His personal answer to copyright is to give away his “ebooks under a Creative Commons licence that allows non-commercial sharing.” He then attracts readers who buy hard copies. Having two books on The New York Times bestseller lists in the last two years, he says, validates his particular approach.

But his piece online at The Guardian, published today, takes on a much broader issue than how he’s perceived by others or even the idea that copy-prevention is futile. “… here’s what I do care about. I care if your plan [to stop people from copying your work over the internet or to build a business around this idea] involves using ‘digital rights management’ technologies that prohibit people from opening up and improving their own property; if your plan requires that online services censor their user submissions; if your plan involves disconnecting whole families from the internet because they are accused of infringement; if your plan involves bulk surveillance of the internet to catch infringers, if your plan requires extraordinarily complex legislation to be shoved through parliament without democratic debate; if your plan prohibits me from keeping online videos of my personal life private because you won’t be able to catch infringers if you can’t spy on every video.”

[Breathe here.]

Many of these strategies are already being employed and Doctorow enumerates several: 40,000 people in the US sued by the record industry; mandatory DRM requirements for several digital distribution channels negotiated by Sony, Apple, Audible, and others; three strikes rule in effect in France that disconnects anyone (and their family) from the internet for “unsubstantiated accusations of infringement”; efforts by Viacom to prevent Google and other companies from allowing anyone to “upload content to the internet without reviewing its copyright status in advance.” This last one seems particularly intrusive and Big Brotherly to me because what Viacom wants is for a court “to order Google to make all user-uploaded content public so that Viacom can check it doesn’t infringe copyright – it thinks that its need to look at my videos is greater than my need to, say, flag a video of my two-year-old in the bath as private and visible only to me and her grandparents.” The incredible arrogance of Viacom is that it wants to court to validate the presumption that everything posted on YouTube and similar sites violates copyrights. So, for example, if this came to pass, would a video of someone watching an NFL game on a network be a copyright violation if it included in the video the actual broadcast in the background? What if you post a video of someone dancing to music? Would the presumption be that the music was pirated? Such a ruling, Doctorow says, “would shutter every message board, Twitter, social networking service, blog, and mailing list in a second.” If he’s correct, the impact on culture, society, daily life would be immeasurable.

There’s a great deal more in the article about artists’ attempts to make money doing what they love and how he thinks they might succeed, but for me, Doctorow’s piece snapped me to attention about DRM. My eyes will no longer glaze over when I see that acronym or the words Sony, Viacom, and others. The idea that my privacy is merely a gossamer wall to be breached by private, for-profit companies who assume I am a thief is incredible and as threatening as anything I’ve ever heard.

If you are sick of hearing about it, then you may agree with Malcolm Gladwell’s perspective on Facebook members in his New Yorker article, “Small Change: Why the social revolution will not be tweeted.”: “The evangelists of social media don’t understand this distinction; they seem to believe that a Facebook friend is the same as a real friend and that signing up for a donor registry in Silicon Valley today is activism in the same sense as sitting at a segregated lunch counter in Greensboro in 1960.”

I tweeted about this (completely incorrect) perception that day, saying, “Gladwell: ‘The evangelists of social media…seem to believe that a Facebook friend is the same as a real friend’ Well, do you?” No, I did not expect answers; probably a bad rhetorical question. But fortunately later that day I found a nice quote on the No Pun Intended blog in response to Gladwell’s assertion, which I also tweeted because it expressed my personal experience with Facebook: “To M. Gladwell: ‘Nobody who actually uses Facebook…thinks a Facebook friend is the same as a real friend.’”

Now before I make you sick of me for talking about my tweeting, let me get this in. Almost no one who “actually uses” Facebook – and there are now more than 500 million active users who spend over 700 billion minutes per month on the site – confuses “Friend” with friend. And if they do, it is not because of Facebook but due to some other cause.

How do I know this? Well, I don’t, in the sense of knowledge based on proof with data, scientific inquiry, survey data, or anything else. I “know” it because I see how the 108 friends I have use it: most post irregularly, some often, some every day; some post personal info, some their location, trip plans, dinner plans; some are companies or sites that I want to follow. I use it because I like to see what other people are thinking and doing. I do get to communicate with people I never or almost never see or even talk to, including relatives. I keep up with people who have moved on to other companies, some of whom I never actually “met” because we worked in a virtual company.

As for Facebook’s ability to mobilize people to do things in the real world, a local group set up a Facebook page to announce a fundraiser for a friend who has cancer; it is sold out, not necessarily because of Facebook but Facebook sure made it easier to communicate the event and information about how to buy tickets and participate in a silent auction.

I wondered last night what my life would be like without Facebook and my first thought was “thinner.” Facebook enhances my personal life but does not substitute for real interactions with real people in real time over real beers watching real sports events or riding real motorcycles fast over real “Blue Highways” (one of my favorite books). Nothing does that for most, if not the vast majority, of people who belong to Facebook. The fact that there is a pretty widespread perception – often based on no or little real Facebook experience – that Facebook is the same thing as life for its members is disheartening to me. Right now, like it or not, detractors, approximately 7.25% of the world’s population seem to like Facebook. That data says something about its popularity but also the perception of its value.

Facebook may well be replaced someday or jump the shark. Right now, neither event is even on the horizon, despite the misperceptions of some observers about its extrinsic value.

nGenera Insight invites you to participate in a new survey designed to gather information on platform usage, impact, and challenges. The survey is open to all levels and functions—if you are reading this we would love to hear from you! It only takes about 7 to 10 minutes and as a thank you for your time we will provide you with a summary of the findings.

The survey is designed to gather information and help answer questions like:

• What popular platform technologies are being used for business purposes?
• What progress is being made on creating customer, as well as internal, communities?
• What are the major enterprise challenges faced by those using collaborative platforms?
• How do business leaders view the future of collaborative platforms and their long-term impact?

To participate, please click on one of the links above or simply click here. To learn more about why platforms are important and what makes them successful, read Nick Vitalari’s posts Apple and the Rise of Competitive Business Platforms – What Other Companies Must Know and 12 Critical Success Factors for Business Platforms.

Thank you in advance for your participation, we look forward to sharing our results with you.

For every Like that is made, Facebook is able to correspond a product affiliation to demographic information such as sex, age, geography, and education, as well as social graph data about relationships and influence within a group. With Places, Facebook can even correlate product activity to mobile location data. If mobile payments ever take off, they could get actual sales data as well.

Ad Age recently asked the very poignant question: What Happens When Facebook Trumps Your Brand Site? (alternate title for the article is: How Facebook Became the Biggest CRM Provider). The online article was accompanied by the following graphic showing the top ten brands on Facebook (in terms of total Likes):

Top brands are garnering millions of Likes, yet only driving a couple hundred thousand visitors per year to their branded sites. What this all means is that Facebook has better data about customers than most consumer products companies do. As Ad Age notes:

For many marketers, their Facebook fan bases have become their largest web presence, outstripping brand sites or e-mail programs either because a brand’s traditional web-based “owned media” is atrophying or because more consumers are migrating to social media.

While fan pages may work a lot like a marketer’s traditional “owned media,” they’re not actually owned by the marketers. Facebook hosts the pages and provides analytics for free, but growing marketer dependency on the network for CRM programs, combined with simultaneous declines in traffic for many of their own brand websites, could give Facebook a valuable revenue opportunity.

