"The "what" supersedes the "how"
By understanding "what" our organizations or enterprises do, we develop powerful insight into how strategic advantage can be created. If the "what" of modern organizations is the ability to gather information, think about it, process it and create knowledge that is then turned into products or services, wikinomics can be used to open up the organization, connect to customers and employees alike and innovate at breakneck speed.
Mass collaboration can support cross-diciplinary activities but it can also facilitate inter-company collaboration thereby enabling an industry to become more like an ecosystem.
It is not new that as companies identify peer partners they will spin off support functions from the core of their firm. It took IBM 40 years to modularize the computer and produce the PC. They did such a good job that once the modularized PC was established as an industry standard, the assembly of computers became decommoditized - anyone could do it. Profit generation shifted from computer assembly to processor manufacturing and then to the function of operating system design. IBM had outsourced these components to them Microsoft and Intel, in hindsight it wasn't the best move for IBM but the world reaped a tremendous benefit - affordable computing.
Business webs comprised of small, nimble firms that play collaboratively to spin out and create value networks can become highly competitive at the industry level. Operating as a swarm, they will learn, adapt and innovate faster without stifling corporate hierarchy. Behavioral rules and industry standards will be created in an emergent process.
These webs will change continuously through cycles of commoditization and decommoditization. Traditionally siloed or vertically integrated firms will likely start becoming more like these networks or part of them. By their nature, swarms will be difficult to compete against and impossible to kill. If cockroaches are genetically programmed to "scatter" as part of a defensive strategy that confounds potential enemies, perhaps wikinomics will give rise to the industrial version of "cockroach" strategies.
As competitive advantage shifts from traditional sources of advantage such as size, scale and the ability to marshall capital and toward more intangible capabilities such as the capacity for organizational learning, knowledge creation and the cockroach-like capability of innovating-on-the-fly, are we potentially heading toward a future of small businesses and cottage industries? Has the concept of scale been obsolesced?
Corporations largely exist as risk mitigation structures - they are legally immune to the sorts of risks partnerships are liable to, and explicitly quantify the risks that investors in them take: nothing more than the cost of the shares. Risk mitigation is needed when individuals do not possess sufficient capital to produce efficiently on their own.
But the rise of individual wealth, and therefore the willingness to take greater risks, combined with greater knowledge and access to information for individuals, will continue to reduce the need for large enterprises and economies of scale.
For starters, economies of scale matter more in the physical world (of manufacturing) than in the services world. It doesn't take an aircraft hangar to house a consulting unit. As technology advances, the process of finding better and better ways to produce physical products inevitably results in decentralization of production - most of the tools of 19th century factories, for example, can now be contained in a well stocked garage. Most things that used to be made out of steel can now be made out of plastics and composites. Production itself is becoming more organic.
Several examples can be given:
Airplane bodies are manufactured in very large facilities because of the enormous fixed costs of the molds and basic metal-forming equipment. But if we can get the requisite properties through simply arranging different metal foils onto plastic or terracotta supports, and heat them at low temperatures, great economies of scale aren't necessary.
Silicon micro-electronics production currently requries $10 billion fabrication plants. But if research efforts at nano self-assembly succeed as they apparently are, the $10 billion capital requirement may shrink to $100,000. Such advances would create opportunities for a micro-electronics cottage industry with competitors identifying and creating products for highly specialized niches.
As the capital requirements of industrial initiatives in a wide variety of sectors shrink, currently unfathomed opportunities for innovation and entrepreneurship emerge.
Page Last Updated: Jun 4 10:03am by Lance B Young