| Digital Aboriginal: The Direction of Business Now |
By Mikela Tarlow and Philip Tarlow
Genre: Business & Money
(The buy button will take you to the standard print edition of this book at Amazon.com. From there you will be able to see if the book is also available in large print or audio.)
Those who have gardens cherish their time with the earth. They will tell you it brings them back to a more centered and simple way of being. While this may be true, there is a far more primal experience that few Westerners have ever even imagined.
One summer a few years ago, an interesting man came to our small town, high in the mountains of Colorado. This traveler had spent many years living in the outback of Australia with an aboriginal tribe. He came to know them and be trusted. He told us that the aboriginal elders counseled their people to avoid the seduction of agriculture. For the average Westerner, working in a garden is a wonderful return to the earth, but to these wise elders, planting is the beginning of the end.
Suddenly, instead of following the weather, you want the weather to be different. And it is now easier to put things in straight lines. And because you have planted, you need fences. And since you have planted, you can accumulate possessions. And once your tribe is bound to a fixed address, forms of hierarchy emerge that were not possible when it had to stay on the move. Because you have put down roots, for the first time you must consider defending your territory. Thus, convenient as it is, planting is the beginning of control.
Merely because you put a small seed in the ground, you are now invested in a whole system of maintenance that requires you to stay put. You are no longer free to follow what calls. So the aboriginal elders wisely teach their people to avoid agriculture. The aboriginal spirit requires the freedom to follow the wind.
The ancient nomad carries little on his back so he can travel at a moment's notice. He senses a pulse that tells him of the weather long before there are any detectable shifts in the wind. There are no straight lines or obvious paths in his world.
His profound sensitivity is possible only because he does not have to wait for seeds he has planted. His perceptions can be long and deep, since he has no territory that he must defend. His mind is quiet, since he is not attached to outcomes. Because he does not have to plan, his spirit is free.
This is a perfect metaphor for the transition we all now face. Many of our values are based not only on the fading assumptions of the industrial era, but on a lingering agricultural mind-setthat territories can be defended; amassed assets make you powerful and control protects what you have.
The digital landscape is a nomadic world. Access is hindered for those who insist on traveling with heavy baggage. You will soon understand why it makes ownership a very difficult thing to pin down.
Most of us long for the opportunity to bring forth a vision we have held deep insideplant an idea and stay with it until it bears fruit. It's hard to let go of this sweet dream of our seeds bearing harvest. But in fact, the way of the gardener is only a rest stop along our return path to a more dynamic creative state. To return to the aboriginal mind we must give up any desire to control what lies ahead. We can no longer waste energy on wanting the weather to be different.
Idea creation is no longer a question of finding a deep personal vision you dream of bringing forth. Idea creation is now a far more nomadic process that rests on seeing an opportunity in the moment and seizing it, long before you even know where the trail will lead. It is far more about being awake and alert, flexible and sensitive, than it is about being forceful and commanding. The well-worn advice of searching your soul for something you love to do may no longer be quite as relevant. It comes from a gardening mentality, and the new economy is the domain of hunters and gatherers.
WHEN MATTER TURNS TO ENERGY
John Perry Barlow, former lyricist for the Grateful Dead, founder of the Electronic Frontier Foundation and leading pioneer in the digital field, wrote a wonderful article titled "Selling Wine without Bottles." Copyright has been relatively easy up to this point because information such as music, writing or film was transported through atoms in the form of a CD, bound book or videotape. The physical form was controllable, therefore the ideas held within had the semblance of defensible copyright.
We believed we were copyrighting ideas when in truth we were mostly controlling the atoms upon which they were imprinted. This reality came home to roost when the technology of MP3 came along and allowed music to be downloaded directly to our homes via computer. With similar forms of somewhat uncontrollable dissemination now in place for every form of personal expression-software, publishing, video, photography, books, games, etc.it puts all of us in the challenging position of selling wine without a bottle.
The short-term solution has been to impose a set of copyright laws on a system that defies these kind of controls. Some cheer whenever a new piece of legislation or technical development arises that seems to defend the parameters of intellectual property. While temporarily this may have impact, Barlow's belief is that in the long term, it just won't work.
It is a rare individual who does not have any pirated software on his or her computer. Content providers cry that their images and text are often sent freely traveling through cyberspace without footnote or payment. Even with tightened security and more protective international trade laws, Microsoft estimates that 40 percent of the copies of Windows 2000 in circulation internationally will be illegal. And though Microsoft and others have moved toward versions of their software that can be accessed only on-line, and toward monitoring unregulated copies more it's still probably only a question of time before that moat is also crossed. Video files have been encrypted using a system called CSS. In 1999, hackers cracked the code and a program called deCSS began circulating. The industry had to resort to lawyers, asking sites that offered this program to cease and desist. In short order, encryption for Microsoft's eBook and Adobe's reader were also broken. Even with Digital Rights Management (DRM), a more recent form of encryption, a natural civil disobedience is still bound to continue to occur under the banner "information just wants to be free," as some portion of the public disseminates to their heart's content.