Of course, it would be difficult to sell granular individual data about users (people would object); however, Facebook could sell aggregate data (trend analysis and market research) and act as a “black box” CRM (Customer Relationship Management) solution whereby companies offer targeted promotions and messaging to individuals with select profile characteristics, mediated through Facebook. Already some companies are using basic Like data to hone their retail strategies. In one example, Urban Outfitters is arranging clothing in its online store based on Like activity and offering select promotions to all those who have liked products. Additionally, Facebook is making information about the Like activity on ads (i.e. “social context” data) available to advertisers on its site. Armed with this data, advertisers can decide to further optimize campaigns by targeting people who have expressed a Like for the ad.

With the Like button, Facebook is benefiting from the power of weak tie relationships (Facebook calls it “lightweight sharing”). Many markets point to the fact that people that Like a product aren’t real fans or brand advocates in the traditional sense. This is s feature, not a bug. By lowering the bar for Liking something, Facebook has opened a channel to—and is gathering data about—ordinary consumers of the brand who otherwise would have no formal connection to the company or its products other than isolated, anonymous purchases. This connection can be potentially valuable in terms of loyalty programs and promotions, market research, and customer support.

A number of factors suggest that the number of Likes will probably continue to grow, including: the continuing growth of the Facebook user base (see chart above, which shows no indication of plateau), expansion in global markets (70% of Facebook users are outside the U.S.), the recent proliferation of the Like button on a range of products and services (the Like button is now on over 350,000 sites), and the growing use of mobile technologies that allow users to Like physical products and experiences. With this in mind, it’s by no means hyperbolic to think that Facebook could be the largest single CRM provider in the world.

On September 12th the banking regulator, the Bank for International Settlements issued what’s known as the Basel III accord. That is a set of new capital adequacy rules. Generally speaking Wall St likes them and so too do the cities of London and Frankfurt. Bank shares rose. But the sting in the tail is that banks now fear that their national regulators will take the capital adequacy issue more seriously and impose harder targets.

“Top bankers in the UK, US and Switzerland are braced for their national regulators to impose tougher capital requirements than those required by Sunday’s landmark global agreement, even as investors bid up bank shares on relief that the standards were not more rigorous.”

The real issue here is not just that the targets might be set too low (there are arguments for and against) but that the reforms won’t be fully effective until 2019 some 12 years after Lehman. At the same time the International Accounting Standards Body is trying to reform lease accounting – in response to the Enron crisis. Again the lag between need for action and enforcement will be some 12 years.

What’s wrong with taking your time? It’s better to get this right than make more mistakes?

It seems that national regulators might well agree that change needs to be deeper and quicker, though we have yet to find out for sure.

The point that I think it raises though is that banks need more exposure to the faster cycles of modern business. Between now and 2019 there is almost certainly going to be one more crisis. We have now the experience of an 6 – 8 year bubble cycle, from the dot.com boom and bust to the housing boom and bust.

Accelerated information flow might be the reason. As with individual products (the iPhone, Facebook, Google) it is now possible to go from a standing start to hyperscale in the same time frame.

On the one hand banking stability is good, but on the other hand banks are integral to booms and busts. When stability is needed they are seen to be embroiled in these hypercycles. So there is an argument that says the new capital adequacy rules will come too late to prevent the next morphing of capitalism.

The better path would be for banks to become more engaged, for bank employees to be better schooled in how business is now done and how consumers now think and behave. This is being done in small doses, the bank blog, the mobile app. And behind the scenes banks are trying to adopt collaborative platforms.

The problem lies more in the relationship of the bank to the regulatory world, which seeks to be over-protective, and provides an excuse for inaction on social technologies (we are a regulated world, cry the banks when advocates of social technologies argue for change).

It leaves bankers in the same position as lawyers and accountants, two professions that self-regulate and also remain impervious to change. What I would like to have seen from the BIS is a Committee on Social Technologies and Banking, one that would formalise and give credence to a vision of the future that goes beyond capital adequacy to other forms of adequacy, adequacies in more modern customer engagement.  It raises this question: how does the wiki-world engage with the world of regulators?

I took away something else from this piece: how important being technologically competent is, and will continue to be, probably forever (or until the machines take over if you envision your future Terminator-style).

Here’s what Griffith says about Zipcar customers: “Our research shows that Zipcar members are highly technically savvy, reporting heavy use of computers, smartphones, social networks, and other digital devices and services.” The business succeeds because of technology and, of course, “a lot of self-reporting by customers.” Essentially, the customers make the business and they are comfortable with self-service in general, Griffith suggests, because of positive experiences over the years with self-service banking, self-service checkouts, self-service airline ticketing, and services like Netflix. Zipcar, I think, is at least as personal as the other self-service experiences they have had.

None of the “self-services,” including Zipcar, requires deep technical understanding, but they all require a level of competence (not to mention trust) with a variety of interfaces, including the iPhone, for which Zipcar has an app that does everything in the location and reservation process, including honking the horn of your rental car in the parking area to make it easy to find.

Competence is built on experience with technology, but is enabled by access to it. I don’t think lack of access to smartphones is a barrier to growth for such cool services as Zipcar, and I expect that the threshold for facility with technology is going to continue to fall over time and that all things technical will become simpler just because people want things to work right, easily, and fast with little work on their part.

But I do wonder (not worry, just wonder) whether we (I will include myself in this) whose jobs involve use and knowledge of new things technological almost as fast as they come to market have an insider’s version of the world, one that does not fit the rest of the world populated by billions who do not know or care about technically cool and useful things, but just want to survive. There are more and more groups, organizations, NGOs, governments, and individuals whose lives are dedicated to harnessing technology to reduce poverty, provide livelihoods, prevent human disasters, and more, and I tend to forget about them when the newest cool app appears for my Droid. These organizations provide both access and minimal competence that opens up technology to people in places that may not have much infrastructure to support more sophisticated uses. There are many great initiatives and endeavors by these groups; the first one I was aware of is txteagle, which gives corporations access to the 2+ billion literate mobile phone subscribers to perform tasks and gives those subscribers a chance to earn money or airtime for performing those tasks.

I did not know I was going here when I started this post and it certainly is a bit off track from the title, but it now occurs to me that technological competence is too often taken for granted by people like me because I have access. It occurs to me now that providing access to the billions without it creates the opportunity for competence, along with the opportunity for improvement; technology provides the platform.

But I have a different perspective, and believe that many brands (and companies) can succeed on Twitter without necessarily engaging in conversations, or being particularly active. Not only that, but I believe the hypothesis that customers necessarily want to be engaged in conversations with brands needs to be challenged, as I don’t think it’s true as a blanket statement.

I’ve been doing a lot of research on this recently, but today I’ll just provide a few different Twitter accounts that appear to be doing very well, in terms of followers, without engaging in conversations (or doing any of the other things most people are recommending they “should” do on Twitter).

@woot:  A quick glance at their Twitter page reveals they typically post once a day (occasionally 2 or 3 times). This post is a link to a daily deal. There is simply no conversation or two-way engagement. They have over 1.6 million followers (#90 overall, between Biz Stone and Penn Gillette), and have been listed 7,000 + times. This makes woot one of the most popular brand accounts on Twitter (out of companies that actually sell stuff).

@zappos: this account is operated by CEO Tony Hsieh, and Zappos is frequently mentioned as one of the leading companies in delivering compelling customer experiences, and engaging in social media. But if you look at his actual activity, there are few signs of conversation to be found. It’s mostly some quotes he finds interesting, a few links, and some seemingly random thoughts. He also doesn’t post that often – less than once a day. He has over 1.7 million followers (#72 overall, between inStyle and Serena Williams), and has been listed almost 10,000 times.

@mashable: Mashable is the online guide to social media. If anyone was to be using Twitter “correctly”, you think it would be them – and this account is run by Pete Cashmore, the CEO. It is popular – @mashable has over 2 million followers (#45 overall, between Pete Wentz and Mandy Moore), and has been listed almost 50,000 times. But again, just look at the activity – a continuous series of links to various articles. More active then the two examples above, yes – but conversational, absolutely not.

