Friday, April 20, 2007

Coolhunt #4: Thursday, April 19, 2007

Coolhunt Log #4
Thursday, April 19, 2007

On Stage:
Scott Cooper, MIT researcher with the Sloan School of Management, co-author of
Coolhunting
Steve O'Keefe, moderator

Leading the Coolhunt today is Scott Cooper.

SCOTT: I thought we would start today at the Creative Commons website. It's not a blog, but it is a starting point for what we talked about yesterday. We wound up at a website called freebeer.org and we talked about a group of people in Denmark who had developed a recipe for beer. It's not just a copycat of Budweiser. For instance with Mozilla's Firefox, where anyone has access to the source code and can essentially innovate on top of that.

WEB: http://www.creativecommons.org

MODERATOR: And develop a better recipe.

SCOTT: Or a different recipe. The idea is that everything is shared and credit is given where credit is due. But the motivation is to build the best mousetrap, not necessarily to make money. So the beer is really analogous to that and we looked at all sorts of beer. On the Free Beer website, there's a link to Creative Commons. Creative Commons is a very interesting concept. This is essentially the legal website for the notion of just what it says on the top: "Share, reuse, and remix -- legally." It's a way to let authors, artists, and creators of intellectual content actually produces legally viable documentation that allows an artist the sort of open source equivalent in writing, codified in contractual-type language that typical copyright and patent holders hold. This is speculative on my part, but I believe one of the objectives is to legitimize this kind of sharing within the framework of the proprietary world. In other words, to make it easier to relax the rights on certain works and to encourage the kind of works you're talking about. And to destroy that regime from within. This is what the Worker's Movement used to talk about in the 1860s.

The reality is that if you're going to do something in an open source way, you don't really need this kind of legal documentation. You just have to trust that the people who are going to use it are going to use it in the ways you stipulate.


MODERATOR: I do have some questions about Creative Commons. Is this a place where I bring content and choose from a menu of rights alternatives and more or less stamp my content with that?
SCOTT: What you can do is go to this website and apply for a Creative Commons license to a work. So people register their (mostly) online and some offline work here. Then you can come and ask to license the online work or whatever work it is. And essentially, you get a Creative Commons license, which is based on copyright, but the difference is the Creative Commons copyright allows you to do all types of things that typical copyrights don't allow you to do. It allows you to treat the work as if it were not copyrighted.

MODERATOR: Are there any big corporations who have decided to rescind their rights on information and to allow it to be copyright-free through Creative Commons?

SCOTT: It's mostly smaller enterprises, but there are examples of companies doing similar things. For instance, not too long ago IBM released a whole slew of its software, relinquished 500 patents in 2005, and proposed a patent commons for royalty-free, open source software development. What IBM did was give it away, seeding the initiative. They identified 500 U.S. patents (or its counterparts in some other countries) in the beginning of 2005, and basically said, "Do what you want with this. We want to establish this platform for people to do what they want with these patents we've developed." In the world of business journalism, and reasonable people who can speculate reasonably, IBM released stuff that would not hurt its profit making venture. While that's probably true, I don't think it minimizes the significance.

MODERATOR: It was fair to say it was a cautious first step, but definitely more than some companies have been known to do: When forced to reveal source code, some companies basically put junk out there that makes it very difficult to use the code.

SCOTT: Right, that's a good point. I think what IBM is doing is certainly in the spirit that's becoming part of the innovation world. Part of unleashing the power of collaboration by putting out there the problems that they're trying to solve and sharing with the swarm everything that they have thus far in their attempts to solve the problem and have whomever happens upon it try to help, where companies actually post problems and offer tens of thousands of dollars to those who can help fix the problem. For example, Innocentive.

WEB: http://www.innocentive.com

MODERATOR: "Innocentive," sort of like innovation and incentive mashed up. I'm there. It has a lovely little atomic logo.

SCOTT: This was started by a pharmaceutical company, Eli Lilley. It's now in lots and lots of industries. You can see right there on the front page how it works. A company posts a challenge. Such as this one, searching for a synthetic root in organic chemistry. If you can do it, $40K is waiting for you.

MODERATOR: People are offering financial incentives to solve problems.

SCOTT: Exactly. What this is illustrating is sort of the breakup. These are all part of a piece even though Creative Commons is not exactly the same. They're all showing breaking up the monolithic black box problem solving or innovation. There are a lot of famous examples of people from the most unexpected places winning the prize. I remember something like a schoolteacher in rural Australia won $50K for solving a problem that the scientists hadn't been able to crack. A guy teaching at a third-rate university in Kazakhstan solved a chemistry problem.

MODERATOR: The Wall Street Journal had an article about a million-dollar prize and a Russian youth solving an "unsolvable" math problem. He declined the prize! What I think came out of your book for me is that companies benefit and society benefits when people stop holding their knowledge so closely and instead toss it to the wind and see what happens. Is that a fair summary?

