I was kicked out of my first economics class (almost 20 years ago) at Carleton University for arguing with the professor that "all assets are scarce." His argument, and the argument of most classical economists, is that the rarer an item is, the more it should cost.
This fundamental assumption is based on basic supply and demand theory, and it's the reason, we're taught, why diamonds and gold cost more than sparkles and silver. My argument was that his theory was too small-minded (in retrospect, probably not the best choice of words for a freshman to use on Day 1 of classes) as some assets don't diminish when shared. My best example came from a quote by George Bernard Shaw: "If you have an apple and I have an apple and we exchange these apples then you and I will still each have one apple. But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas."
Knowledge Shared is Knowledge Doubled
Twenty years ago, my professor called my argument naïve. Yet today, the sharing of non-diminishable digital assets (for example, knowledge) is the cornerstone of economic production (for example, Wikipedia, Google). In the 21st century, knowledge is fast becoming the key asset of production. But, unlike its 20th century counterparts (land, capital, labour), knowledge may be seen as a resource that can be shared without being diminished.
Yes, there is a cost associated with knowledge transmission, development and deployment, and, yes, some information is only valuable when proprietary (e.g. your PIN on your ATM bank card) but our world is no longer solely based on the scarcity of physical goods.
Further, as Shaw's quote illustrates, knowledge shared is knowledge doubled. So what does this mean for traditional competition? For intellectual property? For proprietary data? Can an organization increase efficiency and innovation by shifting from competition to co-operation? By moving from closed and proprietary to open and shared?
Leveraging the Crowd
Goldcorp Inc. provides a famous example. Goldcorp was once the runt of the gold mining litter, under-producing and underperforming. Then, at a seminar in Boston, its CEO learned of a new concept, crowdsourcing. Crowdsourcing is a modern way to describe the process of taking an activity previously executed internally by an organization, and pushing it outside the venture's walls to a community of interested parties. When you post a book review on Amazon.com you are technically helping Amazon crowdsource book reviews. Goldcorp turned the industry on its ear by publishing on the Internet its proprietary geodata, globally challenging anyone to help them find gold on their property. The result, higher returns, higher performance, and the top spot of the gold industry.
But Goldcorp is not alone in leveraging the crowd. Threadless, a crowdsourced T-shirt maker from Chicago, has zero excess inventory and the highest profit in the industry. Google (which leverages community data to rank pages) does the same with its search engine. And of course Wikipedia toppled Encyclopedia Britannica as the almanac of our planet using crowdsourcing. Based on these, and many more examples, it appears that many hands do make light work.
Knowledge Networks to Drive Performance
But crowdsourcing (e.g. open innovation) is only part of the collective intelligence story. Crowdsourcing often generates unique perspectives and innovative knowledge, but innovative knowledge by itself isn't enough to shift the paradigm. The other half of the story is how best to organize ourselves to maximize performance based on knowledge flow. For that we turn to Network Topology.
Topology is the study of mapmaking (e.g. how the land can be described). Longitude, latitude and elevation are often the key measures of geo-topology. Knowledge Networks are the intrafirm relationships that exist over which knowledge assets can flow. Key network measures often include: centrality, homophily, strength of ties, number of ties, distribution of ties, and so on.
Using these measures, Knowledge Network Topologists can map how an organization's knowledge flows from person to person and answer the fundamental question: If networks are the org chart of the 21st century, what shape should your organization adopt to maximize performance?
While still an emerging field, there are some fascinating early conclusions from this research. Conclusions that any person, team, firm or industry should be aware of as they evolve their knowledge networks to drive performance.
University professor, entrepreneurial evangelist & and venture capital expert Sean Wise will address the above at the Partnership's Building Our Future event on Tuesday, November 8, 2011 at the Halifax Marriot Harbourfront in Halifax.
All attendees will receive an electronic copy of Professor Wise's next book (due out early 2012): Hot or Not: How to know if your business idea sucks!