You might think I just cherry picked these examples, and that they are the exception to the rule. But I didn’t – there are many more examples where these came from. And as for the rule, well, I think the rule is wrong.

That social media can be used to engage in conversations is absolutely true, and many people and companies are doing that effectively. I don’t dispute that. But somewhere along the way, there seems to have been a near consensus emerge that:

a) two-way conversations is the only way to use Twitter.

b) two-way conversations is what every customer wants on Twitter.

I don’t believe it. The fact that so many people seem to be interested in so many accounts that do the exact opposite is rather telling on this front. And as more and more people engage on Twitter (and other platforms), and create more and more connections, with the potential for more and more messages, I truly believe we’re going to see more and more people realize that “conversations” isn’t what it’s all about.

Now, Cataphora is in the business of modeling “informal networks” within the enterprise for HR and operational efficiencies, as well as to monitor compliance with internal policies and external regulations. By analyzing the relationship between e-mail data, documents that are shared, calendar information, call logs, and people, Cataphora can assess employee productivity, uncover shadow networks, and map collaborative behavior. Digital Mirror offers some of these capabilities to the public for free by analyzing your archived data from Microsoft Outlook.

I ran Digital Mirror on my own Outlook data and came up with some pretty interesting results. A caveat I would add is that you need to have a lot of archived data for this to work well—several outputs such as “Blow-Off Scorecard,” “Buck-Passing,” “Temperature Gauge,” and “Loud Talking” didn’t work for me due to lack of sufficient data. Some of the other interesting outputs that did work are shown below:

Who have you spent quality time with?

Who have you talked with, about what, and when?

Who has been stressed out, and about what?

The goal of Digital Mirror in its current incarnation is to illuminate relationships, topics of interest, tensions, and hidden processes in the workplace. I think over time, digital reflections and analytics such as these will become increasingly important and, in many cases, baked into our both our personal computing as well as corporate processes.

As more data (beyond simply data from Outlook) is incorporated, I can imagine much richer, higher-definition mirrors. Aspects of our rich digital selves that are open for analysis include things like education; employment, and resumes; health records and government documents; search history; profiles on social networks; comments and posts on forums and blogs; and location information from cell phone signals and GPS-enabled devices. They could include aspects that we actively update like registrations for groups, associations, and publications, or aspects that we are not aware of like un-tagged photos of us on other people’s Facebook or Flickr profiles and images from closed-loop IP-enabled surveillance cameras.

Today most of this information is disassociated, residing in many different databases and in many different organizations. More often than not, the information is not under the control of the individual. In the future, we can envision a composite digital picture of the individual that will augment and accompany each human from cradle to grave. As the world becomes more instrumented, multiple machines—some under our control and others not—will be slicing our data and making observations about our activities billions of times each minute, in parallel.

Beyond optimizing processes and sparking what is likely to be heated debate about privacy and data ownership, digital reflections will also help people understand how they are perceived by others. With this knowledge in hand, we can go forth in the online (and offline) world making conscious decisions about how we want to represent ourselves in different contexts. Most people don’t step out into the real world in the morning without—at least briefly—consulting a mirror. Why should the online world be any different?

My first issue is with the word now. From my perspective, the customer has always been in control – the fate of companies providing products and services in a capitalist economy is ultimately determined by what customers choose to buy. In turn, the analysis shifts towards social media somehow giving customers slightly more control than they had before – a small, but important, distinction.

The typical argument is that as customers have connected with each other through platforms like blogs, Twitter, and Facebook, the opinions they share amongst themselves have increased in importance, while the typical “broadcast marketing” approaches have decreased in effectiveness. While I do believe there is some truth to this, there is another way to look at what’s happening.

For starters, if customers only wanted to hear each other’s opinions, they could do so without engaging companies at all – either in somewhat self-organizing fashion through Facebook and Twitter, or “neutral” services like Yelp. But many, many customers are also opting to directly connect with companies – liking, following, lurking in communities, etc. – through these very same platforms. In doing so, many are effectively asking companies to engage with them.

Second, being “in control” takes time and effort. I would argue that many customers may want to “take control” in relation to certain product and service decisions, for many others they are happy to be passive recipients of messages (and offers) from their preferred brands. For example, the #2 reason given for becoming a Facebook fan (based on a survey earlier this year) was to receive coupons. And while I don’t have time to go into it here, one of the consistent findings from my research is that customers like being “broadcast” to on social media more than many people think.

On a related point, I believe that many customers are being overwhelmed by all the brand-related conversations taking place. For example, many brands on Twitter now commonly send 30+ messages a day, responding to specific people. Many consider this to be engaging. But if you follow (say) 30 such brands, that’s over 900 messages a day – most of which will be of absolutely no interest to you. Perhaps the method will persist for many more years, but perhaps not.

Finally (at least for today), as “word of mouth” marketing has moved online, and more and more data is generated, it’s becoming ever easier for brands to monitor exactly what people are saying, thinking and feeling about various things. I personally believe that all this information points towards a world where many brands can be far more “in control” than they’ve ever been before.

Tying it all together, I’ve taken to asking what someone like Don Draper – the lead character on Mad Men – would think about the rise of social media if he was ported into 2010. Would he look at all the new tools and behaviors and say “wow, I can’t control anything here!” Or would he say “wow, I can influence, monitor and control things more than ever before!”

My sense is that it would be the latter – and many companies would be well served by taking a similar line of thinking. After all, to be in control implies having power; it is commonly said that knowledge is power; and all this information is giving companies more knowledge than ever before.

So what happens when people make professionally damaging mistakes with social media? It seems they either are very emotional about a topic and simply forget the facts of public and permanent, or they forget that what they write can be interpreted differently than how they meant it. The process of getting what we mean to say – what we think we are thinking – into text or video is complex. Even the very best writers and speakers can forget to imagine how what they are writing or saying may sound to an audience that does not share the same context with them. In a time when there are more public words in audio, video, and text than at any time in history, and so many attentive readers, it becomes harder and harder not to make mistakes. And when made, mistakes grow the more they are chewed on.

What fascinates me is that pundits and talk-show folks and now even politicians who simply state their biases and bitterness and anger openly seem to get away with it while often well-intentioned people who misspeak or just screw up their writing or speaking are driven from their jobs and vilified with language and criticism that used to be addressed to the most vicious of criminals – people who meant to do harm.

The warning about the minefield of social media still stands but perhaps we should start accepting that mistakes will be made and that every mistake may not be a fatal character flaw. After all, that may be you – or me – who is thrown onto the Mel Gibson pile at any moment.

Specifically, I was talking about surveys about Gen Ys and the conclusions being drawn, by us and by others, about them – generalizations really, not conclusions, e.g., that Gen Ys are closer to their parents than other generations; more altruistic/less altruistic; more resistant to authority; more interested in finding their own way; and so on. My wife’s friend countered that the survey could not accurately represent some people who probably are not surveyable, e.g., the Gen Y children of illegal migrant workers in Missouri, so no conclusions about Gen Y or even generalizations about them are valid because they are not likely to reflect the views of or apply to this subset of Gen Ys who are likely not going to be reached by a survey.

My understanding of her position is that unless 100% of the people you are targeting with a survey are included, the survey data have no meaning. Okay, I admit to losing it here in that discussion and just withdrawing. There was no argument I could muster against “perfect or nothing.”

I won’t argue that surveys reveal “The Truth” (if that exists), but data from statistically valid and well constructed surveys do reveal a reality that may or may not apply to everyone but that does exist.

