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From Exponential Entrepreneurship

Introduction

This is a book about a world in motion. In writing about the impact of social networks on business models, I am by definition shooting at a moving target: Social networks are not going to change the way work is done in industrialized and semi-industrialized economies; they already are changing the way work is done. But the shift toward new models of work, labor and business is not yet well understood. Indeed, some of the core principles at work have been, to date, only half-articulated by scattered handfuls of business thinkers, writers and bloggers; more often, the paradigmatic shift that is under way is discussed in terms of dispensing management advice to traditional corporations struggling to understand and integrate the new “Gen Y” or Millennial employee into their work force. XXXXXX Nowhere have I found an authoritative study on the more profound issue of how these Millennials – and more particularly, their understanding and use of technology – is changing and will continue to change the way businesses are formed, how workers are organized, and how products come into being in the 21st century.

So I have set out to write such a book. And though I have the advantage of drawing on the work of many others in this field – with particular gratitude to philosophers and writers such as Roy Williams, Thomas Friedman, XXX, XXX, XXX David Meerman Scott and XXX – this project probably has had more in common with high-speed sports photography than most writing efforts, at least in the sense of trying to create a cohesive picture amid a blur of nonstop motion. Daily, the paradigm I am studying both redefines itself and gathers speed. Within the past week alone, for example, rock bands Nine Inch Nails and Radiohead announced plans to release new albums directly to consumers – charging only what buyers are willing to pay for their music – and Google announced its acquisition of Jaiku, a Twitter competitor from Finland. A few months ago, Apple released its new iPhone – and in so doing, unleashed a virtual blizzard of reverse-engineering that already has generated new applications, unsolicited by Apple, for the product. And in the coming weeks, a community of open-source developers will release Drupal 6.0, the latest milestone in a global, collaborative effort that hearkens back to Linus Torvalds and the Linux software development model. Though none of these events are related, in the strictest terms, they all speak volumes about the way industry already is being changed and a new spirit of independence from traditional, management-driven and closed corporate structures. It’s not that the actors in these examples have formed new industries, but rather – as with Radiohead, Nine-Inch Nails and Madonna, for example – the market leaders in traditional industries, sensing the new attitudes dominant among their mainly youthful customers, have seized opportunity as it arrives and allowed their own revenue models to be shaped by the buyers’ cultural outlook. It is no accident, then, that with this youth culture set to become the dominant cultural force in the workplace, decades of business management theory and practices rapidly will be disrupted. Let’s take a closer look.

== Reverse Engineering and Blenders: The iPhone Phenomenon ==

On July 28, 2007, hundreds of thousands of technology zealots – many of whom had camped out overnight on concrete sidewalks -- thronged cash registers around the United States to buy Apple Inc.’s newest device, the iPhone. With its pre-release advertising, slick demonstrations and some smart marketing, Apple turned the iPhone release into the most successful consumer product launch of the last 10 years – and unwittingly unleashed one of the most aggressive reverse engineering projects in living memory. But what happened next was even more interesting. Within days, some 250,000 of these acolytes were – stunningly – cracking open their brand-new devices (each of them costing from $500 to $600 on initial launch) to see what made them tick. Unforgettably, this curiosity led at least one iPhone buyer (and fan of robust kitchen appliances) to ask the now-immortal question: “Does it blend?” Comical as some of these results might seem, the wave of destruction had been made quite necessary for many software developers and hackers among this early adopter group by Apple’s stated corporate position: the iPhone was closed to outside modification and applications. No source code would be shared. This proved a low hurdle, however, to those who saw their own potential market opportunity in the guts of the device. Three weeks after the iPhone’s launch, the first new rogue applications were being released (the first was a terminal application allowing users to log in to other computers via the Internet). Software developers around the world, sharing tools and insights through Websites and chat channels, organized themselves in loose cadre to build on the work of others - prohibitions be damned. My personal guess is that the cadre that broke its way into the iPhone was at least a hundred times the size of the group that Apple employed to build the phone in the first place. Ultimately, what occurred was a decentralized revolution of reverse-engineering that was unleashed by none other than Apple itself, as a byproduct of its natural business practices.

A New Utility Grid So what does this have to do with the way business dynamics are changing? Everything! Beyond the blenders and the YouTube videos, the principles at work in the iPhone reverse-engineering explosion already are widely applicable to numerous other industries, and they will only gather force as the Millennial generation becomes more ingrained in the Western work force. Amazon.com founder Jeff Bezos touched on this notion recently1 when he disputed the viewpoint that the Internet represents another California gold rush -- something that enriched a few but left slim pickings for the latecomers. Instead, he compared its present stage to the introduction of electricity into American households in the early 20th century. Though networks of transmission wires strung across the United States originally were intended to light factories and homes, extending the daily work period, entrepreneurs rapidly came up with new applications to take advantage of the electrical grid. One of the first, the washing machine, brought labor savings directly into the household. And demand for such products accelerated expansion of the electrical grid. In much the same way, the Internet both compounds and secures its own rapid pace growth. Every day, new uses of the Web drive business capabilities to points that were considered impossible only two years ago. New ways of doing business, new ways of communicating, and new forms of collaboration on product creation emerge every day. As an early adopter of communications technology -- and an Internet user since 1989 -- I have been watching this trend evolving for years. In one project, predating the iPhone example, I assembled a team from nine locations around the world to build one of the largest website systems in the State of Texas system -- on a shoestring. My group used tools like Google Spreadsheet, Skype and email to coordinate efforts, and the Website they built in 2006 -- for the Texas Building and Procurement Commission -- is now one of the most powerful content management systems available, with something on the order of 5,000 active pages in use. The project succeeded not because I had the best project managers or the best tools at my command, but was able to organize individuals in a way that capitalized on our loose connections, our ability to act independently and our 24x7 work schedule.

