growing Up Digital, The Naked Corporation, and Digital Capital. Tapscott is also adjunct professor of management at the Joseph L. Rotman School of Management, University of Toronto.
Anthony D. Williams is a research director at New Paradigm. He has an MA in research from the London School of Economics, where he has been teaching during the last year. He leads New Paradigm's work in the areas of innovation and intellectual property.
We spoke to Don Tapscott about the book he wrote with Anthony Williams, Wikinomics: How Mass Collaboration Changes Everything.
tompeters.com asks ...
Don, you coauthored the book Wikinomics: How Mass Collaboration Changes Everything. What does Wikinomics mean? Is that your word or have you picked that up from someone else?
DT: No, Wikinomics is a neologism that came from our team. As you may know, there have been many over the years. I don't invent words to be cute. I invent words when our language fails us. There is a new theory in practice of harnessing mass collaboration for innovation, growth, and profit, and that's what Wikinomics is. The basic idea, of course, is that if you can create Wikipedia, which is an encyclopedia with a million authors, owned by no one and 12 times larger than Britannica in dozens of languages with the same level of quality, what else could you create?
It turns out you could create an operating system. Linux is a robust operating system that now dominates medium and large-sized computers in the world, owned by no one, and developed by thousands of people scattered around the world. Could you create other software? There are 150,000 open source applications projects underway today, and you can bet Microsoft, Oracle, IBM, and SAP are paying close attention and trying to figure out what to do about this.
Could you create a mutual fund? Yes—it's called marketocracy.com. Could you create physical goods? Well, as we explain in Wikinomics, a Chinese motorcycle industry is essentially an open source motorcycle. There are hundreds of little companies that each make a part, or a few, or do something to contribute to the ecosystem. They meet in tea houses and on the Internet. There's no OEM [Original Equipmant Manufacturer]. There's no Yamaha or Harley. This is now the largest motorcycle "company" in the world.
What, then, is a company to do about this? What's a thoughtful manager to do with this change? And Time magazine selected "You," the online collaborator, as the Person of the Year. The question Wikinomics poses is, "What's next?" The answer is not about online dating or chat rooms about gardening. This is becoming a new mode of production. And the corporation is probably going through the biggest change in its short history.
But many people seem to get hung up. For instance, you start off with Wikipedia early on. Of course, everyone then hears that Wikipedia has lots of errors. And Encyclopedia Britannica probably feels that everyone is ripping them off to create these Wikipedia entries. Britannica has errors. But as you say, and I think this is really the point, the difference is that Wikipedia is growing. It's dynamic, and those errors will get fixed that afternoon.
DT: That's correct. Actually, when it comes to errors, the only big study that has been done is by Nature magazine. It looked at scientific articles, and the error rates of Wikipedia and Britannica are about the same. It's an amazing thing how this organism brings out the antibodies to attack a virus. Let me give you an example: I could go onto the site right now and say, "Tom Peters is the world's greatest accordion player." I'm guessing that's not a true statement.
You never know with Tom! But, you're right, that's probably not true.
DT: So that factually incorrect statement—that error—will last probably just a few minutes. Because when anything says "world's greatest," there will be hardcore Wikens—as they're called—that will be all over that. Then there's going to be a bunch of Tom Peters fans who will go there and say, "This just can't be true," and they'll authenticate it. There will also be a bunch of accordion players who will say, "Who the heck is Tom Peters? The guy doesn't even have a CD." It's going to get corrected pretty fast.
I'll tell you a funny story about that. About eight months ago a colleague went to Wikipedia and entered the term Wikinomics. It was something to the effect of, "the theory and practice of harnessing the power of mass collaboration defined by Don Tapscott in his book of the same name." The fellow sent me an email, and I went to the website to check it out to see what he'd put in, and it was gone. As you know, with Wikipedia you can go and find out what happened. There was this intense discussion that occurred over a few minutes. Someone said, "I just Googled this thing. It got 60 hits. That's not enough to get into Wikipedia." Someone else said, "We don't like neologisms here." Someone else said, "Well, Tapscott is a prolific author, and he invented other terms." Somebody else said, "What if his book is a bomb?" Then they deleted it.