I also admit that it was hard for me to argue my position because I am already suspicious of how accurately Gen Y surveys actually reflect the Gen Y population. I tend to rely on anecdote – which has little validity – as a touchstone to what the surveys reveal. I have two Gen Y children so I tend to ask myself whether survey conclusions about Gen Ys work for them. Sometimes yes, sometimes no. My children are more open by far than I was about their lives, but they do not reveal everything, nor do I want them to.

All this is really a lead-in to saying that survey data – about Gen Ys or anything else – at the very least provide something to think about and consider, even if the surveys and the data are always imperfect. To simply declare that we can know nothing unless we talk to everyone is too easy and lets everyone of us off the hook when it comes to digging into the why of everything. That said, I tend to validate survey data by the organization that does the work; like everything else, some are just much better than others at this. We at nGenera will continue to survey because we are curious.

Interestingly, the same could be said for many of the platform design projects currently underway in the Enterprise 2.0 space. In many cases, IT teams are designing and implementing collaborative software without the benefit of collaboration. Yet, collaborative business platforms suffer from many of the same challenges as sustainable building projects. They try to optimize for interactions across complex business ecosystems, usability of digital tools, and aesthetics. They also involve multiple stakeholders and risk costly lock-in if poor architectural or design choices are made early in development. I’m convinced design charrettes can enhance the performance of platform projects as well.

Here’s how it works. In a typical project, as time goes on, the ability to make changes that greatly impact resource allocation and design diminishes. At the same time, the cost of implementing changes increases as successive design choices create inflexibility and lock-in. The effort consumed by stakeholders and the allocation of resources typically follows a bell curve, so a large portion of the project unfortunately takes place during a time of diminishing impact and rising costs. Moreover, if you don’t get people involved early you tend to have a long tail of resource expenditure on after-the-fact customizations, modifications, and revisions.

In a design charrettes, the idea is to shift the project curve to the left so that more time and resources are devoted to planning and a significant portion of the decision-making occurs when the impact of changes are high and the cost of implementing changes is relatively low. Ideally, at the end of the project, the need for modifications would much lower since input from relevant stakeholders was baked into the original design. Since I’m a pretty visual learner, creating the graphs helped me understand how beneficial this approach can be.*

One of the arguments against charrettes is that they result in “design-by-committee” outcomes (usually meant as a derogatory statement, invoking images of the Homer car, designed for the “average” American) and design delays brought on by conflicting egos. In fact, we’ve seen some leading examples of where design-by-committee works great, including Local Motors and CrowdSpring. A good, recent post advocating for design charrettes is “A Camel designed by committee is a camel,” by LEED architect Rob Fleming, where he argues that, given the current state of the World, what we need is design-by-committee “camels,” not “race horses” by impresario architects. In terms of managing conflict, independent, third-party moderators and mediators also play an important role in steering collaboration for productive charrettes.

* Kudos to Jeff Ranson for his leadership in the area of design charrettes and his back-of-the napkin graphs that helped inspire this post.

Most of roles I’ve ever had in organizations have been, on a day-to-day basis, collaborative, so, in my experience, collaboration is not something new, despite the current popular urgency around it. What seems to be the chief hang-up for organizations is that collaboration is a “soft” activity that’s hard to measure and thus hard to justify putting resources into. We at nGenera have done some good research on collaboration ROI and how to measure it, but I have a suggestion: Stop looking for new metrics and measure what’s actually going on now in your organization. Your workforce is already working together, you just aren’t paying attention to the right things.

After more years of working than I want to acknowledge (my “career” is only anecdotal data, of course), I know that the vast majority of people want to share what they know (because that is often reward enough), collaborate every day with colleagues (though they might not label it collaboration), and are more than willing to surrender some control or autonomy in the expectation that others are doing the same and the outcome is better than anything they could do alone.

I think the “data” will show that your collaboration culture only needs some room to breathe; it’s already there in many parts of your organization and one good way to show it is in stories told by the people who are doing the work. Randy Adkins, who helped get AFKN off the ground, says AFKN success “metrics” are found in the stories people tell of how working together accomplished the mission. “We survey our community owners regularly, but the best impacts result from an award program that we have in place where communities tell their ‘stories,’ many of which demonstrate significant productivity gains. While it is not possible to roll them up in an overall number, the individual facts are very compelling.”

Does this make sense to you: finding, paying attention to, and measuring the collaborative activity that’s already going on in your organization? Looking for stories of collaboration as proof of its value?

But, if you must measure, here is something I found this week, a blog post on Cisco’s site that references studies on collaboration ROI: http://tinyurl.com/37kj5ty. I have not been able to find the Salire Partners report, but the Frost & Sullivan report, sponsored by Cisco and Verizon, can be downloaded here.

Full disclosure: I posted pretty much this same message last year on the nGenera internal site. I still believe it makes sense.

The significance of it is something like this: You used to organize around a supply chain and marketing. In future you will have to organize around an ecosystem that is diverse and somewhat out of the company’s control.

Stern points out that companies face a growing spectrum of stakeholders. We think of stakeholders as shareholders coupled to a little deference to employees and customers. NGOs meanwhile argue they too are stakeholders, but nobody quite buys that one. Stern says in fact the stakeholder community is much much wider. I’m inclined to believe he is right and yet think he is also not far reaching enough in this conclusions.

For the July nGenera members meeting I’ve been putting together a map of the ecosystem of one large global company and its initiatives to engender innovation in ways that look like CSR policy but which really come to light when you start to measure the ecosystem as a strategic platform for long term corporate growth.

The stakeholder community is in fact vast, though to date it has been treated as a PR issue. That means potential ecosystems have been marginalized and contained. And their value under-explored.

“In a survey of 660 senior executives around the world carried out by the EIU (Economist Intelligence Unit), almost half felt that leaving PR to handle contact with these new stakeholders would be a mistake. Greater engagement from top management supported by more open mindedness in the C suite would be preferable.” The article is here.

My argument is that these 660 executives are clearly waking up but haven’t yet drawn back the curtains. The stakeholder community – what we might now call the widest possible ecosystem – is a strategic asset. As the global economy fractures and as we learn to deal with multiple economic systems (from $5 a day African programmers to $2000 autos, to our own perhaps bloated production systems and product expectations), the ecosystem will become a dominant management mode precisely because this fractured global economy is not controllable.

Going back a decade we thought of ecosystems as “glocal” partner networks. Today we have to think of them as multifaceted and large, susceptible to management disciplines but able also to create the unexpected.

In short they are ways to plan the unplannable – a little like Apple have done with its Apps environment. Ecosystems bring the unpredictable into the planning zone. My advice to companies who think of stakeholders narrowly is to wake up to the new randomness of economic expansion. Casting the net over the stakeholder community is good strategy if you can bring yourself to live with this new reality.

Update: We’re back in action!

The rationale for both services – protection of the organization – is logical. People can and do make mistakes, and can and do engage in deliberate attempts to damage the reputations of their employers (I consider colleges and universities employers of athletes, but that’s another discussion).

I understand that what employees are doing on their own time and on their own pages, where transgressions often occur, can be problematic, but, aside from some seriously awful anecdotes about employees’ misbehavior or mistakes, I’ve not seen data on just how much employee transgressions have actually cost employers.

Personally, I would not feel comfortable knowing that I was being watched away from work. I do not surrender my personal views or friendships or history or social life to my employer when I accept a position.

