For many years my reputation and credibility as a futurist has been significantly supported by my 2002 book Living Networks, which anticipated many developments of the last two decades, including pointing to the rise of social networks and micro-messaging before any of today’s social platforms existed. 

That was not the only thing it got right. 

To celebrate the book’s birthday, we have launched Living Networks 20th Anniversary Edition, consisting of the original book with a new preface.  

We have compiled a list of 30 developments that the book accurately anticipated, including work from home, software-as-a-service, smartphones, crowdsourcing, subscription music, new intellectual property models, traffic congestion tracking, personalized AI assistants, the polarization of work, meme marketing, shifting movie release windows, and far more.

The book also contained detailed guidance on how to build success in a hyperconnected world. While I would of course change a few things 20 years later, I think almost all the advice in the book holds just as much today as when it came out, in some cases even more.

Living Networks 20th Anniversary Edition is available as a free ebook, feel free to download and have a look! 

Since the collective intelligence of many – or even most – human organizations is significantly less than the intelligence of many of its participants, there are no doubt lessons we can learn.

In my book Living Networks I included a small section on Creating adaptive systems in Chapter 6 on Network Presence. The company I mention, CompanyWay, was subsequently acquired by AskMe and in turn by HiveMine, by name at least keeping to the spirit of the initial concept.

The underlying concepts described in the passage below are now being implemented into some of the most interesting crowdsourcing platforms of today, building the mechanisms whereby we can create value – and hopefully intelligence – from many.

Too much structure in trying to enhance internal networks and collaboration usually results in the unforeseeable—and most valuable—interactions never happening. On the other hand allowing things to happen by themselves usually means that very little happens. How can you tread the delicate boundary between creating enabling structures and ways of working, without stifling the unpredictably useful connections from emerging?

The networks are alive. So we need to treat them as living systems, allowing behaviors to emerge rather than imposing rigid structures. When ants forage for food, they lay down a pheromone trail. When they are in new territory they walk around more or less randomly, but when they stumble across food, they will take it back to the nest, and return for more. Since ants will tend to follow paths that have stronger pheromone trails—that is have been walked along by more ants—other ants will discover the path and go to the food, further reinforcing the path and bringing other ants to take the spoils. What the ants are doing is actually collaborative filtering, in which the best discoveries of individuals are made known the group. Building these principles into collaborative systems, as CompanyWay and others are doing, creates dynamic ways for the intelligence of groups to emerge.

While the examples I used in the book are now a little dated, the strategic concepts are still absolutely relevant. I find that senior executives and strategists at my corporate clients continue to find the strategic planning process outlined here extremely useful. While the flow economy framework is most obviously relevant in technology, media, telecommunications, and services, it can be usefully applied in almost any industry.

Strategic positioning in the flow economy

The six elements of the flow economy

Walk into a youth hostel or budget hotel in any exotic country around the world, and you’re more than likely to see someone reading a guidebook from Lonely Planet, the dominant global brand in budget travel. From its birth in the early 1970s, when Tony and Maureen Wheeler found so many people asking how they’d travelled overland from London to Melbourne that they decided to publish a book about it, the company has grown and repositioned itself neatly in the flow economy. The core of Lonely Planet’s business remains the publication of over 500 regularly-updated travel titles, however that is now complemented by a broad range of other business initiatives. The firm’s website attracts over two million unique visitors a month, providing free downloads of book updates that enhance the attractiveness of the guides, direct book sales sent from distributors worldwide, a highly popular discussion forum where readers share travel experiences, and access to Lonely Planet’s other services.

Lonely Planet launched CitySync in January 2000, providing in-depth guides to four US cities plus Sydney for mobile devices running the PalmOS operating system. The software and content, including interactive maps, can be downloaded on the Internet or purchased on CD-ROM or preinstalled modules. In addition to integrating city maps with reviews of hotels, restaurants, and nightlife, it integrates with other Palm functionality and enables users to add their own comments. As with Lonely Planet’s guidebooks, updates can be downloaded for free. Lonely Planet’s customers are by their nature on the move, so it seemed a natural fit to offer telecommunications services. Its eKno service provides not just low-cost international calls, but also global voicemail, faxmail, and voice notification of emails. In addition, Lonely Planet licenses its brand for a television travel series that is screened worldwide, and now it even publishes world music CDs. From publishing books, Lonely Planet has successfully diversified into providing telecommunications services and software in addition to a very wide range of content, and in the process built powerful direct relationships with its end-customers, which it never had before.

New approaches to business strategy are required as the economy begins to reshape itself. Almost every strategic tool in use over the last couple of decades is based on the increasingly dated concept of industries. Tools such as Michael Porter’s five forces model of competition are still applicable, but their value is fading because they are based on the concept of an industry as something static and defined. You must now consider your firm as a participant in the multi-dimensional space of the flow economy, rather than belonging to a particular industry. As you saw in Chapter 3, the issue is now how to extract value from your participation in a deeply integrated economic lattice made up of many players.

