Orrin Woodward LIFE Leadership Team

Winner of the 2011 Independent Association of Business Top Leader Award; Orrin Woodward shares his leadership secrets.

Wikinomics – Creative Destruction

Posted by Orrin Woodward on January 17, 2008

I am reading a book called WIKINOMICS by Tapscott & Williams.  My good friend Bob Dickie III, the CEO of Team, bought it for me for Christmas.  I have not finished it, but the first couple of chapters were enlightening.  The world is changing and the command and control organizations are going the way of the dinosaur.  Peter Senge stated, “The only competitive advantage is your organizations ability to learn faster than the competition.”  I
have stated, “The only way for your organization to consistently learn faster is to engage as many minds in thinking and learning as possible!”  How can you get any faster than engaging the entire world to help you?   Read what the authors said in WIKINOMICS:

A new kind of business is emerging—one that opens its doors to the world, co-innovates with everyone (especially customers), shares resources that were previously guarded, harnesses the power of mass collaboration, and behaves not as a multinational but as something new: a truly global firm. . . The new art and science of wikinomics is based on four powerful new ideas: openness, peering, sharing, and acting globally. 

Let’s discuss the first concept today and as I read further, we can
discuss more of the concepts.    When you think of openness, you think of candor, transparency, freedom, flexibility, access, and sharing.  The old industrial age companies believe in confidential information, hierarchical structure from top to bottom, authoritarian command and control, and contracts to control people and other companies.  Today’s informational age companies that make their boundaries porous to external ideas and human capital outperform the dinosaur companies that rely solely on their internal resources and capabilities.   Here is what the authors expressed in their book:

Yet another kind of openness is exploding: the communication of previously secret corporate information to partners, employees, customers and shareholders, and other interested participants.  Transparency—the
disclosure of pertinent information—is a growing force in the network economy. . . People and institutions that interact with firms are gaining unprecedented access to important information about corporate behavior, operations, and performance.  Armed with new tools to find out, inform others, and self-organize, stakeholders are scrutinizing the firm like never before.

Customers can see the true value of products better.  Employees have previously unthinkable knowledge about their firm’s strategy, management,
and challenges.  Partners must have intimate knowledge about each other’s operations to collaborate.  Powerful institutional investors who now own
or manage most wealth are developing x-ray vision.  And in a world of instant communications, whistle-blowers, inquisitive media, and Googling, citizens and communities can easily put firms under the microscope.  

Leading firms are opening up pertinent information to all these groups—because they reap significant benefits from doing so.  Rather than something to be feared, transparency is a powerful new force for business success.  Smart firms embrace transparency and are actively open.  Our research shows that
transparency is critical to business partnerships, lower transaction costs
between firms and speeding up the metabolism of business webs.  Employees of open enterprises have higher trust among each other and with the firm, resulting in lower cost, better innovation, and loyalty. 

The old adage, “information is power” has changed to “information shared is empowering.”   So why do some companies conceal and control all information from their customers?  I talked earlier of the benefits of social capital, but a firm that controls all the information loses its ability to create social capital.  The market today will reward the companies who are open and punish companies who are closed.   It is hard to trust a person or company who
keeps secrets from others.  This is why I love the NY Times test.  If what you are doing cannot be written on the front page of the NY Times, then why are you doing it?   Joseph Schumpeter described free enterprise in a concept he called, “Creative Destruction.”    Creative Destruction according to Mr. Schumpeter is what makes free enterprise so effective in creating long-term
wealth.  The underlying principle is that old wealth and ideas will be replaced by new wealth and ideas.  The new creations will destroy the old businesses.   This has happened numerous times over the years.  Look at the record industry; how is that idea doing today?   How about the carbureted automobile?  Is anyone making money with carbureted cars today?  New ideas and money moved in to create CD’s and fuel injectors. 
The opening thesis of the WIKINOMICS book is: the future will be created by the open and transparent companies and the firms who guard their information will be destroyed.   I strongly believe the future belongs to the company who will learn and adapt the fastest.  Slow companies who guard all the information necessary to improve the company are committing corporate suicide.
Is your company, job, or business in the (Open) information age or the
(Closed) industrial age?   I advise you to take Mr. Schumpeter’s principle of Creative Destruction seriously—it will make all the difference whether you are created or destroyed financially in the information age.  God Bless, Orrin Woodward

One Response to “Wikinomics – Creative Destruction”

  1. […] Like they say, “You make your habits and your habits make you.”   In the spirit of the Wikinomics book, I am going to open up the discussion on habits for all.  Here is an article discussing some […]

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