As an author I was kind of irritated by this. But, for someone who studies these things, I was quite impressed because they did the right thing. Now if you go first to Google, today Wikinomics would get, I don't know, hundreds of thousands of hits. If you go to Wikipedia, as I did when recently telling the story on a radio interview, the guy said, "Well, is it back there now?" I went there, and sure enough—it is back there.
Now, I have no idea who put it there, and it's a different definition. It's actually different than the definition I would use for my word. You know, it defines Wikinomics as a book. Well, it is that, but it is also a lot more than that. It's an area of thought, and it's a growing set of practices. But, I'm not going to touch it with a ten-foot pole, and I don't do that in Wikipedia. I'm in there in a bunch of places, but I just leave it for the people out there in the Commons to decide how they describe my work.
Which reminds me of brand discussions I've had with people. Ultimately, your brand is what people think about you. So, I think what we're understanding—and you clearly understand yet another brave new world—is that you can't tell people what your brand is. You are obviously a great example of what one of the underlying tenets here is, which is about letting go. You don't have to control the terminology, even a term that you've invented, because it will sort itself out by the people who use the term.
DT: That's exactly right. I believe that very strongly. You can't spin things anymore, because the truth will win out. Honestly, the definition of the term Wikinomics will be shaped strongly by the book and by my practice, but it may well evolve. We're Wiki-ing the last chapter of the book, and it's out of control. I have no idea where the thing is going, but it sure looks interesting. It's going in a different direction than I would have taken it, but it may well be a much better direction.
I want to come back to that—sort of take a step back. This is a very all-inclusive book that has a lot of different examples of mass collaboration. But who should read this book? Who needs to understand what you're talking about?
DT: I think the reason the book is doing so well—at least one reason—is that it does appeal to a pretty broad audience. It's not just a business audience, and it's actually broader. But any manager who is trying to figure out what to do with this huge change should care. Again, this is not about social networking or user-generated media; that's just the tip of the iceberg.
I'll tell you a story. This is about changing the way you mine gold or build an airplane. There is a guy named Rob McEwen. I know him because he's my neighbor. He was a banker who took over a gold mining company. His geologists couldn't tell him if there was more gold on his most important property, where the gold was, or how much gold there was. After a couple of years, he started getting very frustrated. He was basically at the point of shutting down the mine. But he was a curious guy, and he had gone to a Young Presidents Meeting held at MIT, where they told him about this thing called the Linux Operating System. He went home and he wondered, "If my guys don't know, maybe somebody else does."
He did a radical thing. In the mining industry, your most precious and secret IP [Intellectual Property] is your geological data. This is held in safes and high-security systems. He let go. He published his geological data and held a contest on the Internet called the Gold Corp Challenge—half a million dollars for anyone who could find gold on the property. He got submissions from around the world using techniques that he'd never heard of. He picked the top three, and doled out his half million dollars of prize money. For that investment, he got 3.4 billion dollars worth of gold, and the market value of the company went from 90 million to 10 billion dollars. And I can tell you, he's a happy camper—I know, because he's my neighbor, and he just renovated his house now that he's a billionaire.
So this has nothing to do with websites or eyeballs or stickiness or clicks or any of that old dot-com stuff. This is a fundamental change in how you orchestrate capability in society to innovate—to find gold, you know—and to create goods and services.
Another example, if you wouldn't mind, that I would love to have you talk about is Procter & Gamble, because it's an example of two different ways of working this intellectual capital game, right? If you could just talk about working with InnoCentive.com and yet2.com.
DT: That's actually pronounced yetto.com.
Like the old journalists had the "TK" for "to come." Excellent.
DT: Is that what "TK" meant? I often wondered.
Yeah, the "TK" is "to come," and I don't know why—who knows. We should look that up.