In her book Digital Copyright, Jessica Litman offers a review of the history and problems involved in this domain. From even a far more conservative and legalistic perspective than the information-want-to-be-free crowd, she writes:
The more burdensome the law makes it to obey its proscriptions, and the more draconian the penalties for failing, the more distasteful it will be to enforce.... Laws that people don't obey and that governments don't enforce are not much use to the interests that persuaded Congress to enact them.
Later she says:
Even if copyright stakeholders refuse to give the public a seat at the table, they may discover that they need to behave as if they had.
Napster became the early mythical symbol for everything that is right or wrong with this new world, depending on your perspective. Napster and a host of Napster-like companies offered a way for consumers to upload music or other media they already had in their possession to a central database where it could then be downloaded by others. The premise was that the physical CD was purchased, therefore transmitting this data to an on-line friend was a simple act of sharing. If the atoms are owned, the information should follow.
"Nonsense," said the record companies. Slapped with lawsuits by every major record label, Napster was among the first to test the limits of this new ideology: ownership of the physical property on which information is imprinted versus ownership of information.
The dilution of Napster's ability to function led to dozens of new sites based on a software model of peer-to-peer exchange of music, video, software, books, etc. The most popular of these programs, Morpheus or Audio Galaxy Satellite, require no central server and are almost impossible to shut down. In this post-Napster world we have entered, no matter what the name of the particular company is that is currently tangling with the courts, the core argument remains the same: Should we, can we, will we be able to hold on to our ownership of information once the digital world is in full force?
You may think this is a simple case of technology moving faster than the law, but it is far deeper than legal wrangling. Information has been detached from the physical plane. It is beginning to live in the realm of pure energy, which requires a radically different relationship. The entertainment industry is still banking on DRM, which will allow every download to be counted. However, it still leaves many important questions unanswered.
You might also think that this discussion is just about intellectual property rights, and perhaps not directly relevant to your industry. But the moment a chip is placed in your product or anywhere in your system, you are affected by all the same forces influencing intellectual property. As Patricia Seybold points out in The Customer Revolution, musicians and their end customers share an ecosystem that is similar to those of other industries. So what is happening for the entertainment industry is bound to be coming to a neighborhood near you very soon. The music industry is merely the canary in the coal mine; what happens to them is a harbinger for others.
Every major label now has an agreement with an on-line distribution site like Yahoo! using systems like RioPort or RealPlayer. Even Napster has secured these licensing rights. These approved sites license the song from the label and charge for each download. This answers part of the Napster equation, but avoids a lot of very important concerns that were bound up in the social side of the equation.
Most solutions have focused on the role of the customer in this issue. The users of MP3 technologies were not just excited about the freeness of the music. They wanted the ability to make their own mixes, catalog their own songs, take some songs and not others or to sample the material to use for other purposes like adding to their cell phone rings. The labels are now focused on giving the customers what they want while still exacting a payment, but little changes for the musician.
Due to accounting systems that favor the labels, the majority of musicians never see any money beyond their initial advance anyway. As far as many musicians are concerned, their music is free. Many of them loved Napster. Some saw their visibility and concert attendance soar. Less than one hundred music groups make the lion's share of the money. Similar ratios reign in film, TV, publishing, games and software. This leaves a huge underrepresented but now very empowered population with access to communication at a level never before possible. That's a lot of artistic energy itching for an outlet. These media-savvy creatives are clamoring for a more decentralized entertainment industry and they are taking concrete steps to make it happen. They are flocking to on-line venues such as Riffage and iCast, which bring smaller audiences direct to the artist. The people to really watch in this scenario are the artists.
Every revolution in history has occurred for the very same reasons: Too many people feel left out of the system and they have very little to lose by changing it. This is the spirit that Napster represented, which is still mostly ignored by the industry titans. In the past, as long as the record companies could give the buyers what they wanted, although technically and organizationally challenging, they could feel their job was done. But domination is now a very unreliable strategy. Every player in any economic ecosystem has newfound access to power. Whenever social exchange is transformed, whenever people have the means to come together in radically new ways, then the rules defining economic exchange are also altered.
You can build bigger fences around your property, but you can't legislate the social equation. Once you introduce the possibility of finding a mortgage, choosing insurance, getting groceries or buying a car on-line, you decimate a system of middlemen and retailers that used to control the exchange. You are participating in the dismantling of a once well-established system of delivery. New classes of digital middlemen arise, who connect customers with products and services in ways that often add information about pricing, quality, timing, etc. And in doing so, they create a far more savvy, self-directed and demanding consumer, who in turn forces the supplier to respond at an ever-higher level. Down the line, once the software for conducting auctions, comparing prices, creating chat rooms, sharing data or collaborating on projects is made more readily available, consumers may discover they don't even need digital middle-men. They may begin to self-organize their own buying clubs, political lobbies, creative communities and information exchanges.