SCOTT: Yes, that really is what Peter and I think and we've taken this idea further. We've got an article in the current issue of Sloan Management Review called "The New Principles of the Swarm Business" where we've taken some of our ideas in Coolhunting and gone even further and tried to apply the principles of coolhunting and cool farming to how a business in the future might best succeed. The three principles are: 1) Gain power by giving it away, 2) Share with the swarm, and 3) Concentrate on the swarm, not on making money. The idea is that you should innovate and share, and you probably will end up making a lot of money. It's almost Zen-like.

MODERATOR: That's interesting. What you're providing is evidence.

SCOTT: The development of the World Wide Web is a good example. It happened in all the ways of coolhunting, one of which was the people who propelled it forward did so with the motivating factor of wanting to see the idea to its fruition. They're all worth a lot of money now.

MODERATOR: Is it possible to drill through this site to see how this meeting of problems and solutions happen?

SCOTT: Sure.

MODERATOR: There's a section for seekers who have problems and solvers who have solutions. Which side would you like to drop in on?

SCOTT: It tells you what Innocentive can do for you. If you want to see what the actual challenges are, you go to Innocentive Challenges on the menu.

MODERATOR: This is also a networking site as well.

SCOTT: I think it might be interesting to continue with this thread and go to a site called Rite Solutions.

WEB: http://RiteSolutions.com

SCOTT: This company has a kind of innocentive internally. We're seeing this more and more as well. It's an internal idea and prediction market that they call "Mutual Fun." They call it a marketplace to harvest collective genius. Basically, people who work there are given $10K in pretend money to invest in ideas that employees float on this market. One is for emerging technologies; it's called the SpazDaq. Technologies outside the company might acquire. "BOW JONES" is for products they might consider doing themselves. Savings Bonds are ideas for saving money or making the company more efficient internally. Anyone who works at Rite Solutions can come up with stock. The basis is their collective intelligence about whether or not they think the ideas are good. What Rite Solutions has done is throw out the ideas to everyone and see what people think about it, but they're not necessarily shopping for the solution but shopping for the collective intelligence of their employees to see if it makes sense to invest real money. What do people think about the ideas? They create an "expectus" instead of a prospectus. People review that. There's a ticker that scrolls across all the computer screens in the company in real time. They gauge the direction of the senior managers from gathering this collective intelligence.

MODERATOR: Why do you think that the addition of an exchange or more or less a gambling-style interface would encourage this sharing of knowledge in a way that not having that structure doesn't?
SCOTT: I think part of it is that it's fun to do it this way. If Peter were on the call, he'd use his standard phrase, "It always makes a difference if you have skin in the game." I think what Rite Solutions has done is create a way of having skin in the game that doesn't cost anyone anything but has real potential economic benefits. What we don't know about specifically is the degree to which if the prediction works correctly and they end up making a business decision that turns out to be tremendously profitable how the originator of the idea benefits, but I have no doubt that they do -- financially.

MODERATOR: Is there a certain threshold number of people who have to play in order to get the results that are statistically relevant as opposed to just a couple of employees?

SCOTT: I think Rite Solutions has a lot more employees. I think there's a high level of participation. I don't have a specific number, but definitely the more the merrier -- especially when the swarm comprises knowledgeable, smart people who are innovators and have specific knowledge.

MODERATOR: It looks like they have created a variety of games that they market to companies who want to pull out the marketing consciousness of their employees.

SCOTT: These are not just for their own employees. They create collaborative games that their customers use.

MODERATOR: This is very interesting. There's been quite a bit of research in gaming and how game theory plays in terms of business development. It's sounding like what Coolhunting is telling us is that when you play the game by giving away and spreading it around, those are the people who win the game.

SCOTT: That's a very good point. If people want to read more about mutual fun, they can go to businessinnovationfactory.com. There's a search function. Put in the name of the CEO of Rite Solutions, Jim Lavoie. One of the articles is called "Stories of Innovation" and it's about Lavoie creatively inspiring employees as a source of innovation.

MODERATOR: I have a side segue here, about something in the news today. There was a piece in the Wall Street Journal commenting on an article in the MIT Sloan Management Review. Isn't that the same issue your article is published in?

SCOTT: Yes.

MODERATOR: Four marketing experts at MIT's Sloan School of Management found that companies often didn't understand how consumers were using their products. When they actually looked at how, they found out different information than what they originally thought -- basically, finding the right job for your product.

SCOTT: They're actually not MIT researchers, but it was published in the MIT magazine. They are Clayton Christensen, author of The Innovator's Dilemma and instructor at Harvard Business School, Scott Anthony, President of Innosite (Clayton's consulting company), Gerald Berstel, a researcher in Chicago, and Denise Howell, another researcher in Chicago.