DT: Go to Wikipedia. About five years ago P&G was struggling, and its market value had plunged. The company was stagnating, and the new CEO, A.G. Lafley, came in and decided that—just by doing the math—if it was going to grow at seven percent, it had to create a 5 billion dollar business every year. So that means it has to be an innovation engine.
At the time there were 7,000 researchers inside the boundaries of P&G. But it occurred to him and to others that there was a lot more outside, and it turns out today it has 9,000 inside and a 1.5-million addressable population outside. So if it's looking for a molecule that will take red wine off a shirt, it doesn't go to its own R&D department, it goes to an ideagora. This is another one of our terms. It's an agora, like the Greek or Roman agora market for ideas—it's kind of like an eBay for innovation, basically.
One of these ideagoras is called an Innocentive. There are 90,000 chemists, and they put out the request for the molecule, and somewhere out there is a retired chemist in Taipei or a grad student in Cleveland who can find the molecule, and they get paid for it. P&G comes to market much faster, and they saved millions of dollars and they now have 22 brands that are worth over a billion dollars each.
Again, it has nothing to do with websites, dot-coms, eyeballs, or social networking or any of that. This is changing the way we innovate. If you talk to A.G. Lafley today—he's actually a cover quote on the jacket of Wikinomics—he will tell you that the most important thing behind P&G's success is its model of innovation. It calls it "connect and develop."
P&G is developing deep expertise in Wikinomics. Now rather than, you know, the NIH syndrome—not invented here—how do you encourage your researchers to go inside and find innovations on an ideagora? You'd think they'd be threatened by that, but in P&G they have this thing called PFE—proudly found elsewhere.
Excellent. That's a great acronym.
DT: P&G has set up these reward systems basically so that the researchers benefit from innovation occurring. They don't believe in them necessarily finding it.
That's probably a great lesson. A lot of this behavior—since it's such a radical departure from where a lot of people have lived work-wise—is that you'll have to figure out how to create incentives for operating differently, right?
DT: Totally. This is a big change in the modus operandi of companies. In the book we say it's a shift from plan to push, and that's what companies did. You have the best human capital, and your most precious reserves go out the elevator every night—that's the expression. You retain this human capital, kind of like you retain fluids or something, I don't know, and then you invent things with the best people. Then you pattern them and trademark them, and copyright them, and if someone tries to infringe it, you get out your lawyers to fight them.
Well, that didn't work so well for the music industry, which ended up not understanding that everything to do with its business model pretty much had to change. They ended up—you know, the labels are declining and being replaced by other companies, that essentially create and distribute music.
And Tower Records goes out of business.
DT: Right. So its whole value—its distribution channel, everything. It sold CDs, and it kept insisting that people had to buy CDs. Well, kids didn't want CDs; they wanted songs, and they wanted music. They didn't want to go to a store to get the music, and they didn't even want to play it on a CD player. Anyway, it's a problem with paradigm shifts—you know, the leaders of the old have great difficulty embracing the new.
So this whole plan and push modus operandi is now being replaced by something that we call "engage and co-create," where you can actually engage your—well, the external world—many different classes of people like customers. I'm not talking about just customer-centricity and understanding customers, being close to customers, and all the rest of that motherhood stuff. I'm talking about customers co-creating the product—or, another term, prosumer. It's a term that came about way back from Alvin Toffler in the '70s, and in my book, The Digital Economy in '95 I talked about prosumption as a new theme. I ran up the flagpole and nobody saluted. For ten years I just kind of quietly lowered it again—nothing so powerful as an idea whose time has come again.
There's been all this talk about second life, this virtual world, where people go and have a second life. You have a job and you rent an apartment, and you try to make some money. You save it and you buy a country place, or you can build a cabin on an island. Maybe sell it, and make some money because real estate is going up. There's now a second-life millionaire, and there will be many more, of course.
There's an actual millionaire now.
