Business Landscape
The World is Flat. Thomas L. Friedman
The Borderless World. Kenichi Ohmae
The New Age of Innovation. C.K. Prahalad & M.S. Krishnan
Wikinomics: How Mass Collaboration Changes Everything. Don Tapscott & Anthony Williams
Community
The Wisdom of Crowds. James Surowiecki
Groundswell. Charlene Li & Josh Bernoff
The Connection Culture. Michael Le Stallard
Citizen Marketers. Jackie Huba & Ben McConell
Multimedia & Internet
Always On: Advertising, Marketing, and Media in an Era of Consumer Control. Christopher Vollmer & Booz Allen
SISOMO: The Future of Screen. Kevin Roberts
| The World Is Flat: A Brief History of the Twenty-First Century |
|
Original 1st edition cover
|
| Author(s) | |
| Country | |
| Language | |
| Subject(s) | |
| Publisher | |
| Publication date | April 5, 2005 |
| Pages | 488 |
| | |
| | |
| | 330.90511 22 |
| | HM846 .F74 2005 |
BUSINESS LANDSCAPE
The World Is Flat: A Brief History of the Twenty-First Century is an international bestselling book by Thomas Friedman that analyzes globalization, primarily in the early 21st century. The title is a metaphor for viewing the world as a level playing field in terms of commerce, where all competitors have an equal opportunity. As the first edition cover illustration indicates, the title also alludes to the perceptual shift required for countries, companies and individuals to remain competitive in a global market where historical and geographical divisions are becoming increasingly irrelevant.
Summary
In the book, Friedman recounts a journey to Bangalore, India, when he realized globalization has changed core economic concepts.[1] In his opinion, this flattening is a product of a convergence of personal computer with fiber-optic micro cable with the rise of work flow software. He termed this period as Globalization 3.0, differentiating this period from the previous Globalization 1.0 (in which countries and governments were the main protagonists) and the Globalization 2.0 (in which multinational companies led the way in driving global integration). Friedman recounts many examples of companies based in India and China that, by providing labor from typists and call center operators to accountants and computer programmers, have become integral parts of complex global supply chains for companies such as Dell, AOL, and Microsoft. Friedman's Dell Theory of Conflict Prevention is discussed in the book's penultimate chapter. Friedman repeatedly uses lists as an organizational device to communicate key concepts, usually numbered, and often with a provocative label. Two example lists are the ten forces that flattened the world, and three points of convergence.
Ten flatteners
Friedman defines ten "flatteners" that he sees as leveling the global playing field:
- #1: Collapse of the Berlin Wall – 11/9/89: Friedman called the flattener, "When the walls came down, and the windows came up." The event not only symbolized the end of the Cold War, it allowed people from the other side of the wall to join the economic mainstream. "11/9/89" is a discussion about the Berlin Wall coming down, the "fall" of communism, and the impact that Windows powered PCs (personal computers) had on the ability of individuals to create their own content and connect to one another. At that point, the basic platform for the revolution to follow was created: IBM PC, Windows, a standardized graphical interface for word processing, dial-up modems, a standardized tool for communication, and a global phone network.
- #2: Netscape – 8/9/95: Netscape went public at the price of $28. Netscape and the Web broadened the audience for the Internet from its roots as a communications medium used primarily by "early adopters and geeks" to something that made the Internet accessible to everyone from five-year-olds to ninety-five-year-olds. The digitization that took place meant that everyday occurrences such as words, files, films, music and pictures could be accessed and manipulated on a computer screen by all people across the world.
- #3: Workflow software: Friedman's catch-all for the standards and technologies that allowed work to flow. The ability of machines to talk to other machines with no humans involved, as stated by Friedman. Friedman believes these first three forces have become a "crude foundation of a whole new global platform for collaboration". There was an emergence of software protocols (SMTP – simple mail transfer protocol; HTML – the language that enabled anyone to design and publish documents that could be transmitted to and read on any computer anywhere) Standards on Standards. This is what Friedman called the "Genesis moment of the flat world." The net result "is that people can work with other people on more stuff than ever before." This created a global platform for multiple forms of collaboration. The next six flatteners sprung from this platform.
- #4: Uploading: Communities uploading and collaborating on online projects. Examples include open source software, blogs, and Wikipedia. Friedman considers the phenomenon "the most disruptive force of all".
- #5: Outsourcing: Friedman argues that outsourcing has allowed companies to split service and manufacturing activities into components which can be subcontracted and performed in the most efficient, cost-effective way. This process became easier with the mass distribution of fiber optic cables during the introduction of the World Wide Web.
- #6: Offshoring: The internal relocation of a company's manufacturing or other processes to a foreign land to take advantage of less costly operations there. China's entrance in the WTO (World Trade Organization) allowed for greater competition in the playing field. Now countries such as Malaysia, Mexico, Brazil must compete against China and each other to have businesses offshore to them.
- #7: Supply-chaining: Friedman compares the modern retail supply chain to a river, and points to Wal-Mart as the best example of a company using technology to streamline item sales, distribution, and shipping.
- #8: Insourcing: Friedman uses UPS as a prime example for insourcing, in which the company's employees perform services – beyond shipping – for another company. For example, UPS repairs Toshiba computers on behalf of Toshiba. The work is done at the UPS hub, by UPS employees.
- #9: In-forming: Google and other search engines are the prime example. "Never before in the history of the planet have so many people – on their own – had the ability to find so much information about so many things and about so many other people," writes Friedman. The growth of search engines is tremendous; for example take Google, in which Friedman states that it is "now processing roughly one billion searches per day, up from 150 million just three years ago".
- #10: "The Steroids": Wireless, Voice over Internet, and file sharing. Personal digital devices like mobile phones, iPods, personal digital assistants, instant messaging, and voice over Internet Protocol (VoIP). Digital, Mobile, Personal and Virtual – all analog content and processes (from entertainment to photography to word processing) can be digitized and therefore shaped, manipulated and transmitted; virtual – these processes can be done at high speed with total ease; mobile – can be done anywhere, anytime by anyone; and personal – can be done by you.
[edit] Triple convergence
In addition to the ten flatteners, Friedman offers "the triple convergence", three additional components that acted on the flatteners to create a new, flatter global playing field.