Earlier in this chapter we described how in the new convergence of the flow economy every organization will face new competition—often from unexpected quarters—and immense opportunities will unfold for those that recognize them. Firms must go through a constant process of strategic repositioning, founded on opening their thinking to dramatically new possibilities. Far more than at any time before, companies can participate in shaping the evolving structure of the economy. There is now immense scope for creative thinking—and leadership—in conceiving and forging entirely new forms of business. There are three core steps to this process of strategic positioning in the flow economy. We will study these steps, and then examine how to bring the strategic process itself to life.

STRATEGIC POSITIONING IN THE FLOW ECONOMY
1. Define your space
2. Redefine your space
3. Reposition

1. Define your space

To know where to go, first know where you are. Every company and industry will face different challenges and opportunities. Each firm must ask a number of strategic questions that will enable it to establish and implement a clear strategy. The key strategic questions for defining your current space in the flow economy are shown in Table 7-2.

STRATEGIC QUESTIONS FOR POSITIONING IN THE FLOW ECONOMY – I
Define your space
• What is the “total customer offering” in which you participate, and what is the value created for the customer?
• Who provides each of the flow elements that comprise the total customer offering, and what is the competitive landscape within each flow element?
• Which flow elements do you provide, and how are they combined?
• Are there any non-information elements to the offering, and who provides these?
• What alliances do you have with providers of other flow elements?
• What are your organization’s distinctive competences and strengths?
Table 7-2: Strategic questions for defining your space in the flow economy

The starting point is to define the “total customer offering” in which you participate. Since at this stage of the process we are examining the current strategic space, this should be the most obvious articulation of what customers receive. Only rarely do firms provide the entire customer offering. For example, newspaper publishers may frame their businesses as providing news to end-customers, and selling access to end-customers’ attention to advertisers. The other participants in this offering include newsagents, delivery services, and newswires; and if the newspaper has online services, a far more complex array of providers. Digitally-based customer offerings will always draw on every flow element in some form.

Let’s illustrate the strategic positioning process by taking a brief look at one major player in the flow economy, addressing the key strategic questions by examining each of the flow elements in turn. Nokia—and its peer mobile handset makers—at first view is a participant in providing the customer offering of mobile connectivity and services. Standards are the very basis of this mobile connectivity. Some standards—such as GSM (Global Standard for Mobiles)—are set by non-aligned industry bodies, and as such are essentially in the public domain. Nokia participates actively in the standard-setting process, both in order to have input to the technology, and to be fully informed on developments. It has made a strong public commitment to open standards, and has often worked closely with competitors and partners to initiate and develop other standards such as Wireless Application Protocol (WAP), that have promised to expand the use of mobile services. It is also a strong proponent of RosettaNet, described in Chapter 3. In most cases Nokia doesn’t provide connectivity; this is the role of its close partners, the telecom firms. Relationships with the end-customers are usually controlled by telecom providers, since they usually sell the handsets, and while Nokia has a powerful brand, it often has little or no information on the end-users of its handsets. Nokia, as many of its peers, outsources the actual manufacturing of its products.

The heart of Nokia’s participation in the total customer offering is the interfaces, in the form of mobile handsets. Both content and services are important parts of the total customer offering, and it works hard to make it easier for its partners to deliver these. It understands that the better the total offering, the bigger the space will become, and it will benefit along with all of its partners in providing the total customer offering. Nokia has also established “Club Nokia” in 26 countries, in which it provides services such as customer support, games, and ring tones exclusively to Nokia handset owners. The strategic benefit of this initiative is in fact at least as much in establishing direct relationships with the owners of its handset as in service provision.

The idea of a firm’s distinctive competences and strengths of course has been central to business strategy for over a decade now. In defining a company’s current strategic space, in most cases the existing understanding of the firm’s competences will be adequate, though this may be reframed in the process of redefining the space. Nokia’s core competences and strengths can be considered to be telecommunications expertise, brand and market presence, global presence and scale, and its relationships with telecoms firms.

2. Redefine your space

Having defined the strategic space in which you are currently participating, you can now begin to redefine that space. Selected strategic questions to reconceive your space, and your position within it, are shown in Table 7-3. The creative scope and active challenging of assumptions required by this phase means that highly participative—and provocative—approaches are often useful.

STRATEGIC QUESTIONS FOR POSITIONING IN THE FLOW ECONOMY – II
Redefine your space
• How is the flow of all information and value changing in relation to your current and potential customers, suppliers, and competitors?
• How can you reframe the total customer offering?
• How are market dynamics changing within each of the flow elements?
• Are there flow elements in which you do not participate that influence your ability to extract value?
• How can you leverage your existing strengths in the flow economy into new sources of revenue or value?
Table 7-3: Strategic questions for redefining your space in the flow economy

A very valuable early exercise is simply mapping the current flows of information and value within your strategic space. This can help to uncover new ways to participate in existing flows, and elucidate how they are changing, particularly from the perspective of your current and potential customers. Formal processes, such as Verna Allee’s approaches and tools for mapping value networks, can be very useful. Understanding the current status of each of the flow elements provides a foundation for identifying potential strategic moves for your company.