DT: Yeah, and this is not a millionaire in second-life money, because second-life money is tied to the U.S. dollar, a floating currency. This is an actual U.S. dollar millionaire who's built up a million dollars worth of assets in second life, and everyone has been talking about this story. I think they miss the point. The big point for the people who follow Tom Peters' work, and who care about changes to innovation and enterprises, is that here you have a company whose product is built by its customers. The customers do 99 percent of the work. They're not just consumers, they're producers, or prosumers.
LEGO has a product called the Mind Storms. Kids build robots, but because kids know so much about technology, they're growing up digitally—as they said many years ago—they hacked the code. They created their own website and started sharing these Mind Storm applications.
So LEGO had a choice. It could be like the music industry and decide to sue the children. Or, it could open the whole thing up, which is what they did. They opened up the program's application programming interface, which is the source code interface that a program provides so that other programs can work with it. And you now have thousands of software engineers between the ages of 70 and four years old developing Mind Storm applications. They turned their consumers into prosumers. So, prosumers is one of the seven kinds of wonders of mass collaboration, or seven new business models that we talk about in Wikinomics.
I guess when you think about how to get more people on board, and then you start thinking about somebody in a company who just can't imagine that they could let someone else come in and work with it—it just all seems to boil down to sort of control issues. In many ways, there's a young generation coming along that knows nothing except collaboration. You have kids who are online and gaming, in most cases, and yet they're accustomed to figuring out their schedules because there's some kid halfway around the world they want to play while he or she is playing. They're already living in this kind of environment. I suppose then everything will shift once they're running, and we'll just have to wait for a lot of old people to die first. Or, how does this get jump-started beyond that?
DT: Well, I think you're right, absolutely right in pointing out that this demographic revolution, the children of the baby boom, the biggest generation ever in America—80 million youngsters alone.
DT: Yeah, 78.5 million boomers. On the basis of their demographic muscle alone, they'll dominate the 21st century. But, as you point out, and as I did in my book Growing up Digital, which, believe it or not, is actually over ten years old now, this is the first generation to grow up digitally. These kids are different, and their parents were the TV generation, watched 24 hours of television a week. These kids are the Net generation, and they collaborate. They still watch TV, but not as much. They watch it differently. They come home, turn on their computer, not the tube, and they're in three different windows, and they're listening to mp3 files so that the stereo, as such, is on. They're talking on the telephone with three magazines open doing their homework, and the TV may be on in the background.
But the whole way that they interact with media is different. Rather than being the passive recipients of somebody else's broadcast video, what are they doing? They're reading and collaborating and composing their thoughts, and telling their stories, and authenticating and searching and organizing information. Even with video games, they are developing strategies. This is creating a generation that actually processes information differently.
We're doing a three-million-dollar study right now on this. The code name is Grown Up Digital, because the oldest Net Gen members are 29. They're now in the workforce, in the marketplace. But this is one of the four drivers of Wikinomics, creating this perfect storm, if you like. You've got a technology revolution, the rise of the new Web—this ain't your daddy's Internet—combined with the demographic revolution that creates a social revolution. The social network MySpace is growing at 375,000 new registrants per day.
And the demographics there are even skewing upwards.
DT: Yeah, sure, they are starting to get older. But, again, kids are the leading indicators and they're driving a lot of this. I mean, one of the youngsters, a 20-year-old female university student, is living in Paris studying at the Sorbonne. She's a Syrian, and her boyfriend is in Toronto. So they turn on Skype all day long to maintain the relationship, cooking together and stuff like that.
I asked her, "Do you use email?" And she said, "Well, no, not really. That's sort of yesterday's technology." I said, "What do you use?" She said, "Well, I use Skype and I use instant messaging, and I use Facebook social networking." I said, "Would you use email?" She said, "That's sort of a formal technology like sending a thank-you note to one of your friends' parents." So if you want to understand how marketing is changing, and how management is changing, look through the lens of this generation.