Suddenly the social equation becomes more significant than the legal one. Ownership is far less a technical issue than a creative one. Copyright, intellectual property and power become subservient to the social exchange that now exists between artists and their audience, between buyers and their suppliers.
Information is no longer a noun, something we can own, store and accumulate. Information has become a verb, acting upon any system it touches. Information is now a verb, full of sound, rhythm and cultural nuance.
This is a very critical point. This is why the entertainment industry will eventually be forced to consider new models for how its products are sold, how much it charges, how it interfaces with the public, how it interfaces with artists, how truthfully it supports the creative spirit, etc. There are no bad guys in this scenarionot the profit-driven industry titans, nor the free-spirited artists or the unruly customers. The creative challenge is that none of these players have ever had to deal with true social parity.
If you read the business magazines, you see the same stories over and over, told by free agents, small companies and multinationals alike. They tell of having to share some closely held knowledge in order to share costs, save money, serve a client or develop a new market. They tell of having to share their product with another entity in order to develop a new level of service. They also discover that the transparency that is required when two enterprises come together to develop a shared effort, leaves both parties just a little vulnerable. In other words they have to trust one another just a little bit more than they are used to.
We are no longer walking on solid ground; the path ahead can be instantly transformed with a swipe of a programmer's hand. We have entered a very unstable world where information in the form of pure energy can easily fly out the door and morph into a thousand variations of the product or service we used to think we owned.
Lawyers persist with models that regulate information in ways similar to how we track physical products. Encryption is often a cat-and-mouse game, where one side or the other wins for a while, until the next hacker does what all the high-paid experts said was impossible. Further, many legal efforts to pursue information violators step on the privacy of ordinary citizens or the right of free speech and are therefore very challenging to even consider. Most important, if the participants on both sides of the equationthe buyer and the sellerwant a new form of exchange, no matter how much power the middleman appears to have right now, the intermediary will be forced to adapt.
While some musicians joined the early Napster lawsuits, many oth ers, like hit singer/songwriters Alanis Morrisette, an early investor in MP3.com, and Don Henley, testified before congress offering support and even desire for a Napsterlike world. Many leading musicians have purposely leaked their material to free sites. An interesting fact that the press rarely pointed out in their Napster coverage is that most musicians make more money from concerts than CDs. The record labels and much of the studio infrastructure profit from CD sales, but the majority of less visible musicians make their money from concerts. All one needs to do is follow the money. These musicians profit more when free downloads drum up business for their income-generating concerts.
Even more important, the early public debate hardly mentioned peer-to-peer distribution. Napster took all the heat because they had eighty million users. Freenetand Gnutellatype sites offer software that allow people to exchange data one to one. There is no centralized entity to sue, shut down or take to court. At first, these types of sites were not very popular; they were cumbersome to use and as long as Napster was around there was a better alternative. In just the first week after Napster was shut down, nearly six million had flocked to the dozens of sites that made peer-to-peer software more user-friendly and kept the music free. Believe me: There is someone in a garage somewhere, right now, making even more serious improvement to what is available today. Adapting to freer distribution is a critical feature of the new economic environment.
Many programmers feel that over the long term, traditional copyright models just won't work. They move through this territory every day and instinctively feel the mind-set it requires. When Adobe went to prosecute the first violator of the DRM act, their customers organized a product boycott and Adobe relented. The industry hopes DRM will be a bigger fortress, but many want a larger playground.
There is only one reason these post-Napster-type sites have not completely toppled the applecart already: limited bandwidth. Without high-speed lines it still takes a long time to download a song, and quality suffers. Many still check a song out on-line, and if they like it, they buy it. Some studies even showed that Napster contributed to the music industry's extraordinary profits during that period. Free downloads are troubling in the long term, but not bad in the short run. Once bandwidth is more available, and yes, cheap, the social equation will become even more inventive and hard to control.
DISCONTINUITY IS THE NEW NAME OF THE GAME
As you probably know, Moore's Law predicted the doubling of chip speed every eighteen months. With new developments such as ultraviolet light inscription, the use of organic molecules for data processing and our brand-new ability to stop a light beam in the laboratory with applications for data transmission, the acceleration of computing capacity seems assured for a very long time. The commercial impact is that it rapidly brings data-intensive services, such as language translation or voice recognition, into a range that is cost-effective for the average consumer. With every new doubling of chip capacity, applications explode and creative opportunities abound.
