Business - Written by Denis Hancock on Thursday, November 6, 2008 12:46 - 5 Comments
The wisdom of crowds vs. uniquely qualified minds
The sub-title for wikinomics is how mass collaboration changes everything, which naturally creates the visual of an enormous amount of people working together towards a common end. In turn, it is hardly a surprise that if you look up wikinomics on Amazon, one the books it is most commonly purchased with is Surowiecki’s The Wisdom of Crowds, which argues that “under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them.” From my experience over the last couple of years, that’s exactly what people immediately start thinking about when they contemplate applying wikinomics principles to their business models – how to effectively leverage the wisdom of crowds.
However, I’m increasingly thinking that this perspective is causing people to miss out on a lot of important lessons. In order to explain why, one has to look no further than the very first story told in the first chapter of wikinomics – GoldCorp. It’s about how Rob McEwen decided to publicly release their proprietary geological data on the web, and hold a contest to see who could best help them find gold on their property. It was a remarkable success, and “catapulted an under performing $100 million company into a $9 Billion juggernaut.”
This was (and is) a great wikinomics success story, but it was not really a case of “how groups are remarkably intelligent, and are often smarter than the smartest people in them.” It was not really a case of a whole bunch of people working together. Instead, it was a simple (and powerful) example of how a company could leverage the web, an open IP strategy, and a high dollar value contest in order to attract the best, uniquely qualified minds in the world. Other major examples in the book – such as P&G’s use of Innocentive in the Ideagoras section – have similar themes to them as well.
This is an important distinction in my mind – and one that people often miss. If you work through all the examples of “wikinomics in action” in the book and on this blog, some of them are about harnessing the wisdom of crowds, and others are about attracting uniquely qualified minds. As one would expect, the strategies required for success on one side are very different from the strategies required for success on the other. This is a particularly interesting area to explore as the issue of incentives for collaboration become more important.
For example, one of the areas I’m most interested in is prosumerism – when customers become actively engaged in the creation of goods and services. A lot of companies are naturally attracted to the idea, generally for some combination of lower R&D costs, better innovation, and higher levels of customer engagement. However, as more and more companies become interested in the area, they are competing with each other for the attention of prosumers, which is where the incentives issue comes up – how do I get prosumers to work with me instead of somebody else?
Companies that come at this issue from the perspective of the wisdom of crowds generally quickly run into a problem – how do I allocate and share rewards across the (hopefully huge) mass of contributors? It’s hardly a trivial problem, because once dollars and cents come into play issues of “fairness” often trump what economists would consider “rational behavior.”
So for example, let’s say you and I are working together on a project, and are both making $0. You come to me with a proposal where we each keep doing what we’re doing, but now I will earn $10 for my contributions, and you will earn $100,000. Based on rational economic behavior, I would accept this proposal, as something is better than nothing. But many studies have proven that humans don’t behave this way – I’m for more likely to reject your offer, even though it makes me better off, because I deem it “unfair”.
So if you are trying to figure out how to distribute rewards across a huge crowd of contributors in a wikinomics-enabled business model, you could easily see how this issue could wreck the whole thing. If you share rewards somewhat equally, not only might the per-person amount be too trivial to matter, but those that contribute the most might get pissed off. If you try to distribute the rewards based on contribution to a group collaboration, it’s not only quite hard to figure out, but if the “masses” perceive it to be unfair they might just revolt and blow the whole collaborative model.
On the other hand, an incentive model that focuses strictly on the “uniquely qualified minds” seems a lot easier to pull off. GoldCorp and Innocentive are great examples of this using a contest model – and as noted, there really isn’t much “mass collaboration” going on in either. The big challenge right now is finding that middle ground. Recently I’ve written about Brownbook.net and Parlus, which are but two examples of companies building what look to be “mass collaboration” business models. Each are trying to use financial incentives to draw people in, and each are (rightfully in my mind) structuring these incentives to attract and reward the top contributors / uniquely qualified minds, rather than a huge mass of collaborators. But how to make it work remains a tricky question.
But I don’t want to get TOO far into those weeds here. Key point: those that associate wikinomics with only the wisdom of crowds aren’t going to see the whole picture.
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