Collaborate With the Potential Enemy

Harness customers' interest or they'll find a solution without you

The biggest threat to your business may not be from your competitors, but your own customers. Whether it's teenagers sharing MP3 music, buyers' clubs aggregating purchasing power, geeks developing software, or lonely singles creating a club to meet each other, the Internet enables people around the world to organize themselves more easily than ever before.

In the digital era, self-organizing systems have enormous implications for businesses. Smart managers should be asking: "Is there a chance our customers could work together via the Internet to build a product that competes with ours? How do we prevent this and harness the energies and ideas of our customers to cocreate our product or service?"

Self-organizing human systems are as old as Homo sapiens, dating back to the development of language. Our natural instincts are to collaborate, share knowledge, and give advice. It is also not unusual for a company's customers to work together to improve commercial products. Car enthusiasts have long helped each other cajole a little more horsepower from their engines. Camera clubs help members take better pictures.

But with the Web, this collaboration is lifted to a global scale with virtually unlimited membership. Knowledge exchanges occur in real time, at the speed of light. The Internet accelerates the system's metabolism. What may have taken centuries in the past can now occur in weeks or even days.

Linus Torvalds, a legend in his own time, uses the Internet to work with volunteers to develop a computer operating system - one of the world's most complicated products - that many feel is superior to Microsoft's. Torvalds did this without the benefit of a multibillion-dollar R&D budget, executive strategy committees, HR department, stock options, and all the rest.

Designers - whether of physical goods (like cars and toothbrushes), technology (like computer software), or abstractions (like business strategy) - tend to have a linear view of the design process. Define your needs, create a high-level design, then a detailed one. Create a prototype, then the item. Test before deploying on a large scale. And for heaven's sake, keep the team as small and as focused as you can, because there is a law of diminishing returns in design teams.

Software engineering has, for nearly 30 years, sworn by Brooks' Law, which states that as the number of program developers increases, the number of bugs increases exponentially. Beyond the minimum number required to get the job done, adding people produces a result that is late, of inferior quality, and over budget.

How did the motley Linux crew overturn Brooks' Law? Open-source software evangelist Eric Raymond proffers three design process principles to help explain this phenomenon:

• Treat your users as codevelopers; it's a least-hassle route to rapid code improvement and effective debugging.
• Release early. Release often. And listen to your customers.
• Almost every problem will be identified quickly given enough testers and codesigners: The fix will become obvious to someone.

It makes me wince when managers grumble that the Internet simply deluges them with customer email, driving up their customer service costs. Instead, they should embrace the customer interest and capitalize on these energies to develop better products.

Another corporation tapping into the self-organizing community is the Lego Group toy company. In 1998 the company began selling a new toy called Mindstorms. The $200 build-your-own-robot kit has 700 bricks plus gears, motors, lights, and touch sensors, along with a proprietary microprocessor.

Soon after Lego released the kit, a graduate student reverse-engineered the Mindstorms software and posted it on the Internet. Then another student developed a different Mindstorms operating system that he also posted on the Internet.

In the wake of these developments, amateur programmers self-organized - cranking out innovative Lego applications that ranged from slot machines to photocopiers. They set up a Web site for collaborating on, and sharing, these applications. Lego could have launched an attack on this breach of its intellectual property, but that would have been dumb. The company benefits hugely from the work of this volunteer business web: Each time a customer develops and posts a new application for Mindstorms, the toy becomes more valuable.

A direct upshot of this customer involvement is a greatly expanded consumer market for Lego. Originally a children's toy, Lego Mindstorms now has broad appeal, particularly for university students and business professionals.

These examples of self-organizing communities are happening while the Internet is in its infancy. Participants communicate largely by email and file transfers. But the Internet is starting to soar in ubiquity, bandwidth, and functionality. Soon, much more sophisticated collaboration and knowledge-management tools will be available, and far more complicated projects will be possible.

It's easy to imagine any digitized content being developed this way - for example, a text book. In fact, the Open Source School Book is attempting to create a comprehensive set of K-12 textbooks on this open-source model. The model works for many other sectors - including those developing physical things. Perhaps volunteer engineers could cooperate on the Internet to create a next-generation automobile. Or a car company such as General Motors could harness the creativity of its own customers to codesign such a car. It could build an online collaboration arena that presents 3D visual prototypes. Participants could include style-conscious customers, fleet buyers, knowledgeable service technicians, supply chain partners, dealers, car buffs, and industrial designers.

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These participants would be motivated to provide their advice freely because they love cars, enjoy interacting with other members of the online community, and gain pleasure from influencing the design of a future car. When GM adopts an idea, it publicizes the news to the community, enhancing the contributor's reputation. The manufacturer returns the favor by providing buyer rebates based on quality and quantity of contributions.

Encourage self-organization among your customers and others. If you play your cards right, customer collaboration, rather than threatening your company or rendering it irrelevant, can enable you to create better products and services.

Don Tapscott [dtapscott@itemus.com] is chair of itemus inc. (www.itemus.com) and coauthor of Digital Capital (Harvard Business School Press, 2000).