According to George Gilder, bandwidth will explode even faster, doubling every six months. Gilder claims it will trigger a revolution that will make the one we have just encountered seem like child's play. He opens his provocative treatise Telecosm with the following vision:
After a global run of thirty years, the PC revolution has stiffened into an establishment. So swiftly and subliminally did this silicon tide pass through the economy that, like many experts, you might have missed some of the motion until it stopped....The computer era is falling before the one technological force that could surpass the computer's ability to process and create information. That is communication, which is more essential to our humanity than computing is. Communication is the way we weave together a personality, a family, a business, a nation and a world.
The explosion of bandwidth will turn many of our current values upside down. Suddenly bandwidth will become cheap and silicon will be the costly end of the equation. When bandwidth was expensive and rare, we needed to build bigger, faster machines that could do more and more. When bandwidth becomes cheap and easy, we will switch from pumping up our silicon-based products to moving around the capacity we need.
This is why many forecast that personal computers as we now know them will probably cease to exist. We will access only whatever memory, data or software that is necessary for the particular task at hand. Whether it is the new set-top boxes for our TVs that are being touted by Microsoft and others, or some other wireless device, we will no longer purchase fixed capabilities; we will subscribe and pay for the functions we need, when we need them. This opens the door to a host of current products becoming far more transient. In Asia and parts of Europe, where wireless has taken off, they may bypass the PC stage altogether.
On another front, one hundred thousand people signed up with the Search for Extraterrestrial Intelligence (SETI) Institute, contributing their personal computing capacity for this collaborative project. Thirty thousand also signed up to help NASA's Mars Project and thirty-five thousand man the Open Directory Project, ushering in a new form of cyber volunteerism. Distributed computing is a fascinating development that is being used for scientific research in a number of areas, including pharmaceutical studies. Computers are linked and their capabilities aggregated, shifted and exchanged. It diminishes the need for an organization to own large computing capacity for a particular project, since with the right software they can tap into a resource that is freely available.
In the same way that the record labels must consider what they are, if not the CDs they sell, what is Dell, Apple or Gateway if not the plastic box you take home from the store? What is Palm, Handspring or Psion, if not the snazzy device you hold in your hand? What happens when more and more industries realize they will soon be selling verbs and not just all those nouns that they pack in a box. Encyclopedia Britannica is a prime example of product dissolving into service. What was once a line of expensive hardback books now exists only as a service where for $89.95 a year you have access to their continuously evolving research base.
Another example is Anderson Windows, who developed a piece of software so that high-end architects could easily order customized windows straight from the computer renderings of a building. Because the ordering process became so easy, their windows were ordered more frequently. Anderson's future now rests more on marketing and expanding the capabilities of its software than on developing the features of their product.
Similarly, almost every product is well on its way to becoming smart, thus dependent on the communication partnerships it can forge. So a car is no longer just a vehicle for transport; it is your mobile work station. It connects you with subscription radio and is fully wired so service, repairs, oil levels and tire tread are monitored and communicated to you. A working vehicle must offer a global positioning device for navigation and safety, and also help if you want to know where the closest Gap is and if it's open at this hour. Like so many other industries, much of the innovation efforts in auto manufacturing are focused on developing new uses for chips and developing the alliances that will allow connection to bigger, better services. This we have come to accept.
In the unlimited bandwidth scenario, smart products are no longer the brains behind transactions, they are just the mouthpieces. This means that soon the automakers won't have to develop individual vehicle brains; they will just wire every element and the driver will choose what he/or she wants and when. You don't need global positioning all the time; you can choose it only when you take a long trip out of town. Of course the price goes down with frequency of use or when several services are bundled.
As a result of thinking of products as solid objects, our notions of service are still very fractured. The subscription-radio people work in different offices than the global-positioning folks and pursue separate and competing relationships with the auto industry, because, after all, how much more expense will the customer be willing to absorb in order to have a smart car? But once we move from a focus on building the car's brain, to letting the car owner download whatever he or she wants, when he or she needs it, these now divergent services have the freedom to become far more integrated. Companies like OnStar have already begun to think this way, considering directions outside their traditional scope of service.
Further, in the new era of Telecosm, 3-D communication, complete with special effects, musical accompaniment and a full spectrum of hyper-links, will become widely accessible. If you think information is hard to bottle, communication is even harder to pin down. This next wave of technological magic coming down the pike will only highlight the need for Barlow's wise suggestion: a shift in consciousness.
With ample bandwidth, live concerts, theatrical events, conferences or intimate songwriting sessions can be easily Webcammed to subscribers. The subscribers can act as a virtual audience expressing their responses to you. Several musicians can jam live on-line and whoever wants to can attend. As long as these capabilities remain expensive, industry titans will dominate. But if, as Gilder predicts, this capacity gets cheap, then the bandwidth for sharing live events will be widely accessible. What happens when the artist, the audience and the creative process become more relevant than a particular set of songs? Suddenly entertainment begins to look like a service contract between the buyer and seller, the artist and his or her audience.
