Smart managers in all industries look at the now-legendary Linux phenomenon and wonder: "How can we do that? How can we exploit the collaborative powers of the Internet and draw on the intellectual capital of our customers to improve our products?"
Linus Torvalds worked with online volunteers to develop a computer operating system - one of the world's most complicated products - that many users insist is superior to Microsoft's. Torvalds did this without benefit of a multibillion-dollar research-and-development budget, executive strategy committees, a human resources department, stock options and the rest.
Moreover, all this has been done while the Internet is still in its infancy. The Linux gang (an example of what I call a business web) relied on e-mail and file transfers. But the Net is going to soar in ubiquity, bandwidth and functionality. Far more sophisticated collaborative and knowledge management tools will soon be available.
It makes me wince when managers grumble that the Internet simply deluges them with customer e-mail, driving up customer service costs. Instead, they should embrace the customers' interest and capitalize on these energies to develop better products.
Lego Co. in Denmark understands this. In 1998, it began selling a toy called MindStorms. The US$200 build-your-own-robot kit has 700 bricks, plus gears, motors and light and touch sensors.
The company developed software for the robot that runs on a proprietary microprocessor called an RCX (Robotic Command Explorer). Soon after the software was released, it was reverse-engineered by a Stanford University graduate student and posted on the Internet. Then a German university student developed a different operating system, which he also posted on the Net.
In the wake of these developments, amateur programmers began cranking out Lego applications that ranged from slot machines to photocopiers. Lego could have launched an attack on this breach of its intellectual property, but it didn't. Although it doesn't officially support the release of the code, the company benefits greatly from this volunteer business web. Each time a customer develops and posts a new application for MindStorms, the toy becomes more valuable.
Obviously, customer collaboration isn't new. Car enthusiasts have long helped one another tweak more horsepower out of their engines.
But with the Web, this collaboration is lifted to a global scale with virtually unlimited membership. And don't think it's limited to software. Consider General Motors Corp.'s development of a business web to design cars using 3-D visual prototypes that it distributes via the Internet. Participants include style-conscious customers, fleet buyers, knowledgeable service technicians, supply-chain partners, dealers, car buffs and industrial designers.
These participants are motivated to freely share their advice because they love cars, enjoy interacting with the business web community and gain pleasure from influencing the design of a future car. When GM adopts an idea, it publicizes the news to the business web's members, enhancing the contributor's reputation. And it provides buyer rebates based on the quality and quantity of contributions.
Indeed, the Internet will soon make deep collaboration so easy that many companies should worry whether their customers could get together and produce the product on their own, making the company superfluous. With the arrival of the Net, it's eat or be eaten.
Don Tapscott is chairman of Itemus Inc. (www.itemus.com) and co-author of Digital Capital (Harvard Business School Press, 2000). Contact him at firstname.lastname@example.org