Tompeters.com interviewed Ben McConnell and Jackie Huba, who have written a book called Citizen Marketers. Though they discuss similar ideas, they are not quite as comprehensive as what you've done here. One interesting thing, and I think you also mention it in your book, is that there are massive amounts of people visiting these various sites or Wikipedia and Flickr, and all this. But, apparently only one percent of visitors to whatever site are actually in there manipulating. And I don't know if that's a number that's going to change, or they're just going to be more people. There's only ever going to be one percent. A lot is going on, but the actual number of people, well, one percent of a big number is still a pretty big number.
DT: Maybe two or three percent, but that's the correct ballpark. But if you look at the Net generation, as we've done, some of our data indicates that up to half of them actually change the sites they go to.
So like 12- to 29-year-olds.
DT: Yeah. So they're in there. They're actually editing Wikinomics. Well, Facebook, I mean, this is their world. They're constantly creating Facebook pages and doing stuff like that. So again, if you want to see where the world is going you look at it through the lens of this generation.
I just want to touch on a couple of areas related to publishing. You are working in the real old style when you're publishing a book, as you well know. But, you do fire a couple of shots across the bow of the publishing industry in your book. What is it going to take for ... publishers still seem to be locked into, "We have the intellectual capital. We produce the books. And then we push this out to the world." Yet the world now clearly is—we out here in the world are, in effect—producing the content or co-collaborating on the content and we will sort out into what format we want, which may be an eBook, it might be a Web site. We all still love books, and books are important. Yet clearly the model that supports them is going to die, but the publishers don't know this yet.
DT: That's absolutely true. I've written about this topic for many years. Actually, the most comprehensive article that's been written about it was Kevin Kelly's cover story in the New York Times Magazine last year, "The Future of the Book." And anyone who is interested in this should absolutely read that.
But, you know, one of the things I do is write books, as does Tom, and it's still an effective vehicle to reach people and influence people. If I could, I would make the book free online. But you know what would happen, a whole bunch of people would download it, and, quote, "steal my work." How exactly would that hurt me? I'm guessing it would radically increase book sales, and it sure would increase my influence in the world. As someone who tries to be an influential leader of thought, as the saying goes, "I don't fear theft, I fear obscurity."
We've tried to get with the program here over the years, and practice what we preach. So Wikinomics was actually a product of mass collaboration. If you look at the acknowledgement section it goes on for pages. But the final chapter is Wiki, and we are inviting the world to help us write a definitive guide to the 21st century corporation.
Now that's more than a publicity ploy, I take it.
DT: I've got four people working on this thing. It's a huge investment, and I'm very serious about it. I think that we can create something truly wonderful here.
But, then do you end up having a struggle with the publishers about copyright issues?
DT: For that to be effective, you must agree to create a Comments License. I don't own it, and I can't make money off it. It's owned by the Commons and that's the only way that people will participate. It's the right way to do it. We also went to the Web to choose a subtitle. We didn't like our subtitles, so ...
I like that. You have it right up front in your book here.
DT: Well, every book has a title page; this book has a subtitle page where we printed 15 of the best subtitles that didn't actually make it onto the cover. Every one of them would have been a good subtitle, I think. It's really fabulous.
I like "The Power of Us."
DT: Or, "We the People." That was another one I really liked a lot.
We look forward to the ongoing discussion. I am particularly curious to see where that goes. I just want to thank you. There are a lot of great examples in here and it's a great point of departure for anyone.
DT: Well, you know, like Tom, I try not to be just a smart guy with big ideas who writes a book. I'm not smart enough to do that, anyway. I have to do real research, as does Tom. We've got a big team that's scouring the earth trying to find the next example of something that's going to be really disruptive, and we're very proud of the book. We're thrilled that it's doing so well. We very much appreciate and welcome the friendship that Tom has given to us and to me personally, and the great collaboration that we have.
We'll see where it goes. We, of course, wish you all the best with the book, and we'll keep an eye on what happens.
Email: don (at) - newparadigm.com