- Up until the year 2000, the ten flatteners were semi-independent from one another. An example of independence is the inability of one machine to perform multiple functions. When work-flow software and hardware converged, multiple functions such as e-mail, fax, printing, copying and communicating were able to be done from one machine. Around the year 2000, all the flatteners converged with one another. This convergence could be compared to complementary goods, in that each flattener enhanced the other flatteners; the more one flattener developed, the more leveled the global playing field became.
- After the emergence of the ten flatteners, a new business model was required to succeed. While the flatteners alone were significant, they would not enhance productivity without people being able to use them together. Instead of collaborating vertically (the top-down method of collaboration, where innovation comes from the top), businesses needed to begin collaborating horizontally. Horizontalization means companies and people collaborate with other departments or companies to add value, creation or innovation. Friedman's Convergence II occurs when horizontalization and the ten flatteners begin to reinforce each other and people understand the capability of the technologies available.
- After the fall of the Berlin Wall, countries that had followed the Soviet economic model – including India, China, Russia, and the nations of Eastern Europe, Latin America, and Central Asia – began to open up their economies to the world. When these new players converged with the rest of the globalized marketplace, they added new brain power to the whole playing field and enhanced horizontal collaboration across the globe. In turn, Convergence III is the most important force shaping politics and economics in the early 21st century.
Proposed remedies
Thomas Friedman believes that to fight the quiet crisis of a flattening world, the United States work force should keep updating its work skills. Making the work force more adaptable, Friedman argues, will keep it more employable. He also suggests that the government make it easier to switch jobs by making retirement benefits and health insurance less dependent on one's employer and by providing insurance that would partly cover a possible drop in income when changing jobs. Friedman also believes there should be more inspiration for youth to be scientists, engineers, and mathematicians due to a decrease in the percentage of these professionals
Criticisms
In a 2007 Foreign Policy magazine article, Harvard Business School Professor Pankaj Ghemawat argued that 90% of the world's phone calls, Web traffic, and investments are local, suggesting that Friedman has grossly exaggerated the significance of the trends he describes: "Despite talk of a new, wired world where information, ideas, money, and people can move around the planet faster than ever before, just a fraction of what we consider globalization actually exists."[2][3] The book is perceived to be written from an American perspective. Friedman's work history has been mostly with The New York Times and this may have influenced the way in which the book was written – some would have preferred a book written in a more "inclusive voice".[4] Friedman is right that there have been dramatic changes in the global economy, in the global landscape; in some directions, the world is much flatter than it has ever been, with those in various parts of the world being more connected than they have ever been, but the world is not flat […] Not only is the world not flat: in many ways it has been getting less flat.
Richard Florida expresses similar views in his 2005 Atlantic article "The World is Spiky" Future Criticisms
This whole section is full of personal opinion. It should be either removed or neutralized.--
SohanDsouza 04:27, 15 June 2006 (UTC)
I would also question the neutrality of the "Criticism" section. In particular such phrases as "Friedman does not to appear spend much time outside of golf courses, five star hotels or restaurants, and limousines. His view of the flat world consists citizens of elites he interviews on his journey." This is not only a POV but an attack on his character. I propose that this last section, starting with the lines mentioned here, be deleted.
Tmchk |
Talk 20:04, 23 December 2006 (UTC)
Further Criticism
The following quote is one the authors cite from Friedman’s chapter, “The Unflat World”. In this chapter, Friedman attempts to prescribe a dubious cure for developing countries to catch on to this supposedly inevitable flattening of the world.
"Let’s stop here for a moment and imagine how beneficial it would be for the world, and for America, if rural China, India, and Africa were to grow into little Americas or European Unions in economic and opportunity terms. But the chances of their getting into such a
virtuous [italics mine] cycle is tiny without a real humanitarian push by flat world businesses, philanthropies, and governments to devote more resources to their problems. The only way out is through new ways of collaboration between the flat and unflat parts of the world (87)."
My question is, what’s so wrong with having a shapely world? A world where there are crevices and contours. A world where culture is preserved and discovery is always possible. This book serves as one long advertisement for the globalization of capitalism, with Friedman as the spokesperson, offering very simplistic theories on how to fix all of the ways in which our flat world is “unflat”. Yet, his chapter "The Unlfat World, Friedman asserts that the world
isn’t flat. So why does he compare himself to Christopher Columbus although he has not actually discovered that the world is flat? Perhaps he is Thomas the Train “thinking he can” somehow make the world flat because if he says it enough and if enough people accept it as authoritative knowledge, it will serve as a self-fulfilling prophecy. With this quote, Friedman gives us a false sense of tidiness to this whole process, although we know now devastating and bloody this new imperialism can be.
An example of this is in America's war with Iraq. In the latter years of the war, we were finally given the "truth" after a swarm of ideological outbursts in the media about “freedom”, “liberty”, etc. (all of which no American would argue should be protected). The "truth" now is that we are there to bring democracy to the Iraqi people. So why are we not at war with Saudi Arabia, whose culture is very stifling to individuals? I see our government doing exactly what Friedman is prescribing. In this new era, warfare has turned into a new form of imperialism where we are now trying to make “little Americas and European Unions”. With this, we should question whether these attempts are truly “philanthropic” or “humanitarian”? I would argue that they are not because the goals are primarily economic and so are the goals of Friedman with his book. As I asked earlier, why would we have to rid the world of culture and diversity? Certainly not for humanitarian purposes. Because our diverse cultures, symbols and interpretations of the world are what make us human.
The Criticism Section
"Ninety percent of the world's phone calls, Web traffic, and investments are local, suggesting that Friedman has grossly exaggerated the significance of the trends he describes."
This is a very bad critique of the book and the authors true intentions, I belive this statement is intentionally misleading. Friedman's book and the ideas contained within do not apply to every communication on the planet, he was speaking solely of business connections and communications. Of course 90% of communications would be local, how could you outsource a call to granny, your city University, or your significant other? If the statement said "Ninety percent of the world's
business phone calls, web traffic, and investments are local..." then it would be a valid point, as it is it's just misleading. Of course 90% of routine, day-to-day communication is going to be domestic, no one contests this, Friedman was addressing business related interchanges, not every type of communication there is.
