From our conceptional point of view, individuals acting in networks have the ability to decide whether they want to collaborate on the development of a business model or continue to distribute their work for free by means of open source. This stays not only true for knowledge-based work, but also financial investments and even physical goods. Factory capacities are available for rent since long ago as well as some companies have specialized in the production of custom parts. For instance, the company eMachineShop lets users design, price and order custom 3-D objects out of different materials, making it even possible to produce any quantity of items of highly specific goods like gearwheels for a certain machine.

A distinction in our approach of Open Entrepreneurship in regard to level intermediary seems to reduce conceptional unclarity. First and foremost lead users have the opportunity to affiliate to existing intermediary platforms being open for contribution or even to stimulate the creation of new intermediaries. In this case eBay might just be the most prominent example probably having facilitated more setting ups of businesses than any means of public support for entrepreneurship over the last decades. A further distinction seems to be useful by the means companies or individuals utilize within their collaboration in the process of interactive creation of wealth in networks.

In this context, we have already shown examples for Mass Customization (Threadless) and Open Innovation (Second Life).

“As a growing number of individuals eke out a living as free agents, open platforms can become a hub for innovation and wealth creation. And companies with the most dynamic platforms—and with great opportunities for partners to establish a synergistic business—have the best chance of harnessing the talent those free agents can offer.”
(Don Tapscott and Anthony D. Williams)

First of all, we would like to recommend the Businessweek-Wikinomics-Special. There you`ll find different perspectives on the topic of Open Innovation and Peer-Production.

“Opening Up to Collaboration” describes the parallels of the Openeur-approach an the Wikinomics. In contrast to the last post about Tapscott, this article focuses on the single entrepreneur using “structural holes” as a business opportunity

Tapscott on the changes of the infrastructure:

“… many new low-cost collaborative infrastrutures - such as free Internet telephony, open-source software, and global outsourcing—that allow individuals and small producers to harness world-class capabilities, access markets, and serve customers in ways that only large corporations could in the past.”

“Unlike the previous generations, today’s entrepreneurs can buy, off the shelf, practically any function they need to run a company. With storage, computing services, and other digital utilities on tap, business infrastructures that used to be expensive and complicated are increasingly cheap and easy to use.”

On the Openeur using these infrastuctural changes:

“The potential of these modern-day platforms goes way beyond providing digital utilities. They can be a force for growth and competitiveness. As long as you’re smart about how and when to take advantage of them, you can use open platforms as a foundation on which to build a successful business ecosystem.”

“Open platforms enable the small to become mighty—something today’s generation of Web entrepreneurs learned from the open-source software community.”

All those who wanted to know what SL is all about and what is going on inside the world, without entering it, should definitively have a look and watch this cast of ABC.

Our post about SL:

Second Life - Virtual Entrepreneurs

Don Tapscott is probably the most popular promoter of Open Innovation and creation of wealth in networks at the moment. In the middle of last month, Tapscott published a roadmap for Peer-Production. Now the businessweek article is available. Some quotes out of the Roadmap:

“First, think about how self-organized collaborations can change the way we invent, build, market, and distribute products and services—and build scenarios for your industry. Remember that its greatest impact today is in the production of information goods—and its initial effects are most visible in the production of software, media, entertainment, and culture—but peer production won’t stop there. We already see it at work in mutual funds (www.marketocracy.com), peer-to-peer lending systems (www.zopa.com), designer T-shirts (www.threadless.com), and to an increasing degree, in the production of complex physical goods such as cars, motorcycles, and airplanes (check out Boeing’s 787 Dreamliner).”

“Second, remind the doubters that open source doesn’t mean “no profits”—it means that the profits are migrating to new offerings, and increasingly these offerings are big business…”

“Third, abide by community norms. IBM not only accepted open-source software products and processes but also accepted its philosophy, which is to spur quality and fast growth rather than just profits based on proprietary ownership of intellectual property…”

“Fourth, remember that to reap, you must sow. When firms join a peer-production community, sharing is the continued price of admission to the community from which the firm derives various benefits…”

The last sentences give a great impression, what enormous potential Tapscott predicts when the acceptance and usage of Peer-Production and Innovation rises:

“It’s time to get your peer-production roadmap ready. Barriers to entry are vanishing and the trade-offs that individuals make when deciding to contribute voluntarily to projects and organizations are changing, creating opportunities to reconfigure the way we produce and exchange information, knowledge, and culture. Companies that recognize, address, and learn to tap peer production will benefit, while those that ignore and resist will miss important opportunities for innovation and cost reduction and may even go out of business.”

“Peer production is about more than sitting down and having a nice conversation… It’s about harnessing a new mode of production to take innovation and wealth creation to new levels.”
- Eric Schmidt, CEO Google

Straight to the point.

On the basis of the framework we provided so far, we will now suggest our approach of Open Entrepreneurship linking the mentioned concepts of Open Innovation and the Commons Based Peer Production. Open Entrepreneurship puts the inter-personal creation of value in networks in the centre of attention and creates opportunities for entrepreneurial action.