In an interesting collection of articles titled Digital Archetypes, Laura Fillmore makes a similar point.
One may not want to pay $5 for an on-line, finite, static text of James Michener's Chesapeake, but one might pay considerably more if one could follow the electronically generated thought path resulting from the course taught by the author himself...where one could navigate the links students make in their critical thinking about the novel, navigate and link to real documents, graphics, video, sounds, experiences, and the author himselfall in real time.
Further, what happens when the creative exchange between two or more groups, representing two or more different companies, perhaps even from different industries, becomes the heart of the innovation process? Who owns the idea? Is the idea the moment of conception or is it all the negotiation that makes it real?
This is what has led consultants like Stan Davis and Christopher Meyer to say in their book Blur that products will become negotiated events between two or more participants in a process. When relationship is the basis of exchange, products are no longer center stage and they become elements in a much larger creative dialogue. Suddenly the product is subservient to the conversation that surrounds it and intellectual property rights become very fuzzy.
Peter Gabriel, hit musician and founder of World of Music, Arts and Dance (WOMAD) and Real World, foresees this interactive environment also forging a new role for the artist. Keep in mind as you read the following quote that the term artist can also refer to a very broad spectrum of creative roles, from product development to marketing to management, and not just the traditionally narrow definition of an artist.
Traditionally the artist has been the final arbitrator of his work. He delivered it and it stood on its own. In the interactive world, artists will be the suppliers of information and collage material, which people can either accept as is, or manipulate to create their own art. It's part of the shift from skill-based work to decision-making and editing work-where the choice becomes as important as the actual piece of work. That's what's so excitingthe fluidity and flexibility of technology is a good complement to the human artistic spirit.
We hold the idea of authorship so dear, forgetting that authorship as a property right did not exist until the printing press was invented. It was not until thoughts could be contained on paper, and that paper could be regulated, that copyright first came on the scene. Until then, stories, music, theater, and artistic images were all public domain. Each new generation sampled the content of the generation before, and used it to evolve the next layer of creative material. In this early system of free exchange, artists did make a living and some would always rise to the top. But their visibility rested far more on the quality of their work and a natural word of mouth than a system designed to hype and unnaturally promote a select few. This is a point I will discuss more fully in the next chapter.
Further, it is upon this notion of fixed authorship that we have constructed so many of our organizational values. Ideas such as someone must be accountable and the buck stops here, rest on the assumption that someone has ownership of a final result. You can begin to see how the changing role of the artist and audience will also forge new roles for managers and leaders. When the notion of authorship becomes more fluid, the underlying assumptions behind many of our organizational values also become more malleable. In an economy driven by communication, the quality of discourse is often more important than what you think you own. As you will see in the next chapter, this is why tightly knit on-line communities will have so much power to drive markets and define how they interface with the author of a product service.
It sends shivers down everyone's spines to even consider this possibility, but like the mighty dinosaurs that once ruled the earth, the concept of fixed authorship as we now know it may be reaching the end of its rather brief life span. This will occur not so much because we can't control dissemination, but because we won't want to. The hyperlinked document, thus the hyperlinked company, and eventually the hyper-linked culture will change the very rules of storytelling.
In physics there is a state called superfluidity, where fluids are cooled down far below normal conditions. Once this critical temperature is reached, almost nothing acts the way it did before. Entirely different laws of physics seem to be set in motion merely because the very same elements are being subjected to a different context. It is a perfect metaphor for this ownership issue. What made sense in the world of stable products and clear avenues of dissemination, makes far less sense in a superfluid digital landscape. People keep taking sides based on what they think is right and wrong, but that is not where this decision lives. It is not a moral question; it is a creative issue.
Barlow is definitely one of the ringleaders of the information-just-wants-to-be-free crowd, and most would not go as far out as he does in terms of the actual solutions he offers. But he is right on the money when he says that unless there is a shift in consciousness to accommodate this unstoppable reality, we are destined to enter a future riddled with litigation, controls and ultimately systemic failure. It is not new sets of rules that will define this world, but new mind-sets.
THERE ISABIG OLD HAIRY ELEPHANT
IN THE LIVING ROOM
In psychological jargon, the elephant in the living room is the behavior that is running the whole family that no one acknowledges or talks about, like the father who gambles or the mother who drinks. The family never discusses the fact that the mother is drinking; rather, they spend their time analyzing why one of the children got a bad grade or why some neighbor did something stupid. The whole family is organized to avoid, deny and ignore this behavior, because to address it would require looking at the deepest layers of what is really going on and potentially making some hard choices.