I wonder whether work at some employers is going to become too much of a risk for some people – those who value their privacy, individuality, and freedom of expression (most people, I imagine). People need and want to work, which can put employers in control when it comes to privacy. If you love your work, you may forgo some freedom at the edges of your life to continue doing it but you also get paid in return for doing something you love. That is still (and I hate this phrase now that just about everyone uses it) a slippery slope. Where do you draw the line on your privacy? Do you stop posting political views? Religious views? Opinions about sports figures? Any and all photos? Do you simply start setting up private groups on social networking sites, vetting the invited friends by asking them to “sign” your own privacy agreement?

When it comes to personal social networking activities, I believe employees should be free from spying activities, regardless of how concerned an organization says it is about loss of IP or any proprietary info on processes, new products, etc. And, while I’m at it, I would view with suspicion any company argument that it’s those Gen Ys with little fear about privacy they are afraid of; I think most Gen Ys know the difference between telling everyone what they did last weekend (which, again, is another issue entirely) and posting information on Facebook about a forthcoming product or breaching confidentiality agreements.

In my opinion, spying on employees’ social networking activities and communications reveals weaknesses in the employer, specifically in its hiring and engagement skills and processes. If an employer does not trust its employees – and this, for me, is all about trust, nothing more and nothing less, regardless of the coating an employer may put on it – it will reap the deserved rewards: lower loyalty and lower engagement, both of which affect productivity and, some research suggests, are directly correlated with lower organizational performance and even lower stock price. With the job market loosening up, monitoring personal social networking activity might even something else: losing an employee or two.

I’m currently reading Jaron Lanier’s manifesto called “you are not a gadget”. While I find myself nodding along with some parts, and occasionally shaking my head at others, my most common reaction to each chapter is that I’ll need several months of quiet reflection to even form a coherent opinion (which, based on what I think I’ve read, is part of the point of his book). It is unquestionably the most thought provoking body of text that I have read this year – and I hope to respond to various parts of it, if and when thoughts hit me, over the coming months.

The part I’ve been thinking about most today is “The transition” section, within the “what will money be?” chapter (page 106). The general idea is to allow people to earn from their “bits” of contributions, such as photos, music, or articles. It’s posed in response to his (very valid) concerned that society is losing its way as the value of “bits” people contribute trends towards zero in the marketplace, and all the rewards (if any) go to the people that aggregate them. If this continues, there will be fewer and fewer bits to aggregate, of worse and worse quality, in a continuous downward spiral that could have disastrous long-term consequences. He explains the consequences, and proposes a few ideas on how to avoid them – but you can read about those in the book.

Why I find this, (and Jaron’s book in general) so interesting is that it’s challenging the new orthodoxy of “the wisdom of mobs”, working in conjunction with powerful algorithms, is superior to the judgment and intelligence of individuals. At first glance, one my primary research areas – prosumer-driven innovation, or customer co-creation – we seem to be right in his line of fire. But as I’ve studied it over the years, my thinking on the subject lines up directly with Jaron more often than not (I think).

This research area was born out of the book Wikinomics by Don Tapscott and Anthony Williams. As the sub-title of the book is “how mass collaboration changes everything”, the idea is often viewed as synonymous with the “wisdom of crowds”. But I’ve went to great lengths over the years to explain how this common interpretation of this is often misguided. It’s often not about a “crowd” collaborating in any meaningful way; instead, it’s about finding the few uniquely qualified minds within the crowd that are both willing and able to make an important contribution. While not a prosumerism example per se, the first story in the book – GoldCorp – is a great example of this. Rob McEwen didn’t enable mass collaboration. He opened up the data about his property in hopes of finding those few people in the world that might know the best way to find the gold. That’s a very big difference.

Such contest models have their own problems built into them, as Lanier references regularly in his book. But at least they point towards some sort of financial compensation for the people that have the best “bits” to contribute, and have very little to do with the problem associated with the “wisdom of mobs.” This indicates a very different set of opportunities, and potential problems. The key challenge, then, is to adapt the model to instances where it’s not a “winner takes all” contest – one where a larger number of people can be rewarded for contributing “bits” to the creation of a new product or service.

I’ve been hypothesizing about this, and waiting for signs that it’s happening, for many years. While much of my research focus has recently been on marketing (which also puts me on the bad side of much of what Lanier talks about), my academic background is in economics – and I have a strong belief that financial compensation for contributors and creators is absolutely vital to the long-term success any prosumer-driven models. But examples of it actually working have been few and far between. That is why I’ve taken a relatively keen interest in Quirky – which I just recently discovered.

Quirky is a platform for social production, founded by Ben Kaufman. The core idea is fairly simple. If you have an idea for a new product, you can submit it to the site (for $99 – which presumably provides a decent “filter” for idea submissions). Each week, a winner is selected (through some combination of community votes and design team input). It then moves into the “influence” phase, where the community can weigh in on everything from specific product design to the logo representing it. Once this phase is completed, it’s handed over to Quirky’s industrial designers and mechanical engineers to create a 3D render. Next up is the pre-sell phase, where a minimum number of purchase commitments must be made before the company invests in moving it into production. If that threshold is met, it then moves into production – hopefully allowing many of the people to cash in.

Why I say “many” is that Quirky currently allocates 30% of revenue from direct sales, and 10% from indirect sales, to the community. What exactly the allocation will be is hard to say (and the company is likely still figuring out the best way to do it), but some “ingredients” include submitting the winning idea (or name, logo, etc.), making insightful comments, voting, rating, and committing to pre-sales. All of this activity is rolled up into an “influence percentage”, which is used to distribute the money. The rest goes to the company itself, which as I referenced above does a lot of the heavy lifting in actually turning an idea into a market-ready product.

Now whether Quirky itself will succeed, I (nor anyone, in my opinion) can really say. I think the biggest challenge comes in terms of scale. As one might expect, the examples provided on the site (to show how much money can be made) typically involve two key assumptions – lots of products are sold, and your individual influencer percentage is high. The end result is lots of money for your effort. Obviously not everyone’s influencer percentage can be high. As (hopefully, for the company) more and more people engage, each individual’s potential influencer percentage might decline further still (in relation to effort applied). If the percentages are small, the potential rewards are low – and thus much of the incentive to engage evaporates.

But at minimum, it’s an interesting idea, and I believe such experiments are critically important to the evolution of web enabled, and prosumer driven, business models. Someday, someone is going to figure it out. And what I find most intriguing is that, at its core, Quirky appears to be trying to find a way to reward individuals for their “bits” of contribution – which I think is absolutely key to making this web-enabled world work, and appears to be something that Lanier might approve of. But the process by which they are figuring out how to do it, which will likely involve layering some sort of algorithm on top of what looks like a “winner takes all” competition platform, seems to be tie directly to approaches he typically disproves of (or not – I’m sure there’s many nuances in the book I’ll have to re-read to capture).

So I’ll personally wait and see – and perhaps even engage in the community to get a real feel for how it works, and whether my own mind is uniquely qualified enough to add value anywhere. But in the end, I’m hoping both Lanier and Kaufman are right – there are ways to reward people for the bits they contribute, and this can be done within the context of a social production model.

Cappelli lists the advantages of social media at and for work, and then quickly counters them:

• The lawyers will be all over every mistake by employees – “throwing up restrictions and imposing limits on the use of social media.” He mentions the, by now, old saw of risk, the inadvertent disclosure of proprietary information via social media. He fails to mention effective social media usage policies such as those at IBM and Oracle, which set clear guidelines for employees using social media. There are dozens of organizations with social media policies that, apparently, work well enough. Also, lawyers already make use of social media themselves.