Hyperion395 (
talk) 19:50, 6 March 2008 (UTC)
References
- ^ Warren Bass (April 3, 2005). "The Great Leveling". Washington Post. Retrieved 2007-09-06.
- ^ Pankaj Ghemawat (March/April 2007). "Why the World Isn't Flat" Foreignpolicy.com. (Subscription). Accessed 2008-04-03.
- ^ Pankaj Ghemawat (October 2007). Why the world isn't flat. Growth Strategies. Accessed 2008-06-04.
- ^ Peter Begley (2006). "The World Is Flat: A Brief History of the Twenty-First Century". Accessed 2006-11-06.
- ^ Richard Florida (October 2005). "The world is spiky". Atlantic Monthly. Accessed 2009-05-09.
- ^ Justin Fox (October 17, 2005). "A Painter Is Flat-Out Flimflammed". Fortune Magazine. Retrieved 2007-10-21.
The New Age of Innovation
The New Age of Innovation
C.K. Prahalad and M.S. Krishnan
Book Summary
In the first chapter, Prahalad and Krishnan outline their central
thesis; that there are new managerial demands in business, requiring new sources of value creation. They argue that these demands have created an N=1 and R=G environment, where companies need to customize their product for each customer by gaining access to a new array of suppliers.
The book argues that the old sources of
competitive advantage -technology, labor, and capital – are fading and that new sources are emerging. Prahalad and Krishnan suggest an internal capacity to reconfigure resources in real time by focusing on clearly documented, transparent, and resilient
business processes (the link between strategy, business models and operations) has become a strong differentiator. They also argue that a focus on
co-creation, by developing an R=G supply network and emphasizing analytics which identify trends and unique opportunities can create a strong competitive advantage. The technical architecture required to develop these flexible and resilient business processes and strong analytics capabilities is outlined in the book.
The last four chapters describe how to implement these new strategies. Recognizing that many companies have fragmented and archaic systems, the book describes typical problems that occur when migrating to an N=1 and R=G friendly system. Prahalad and Krishnan emphasize the importance of a social architecture with strong linkages between managers and the technical architecture. They also outline the necessity for companies to recruit new skills from around the world and use
globalization to its advantage.
Key Concepts
The book argues that "the industrial system as we know it has been morphing for some time. Now it may have reached an inflection point.”
[1] Prahalad and Krishnan outline the approach that firms in the new economy must take to survive and become successful. The previous choice between low cost and differentiation is rarely the chief strategic choice anymore, firms must achieve what Prahalad and Krishnan call N=1 and R=G.
N=1
N=1 requires companies to focus on the importance of individual customer experiences and tailor their product accordingly. It requires that companies have resilient, dynamic and flexible business processes. They also emphasize the importance of strong analytics which allow management to discover trends and unique opportunities and enable the company to engage in product
co-creation with their consumer base.
R=G
R=G advises firms take a horizontal approach to supply rather than
vertical integration. The focus is on obtaining access, rather than ownership, to resources from an array of suppliers both inside and outside the firm. R=G provides the best opportunity for firms to leverage the necessary resources to co-create a personalized experience for each customer. R=G is often mistaken as a suggestion to
outsource, however this is often not the case, as there are many notable instances where it makes sense for companies to leverage local resources to fulfill a personalized demand mode
References
External links
Business Network Transformation
Factors driving Business Network Transformation
The rising power of consumers as evidenced by the rise of
Social networks, access to new markets via rapid
Globalization in the past decade and rapid commoditization are pressuring companies to rethink their traditional
value chain. Connectivity of people, processes and information beyond corporate and country boundaries has further helped the ease of formation and management of business networks.
Type of Business Networks
Research from
Geoffrey Moore and Philip Lay shows the emergence of two types of business networks at different stages of evolution of a market or a product.
[1].
Collaborative Business Networks
In the emergent stage, collaborative business networks enable companies to explore and develop an emerging opportunity. Such a challenge is highly complex and largely undefined, so the emphasis is on communication, interaction, iteration, fast failure, and faster recovery, all trending toward delivering a complete solution to an end customer. In these networks there is typically a ringleader (called an Orchestrator) who has a vision for what is possible and rallies the other parties to pursue it. The other members of the network are included not only for their specialized expertise but also for their ability to team well with others in relationships that are not explicitly defined. This in turn implies relationships of trust built on a spirit of joint venturing to create new products and markets, the unifying principle being that the new market will reward all in reasonable terms. Examples include
linux development initiative, chip design efforts that go into a new game machine or developer ecosystem supporting a software platform.
Coordinated Business Networks
As a process or product produced by a business network matures, it must now provide scale through coordination and standardization. Now the network must operate under a new social contract, one which puts a high value on efficiency. This type of network is usually dominated by a single organization which acts as a “Concentrator’. As such networks ramp to maturity, their operations become increasingly driven by a concentrator, a member of the network who has gained greater bargaining power than the others and who drives the performance of the whole to its own greater benefit. In a sector that is supply-constrained, this will be the resource owner or the manufacturer. In a sector that is demand-constrained, it will be the end customers or consumers, or the sales channel that controls access to them. In either case, the network as a whole has become highly transactional in its relationships and becomes increasingly dependent on information technologies (IT) to manage and monitor its end-to-end operations.
How To Do Business Network Transformation
C.K. Prahalad and M.S. Krishnan in their new book, The New Age of Innovation: Driving Co-Created Value Global Networks argue that firms need a new operating model for global networked economy. This Business Week article
[1] captures their insights very well. This book revolves around two ideas - N=1 and R=G. N=1 states that companies can create value through unique and personalized consumer experience. While, R=G, argues that since no company has resources to satisfy demanding and varied expectations of so many consumers, it must orchestrate resources from its business network partners. Instead of owning assets, companies can seek relationships that provides these assets.