In many ways, ownership is the elephant in the living room when it comes to thinking about our current economy. Much of the coming economic transformation will ride on a redefinition of our images of creative territories; whether it is really possible to hold on to products in the way we once did, and ultimately whether it actually serves us to focus our attention in that way. No one really wants to talk about this topic because it threatens the heart of many assumptions we now hold dear and potentially necessitates some hard choices.
Everyone dances around the edges. We discuss Napster's bad behavior or talk about the predatory behavior of digital companies. We talk about the rights of artists and needs of businesses. We bemoan the collapse of the gatekeepers we have come to know. We psychologize about the youthful rebelliousness of unruly hackers and hope they will grow up some day to act responsibly like the rest of us. Sometimes we even comfort ourselves by saying that there really is no new economy; the good old fashioned rules of business are still what drive profit. Few talk about this elephant directly because to really explore this topic would challenge the very core of the capitalist dream.
In his extraordinary book Weaving the Web, Tim Berners-Lee profiles the early days that allowed this woven wonder to come into existence. It is a very important piece of history that explains a lot of what we are currently witnessing. Much of what we see would not have been possible if the key players had insisted on intellectual property rights. He explains:
Software patents are new. The internet ethos of the seventies and eighties was one of sharing for the common good. It would have been unthinkable for a player to ask fees just for implementing a standard protocol such as http. Now things are changing. Large companies stockpile patents as a threat of retaliation against suits from their peers. Small companies may be terrified to enter the business.
...The lure of getting a cut of some fundamental part of the new infrastructure is strong. Some companies (or individuals) make a living only by making up patents and suing larger companies, making themselves immune to retaliation by not actually making any products at all.
...The threshold of innovation is too low. Corporate lawyers are locked into a habit of arguing whatever advantage they can, and probably only determined corporate leadership can set the industry back on a sane track....As I write about the new technology, I do wonder whether it will be a technical dream or a legal nightmare.
This is why there is an elephant in the living room. Although patents were designed to provide profits that would in turn foster new research and development, they actually slow the progress of an industry when the ideas being patented are too small or obvious. Even the medical community is complaining about broad gene patents that are stifling research. Every industry must consider the ideal balance between sharing knowledge in order to build something far larger in the long run, and holding on to a very small piece of something that would make everyone have to go around it unless they paid the toll. As long as extreme forms of territoriality persist, the sharing of discoveries so necessary for rapid progress will be strangled.
Fortunately, the market is mightier than the law. When we discuss the open source movement a little later on, or distributed computing, or convergence and mergers, in every arena, it is not simply one case that is being tested, but a worldview that is being challenged. It doesn't matter who appears to win the endless series of court cases that are about to emerge in every digital domain from graphics to video to games to software. The issue of ownership will continue to be tested over and over again in new and intriguing variations. It is at the heart of what will eventually throw our once stable business models to the wind. It will change the very DNA of commerce.
MARKET VOLATILITY AND THE FORCES OF CHAOS
Think about this: In 1991 the Internet was a business-free zone. You signed an agreement not to conduct business on-line in order to gain access. This bias toward communication continues to be the foundation of all that we see.
These social dynamics continue to define the space. Yahoo!, one of the most heavily trafficked portals, says that its fastest area of growth is conversation.
Whenever consumers and suppliers come together in new ways, the boundaries between who controls what get fuzzy. This has been referred to as market volatility, but volatility is possible only when past assumptions about ownership are no longer well defined. Volatility can only occur when past forms of control have been deconstructed.
The following trends are contributing to this never-before-seen level of volatility. As you consider these impacts, you will see that they are not just new directions. They are paradigm shifts, forcing us to reorganize our familiar attitudes toward control and dominance.
Information technology now makes it economically feasible to produce and distribute very small volumes of a product or service. With lower barriers to entry, more players can enter the game. They have little corporate history to defend, so they care less about preserving the current standards. Thus, once well-defended markets are vulnerable to outsiders and subject to all the ways these trespassers will go about breaking the rules.
Radical hackers and insurgents are the new research and development arm of every industry. These outsiders forge new directions, work out the bugs and invent the markets. The big guys either play catch-up or buy their way into innovation. In fact, the big guys eat start-ups for breakfast to fuel their insatiable need for new ideas. Many find it cheaper to buy the innovation they desire. In every industry, the edges are now driving the center.
The well-known joke is "on-line no one knows you're a dog." It is not so much that those with limited resources can approximate the look of larger, more established businesses, it is that contexts can't be owned. You can patent a formula, but you can't hold on to a context. Anyone can copy what you've done. So e-commerce businesses regularly cannibalize and steal from each other, creating a far more aggressive and destabilized landscape. The more a product rests on information, the more ownership can flow through your fingers. It is almost impossible to keep up with the torrid pace at which others can reinvent your business.