• Cappelli dismisses the idea that social media are free. I agree here: they are not free because use means time and time is a cost. My response is: social media enable interactions that might never take place without them, may very well solve problems or get questions answered faster than any other means, and create enhanced engagement by improving employee relationships, particularly in global organizations. I’ve written about the USAF Knowledge Now platform’s ability to save time by enabling users to find the exact answer to a specific question and avoid recreating processes that have already been created. IBM’s platform Fringe serves, in part, as an expertise locator, and other organizations have similar platforms.
• Cappelli says it’s likely that employees will get too much information in answer to a question, making it difficult to make the right choice among solutions. To cite the Knowledge Now example again, when searching the KN database for information or advice, the top results that show up are those that have been validated through a rigorous, annual process. Essentially, the best advice shows up first. Validation is time-consuming, but the back-end results seem to make it worthwhile. There is no reason the same process cannot be applied to any internal social media platform. Clearly, reaching out to an outside network means responses are not going to be organized or validated, but I expect most employees are able to make decisions about which advice to follow after they have it if they trust the people providing it; after all, they knew too little before asked the question, so knowing more has to be better. Also, I should point out that there are good tools available now – collaborative filtering, rating systems, and trust networks that filter based on people whose opinions you value – that simplify the identification of the best answers to questions.
• Finally, Cappelli implies that the change in organizational culture required – “to make it work demands a very high level of trust and employee commitment” – is too much. His first example of why: employees may try to enrich themselves “at company expense” using social media. I would say that this has happened long before social media. I’d also say that, in my view, trust should already be part of the organizational culture? Is social media really a threat to trust, or is social media the tool that reveals how little trust really exists?

Cappelli concludes: “My guess is that we will gradually go back to something not that far from where we are now: A few jobs such as those in recruiting and sales where the focus has always been on outside relationships will use social media extensively. Other employees will occasionally ask their social network for help with work problems but will be wary of abusing outsiders.”

Some employers ban social media use, fearing the things Cappelli mentions and more. My question is: How engaged are their employees who use social media daily in their personal lives likely to be in an organization that says, “We don’t trust you and we don’t trust your judgment, common sense, and intelligence”? There is ample evidence of the power, efficacy, utility, and bottom-line results that greater employee engagement produces. My personal experience with social media is that it tends to draw employees closer to the company rather than away from it.

I know that employees’ work-time use of external social media sites and applications for non-work purposes often represents lost productivity; in my opinion, that behavior is better dealt with via policies, clearly communicated expectations, and trust than prohibition or banning or real-time monitoring of employees’ social media use.

I am not so naive to believe there is not social media abuse going on in companies. However, I don’t see a return to the good old ways – ever – because, for all the potential risks, the benefits to employees, customers, and others of the relationships formed and leveraged through social media outweigh those risks. It may take training and some trial-and-error experiences, but employees are wise enough to figure it out. That’s why you hired them.

Most marketers try to understand this collaboration space through sentiment analysis. This gives you a snapshot – are people positive or negative about my brand, product or company. I recently wrote this about sentiment analysis on my own blog:

“The problem of sentiment analysis has generally been something like this – people create double negatives such as not unkind, to mean a positive. And then there is the general sense that people are ambiguous in how they express what they mean.

My problem with sentiment analysis is neither of these. It’s the fact that companies need to connect with people in different ways rather than through a scaled up focus group or opinion survey; and that people are extremely granular in their sentiments. Companies need to know people’s ideas and beliefs at the granular level not at a polarized level.”

Clearly I erred here because sentiment analysis does not yield as much information as a focus group or opinion survey – in both those cases there is granularity, though in  my view the results are too easily manipulated or geared by the interviewer.

For example – and anyone in marketing can answer this: how often are brand recognition surveys consciously or unconsciously biased because the company paying for that work needs to show improvement?

What the web offers is a way to get at volunteered opinion and attitudes.

To that end I and a couple of colleagues have spent the past year developing the global attitudes project, which I hope to share with members of the nGenera/Wikinomics community over the coming weeks.

To do good web analysis means we really have to accept the validity of what people are saying, and accept the web as a bona fide collaboration space where people collectively give meaning to life in the 21st century -  an unparalleled exercise in meaning creation.

In the past meaning creation has been the job of intermediaries – philosophers, trades unions, politicians, writers, teachers, academics, and of course market researchers. But now we’re doing that for ourselves.

Look at it this way – how many studies do you know where researchers have interpolated meaning for us? Most trend studies and projections do this – telling us we are becoming more individualistic or more short term in our actions, or more multitasking, etc. Actually on the web people are telling us what they are and what they believe.

I think the narrative accompanying this new description of what people are about is something like: we still believe in human progress; we don’t necessarily believe society as it is now organized is a vehicle for that progress; we believe in individual betterment but we also believe we are part of an organic “world ecology” with life cycles that rise and fall. We might be in the fall phase so we need to work harder at renewing our human ecology.

I can’t present all the evidence for that in a short blog post but what I want to do is give a small evidence base for one term and one term only.

Before I do that – why is it important? The answer is the Web provides us with deep insights into how people are thinking. You have to care about that if you are in business. You can short circuit that understanding by using sentiment analysis – but be aware it is a short cut and lacks essential insights.

So: Throughout the recession people online have been making increasing use of the term betterment. We know that through a variety of data collections we’ve executed.

We analyzed the use of that term semantically, i.e. asking what meaning are people attaching to it. Here’s a graph:

The graph actually shows you the terms people attach to the term “life” when you use an evidence base made up of blog posts referring to the term betterment. Why does it show “life” at the core?

Because that is the term most used in a selection of blog posts that top the Google blog search returns for the term betterment (as of Mid May 2010).

Sorry if that is confusing. This is an early result and we may yet refine the technique, data, analysis and visualization. I wanted to share it as an example of what can be learned from the web when you go beyond sentiment and polarity.

What it means is that when they discuss betterment, many people in this sample use the term “life” at least once. They use “life” more than they use any other term (there is a refinement to rule out the possibility that people always shoot the breeze about “life” and that rather than betterment is a driver).

And when you look at the semantic family of terms around “life” you see the graph above. It’s mainly constructed of terms that evoke relationships.

What is not on here because the terms are not present enough are terms like God, i.e. people attribute more to the core human temporal aspects of life than they do to religion.

We began this whole area of study with a review of about 20,000 comments on “recession and recovery”. In that study we discovered that people in blog comments tended to interpret recovery and recession in terms that evoked the human side – i.e. by referring to people. In parallel we collected data on how the financial press reported recovery and recession and found, by and large, they focused on institutions.

I make that extra point because the two examples taken together probably tell us we need to retune how we speak about marketing, the web, social media and analytics. Once we look at the world from the vantage point of this constantly emerging philosophy we have to put people and realtionships first.  Marketers need to engage with this non-polarized way people express themselves. More at a later date!

The reason I believe this is fairly simple. When I think of the word “control”, I immediately think of the word “power”. When I think of “power”, I think of “knowledge” (as in the latter is the former). When I think of “knowledge”, I think of “information”. And when I think through what social media enables, from a marketing perspective, time and again I see better information, more knowledge, and more power. In turn, that looks like more control to me – rather than less.

I have more thoughts on this, but wanted to stop there and see if anyone believes this “customer is in control” argument, in relation to social media, might be wrong. And if you want to hear a few more of thoughts on these (and related) marketing subjects, check out my webinar on Tuesday.

I commented in another post that I thought Facebook members would get over the latest privacy dustup and that very few would leave. Now, I think we see why so few are concerned about the Facebook Privacy Settings Scandal: they apparently either really don’t care about their privacy when active in social networks or they don’t yet consider Facebook a public activity (if the latter is the case, they really aren’t paying attention). It may take one or more catastrophic-impact privacy events that affect millions on social networks before there are any mass departures from any of the popular ones.