Strategic Role of IT
Business network transformation requires change that runs through a company, its partner companies, and the underlying IT landscape that connects the two. Not surprisingly, businesses are turning to IT to address this phenomenon. Orchestrating these business networks requires a new IT architecture and strategy. It begins by establishing an open, service-enabled business process platform. This allows companies to reuse capabilities and rapidly compose new processes to integrate with partners and drive cross-enterprise business performance. Analytical apabilities then provide
closed-loop performance execution, making visibility, decision making, and
collaboration possible across the business network.
1.^ Global Information Technology Report 2007-2008, Published by the World Economic Forum Pg. 101
References
- Business Week Research Services: Getting Serious About Collaboration: How Companies Are Transforming Their Business Networks [2]
- Business Network Transformation: Strategies to Reconfigure Your Business Relationships for Competitive Advantage [3]
- How Mass Collaboration Changes Everything.
- Exploring the cutting edge of mass collaboration with Don Tapscott,
- Anthony Williams, and the rest of the team. [4]
- Business Week: Nike's New Public Design Studio—Where Consumers Become Designers [5]
- Orchestrating Loosely Coupled Business Processes: The Secret to Successful Collaboration
- By John Hagel III, Scott Durchslag, and John Seely Brown
- [6]
- Geoffrey Moore: Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution (Hardcover)
- Henry Chesbrough: Open Innovation: The New Imperative for Creating and Profiting from Technology (HBS Press, 2003)
Wikinomics: How Mass Collaboration Changes Everything
Wikinomics: How Mass Collaboration Changes Everything (
ISBN 1591841380)
[1] is a book by
Don Tapscott and
Anthony D. Williams, first published in December 2006. It explores how some
companies in the early 21st century have used
mass collaboration (also called peer production) and open-source technology, such as
wikis, to be successful. Tapscott and Williams have released a followup to Wikinomics, entitled
Macrowikinomics: Rebooting Business and the World, which was released on September 28, 2010.
[2][3]
Concepts
According to Tapscott, Wikinomics is based on four ideas: Openness, Peering, Sharing, and Acting Globally. The use of mass collaboration in a business environment, in recent history, can be seen as an extension of the trend in business to outsource: externalize formerly internal business functions to other business entities. The difference however is that instead of an organized business body brought into being specifically for a unique function, mass collaboration relies on free individual agents to come together and cooperate to improve a given operation or solve a problem. This kind of outsourcing is also referred to as crowdsourcing, to reflect this difference. This can be incentivized by a reward system, though it is not required. The book also discusses seven new models of mass collaboration, including:
- Peering: For example, page 24, "Marketocracy employs a form of peering in a mutual fund (Ticker Symbol: MOFQX) that harnesses the collective intelligence of the investment community...Though not completely open source, it is an example of how meritocratic, peer-to-peer models are seeping into an industry where conventional wisdom favors the lone super-star stock advisor."[4]
- Ideagoras: For example, page 98, linking experts with unsolved research and development problems. The company InnoCentive is a consulting group that encapsulates the idea of ideagoras.[5]
- Prosumers: For example, page 125, where it discusses the social video game Second Life as being created by its customers. When customers are also the producers, you have the phenomenon: Prosumer.[6]
- New Alexandrians: This idea is about the Internet and sharing knowledge.
The last chapter is written by viewers, and was opened for editing on February 5, 2007.
Coase's Law
In the chapter
The Perfect Storm, the authors give an overview of the economic effects of the kind of transactions
Web 2.0 permits. According to the authors,
Coase's Law (see
Ronald Coase) governs the expansion of a business:
A firm will tend to expand until the cost of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction on the open market.
[7]
However, because of the changing usage patterns of Internet technologies, the cost of transactions has dropped so significantly that the authors assert that the market is better described by an inversion of Coase's Law. That is:
A firm will tend to expand until the cost of carrying out an extra transaction on the open market become equal to the costs of organizing the same transaction within the firm.
[7]
Thus, the authors think that with the costs of communicating dramatically dropping, firms who do not change their current structures will perish. Companies who utilize mass collaboration will dominate their respective markets.
References
7. ^ a b Wikinomics: How Mass Collaboration Changes Everything, 56 8. ^ Harvard Business Review, March 2007 v85 i3 p34(1) 9. ^ Choice: Current Reviews for Academic Libraries, August 2007 v44 i12 p2147
COMMUNITY
Language English Genre(s) Non-fiction Publisher Doubleday; Anchor Publication date 2004
The Wisdom of Crowds
The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, published in 2004, is a book written by
James Surowiecki about the aggregation of information in groups, resulting in decisions that, he argues, are often better than could have been made by any single member of the group. The book presents numerous case studies and
anecdotes to illustrate its argument, and touches on several fields, primarily
economics and
psychology.
The opening anecdote relates
Francis Galton's surprise that the crowd at a county fair accurately guessed the weight of an
ox when their individual guesses were averaged (the average was closer to the ox's true butchered weight than the estimates of most crowd members, and also closer than any of the separate estimates made by cattle experts).
[1]
The book relates to diverse collections of independently-deciding individuals, rather than
crowd psychology as traditionally understood. Its central thesis, that a diverse collection of independently-deciding individuals is likely to make certain types of decisions and predictions better than individuals or even experts, draws many parallels with statistical
sampling, but there is little overt discussion of statistics in the book.
Its title is an allusion to
Charles Mackay's
Extraordinary Popular Delusions and the Madness of Crowds, published in 1841.
[citation needed]
Types of crowd wisdom
Surowiecki breaks down the advantages he sees in disorganized decisions into three main types, which he classifies as
Thinking and information Processing
Market judgment, which he argues can be much faster, more reliable, and less subject to political forces than the deliberations of experts or expert committees. Coordination of behavior includes optimizing the utilization of a popular bar and not colliding in moving traffic flows. The book is replete with examples from experimental economics, but this section relies more on naturally occurring experiments such as pedestrians optimizing the pavement flow or the extent of crowding in popular restaurants. He examines how common understanding within a culture allows remarkably accurate judgments about specific reactions of other members of the culture. How groups of people can form networks of trust without a central system controlling their behavior or directly enforcing their compliance. This section is especially pro free market.
