August 24, 2008 Phil


I recently had the opportunity to go back and re-read a favorite book of mine call Wikinomics by Don Tapscott and Anthony Williams. It was re-release in 2008 so it seemed like a good opportunity to rejuvenate my mind on the topic of collaborative thinking. Tapscott and Williams do a great job of demonstrating how traditional business models are under attack by growing collaborative structures that leverage open sharing of information. They believe that the future for all business is a global model that involves open sharing of intellectual properties (IP) with the goal of increasing innovation. What made the read more interesting this time around is I could compare the book’s 2006 predictions to 2008 realities. It’s amazing how well they called it.

Tapscott and Williams discussed the Apple iPod and sighted how Apple was under attack by a small group of enthusiastic programmers who want to hack their product. They discussed how a traditional approach to manipulation of a product would be to fire off a lawsuit and shutdown the offenders much like the music industry has done with illegal downloads. In 2006 Apple didn’t know how they were going to deal with this issue. In 2008 we see their response in the iPhone and iTouch products.

Apple looked at the effects of taking a defensive stance on iPod abuse and instead of launching a war with their customers and enthusiasts they decided to collaborate with them and build a better product. Apple looked at the music industry and saw how companies like Sony are alienating their customers. Sony’s defensive position on music and downloads has put them at odds and in some case in court with the people who buy their products. Apple realized it had to find a better way to meet its customer’s demands and create a revenue opportunity. They had to innovate.

Rapid innovation is no easy task. Traditionally it involves a team of company engineers who brainstorm, invent, develop, test market, re-work and launch new products. It can be a lengthy process spanning years and costing millions of dollars. Given today’s rapidly changing global playing field, it’s extremely risky to invest “the farm” in R & D. Today smart companies are doing their homework by asking their customers what they want before they build it. They’re listening and learning before they invest. Apple did this when they embarked on the re-design of the iPod and the development of the iPhone. What they heard completely changed the product, challenged the business model and ultimately lead to one the biggest innovations in the history of the company.

Apple created hackable devices. They didn’t go out there and broadcast it, but you can bet they intended to have it happen. Apple realized in 2006 that their enthusiasts, their market influencers, want a piece of hardware they could customize. They were already doing it so it was quite obvious where the new device’s development had to go. Apple used a collaborative approach to developing these products. They listen to their customer and found a way to give them what they wanted without bankrupting the iPod division. They could have very easily locked down their device and issued cease and desist letters to their customers. Instead Apple developed a software operating system for handhelds that allowed their customers to write their own apps.

As a result the market has exploded with innovative new tools for the iPhone and iTouch. Apple’s R & D for iApps has become a revenue generator as opposed to an expense. They now have a global network of millions of software engineers who can respond to their customer’s demands for iApps 100 times faster than a group of Apple engineers. Apple simply shares the revenues with the developers and approves their products. The new collaborative model has lead to a windfall for Apple who just announce $3o million in revenue in the last 30 days from iApps and is projecting a gross revenue of over $325 million on the year.

Apple leveraged the collaborative approach by sharing some of their IP with their customers in order to gain the knowledge they knew existed in the iPod community. By sharing their technology they have built a massive new R & D department that doesn’t require parking space at head office. This group develops applications because they can and because they want to, not because they’re being paid for it. People love their iPhone and iTouch. Christ, I love my iTouch and 3 years ago if you had of asked me about Apple I would have told you it was junk – pretty package with nothing inside! Today I see them as one of the most innovative companies on the planet.

You have to wonder if Steve Jobs didn’t read Wikinomics in 2006 because the direction Apple took parallels perfectly with the Tapscott and Williams model. I think I’ll give Jobs a ring and ask him!

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