Palm broke into the handheld computer market like a hurricane, quickly dominating. Then several lead designers broke away to develop Handspring, which showed signs of being the next hot must-have toy. Next-generation companies splinter off at a staggering rate. Digital pioneers have little patience to wait for corporate permission to proceed. They also know that ideas have far shorter life spans, so rapid response is vital. Often when individuals have really, really good ideas, they will move on to form their own ventures rather than contribute their breakthroughs to the companies that employ them. Businesses once counted on the intellectual capital of their key employees to make plans and build their futures. Now, that commodity is far more fleeting and no longer an asset that can be counted on.
The early buzz for the low-budget independent film The Blair Witch Project was created almost entirely on-line. One continuous thread led from the gossip about a recently discovered documentary made by some lost kids to the beginning of the film. The jerky camera motion kept the rumor going that this was a homemade movie. It drew the viewers into the plot long before they ever saw the film. The line between fact and fiction was deliberately blurred. It was far more than a clever on-line campaign; it was a new dimension of storytelling. With new avenues for marketing narratives, it is far easier for anyone to access guerilla marketing. Entrepreneurs now view the entire digital landscape as their stage, traveling across mediums to get the word out in ways that continually defy normal channels and traditional gatekeepers.
Integration is yet another dynamic that will bend our notions of creative territories. Your refrigerator will soon be able to tell your grocer to add milk to your order and send that information on to the farmer so he can modulate production. When your family needs milk, the farmer will know. For an event like this to occur, dozens of companies must cooperate and share information. The boundaries between the software company, appliance manufacturer, grocer and farmer will be blurred as they plan and develop future directions together. With convergent products and collaborative services such as these, no one is the sole owner of the end result. We will no longer have distinct products and services; instead we will have consumer events that tie vast networks of providers into a single system and force them to share once closely guarded knowledge.
Once stock trades became inexpensive and easy and in-depth information became readily accessible, day trading was born. Thousands of small trades made on very small shifts in price began to create their own weather that had nothing to do with real conditions. The capacity to trade built its own feedback loops independent of real-life events. Many discovered they could make as much or more by trading on pulses of information and the flow that followed than by following real-life valuations. There will be a whole new breed of entrepreneurs and business endeavors that are designed to capitalize on very small windows of opportunity. They get in and out fast, leaving slower-moving entities to deal in their wake. Often they will reap rewards from the pockets of more committed enterprises.
Further, the digital world will always race ahead of the law, our favorite form of control when all else fails. There are sites that freely expose the weak links in corporate information networks. If these same individuals were offering known criminals the keys to a corporate headquarters, they would be considered accomplices in whatever crime was committed. These sites are the digital equivalent of breaking and entering, yet they are perfectly legal. The law has not arrived in this part of town yet. For the immediate future, the digital landscape will remain a relatively lawless land, which means no one is really in control. And if ultimately no one can ever own the wind, there may never be truly enforceable claims to this land.
The World Wide Web was conceived as a forum for universal access, so researchers could freely share with each other. It is a principle that the players will fight hard to defend. It is a driving passion similar to that of the founding fathers who wrote the American Constitution and envisioned a land of the people, by the people and for the people. Many who are shaping the blood and guts of this new economic beast are not just doing business; they sincerely believe they are building a new world. This spirit shapes the attitudes of many residents of this world and should not be dismissed lightly. This intangible, egalitarian ideology will always permeate the digital landscape. Key players in this world believe information wants to be free-freely exchanged, freely shared, freely available. We have seen it happen many times before; passionate visions are often the prelude to a new reality.
If you peek beneath the surface of each of the points we just made, you will discover that they each force you to think in new ways about creative territories. The boundaries between companies, industries, consumers, suppliers and even between product categories become increasingly fuzzy. Ideas travel to seek out their best homes and little can be done to stop them. New dimensions of products and services arise with greater frequency, forcing everyone to let go of what they know in order to keep up. The future is no longer tied to predictable events and channels that the major players can control and dominate.
But ultimately, it is not all these remarkable trendsthe fluidity of intellectual property, level playing fields, slippery contexts, fractured markets, fleeting intellectual capital, dissolution of gatekeepers, convergence of industries, hit-and-run players, lawlessness or free-spiritednessthat will define this landscape. The foundation of this emerging terrain will be formed by the new kinds of power that are now in the hands of many.
Leading business theorist Peter Drucker says that the most far-reaching impact of the information wave is e-commerce. A software program that allows an architect to do in a few hours what once took weeks is not really anything new. This kind of change is actually more reminiscent of the industrial revolution, where the means of production were continually streamlined.
The real impact of e-commerce is a power shift, where the individuals who shape knowledge can also rewrite the rules. Andy Grove, Chairman and former CEO of Intel, has been known to say quite dramatically, "E-commerce is taking us into the valley of death." Despite the dot-com collapse, the pecking order is more easily challenged. But more important, those who shape the knowledge hold the most power.