Becoming an entrepreneur in networks has thereby become easier by lowering the barrier for cooperation by the interface of the internet. It has not only become possible to spread self-produced content or to take part in online communication, but to be creatively and collaboratively active in many other spheres. Companies and individuals are trading with tangible and intangible goods and offer them worldwide to others. Even if people are not producing goods or providing services on their own, but take only an intermediary role like in affiliate networks, they can though appear as kind of “mini-entrepreneurs” actively contributing to the creation of value. Almost unnoticed, a huge amount of small and large innovations is created that way. Of course, most of the knowledge available on the internet is not yet marketable, but as different examples show, the quality of user generated content cannot be condemned wholesale as inferior to professional content. As the quality of content emerges, in many cases the results are good enough that companies and individuals would accept to pay for the created knowledge or goods. So by the creativity of individuals acting in networks, values could have been created. Opportunities for entrepreneurship may be located especially in so called structural holes defined by Ronald Burt as a relationship of nonredundancy between two contacts in networks.  Supporting Mark Granovetter’s argument of the strength of weak ties, the strength of structural holes could lie in such opportunities for entrepreneurship.

The possession of capital is therefore no longer a necessary condition for entrepreneurship. Particularly the internet provides people the opportunity to become an entrepreneur in network structures and to use a worldwide market for their produced knowledge and tradable goods. Furthermore through collaborative work, networks of individuals can realize even extensive projects by division of labor. The central challenge for Open Entrepreneurship is transforming not yet marketable knowledge in networks (Littmann/Jansen, 2000) to a value-added stage and switching these opportunities for innovations generated in networks to hierarchies or markets.

The internet is changing society as society is changing the internet. In this self-reflecting connection, Benkler’s approach of Common Based Peer Production thereby opens up a new perspective of the network, shifting our view from the inter-organizational as well as from the individual to an ad-hoc group of user collaboration limited in time. The question that arises in this context is, how there can be unity whatsoever in a world that appears to be increasingly diversified. It seems to be a paradox situation that by social production the individual gains significance while the increasing value of individual work on the other hand benefits the whole group working together. Thomas W. Malone and Robert J. Laubacher (The Dawn of the E-Lance Economy. Harvard Business Review; Sep/Oct1998, Vol. 76 Issue 5, pp. 144-152) have observed this circumstance in their concept of an E-Lance Economy under comparable conditions:

“By changing the way work is done, electronic networks may lead to a new kind of economy centered on the individual.”

As the individual takes center stage the question arises which relevance he has in inter-personal collaborations because frequently used terms for the current developments like “Social Web” or “Social Commerce” suggest an increasingly importance of sociality. Being paradox as well, individualization and socialization of cooperation seem to take place simultaneously. Thereby networks play the decisive role shaping the quality of collaboration by individuals acting together and creating value in networks.

An important contribution to the mentioned development comes from Yochai Benkler (2002) introducing Commons Based Peer Production as a new form of organization besides hierarchies, markets and interorganisational cooperation. Benkler focuses especially in regard to open-source software and user-generated content on the collaborative production of knowledge-based goods by virtually connected individuals. Recently, Benkler has extended this approach by a wider theory of social production transforming markets and freedom, published as “The Wealth of Networks” (2006).

The organizational form of Commons Based Peer Production he defines as “radically centralized, collaborative, and nonproprietary; based on sharing resources and outputs among widely distributed, loosely connected individuals who cooperate with each other without relying on market signals or managerial commands.” The characteristic of commons is according to Benkler based on multilateral access, use and control of resources. The motivation for contributing in peer production according to Benkler is intrinsic, similar to the lead user attributes in von Hippel’s Democratizing Innovation (2005). As the collaboration will probably embody the characteristics of the society it was created in, it is as least questionable if people would always forgo self-interest for the benefit of the community.

The question indeed arises what are the methods those collaborations in networking structures are working with. As Charles Handy puts it into the context of virtualization: “Virtuality requires trust to make it work: technology on its own is not enough.”  According to Walter Powell networks are working on the methods of conflict solution by reciprocity and reputation. Robert Axelrod has argued that the foundation of cooperation is not trust, but only the lastingness of a relationship. Therefore, especially reciprocity seems to be what commons really have in common.

The importance of electronic networks and information technology seems to be obvious wherever you look at. However, it has to be questioned in how far it substantially influences the way we are doing business today and in future. Don Tapscott and Anthony D. Williams recently published their book “Wikinomics” (2006) to examine the influence of digital mass collaboration on economy and society and to embrace a new art and science of collaboration they call wikinomics. 

“We are talking about deep changes in the structure and modus operandi of the corporation and our economy, based on new competitive principles such as openness, peering, sharing, and acting globally.”

By drastically reducing transaction costs, the internet has indeed high influences on today’s economy, but is the wiki principle really the best way for future cooperation leading to the best results as James Surowiecki (2004) has suggested by referring to the wisdom of the crowds? Cass R. Sunstein has recently shown (Harvard Business Review, September 2006), referring to Condercet’s theorem, that the crowds could not be always wise. It rather depends on the publicly available information whether the crowd’s opinion converges to right or wrong. Therefore, the internet may provide the technological infrastructure and may foster the development of new ways of communication between individuals, but does not seem to embody the solution to all problems itself. Instead it seems to produce new problems as well, probably misleading people who rely only on the aggregated competence of the masses.