Thursday, September 28, 2006

The Participation Economy

In the history of mankind – technology has always enabled transformation ; leading to a paradigm shift in the way humanity and human beings live. I believe we stand today at an interesting cusp – technology is now engineering transformation around us that is faster and more pervasive than any the world has ever encountered – replacing the physical world with the virtual. The forces of transformation are almost limitless choice, collaborative niche networks and individual value creation.

Lets take a look at this some more. The limitations of the physical world translate not so much to aggregation as optimization – leading to a limitation in choice. We all listen to the same hit songs because the record store can stock only so much, we were educated in the same fashion because career options were limited etc.For a moment, lift these constraints – supposing a record store could stock infinite tunes , supposing we could successfully create a career out of an interest area – however arcane ; what happens ? This is the phenomenon of the long tail as written about by Chris Anderson - combine enough nonhits on the Long Tail and you've got a market bigger than the hits. Take books: The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon's book sales come from outside its top 130,000 titles.

Now lets look at this world of infinite choice – a world where economies are ruled by what we choose to participate in. This is creating a transformational force of collaboration – leading to a complete reconstruction of business models. Lets look at some of the business transformations in the last few decades. The biggest rival for Microsoft's dominance of the market for operating systems is Linux, a system developed collaboratively by perhaps 140,000 computer users, with a core of about 2,000 programmers, who gave their time, ideas and effort for free. IBM gave up the PC highground to Dell – who managed to get customers, suppliers and partners to collaborate in engineering their success. The most breathtaking example: Wikipedia – 5 million people making 1.5 million entries a month in 200 languages to oust the supremacy of the Encylopedia Britannica. At, thousands of volunteers write buyer's guides and lists of favorite products. In India, the e Choupal is bringing together farmers and ITC in a collaborative network creating value for both.

Every business needs to understand the impact of collaboration – where the only scarcity is the individual choice to participate. Our employees will refuse to participate if we cannot create a compelling employee engagement experience. Our customers will refuse to participate if we cannot create value for them. Our shareholders will refuse to participate if we cannot create wealth for them. At the same time employees, customers, shareholders are all in multiple ways indicating their desire to be active participants in our business. The enormously successful Grameen bank is famous for a transformational microfinance model where the poor borrowers of the bank also own it and operate through self help groups – with a 98 % loan recovery rate. The new organizations of tomorrow will find canny ways to convert self interest into social benefit and real economic value – using an “architecture of participation”.
How do we live and flourish in the participation economy as individuals ? If our sphere of influence can only be sustained by being part of one or many collaborative networks – the participation economy will not allow for identity to be derived from the social, cultural or political system that we may be part of. American teenagers have already made this discovery through – where individuals build personal identity expressing interests, tastes and values. has more page views per day than Google or MSN. Today a new blog is created every second of every day – with over 95% of them enjoying no readership. Identity by itself is not enough – without it generating value we will be unable to invite participation to our sphere of influence. The new economy is based on endless originality – and marks the transformation from mass customization to mass innovation.

The challenge in this is profound – we have already experienced people who successfully engender participation in their spheres. These are typically entrepreneurs and stars. In the transformation we are faced with today – all of us will have to become entrepreneurs and stars ; all enabled by a paradigm shift in technology it is difficult to fathom today. I made a personal career change in anticipation of this – from Retail to IT Services. Hopefully, it will be possible to be a part of this wave. Marketers watch out ! – how we handle our brands is about to radically change ; because our audience behaviour is profoundly changing.


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