Some other interesting findings from the report indicate serious differences between individuals and businesses when it comes to data privacy. While some 70% of both business and individual respondents agreed or strongly agreed that organizations have certain obligations when it comes to individuals’ data in the areas of security, disclosure, and dealing with loss of data in their possession, between 40% and 50% of the 5,500 business leaders surveyed:

• Are either unsure about or actively disagreed with giving people the right to control the type of personal information their companies collected about them or about how the companies used that information. My initial responses are “Wow!” and “I guess I am not terribly surprised.”
• Do not believe “it’s important or very important to limit the collection and sharing of sensitive personal information, protect consumer privacy rights, prevent cross-border transfers of personal information to countries with insufficient privacy laws and prevent cyber crimes against consumers and data loss or theft.” That’s stunner #1. I would hope I am not dealing with or a customer of those companies.
• Do not consider important or very important common organizational privacy practices such as “notice, consent, access, redress, security, minimization, and accuracy.” That’s stunner #2. I guess I’d better actually read those disclaimers from now on.

Accenture suggests that industry differences, cultural or regional differences, regulatory differences, and/or lack of clarity about responsibility for data protection and privacy within organizations may be at the root of the business attitudes reflected in the three bullet points.

At this point, it seems, many companies consider data on customers to be their data not the customers’ data. I admit this is a complex issue, but I think there has to be some common ground that enables companies to use the data and individuals to control it – of course, I am not sure what that is yet.

There’s much more in the report, including five key findings I’ve not really addressed here. To my knowledge, this is the first comprehensive survey on this topic that captures both the business and individual perspectives.

Cloudmade is a great example of “business as platform”. From the ground up, day 1, Cloudmade’s founders set out to create monetizable services around free mapping. That’s what lines them up against the likes of Google and Nokia, true behemoths of the mobile space. For those who are new to mapping, briefly, mapping’s popularity began with in car navigation in high end saloon cars (BMW for example) where the nav app could be charged out at a fraction of the saloon car price and still be worth $3,000.  That was less than a decade ago. Navigation is now free, and maps – or geo-data – are the next big wave of content and applications.

Cloudmade’s platform makes it easy to create any kind of map, or geo-data-related app for any mobile device or web service. Apps range from games to locators to, in future, opportunities that might include delivery companies coinciding with their customers in mutually convenient places rather than delivering door-to-door, and devising more of an any time any place offer.

Still, you might say of Cloudmade, just one more API project, and one more ecosystem.

The difference is that Cloudmade is out to create the reward structure for its eco-system, rather than leaving all those app developers (10,000 of them now) to sink or swim in the market. Because Google sees dominance in advertising as its right (in return for all those things it gives away like free search) Cloudmade’s business plan also involves out thinking the Google business model.

Nick pointed out that Google is fantastic at creating new tools around its free services and giving these away, all in the name of increasing ad revenues. What it tends not to do though is create business opportunities for app developers (if you are an ad words professional then you know it does create opportunity in the ads world).

Cloudmade’s unspoken pitch is therefore to take the moral framework of free beyond what Google has enshrined in its business practices. This is not just about giving stuff away so the platform owner can pocket billions of dollars. It is driven by a model where everyone shares the revenue growth.

Cloudmade could then be in the process of redefining what it means to be a platform business. Not only does it reach beyond Google, it also extends the platform model beyond Apple, who, like Google, do not help apps developers monetise their apps beyond the iTunes download.

In Cloudmade’s model apps developers can sell their apps (on iTunes or elsewhere) but also have ad revenue potential – by using the Cloudmade SDK’s they are inextricably linked to Cloudmade’s platform, which includes a contextual advertising service. Cloudmade is in fact an ads aggregator that places geo-contextual ads for merchants via the growing network of Cloudmade developer apps (700,000 people accessed Cloudmade geo-apps in March and the figure is growing at 15% per month).

Two more points are worth making around the Cloudmade model.

First it reflects the fact that open collaboration carries responsibilities. Cloudmade’s founders are openstreetmaps‘ founders. Openstreetmap – with Cloudmade’s support – provides the means for anyone to upload mapping information. For “mapping information” read anything that relates to a place.  Openstreetmap and Cloudmade are crowdsourced map, direction and place related databases and the rewards structure needs to be fair.

Secondly a new wave of entrepreneurs is taking free in new directions.”Cloudmade’s support of openstreetmap is driving the cost of data collection down to zero,” says Nick after recounting how much Nokia paid for mapper NAVTEQ ($ 8 billion).

By driving the cost of data collection towards zero Cloudmade can fight on Nokia’s turf. By creating an ad network for its app developer network Cloudmade represents a low cost competitor in the world of Google.

Looking to lessons for the larger economy, I had a few days this week in Stockholm where the rumour is that the large European mobile infrastructure players are facing price reductions of 30% per annum from Chinese competitors.

If that’s the case then finding radical ways of taking cost out of US and European product is an imperative as the economy begins to revive. The question is does it mean that more companies need to work through the moral framework of free, and the reward structure of the eco-system platform. Somehow, somewhere we need to claw back the idea that we can export cost reductions and instead begin devising new pacts around prosumer and developer activity.

In 2007, nGenera Insight began writing about what we call “hothouse innovators”—a new breed of global enterprises in Asia, South America, and Eastern Europe that are being built under fertile conditions for accelerated growth, including: A vast pool of low-cost, and increasingly highly-skilled labor; a rapidly growing group of wage-earning domestic customers with few preexisting expectations or brand loyalties; active government involvement in the private sector; and greenfield IT infrastructures that lack legacy complexities.  By exploiting these conditions, global hothouse innovators are developing business models that allow them to move up the value chain, compete with firms in mature markets, and threaten the profit structure of incumbents in almost every industry.

The Economist article touches on all of these elements, but expands the argument by introducing additional factors worth discussing. Specifically:

• Superior positioning for M&A: Rapid growth has made resulted in cash-rich enterprises with access to highly-developed, public and private capital markets. Additionally, large conglomerates benefit from consolidated ownership which helps diversify risk and increase flexibility. The combination of these two forces is allowing large emerging market companies to use M&A not only to reduce cost or achieve economies of scale (which they have in many cases), but rather as a way to acquire name brand recognition, skilled workers, and global distribution channels.
• “Frugal” innovation: We tend to think of innovation as “more bells as whistles,” but this mentality is base on the notion that consumers are going to shell-out more money to get the latest-and-greatest gadgets. In contrast, hothouse innovators are dealing with a population with highly-constrained budgets. In many cases, innovation is aimed at the bottom of the pyramid and focused not on growing wallet-share but rather turning non-consumers into first-time consumers. With low margins, the emphasis is on volume and utility; “new and improved” really means “simpler and cheaper,” as well as “tough and easy-to-use.”
• New Western investment: Think of it as fertilizer for the hothouse. Companies like Cisco, General Electric, Microsoft and many others are investing heavily in emerging markets, and China and India specifically. As The Economist report notes, “Companies in the Fortune 500 list have 98 R&D facilities in China and 63 in India.”

