How we buy things and how they are sold is continuing to change. Remember before we had Amazon, Ebay and forums to review and rate stuff. We used to talk to salespeople but now we are increasingly listening to each others opinions and buying on-line. We are now moving into a time where consumers (retail consumers and business users) can directly control the product design and features they want. This change has significant economic and organisational implications.
For many years on-line communities have been operating in the background. In 1998 Before Microsoft crushed Netscape in the ‘Brower Wars’ Netscape gave birth to the Opensource Mozilla project, which produced Firefox, now the most downloaded software in history. Against Microsoft Netscape’s browser marketshare went from 90% to 1% and today Firefox sits at 18%. Fundamentally consumers want choice and value products which they can have input into producing. Opensource is destined to grow much further with this user involvement.
Another example of this change is from the renowned innovation academic Eric von Hippel of MIT who believes the Threadless business model has “tapped into a fundamental economic shift, a movement away from passive consumerism” and he goes onto say “everything is moving in this direction”. In the Threadless model the customers design the products and serves as the sales force. Customers opinions tend to be trusted as they are real and honest.
The tables have turned with suppliers no longer gradually driving innovation but communities of consumer’s actively pushing innovation forward through participation. The idea of the ‘Wisdom of Crowd’s’ argues that groups are remarkably intelligent, and are often smarter than the smartest people in them. This theory is supported by academics such as Andrew McAfee of Harvard. Web2.0 is a another example because it has lead to Enterprise 2.0 which in turn is putting a spotlight on current management practice limitations and should result in management innovation to a more open structure.
With 1,407,724,920 Internet users the rate of change is increasing, however many of our existing firms organisational sales and marketing structures are unable to keep up. Firms generally understand the need for product, process and management innovation, however organisational hierarchies are not like consumer communities they are slow and careful. And so new organisational structures are formed within fresh new companies, that if successful, grow to become dominate forces. This is classic entrepreneurial economic innovation, however a point which really struck a cord with me at the Boston conference from Don Burke of the CIA was ‘at no other time has the rate of technological change been so rapid within a life time.’
The latest evolutionary organisational form seems to be a firm with no sales force and a marketing department focused on community building and relations rather than advertising or branding as discussed by Umair Haque of Harvard. Most importantly this new structure moves innovation out of R&D and puts it in the hands of the employees closest to the customers.
Today’s innovation challenge for many firms seems to lie with too much power with too few people. Perhaps the answer is in trusting employees to make and take the decisions, who are not afraid of making mistakes along the way. Some old wise firms will make the jump into the new model, however many won’t and the faces of our leading companies will continue to change at an even faster rate than in the past.