Four elements required to form a wise crowd
Not all crowds (groups) are wise. Consider, for example, mobs or crazed investors in a stock market bubble. According to Surowiecki, these key criteria separate wise crowds from irrational ones:
| Criteria | Description |
| | Each person should have private information even if it's just an eccentric interpretation of the known facts. |
| Independence | People's opinions aren't determined by the opinions of those around them. |
| Decentralization | People are able to specialize and draw on local knowledge. |
| Aggregation | Some mechanism exists for turning private judgments into a collective decision. |
Based on Surowiecki’s book, Oinas-Kukkonen[2] captures the wisdom of crowds approach with the following eight conjectures: - It is possible to describe how people in a group think as a whole.
- In some cases, groups are remarkably intelligent and are often smarter than the smartest people in them.
- The three conditions for a group to be intelligent are diversity, independence, and decentralization.
- The best decisions are a product of disagreement and contest.
- Too much communication can make the group as a whole less intelligent.
- Information aggregation functionality is needed.
- The right information needs to be delivered to the right people in the right place, at the right time, and in the right way.
- There is no need to chase the expert.
Failures of crowd intelligence
Surowiecki studies situations (such as rational bubbles) in which the crowd produces very bad judgment, and argues that in these types of situations their cognition or cooperation failed because (in one way or another) the members of the crowd were too conscious of the opinions of others and began to emulate each other and conform rather than think differently. Although he gives experimental details of crowds collectively swayed by a persuasive speaker, he says that the main reason that groups of people intellectually conform is that the system for making decisions has a systematic flaw. Surowiecki asserts that what happens when the decision making environment is not set up to accept the crowd, is that the benefits of individual judgments and private information are lost and that the crowd can only do as well as its smartest member, rather than perform better (as he shows is otherwise possible). Detailed case histories of such failures include:
| Extreme | Description |
| Homogeneity | Surowiecki stresses the need for diversity within a crowd to ensure enough variance in approach, thought process, and private information. |
| Centralization | The Columbia shuttle disaster, which he blames on a hierarchical NASA management bureaucracy that was totally closed to the wisdom of low-level engineers. |
| Division | The United States Intelligence Community, the 9/11 Commission Report claims, failed to prevent the 11 September 2001 attacks partly because information held by one subdivision was not accessible by another. Surowiecki's argument is that crowds (of intelligence analysts in this case) work best when they choose for themselves what to work on and what information they need. (He cites the SARS-virus isolation as an example in which the free flow of data enabled laboratories around the world to coordinate research without a central point of control.)
|
| Imitation | Where choices are visible and made in sequence, an " information cascade" [3] can form in which only the first few decision makers gain anything by contemplating the choices available: once past decisions have become sufficiently informative, it pays for later decision makers to simply copy those around them. This can lead to fragile social outcomes. |
| Emotionality | |
Connection
Surowiecki presented a session entitled Independent Individuals and Wise Crowds, or Is It Possible to Be Too Connected?[4] The question for all of us is, how can you have interaction without information cascades, without losing the independence that’s such a key factor in group intelligence?
He recommends:
- Keep your ties loose.
- Keep yourself exposed to as many diverse sources of information as possible.
- Make groups that range across hierarchies.
Applications
Surowiecki is a very strong advocate of the benefits of decision markets and regrets the failure of
DARPA's controversial
Policy Analysis Market to get off the ground. He points to the success of public and internal corporate markets as evidence that a collection of people with varying points of view but the same motivation (to make a good guess) can produce an accurate aggregate prediction. According to Surowiecki, the aggregate predictions have been shown to be more reliable than the output of any
think tank. He advocates extensions of the existing futures markets even into areas such as
terrorist activity and prediction markets within companies.
To illustrate this thesis, he says that his publisher is able to publish a more compelling output by relying on individual authors under one-off contracts bringing book ideas to them. In this way they are able to tap into the wisdom of a much larger crowd than would be possible with an in-house writing team.
Will Hutton has argued that Surowiecki's analysis applies to value judgments as well as factual issues, with crowd decisions that "emerge of our own aggregated free will [being] astonishingly... decent". He concludes that "There's no better case for pluralism, diversity and democracy, along with a genuinely independent press."
[6]
Applications of the wisdom-of-crowds effect exist in three general categories:
Prediction markets,
Delphi methods, and extensions of the
traditional opinion poll.
Prediction markets
The most common application is the prediction market, a speculative or betting market created to make verifiable predictions. Surowiecki discusses the success of
prediction markets. Similar to
Delphi methods but unlike
opinion polls, prediction (information) markets ask questions like, “Who do you think will win the election?” and predict outcomes rather well. Answers to the question, "Who will you vote for?" are not as predictive.
Assets are cash values tied to specific outcomes (e.g., Candidate X will win the election) or parameters (e.g., Next quarter's revenue). The current market prices are interpreted as predictions of the probability of the event or the expected value of the parameter.
Betfair is the world's biggest prediction exchange, with around $28 billion traded in 2007.
NewsFutures is an international prediction market that generates consensus probabilities for news events. Several companies now offer enterprise class prediction marketplaces to predict project completion dates, sales, or the market potential for new ideas.
[citation needed]. A number of Web-based quasi-prediction marketplace companies have sprung up to offer predictions primarily on sporting events and stock markets but also on other topics. Those companies include
Piqqem,
Cake Financial,
Covestor,
Predictify, and the
Motley Fool (with its Fool CAPS product). The principle of the prediction market is also used in
project management software such as
Yanomo to let team members predict a project's "real" deadline and budget.
Delphi methods
The Delphi method is a systematic, interactive
forecasting method which relies on a panel of independent experts. The carefully selected experts answer questionnaires in two or more rounds. After each round, a facilitator provides an anonymous summary of the experts’ forecasts from the previous round as well as the reasons they provided for their judgments. Thus, participants are encouraged to revise their earlier answers in light of the replies of other members of the group. It is believed that during this process the range of the answers will decrease and the group will converge towards the "correct" answer. Many of the consensus forecasts have proven to be more accurate than forecasts made by individuals.
In popular culture
The
Hugo-winning 1968
science fiction novel
Stand on Zanzibar by
John Brunner includes an elaborate planet-wide information futures and betting pool called "Delphi" based on the Delphi method.