To understand how truly competitive some of these emerging companies are, it helps to study some leading examples. Consider the following, pulled from nGenera’s previous research on the subject:

• Foxconn: Taiwan’s Foxconn, a once lowly parts manufacturer, is challenging the traditional value chain model by designing and assembling entire products¾often leveraging new innovations and intellectual property to achieve this. In 2007, Foxconn earned $2.6 billion on $38 billion of revenue; its top five competitors combined lost $1.6 billion on sales of $57 billion. Foxconn’s success was bolstered by a record high 81,820 patent applications in 2007; 49,007 of which were granted. By comparison, IBM – the leader in US patent applications –at the time held approximately 40,000 active patents worldwide (out of over 2 million granted since 1974).
• ICICI Bank: In less than 10 years, and from a standing start, India’s ICICI Bank ICICI has become India’s second largest retail bank, leading in every retail product market that it targets. Using e-lobbies and customer self-service, it drives over 70% of its transaction volume through electronic channels in a country where Internet and mobile phone penetration are below five percent. The company’s IT systems—which are generally based on servers instead of mainframes—are free from complex legacy issues and cost less than one-tenth of developed-country benchmarks. Moreover, the bank operates on 90-day business plans and established its UK subsidiary in only 65 days.
• Tencent: Although few people outside of China have heard of it, Tencent QQ, China’s premier integrated platform for social networking, media, and mobile gaming currently boasts 400 million active users (the same as Facebook) and 2009 annual revenues of over USD $1.8 billion (more than double the between $600 and $700 million 2009 revenue estimated for Facebook). Perhaps the most remarkable figure around Tencent’s financial model is that over 75 percent of revenues stem from value-added services (paid for by users), not advertising. The company’s virtual currency, Q-Coin, which is used to purchase products (such as shows, online “pets,” games, and music) has become so widely accepted that it is also being used to purchase physical goods from other online retailers.

But opportunity is not without risk. These waters be uncharted and filled with pirates. As The Economist notes:

“These markets are among the toughest in the world. Distribution systems can be hopeless. Income streams can be unpredictable. Pollution can be lung-searing. Governments can be infuriating, sometimes meddling and sometimes failing to provide basic services. Pirating can squeeze profit margins. And poverty is ubiquitous. The islands of success are surrounded by a sea of problems, which have defeated some doughty companies. […] This combination of challenges and opportunities is producing a fizzing cocktail of creativity. Because so many consumers are poor, companies have to go for volume. But because piracy is so commonplace, they also have to keep upgrading their products.”

What this means is that not only are emerging market companies benefiting from hothouse conditions, but they are also operating in markets that pose fairly substantial barriers to entry for Western firms. At a macro level, what we’re seeing is not only a new wave of innovation, but also a global redistribution of wealth. The Economist says, “The emerging world is enjoying the most spectacular growth in history. Its share of global GDP (at purchasing-power parity) increased from 36% in 1980 to 45% in 2008 and looks set to grow to 51% in 2014.” Another source, Worldmapper, provides a visual representation of how this might play out:

World wealth: 1990 to 2015
(map area shows relative wealth)

So, is the West doomed? Not by a long shot. But, we probably have a lot to learn from what’s going on in emerging markets. Established companies have to rethink innovation in a way that focuses equally on features and branding, as well as cost, simplicity, volume, distribution, durability, and accessibility. Enterprises can also develop strategies for open innovation that broaden the scope for disruptive ideas and increase the potential for high-yield opportunities.

Nokia is a much-to-be-admired company, the global leader in smartphones, feature phones and ordinary mobile phones. The N8 is a superbly engineered product – 12.1 megapixel camera, Carl Zeiss optics, HD video, an onboard editing suite, Dolby Plus surround sound, 16 GB of built-in storage extensible to 48GB., and free Ovi maps and navigation. You get the picture. And it will cost less than $500 unsubsidised.

The strategic issue  for Nokia though is how to get away from its engineering culture and how to connect with the many communities that love mobile phones for very different reasons.

I emphasize the “many communities.” Back in late 2009 there was speculation that the mobile phone world would have to begin  customising its brands more to fit specific user groups – phones for older people with, for example, specialized health monitoring capabilities, phones that do augmented reality better than they do photography, phones that do great social networking, phones that are great apps windows, the Blackberry for business.

The N8′s special claim to fame is as a camera phone and I’ll come back to that. Nokia’s engineers are an exceptional bunch of people but do they and senior management need reminding that the iPhone is phenomenally successful at the same time as being a very poor multitasking phone with a pretty lousy camera and brittle casing?

Just as the auto-industry is fragmenting as it becomes clear the majors can’t satisfy niche demand propelled by personalization, the mobile phone industry knows that the success of Apple’s iPhone is a sign that customization and personalization are now more important than engineering excellence. No manager, executive or designer is unaware of it – though we’ve seen a succession of ultra-high functionality phones launched recently, with a phone-based Sony playstation device to come.

The mobile phone user community has moved on from engineering as an end-in-itself though and Nokia is very aware of that. That’s why in April last year Nokia donated its operating system to the open source movement. It’s also why Nokia has an open innovation strategy and is experimenting with Ideastorm-style consultation in its Design by Community program. Despite ticking all the right externality and consultation boxes, Nokia is marketing the N8 as a bigger-is-better product.

It is built on the Symbian ^3 platform, the  open source version of the Nokia smartphone operating system. In fact it is the first product built on this new open source OS.

The world was not holding its breath to see whether “open” meant different, but for a number of reasons I’m disappointed not to see the values of openness incorporated in the phone or its messaging.

Back in late 2009, Symbian expressed the view that the race to bigger = better probably wasn’t the smartest way to drive an OS platform:

“The major reason for adding more megapixels is the “more=better” algorithm in the mind of many consumers when it comes to the numbers on the box.

What does all this have to do with Symbian? Well, to the extent that the platform could define software for the camera sub-system, should it be optimized for a pragmatic megapixel range and an attempt made to educate consumers about the pros and cons of technology choices?

Or, alternatively, should the OEMs that use that platform to build products decide what they think they can sell and drive the architectural requirements and consumer messaging accordingly?”

In other words OEMs can build clear and easy messages around 12 megapixel cameras but could alternatively help build out the opens source platform in a more balanced and productive way by scaling back on the optical engineering and taking time to interact with the customer base to explain why 6 Megapixels is just as good.

What the N8 represents, if you look at the general movement towards a more personalized relationship between customers and firms, and if you take into account the many values people are now bringing to product choices, is Nokia’s traditional values and strengths. Those values have a powerful presence in the market. After a critical hammering during 2008 and early to mid-2009 Nokia began to grow market share again in late 2009.

But those open innovation and listening projects they’ve set up have to be there for a tangible reason. The N8 though is driven by engineering considerations:

“The team behind the Nokia N8’s camera want to set new benchmarks. Not just for the quality of the still image camera, but the video recording as well. Across both uses, the team have been optimising each specific element of the device’s camera for as many use cases as possible.”

In an April 2010 survey, phonerated.com readers scored the Apple 3GS as the best American camera phone – it’s a 3 Megapixel camera – followed by the Samsung Renown, 2 Megapixel.

Users, in other words, don’t necessarily want bigger and better. Photography is there to share so getting an image from a phone to an upload site or to Facebook at the lowest possible data cost is where the priority might conceivably lie. It’s time consuming and potentially expensive to connect with 12 Megapixel HD imagery which brings us back to values – and the value users put on connectivity.

I’m a supporter of Nokia and felt it was much maligned as the iPhone captured everyone’s imagination – but I have to say that customization, personalization, connectivity, and a broader set of purchasing values are the reason companies like Nokia adopt open management programs. A couple of years back I interviewed a leading concept car designer about his company’s lack of an eco-car. His answer was they hadn’t yet worked out how to express ecological sensibility in a car’s appearance. I sense Nokia is similarly stuck. Executives have mandated an open approach without quite knowing what it means or how to embrace it yet.

How to express opennness in a phone’s functionality and design? How to embrace openness so that the product tangibly represents an output of a new and different approach to management, R&D, production design and marketing? These I think are the questions Nokia and the other OEM’s are yet to ask.