Unleashed from ‘Labor’

It would be easy to argue that this paradigm applies only to the software world, and not to less technology-oriented industries. But to this I say “bunk!” Modern, industrialized economies are no longer “labor-centric” so much as “knowledge-centric”: Every process in an industry with any competition has come to be focused on the issue of how the industry creates knowledge, shares it, coordinates and collaborates around it. Yet, given that many of us have been trained to work hard, long hours in a “labor-centric” tradition, we often overlook this. Nevertheless, there are few labor-centric industries in the Western world that have not been heavily automated, and new definitions of “work” are taking shape in a world where someone can come up with an idea, launch a website, and sell the company within months for more than $1 billion.2 With the creation and sharing of knowledge at the center of this new Internet-based work environment, the same forces that quickly unraveled Apple’s prohibitions on iPhone technologies also are being used to build fresh new industries -- while disrupting industry incumbents. Consider a few examples that show how deeply the new work dynamic already has penetrated into the traditional industrial fold.

[[Image:AREA EXAMPLE DETAILS Politics Extreme democracy From the way funds for political campaigns are raised, to how candidates interact with questions posed to them from constituents, citizens around the world are shifting the dynamics of governance into their collective control. War Fourth-generation warfare This concept, originally discussed by U.S. war planners and researchers, has drastically changed the dynamics of how wars are fought and won. In 4G warfare, small, loosely connected groups – such as discrete groups of Sunni insurgents and jihadists in Iraq -- are able to exert considerable control over territories and actors, inflicting significant attritive damage on much larger foes. Automotive industry Electric cars Although there has been strong resistance by major industry players in making electric vehicles available to the masses, enthusiasts are coordinating efforts and building vehicles – using electrical car models that are being widely shared in an “open source” fashion. Higher education Massachusetts Institute of Technology MIT has made available to anyone with an Internet connection and a web browser the ability access its top-tier education materials. Health care The Farmer Model Disgusted by what modern medicine wasn’t accomplishing in fighting infectious diseases among Haiti’s poor, Dr. Paul Farmer built the “Partners In Health” model- giving hope to many around the world that health care crises in both the first and third worlds can be effectively addressed through a new organizational model.3 Software Linux There are countless examples of open-source projects with products equaling those of their incumbent rivals in quality and features. Linux has shown that tens of thousands of software developers can be coordinated to put out a product strongly preferred by business users around the world.]]

Area: Politics Example: Extreme Democracy Details: From the way funds for political campaigns are raised, to how candidates interact with questions posed to them from constituents, citizens around the world are shifting the dynamics of governance into their collective control ??????? – this doesn’t tell me much that’s important. Give an example of an organization, candidate, something. the example that you gave is pretty cool from the other day- questions are being asked by individuals across the US that are being posed to candidates and then podcast out to the net... this was a great example... canidates are talking directly with individuals- less intermediated by the media. YOUTUBE democratic debates -- individuals are increasingly mistrustful of the mainstream media in its “gatekeeper” role, are demanding and receiving more direct access to candidates through channels such as YouTube, WSN radio, blogs and more. Area: Automotive industry Example: Electric cars Details: Although there has been strong resistance by major industry players in making electric vehicles available to the masses, enthusiasts are coordinating efforts and building vehicles – using electrical car models that are being widely shared in an “open source” fashion. EXAMPLE OF ONE? .hmmm... i don’t have a good one off the top of my head. there is an example of a car that is being designed in an open source manner... I will have to punt for now... can we hold on this one?

Area: Higher education Example: Massachusetts Institute of Technology Details: MIT has made available to anyone with an Internet connection and a web browser the ability access its top-tier education materials. HOW IS THIS DIFFERENT FROM MORE GENERIC WEB-BASED TRAINING COURSES (UNIVERSITIES) OR THE OLDER MODEL OF RELEASING POPULAR COURSES/LECTURES TO CONSUMERS VIA AUDIO OR DVD? IS MIT A MARKET-MOVER IN THE EXAMPLE YOU DESCRIBE?.the “market mover” is that they are releasing EVERYTHING at MIT. All of their courseware is being released. they are creating a disruptive environment by displacing second class work with their content. This means that there are kids in Africa with network connections that at some level have access that they did not before. It is all about ACCESS.