Illusionist
Derren Brown claimed to use the 'Wisdom of Crowds' concept to explain how he apparently
predicted the UK National Lottery results in September 2009. His explanation was met with criticism on-line, by people who argued that the concept was misapplied
[7]. The Wisdom of Crowds concept by definition requires a known truth or absolute in order to work; the lottery has no such previously-existent absolute outcome. The methodology employed was too, flawed; the sample of people, couldn’t have been totally objective and free in thought, because they were gathered multiple times and socialised with each other too much; a condition Surowiecki tells us is corrosive to pure independence and the diversity of mind required (Surowiecki 2004:38). Groups thus fall into
groupthink where they increasingly make decisions based on influence of each other and are thus
less accurate. However, other commentators have suggested that, given the entertainment nature of the show, Brown's misapplication of the theory may have been a deliberate smokescreen to conceal his true method
[8][9].
Criticism
In his book
Embracing the Wide Sky,
Daniel Tammet finds fault with this notion. He explains that this notion may work in the Who Wants to be a Millionaire scenario because audience members have various levels of knowledge that can be coordinated to provide a correct answer in aggregate: Some persons will know the correct answer, others will know what are not the right answers and some will have no clue. Those who know the right answer will choose it, and the others will choose among what might seem the possible answers. The result will be to give a slight edge to the correct answer, even if only a few actually know the correct answer.
However, Tammet points out the potential for problems in systems which have less well defined means of pooling knowledge: Subject matter experts can be overruled and even wrongly punished by less knowledgeable persons in systems like Wikipedia, citing a case of this on Wikipedia. Furthermore, Tammet mentions the assessment of the
accuracy of Wikipedia as described in a study mentioned in Nature in 2005, outlining several flaws in the study's methodology which included that the study made no distinction between minor errors and large errors.
Tammet also cites the
Kasparov versus the World, an online competition that pitted the brainpower of tens of thousands of online chess players choosing moves in a match against
Gary Kasparov, which was won by Kasparov, not the "crowd" (which was not "wise" according to Surowiecki's
criteria.)
In his manifesto
You Are Not a Gadget,
Jaron Lanier argues that crowd wisdom is best suited for problems that involve optimization, but ill suited for problems that require creativity or innovation.
See also
References
1. ^ Introduction (page XII): Although Surowiecki's description of the "averaging" calculation (page XIII) implies that Galton first calculated the mean, inspection of the original 1907 paper indicates that Galton considered the median the best reflection of the crowd's estimate. (Galton, Francis (1907-03-07). "Vox Populi". Nature. "the middlemost estimate expresses the vox populi". ). Galton's quotation from the end of this paper (given by Surowiecki on page XIII) actually refers to the surprising proximity of the median and the measurement, and not to the (much closer) agreement of mean and measurement (which is the context Surowiecki gives it in). The mean (only 1 pound, rather than 9, from the ox's weight) was only calculated in Galton's subsequent reply to a letter from a reader, though he still advocates use of the median over any of the "several kinds" of mean (Galton, Francis (1907-03-28). "Letters to the Editor: The Ballot-Box". Nature. "my proposal that juries should openly adopt the median when estimating damages, and councils when estimating money grants, has independent merits of its own".); he thinks the median, which is analogous to the 50% +1 vote, particularly democratic. 2. ^ Oinas-Kukkonen, Harri (2008). Network analysis and crowds of people as sources of new organisational knowledge. In: A. Koohang et al. (Eds): Knowledge Management: Theoretical Foundation. Informing Science Press, Santa Rosa, CA, US, pp. 173-189. 3. ^ Sushil Bikhchandani, David Hirshleifer, Ivo Welch. October 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades." Journal of Political Economy, Vol. 100, No. 5, pp. 992-1026. Further reading
- Bikhchandani, Sushil, David Hirshleifer, and Ivo Welch. "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades." Journal of Political Economy, Vol. 100, No.5, pp. 992–1026, 1992.
- Ivanov, Kristo (1972). Quality-control of information: On the concept of accuracy of information in data banks and in management information systems: The University of Stockholm and The Royal Institute of Technology. (Doctoral diss. Diss. Abstracts Int. 1974, Vol 35A, 3, p. 1611-A. Nat. Techn. Info. Service NTIS order No. PB-219297
- Johnson, Steven, Emergence: the connected lives of ants, brains, cities and software (2002) Scribner, ISBN 0-684-86876-8
- Le Bon, Gustave. (1895), The Crowd: A Study of the Popular Mind. Available from Project Gutenberg at University of Pennsylvania
- Lee, Gerald Stanley. (1913). Crowds. A moving-picture of democracy. Doubleday, Page & Company. Available from Project Gutenberg
- Oinas-Kukkonen, Harri (2008). Network analysis and crowds of people as sources of new organisational knowledge. In: A. Koohang et al. (Eds): Knowledge Management: Theoretical Foundation. Informing Science Press, Santa Rosa, CA, US, pp. 173-189.
- Shirky, Clay (2009). Here Comes Everybody: The Power of Organizing Without Organizations Penguin
- Sunstein, Cass R., Infotopia: How Many Minds Produce Knowledge (2006) Oxford University Press, ISBN 0195189280
- Surowiecki, James (2004). The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations Little, Brown ISBN 0-316-86173-1
- Tarde, Gabriel (2001, orig. 1901). L'opinion et la foule. BookSurge Publishing, ISBN 0543970833
- L. Fisher, The Perfect Swarm : The Science of Complexity in Everyday Life, Basic Books, 2009.
Counterpoint
Umm... this is fine and all... but is there any counterpoint floating out there... thoughtful criticism of this "mobs know best method" ?... -anon
I would like to know... when I first heard of this "wisdom of crowds," I was dubious, because even though I love the idea of people coming together to form a vast and powerful neural network (I know, it's kind of John Lennon meets William Gibson, but stay with me, and watch Serial Experiments Lain if you haven't), I've always been under the impression that enough people in a group can wipe out one of the most important aspects of the individual mind: the conscience. "Moral man, immoral men," the saying goes, and people can convince themselves easily of being in the right if they can share the guilt with a group. Thus, heinous acts of corporate crime are justified by people who say they are merely "influenced by a corrupt corporate culture" (okay, that's from a Dilbert comic, but you get the idea), or a military commander can order his soldiers to fire upon innocent civilians and convince himself that it's "for the greater good," even if he himself would never be able to bring himself to do the deed of killing even one civilian.