Capital is still the dominant way businesses hold on to people throwing money at them, tying them to stock options. Golden collars is the term for programming whizzes that make far more money than their bosses ever will. Drucker believes that financial incentives are only a short-term solution. In short order, knowledge workers will no longer be satisfied with financial reward; they will want to run the show. It is a revolution in every sense of the word; we just haven't noticed it because it is not being fought on the streets.
A PARALLEL WORLD
American Airlines slowly built its dominance over the course of decades. It has hundreds of planes, a well-respected name, and key routes all over the world. It also developed Sabre, a computerized reservation system.
As the travel industry came on-line, American Airlines aggressively worked Sabre into many on-line formats. The value of Sabre unfolded almost overnight. With almost no hard assets and in a few short years, Sabre became greater in value than American Airlines.
This kind of startling growth has caused bricks-and-mortar businesses to evaluate whether or not they can offer viable on-line versions of what they do. But often they find that the knowledge gained in their traditional businesses must be translated to a world that speaks a very different language. Some will form a company within the company and others will hire outrealizing that what you know in one world doesn't necessarily translate to the other.
Once a business or industry acquires this virtual mirror of what it does, it is initiated into a new world. When intangible assets become as significant as hard assets, a company naturally becomes more fluid. The more chips embedded in your product, the more you must consider the rules from the column on the right. When a business spins off an information product, it turns once rigid management structures into moving rivers of change. Ordinary planning often goes out the window.
It is a parallel world that sometimes echoes real-life transactions and sometimes defies them. Although organizations face having to learn a new language, the people working in this transitional environment face the same set of cognitive and emotional challenges. The people working in the world of American Airlines may be bold, clever and imaginative leaders, but the challenges they face are most often observable, tangible and rest on familiar problems for which they have been trained. For them, ordinary senses are enough. Incremental problem solving is sufficient.
The people who work in the world where Sabre lives are faced with mostly invisible factors that they must learn to sense. They have to be loose and unencumbered. They can't hold on to what they know, because it will hinder their ability to perceive what lies ahead. Growth will always hinge on forging entirely new arenas of partnership and embedding your company's products and services within the context of what other companies offer. These are the kinds of shifts in consciousness that will move us past litigation and control into mind-sets that will allow us to follow the wind. These are the kinds of personal strategies that will open everyone's eyes to new kinds of values.
If you look at the Napster phenomenon through the eyes of those who live in the American Airlines world, then of course Napster-type events seem destructive and should definitely be stopped. Napster-like sites are a clear violation of intellectual property, and without these rights the system of exchange we now have would collapse.
However, if you look through the eyes of those who live in Sabre's world, suddenly Napster's actions make a lot more sense. Flexible, adaptable, and yes, more affordable data no longer seems like such an awful predicament, but merely the next stage of unraveling how information will travel through society.
I must admit, a large part of my brain still lives in the American Airlines world. And I would certainly hate to see my intellectualty become completely irrelevant. But in my heart of hearts, I do believe that intellectual property as we now know it will become far more transparent. Books will no longer be static events. They will arise in conjunction with idea communities that shape the direction of how new ideas are offered. The day will come when all forms of authorship will live in a world with far fewer fences. I also know deep in my gut that the more I surrender my personal biases in this area, ultimately, the more creative I will become.
The Net economy has allowed for dynamic pricing, where the price of a good changes moment by moment depending on supply, demand, amount of goods purchased, frequency of purchase and whatever other factors the business chooses to place in the equation. We will probably move toward a system of dynamic copyright, a system of reward that fluctuates based on what is being brought to the table at any given moment.
Fuzzy ownership is just one piece of this puzzle. By the close of this book you will see how it connects with a much larger conceptual metamorphosis that is well under way. The on-line world is not just an informational highway with commerce following along its paths. What may prove to be most significant in the years to come is the potential for this landscape to evolve in a way that fractures the economic and business models that have ruled for so long. Thousands of directions will emerge that the power brokers will no longer be able to control. The edges will become increasingly inventive and drive the center toward ever more radical transformation.
And the only reason we are not seeing more dismantling of the traditional models of exchange is because we are only a decade or so into this process and still living deep in the shadows of the industrial world. The further we travel on this digital path, the more these shadows from the past will fade. More rapidly than anyone expects, we will be moving into a world of strange new creatures and never-before-seen events.
Excerpted from Digital Aboriginal: The Direction of Business Now , by Mikela Tarlow and Philip Tarlow . Copyright (c) 2002 BY Mikela Tarlow and Philip Tarlow . Reprinted by permission of Little, Brown and Company, New York, NY. All rights reserved.Back to top