MODERATOR: This strikes me as dovetailing very nicely with what you've been talking about in that they quote Peter Drucker: "The customer rarely buys what the business thinks it sells them."

SCOTT: I think more businesses are figuring this out. Peter and I have written about some interesting ideas. I recently did some research for some MIT researchers. Design-inspired innovation in which he discusses a very interesting example of this, Lego. Lego was really hurting a few years ago, but reinvented themselves, and in some ways financially saved the company. Customers can go to the Lego website and design their own product. We give you the customer, the platform is the ubiquitous Lego block. "User-driven innovation" is what the scholars are calling it.

MODERATOR: In your book, you mention the 3M company and a study that was done there. Customer suggestions were 80% more profitable than those of the designers working at the company.

SCOTT: Yes, something along those lines. I'm trying to remember the exact number.

MODERATOR: It seems to suggest, "fire the designers and hire your customers and you will have a more profitable operation." I know it's not that simple but it's an interesting study, certainly. It questions what it means to be an expert. Whether expertise or being able to tap a hive is more valuable.

SCOTT: It's really a hot topic right now. It goes under a lot of other names. Eric von Hippel at MIT, author of Democratizing Innovation, pointed out that if you put "user-driven innovation" into Google, you get quite a number of hits.

MODERATOR: That terms sounds like an individual thing. But what you're talking about in the book is letting hundreds or thousands of users interact with each other.

SCOTT: Our focus is much more on how swarms of people interact to create innovation. We use all sorts of examples all the way back to our consummate "cool farmer," Benjamin Franklin. If there were a tagline for our book, it would be "More Ben Franklins!"

MODERATOR: In many senses of that word. He's on the $100 bill, isn't he? "It's all about the Benjamins." In your case, it's all about the Benjamins in the role of cool farmer.

SCOTT: A cool farmer is someone who takes our idea of coolhunting and plays a more proactive role. If a coolhunter is someone who zeroes in on ideas and finds someone responsible for the idea and watches them and figures out how to find what's going to become the next big thing, the cool farmer is someone who immerses himself in the swarm and plays the role of promoting swarm creativity. He personally engages in creating the idea of what's cool through collaborative innovation, but really tries to make something happen without playing a starring role. The key point is that, in order to function best in these networks and come out at the other end, you have to function like a galaxy.

MODERATOR: You're asking people to give up any financial and power motivation, and if they do this they will have more power and more stature.

SCOTT: For cool farming, we've identified four principles that we think explain what it means to be a cool farmer. One is power by giving it away -- most important -- you gain your power from sharing the power and we're talking about ethically used power, not raw power.

MODERATOR: A more successful designer is able to tap the hive of the customers, not necessarily the one who has the training of a designer.

SCOTT: A good example is the inventor of the Linux operating system. He gives credit to all fellow Linux programmers and doesn't take credit for himself. Or Benjamin Franklin in Philadelphia, where his ideas became the ideas of the entire group. He is an icon today for all manners of things by virtue of the way he did things. He gave his inventions away. He didn't patent them.

MODERATOR: We've talked about the young mathematician giving up his award, Ben Franklin giving away his patents, and IBM releasing 500 patents into public domain. These things resulted in significant improvements for not only companies and individuals but for society as well.

SCOTT: The Creative Commons site is a good example of this concept of sharing. It shows projects under development. It would take anyone listening in a while to read through this, but I do recommend taking a look at Meta data lab. It's a fascinating concept of how to create the conditions and how to get attributions for the work you do -- in a scientific context -- but share what you know. We talked about an initiative putting together a bunch of labs to share the data on the outbreak of SARS in a way that enabled much faster ideas of solutions than what could possibly have happened under the proprietary system. The global outbreak alert and response network, part of the World Health Organization, got a dozen labs from a dozen countries and linked them together during the period when they were trying to control an outbreak, and virtual networks allowed them to share whatever information they had. These labs, by working together, very quickly enabled a whole bunch of pharmaceutical companies to develop drugs that helped in the outbreak in virtually no time at all.

MODERATOR: In web development, when you adhere tags to content, it makes the content more searchable and easier to find. Is this meta lab about developing tags?

SCOTT: This is really about sharing meta data in all sorts of situations. If you take the meta data as data that's used to describe other data, this is a way to share the mash-ups, the amalgams of data that give people the ability to know where to look for the information that they need in a much faster way. One of the things that slows down scientific research is that people are working on similar things, but they don't always share quite the right stuff even when they do share.

MODERATOR: We are out of time. Thank you very much, Scott. Listeners, please post your comments to the blog -- whether they're about any connection problems you're experiencing or commentary on the subject of today's coolhunt.

MODERATOR: Join us on Friday for the next installment of our live, online coolhunt with Peter Gloor and Scott Cooper.

Thank you.

Copyright Notice: Please feel free to duplicate or distribute this log as long as the contents are not altered and this notice is intact.

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