Of course, perhaps such acts of collective immorality are only carried out by evil men who surround themselves with syncophants, which is the "diversity of opinion" issue that Surowiecki rightfully brings up. I just can't help but think of the 1964 murder of Kitty Genovese that I learned about here: [1] In 1964, a woman named Kitty Genovese was stabbed to death in front of her apartment in the Kew Gardens section of Queens, N.Y., while about 40 people who saw or heard the 45-minute attack did nothing to help. Admittedly, our little experiment was nowhere near so extreme as that famous example, but two social psychology professors say the reasons no one did anything remain the same. The phenomenon is known as "bystander apathy," and it's been the subject of numerous studies over the past 40 years.
...
"If no one else is reacting, people question their own idea of what's going on," Hodges says. People often don't want to be embarrassed if they size up a situation wrong—like accusing someone who lost their keys of stealing a bike—or have the spotlight turned on them as they get involved.
Also, the more people who are around, the more diffused the responsibility to intervene becomes, she says. If you're the only one there, it's up to you to stop a mugger, but if there are 30 people, it's easier not to act because each shares only a little slice of the onus.
So, that's the sort of thing I'm interested in, and I want to know if there's any material like that that we can use for the article. Do our moral impulses get smoothed over in a crowd? (I don't mean to reframe what Mr. Anon was saying, though; any useful counterpoint to Surowieck's wonderful ideas is, you know, useful.)
Also, I have to wonder: if crowds are so wise, how on Earth did we in America elect George W. Bush? (Republicans can feel free to flame me to death for that one; and besides, it would be valid enough to argue that, even if Bush and Co. painted Bush's electoral nemesis John Kerry as a panty-waisted loser, perhaps someone who wouldn't fight back against that portrayal shouldn't be President. That's not my opinion at all, but it's valid.) 67.100.45.134 02:40, 6 September 2006 (UTC) Never mind Bush, how do socialist governments ever get elected?
What about technology designed by committees? Design-by-committee is a favorite laughing stock in tech, marked by overly complex solutions which try to cater to conflicting design goals, take forever to implement and fail user acceptance in the end. —Preceding unsigned comment added by 192.139.122.66 (talk) 23:12, 27 June 2008 (UTC) Garrett Hardin's article Tragedy of the Commons makes a counterpoint to WOC. It discusses the commons dilemma in which a crowd of individuals acting in short-sighted self interest ultimately destroy a shared resource such as grazing land in spite of that avoidable outcome not being in anyone's long term interest. Cuddlyable3 (talk) 10:09, 10 December 2008 (UTC) I do not agree that Tragedy of the Commons offers a counterpoint to WOC. The central thesis presented in both are not mutually exclusive and can sit quite comfortably together. The reasons why collective wisdom can fail as presented in WOC are an underlying current to Tragedy of the Commons —Preceding unsigned comment added by 195.95.190.2 (talk) 08:22, 5 June 2009 (UTC) Laugh
The U.S. Intelligence community failed to prevent the September 11, 2001 attacks partly because information held by one subdivision was not accessible by another
Oh, come on, don't make me laugh... Anon2 18:06, 1 August 2006 (UTC) Well, this is a pretty commonly promoted idea. If we have an article with discussion (including criticism) of this idea (and I wouldn't be surprised), then you could link to it from this article. —Toby Bartels 20:33, 11 August 2006 (UTC)
Groundswell: Winning in a World Transformed by Social Technologies
Chapter 1: Filters, Fanatics, Facilitators, and Firecrackers
People who create content on behalf of products, brands, companies or other people can be classified into four different categories: Filters, Fanatics, Facilitators and Firecrackers. The 4 F's. From the professional journalist whose part-time hobby of maintaining the
Starbucks Gossip blog (Filter), to the blogger
who loves McDonalds and wants the company simply to be "awesome" (Fanatic), to the car owner who maintains
an online community for fans of the Mini Cooper (Facilitator), to the teenager who unwittingly drove up sales of a webcam brand with her impromptu video demonstration on YouTube (Firecracker), the work of the citizen marketer is varied but the categories are often remarkably consistent.
Chapter 2: The 1 Percenters
Citizen marketers don't do what most people do. They live and work on the edges of mass culture. Metaphorically, they are a bit like the members of an outlaw motorcycle gang: they live on the fringes from everyone else, but their own sub-cultures are marked by strong-as-steel bonds. Like some outlaw motorcyclists who wear a "1%" patch over their heart to signify their disdain for the norms of mass culture, so too do most citizen marketers. Our research into the percentage of people who create content at a democratized forum like
Wikipedia found a curious similarity in percentages, too: typically, only about 1 percent of all visitors will create content for it. They are the 1 Percenters. Their numbers are small but they can be highly influential. As the creators of content, they are also the shapers of culture... from its edges.
Chapter 3: The Democratization of Everything
As we shape our tools, our tools shape us,
Marshall McLuhan once wrote. Never has that been more true in the early years of the 21st century as technology trends fuel the rise of the citizen marketer. From the explosive growth of broadband connections and the total number of people online in the world (over 1 billion), to the growth of digital cameras to the proliferation of cellphones, today's common technologies have crossed a threshold of usability and affordability. People blog, podcast and create online community forums because it's easy.
Chapter 4: Everyone is a Publisher; Everyone is a Broadcaster
The seismic earthquakes rocking the economic foundations of traditional media are caused by the clannish nature of social media networks. The audiences of traditional media networks have found that the two-way and multiple-way communication inherent within social media are considerably more engaging that the one-way broadcast mode, causing a fundamental redistribution of audience attention. But what is social media, exactly, and what are its tools that enable everyday people to become publishers and broadcasters? With the Internet as their worldwide distribution platform, citizen marketers are building audiences that rival local newspapers and cable television shows.