Area: Software development Example: Linux There are countless examples of open-source projects with products equaling those of their incumbent rivals in quality and features. Linux has shown that tens of thousands of software developers can be coordinated to put out a product strongly preferred by business users around the world. PAVING THE WAY FOR LATER EFFORTS LIKE DRUPAL – OTHERS? WAS LINUX AMONG THE FIRST TO ORGANIZE THIS WAY?. Linux is the most notable, not the first. The GNU foundation was the first to really do this... Linux just took it to scale the farthest... the GNU organization, though, and Richard Stallman (spelling) deserves the biggest credit for the original idea... but it is not about one person... it is about an idea that got shared a bunch... and many people, recognizing that their software had no other opportunity started releasing it in many different ways... this is what is interesting about the notion of a software project being a “non-rival” good... and many people benefitting from it.

Area: Medicine Example: Farmer Model Details: Disgusted by what modern medicine wasn’t accomplishing for infectious diseases for Haiti’s poor, Dr. Paul Farmer built the “Partners In Health” model- giving hope to many around the world that health care crises in both the first and third worlds can be effectively addressed through a new way of organizing health care’s constituents.3 WHAT ARE THE PRINCIPLES OR PRACTICES USED IN THIS MODEL? . let’s leave this for later... the main thing is that the community plays a part in it... I do not have the best data on this example... I recognize it to fit the mold, but I do not know enough about it to say that it is one or the other.... To provide a very simple example, author and venture capitalist Guy Kawasaki used these paradigmatic forces in preparing and releasing his recent book, The Art of the Start: To come up with a compelling book cover, he held a contest for artists around the world. This is a perfect example of how a community can be established around a topic and the shared social interests of that community can be leveraged to produce work that has value. In this case – and many others around the world – the social network exists as a co-creator alongside the original author, visionary, or businessperson.

Navigating a Flat World In this sense, it is easy to agree with Thomas Friedman, whose book The World is Flat points toward the chaotic disruption to traditional business models. As Publisher’s Review sums up: …. cheap, ubiquitous telecommunications have finally obliterated all impediments to international competition, and the dawning 'flat world' is a jungle pitting 'lions' and 'gazelles,' where 'economic stability is not going to be a feature' and 'the weak will fall farther behind.' Rugged, adaptable entrepreneurs, by contrast, will be empowered.” My goal in writing this book is to help entrepreneurs and industry incumbents alike to become adaptable and empowered, and avoid the fate of flat-world roadkill. I have drawn from a number of works, listed in the bibliography, that analyze in great detail the trends that are under way. In the coming chapters, I will share some high-level analysis of my own, but my chief goal is to provide a vision of the future of business while proposing some tools and best practices to help existing businesses and entrepreneurs shape their responses to the chaos. In writing this book, I have drawn from my background of 20 years in leading- and bleeding-edge technology startup environments. My background has established me as an entrepreneur who easily recognizes important trends and assembles teams around them -- and then executes to bring our shared vision to life. The new social architectures that I speak about in this book are still at very nascent stages, but that does not mean they should be dismissed. In 1994, a few friends and I were talking about e-commerce and how people were starting to buy products from the Internet -- but it was years before this trend was widely acknowledged. In fact, even after we launched the Dell Computer Corp. e-commerce engine in 1996 (selling over $1 billion in computer equipment), Business Week in 1998 still asked the question: “Is eCommerce just a passing fad?” The same will likely hold true for our current discussion of social networks and their impact on business dynamics. My perspective on business also owes a considerable debt to the martial arts, which includes a deep study of Aikido. The notion of resolving conflict without resorting to violence, as well as having a principled and balanced approach to responding (rather than reacting) to life-threatening situations provides useful guidance for businesses that will need to respond to the chaos of the flattening world. This book is organized into three sections. The first is a primer on the business theories relevant to the current trend of social networking as it shapes the business environment. The next is a discussion of best practices and leading questions for those who are attempting to form or use social networks -- or business ecologies -- to build or advance products. Please note that I have not framed this as a “how-to” manual specifically, since one of the guiding principles of ecologies is that they form organically -- they can be seeded and nurtured, but not engineered from the top down. Readers of this book may find ways to innovate and improve upon the practices mentioned here -- and if so, that’s great! Please share them with me by posting comments to my blog, at www.exponentialentrepreneurship.com. As I said, it’s a world in motion and a moving target -- and I’d like to keep this conversation going as we practice and learn more. This book will conclude with my vision of the future, as the wave of disruption impacts and changes the business practices in use today. Briefly, I foresee two symbiotic life forms: Networks of entrepreneurial companies that form ecologies to support each other (example: Bootstrap Austin), and innovation networks anchored around larger organizations (example: iPhone and Apple). Both entail a fundamental shift in the psychologies and approaches to product formation that are familiar today. With that said -- the Internet and disruptive cadres of competitors are not stopping to wait for us, so let’s hop right into the discussion. I hope that this book will help you implement solutions that can immediately improve your company’s or community’s bottom line. �