Chapter 5: Hobbies and Altruism
Why, exactly, would someone spend months, if not years, dedicating himself to creating content and building community around a commercial product, brand, company or person as a volunteer? Because his work is a hobby, and hobbies are fun. But deeper than that, hobbies grant participants the permission to consider their work as recreation while it subconsciously works as ideological re-creation. Their hobby replicates the skills of the workplace and adds value that may be lacking from it. We explain their "market-helping behaviors" and hypothesize the reasons for their work. We introduce you to several citizen marketers and get their perspective on why they do what they do, whether it's trying to resuscitate a deceased brand of soda, to ongoing promotion of a black notebook made by a tiny Italian company.
Chapter 6: The Power of One
Why does the work of some citizen marketers spread more than others? We examine how citizen-create memes catch fire and explode into mainstream media. We delve into how influential citizen marketers are driving sales for the objects of their affection.
Chapter 7: How to Democratize Your Business
The foundations of social media share many similarities to the foundations of democracy: Freedom of speech and self-expression, the right to assemble, the right to vote. Some businesses that create a democratized culture, where the community has a say in outcomes, find that a culture of community participation drives word of mouth and a strong sense of loyalty. We examine several examples of the "3 C's" of democratizing participation with citizen marketers by examining efforts from Converse, Yahoo, the Beastie Boys, Lego, Discovery Communications, Intuit and Microsoft.
Conclusion
Where is all of this leading to? How should organizations respond to the rise of amateur culture? One solution might be to add a fifth "P" to the famous 4 "p's" of marketing: Participation.
MULTIMEDIA
Always On: Advertising, Marketing, and Media in an Era of Consumer Control. Christopher Vollmer & Booz Allen
New Metrics for Media
The measurements associated with digital media will shift the focal point of all advertising from exposure to results.
Advertising has value only to the degree that it influences consumer behavior. But whether advertising succeeds in driving people to purchase products and how well it is able to do so are among the most important and difficult-to-answer questions faced by marketers, media companies, and agencies. Indeed, the measurement of advertising effectiveness has long been a frustrating and imperfect science, leaving marketers with few options but to toss out messages in various directions and hope that some indication of consumer response would appear.
As unsophisticated and unreliable as traditional media measurement approaches may have been in the past, they did provide standards and currencies that enabled marketers, buying agencies, and media companies to transact business. Today, however, this equilibrium has become unstable. Marketers demand more effectiveness and efficiency from their media buys. Digital media are reaching critical mass with consumers. And the promise of more granular (or even real-time) data capture of consumer response to advertising is tantalizingly close to realization.
“Lately, marketers have become less interested in the number of eyeballs that see a screen or hands that touch a page and more interested in the behavior of the owners of those hands and eyes, and how the ad message connects with them,” says David Verklin, CEO of Carat Americas and chairman of Carat Asia-Pacific, the world’s largest independent media buying agency.
Or, put another way, the proliferation of media (from yesterday’s print, radio, and TV to today’s Web, cell phones, podcasts, GPS systems, video games, PDAs, and more) and the fragmentation of audiences have rendered the traditional currency of advertising — audience exposure, or “reach” — a much less compelling measure of media value than it was before. In turn, the very prospect of new metrics has contributed greatly to the popularity of digital media among advertisers. In a recent Booz Allen Hamilton survey conducted with the Association of National Advertisers, 62 percent of marketers surveyed said that they would spend more on digital media if better cross-platform metrics existed to gauge advertising effectiveness.
Marketers can use digital media to deliver contextually relevant messages and product information to specific concentrations of potential customers, targeting only consumers looking for a new Volvo, planning a ski trip to Deer Valley, or searching for organic baby food. And they can measure the actual results of those efforts instead of relying on extrapolated audience estimates. Moreover, consumer actions, including browsing, clicking on an ad, sharing information with a friend, and buying a product, as well as the development of brand loyalty, can be recorded and analyzed, allowing marketers to track with greater precision how a specific piece of advertising influences consumers to make brand and purchase decisions.
With these possibilities, it’s little wonder that marketers have so rapidly embraced Google’s pay-for-performance advertising model, in which advertisers pay Google only when potential customers actually click through to their Web sites. No longer do marketers just ask, What is the cost of the gross rating points that we are buying? Now, they want to know results at a much more detailed level, asking, Who is searching for my brand or product and how often? What sites are my target consumers going to, and what do they do there? How many online registrations are my advertisements generating? And, most importantly, how does all this activity correlate to actual sales?
But the media metrics for the new digital media environment are still of uneven quality. They lack the standardization that would enable the simple comparison of advertising effectiveness both within the online environment and across other media channels. Marketers, agencies, and media companies all agree that improvements in these metrics are going to be essential; without them, it will be difficult to profit in an advertising market increasingly characterized by more choices among more media. In other words, there will need to be a wholesale shift to metrics that are both outcome based and comparable across many channels.
The Future is Now-Get Ready to Reap the Profits.
We stand at the beginning of a consumer-centric age-an era with potentially enormous returns for leaders in marketing, advertising and media-if they get their approach right. The new media environment is ?always on,? digitally accessible to audiences from anywhere at any time, and responsive to their control. As consumers get used to this, the world of marketing is shifting to one of constant experimentation, fine-grained insight through new metrics, and continual innovation of the visible advertising message, as well as the changing business infrastructure beneath it.
The thought leaders at Booz Allen Hamilton and strategy+business magazine have collaborated to create an up-to-the-minute exploration of this turbulent yet promising new digital era and its implications for corporate executives and marketing and advertising professionals. Giving you profiles of the best in the business and deep explorations of the most effective innovations and strategies in the marketing world, Always On introduces you to the companies that are reshaping the ways we will reach customers in the future.
Their secrets are in this book, including how to:
- Match your messages to the right media
- Learn the leading strategies of consumer-centric pioneers
- Discover the lessons of laggard marketers
- Explore viral marketing
- Track advertising spending shifts
- Capture emerging opportunities in a world of constant change
- Master the new marketing metrics
- Engage your customers on their terms
Figuring out the best mix of strategies for any brand requires experimentation, networking, innovation, analytics, and risk taking-qualities that have never been adequately nurtured in a marketer's traditional career path. Always On puts you at the front of the race for successful innovation, with the latest successful approaches and techniques-essential competitive knowledge in a marketing and advertising world that never quits.