American Airlines was a very early leader in redefining its participation in the emerging information flows in the economy. Starting in 1959, working with IBM, it established the Sabre airline information and reservations system, which at one stage was the largest private real-time computer network in the world. In the 1990s Sabre generated more profits than its parent, playing a dominant role in one of the most information-intensive industries in the world. Now one of six global computer reservation systems, Sabre is continuing to reposition itself, having taken a 70% stake in Internet travel agency Travelocity and providing software to other airlines on an applications service provider (ASP) model.

Another example is provided by how corporate banking is redefining its scope. The family tree of JP Morgan Chase is long and distinguished one, bringing together a multitude of firms such as Manufacturer’s Hanover, Chemical Bank, and of course John Pierpont Morgan’s eponymous institution, all of which have provided financial services to the corporations of America and the world since the 19th century. JP Morgan Chase no longer provides just financial services to its traditional client base, but is now seeking to take a commanding position in the information and value flows between corporations.

Electronic Invoice Presentment and Processing (EIPP) is a digitally-based process by which firms present invoices and make payments in business-to-business transactions. At its most basic, the field is about providing electronic notifications to suppliers and clients of order status, and making the related payments. However to implement these systems effectively when there are a multitude of complex processes including internal approvals, partial shipments, returns, insurance, and far more, ultimately requires integrating the accounts payable and accounts receivable systems of the firms involved. For consumer goods companies, these systems can extend as far as providing accounting systems and payment options to retailers, while for other large firms, they can cover all aspects of procurement, including integration into online marketplaces. This emerging space is attracting competitors from all fronts, including software vendors such as SAP, start-ups such as Billpoint, and banks like JP Morgan Chase. The only part of the EIPP suite of services traditionally provided by banks is payments—a very low-margin and commoditized business. However JP Morgan Chase has redefined the scope of its business to encompass a far larger proportion of customer value.

3. Reposition

Once you have determined your new strategic space, you need to decide how you will reposition your company. You have the usual range of strategic options available, as illustrated in Figure 7-2. You can:
• Build. Create the capabilities you require, by internal development and hiring.
• Acquire. Identify and merge with a firm with complementary capabilities and positioning.
• License. Implement technologies or processes others have developed.
• Form Alliances. Create shared business models with other organizations.
• Virtualize. Outsource business processes and functions.

Figure 7-2: Strategic options for repositioning

Traditional approaches to corporate strategy remain useful in assessing this range of options. Depending on the specific situation, some of the issues to be taken into account include the degree of integration required, financing costs, the importance of market dominance, intellectual property, cultural fit, industry barriers to entry, and so on.

At the same time, it’s important to understand how the rapidly shifting dynamics of the flow economy change repositioning decisions. As you saw earlier in this book, companies can now easily integrate their processes and operations to a far deeper degree. This means that it is increasingly possible and relevant to shift towards options that require blurring the boundaries of the organization. You are severely limited in what you can achieve if you simply buy or build capabilities internally. Those firms that actively engage in the more challenging approaches of drawing on external intellectual property, forming alliances, and allocating business processes inside and outside the organization, will have immensely greater flexibility in their strategic positioning. In Chapter 3 you saw that companies today participate in a broad network of value creation, and position themselves to extract value from that. The greater your versatility in fine-tuning your positioning relative to other firms, the more accurately you can conceive and implement your strategic vision.

Lonely Planet, discussed at the beginning of this section, clearly started with its primary strength in content creation, combined with a strong brand. In seeking to develop direct relationships with its end-customers—which most book publishers don’t have—it chose to develop its own capabilities for the Internet and online community development. However for its other new ventures it has formed alliances with a telecommunication provider, television program producer, software developer, and personal organizer makers to leverage its content and brand. In all cases it ensures that it controls the customer relationships—and thus the majority of the value creation.

Microsoft has never hidden the fact that its Xbox game console is in part the first step of a strategy to be at the heart of all home entertainment. As such it needed to create a standard. It could have done that through alliances with established players, but it decided that it wanted to completely control this business. Despite being historically a software firm rather than hardware vendor, it was easy for it to outsource manufacturing of the console. However for a game console to be massively successful it needs a large range of quality games to be available, so in addition to providing its own games, it allies with third-party game developers.

Strategy in the flow economy is also about positioning relative to your competitors. Microsoft is a powerful player in many of the flow elements, however one of the elements at which it is currently weakest is connectivity. It’s happy if the market is open and competitive, but if there is a dominant player, especially combined with relationships with end-players, it could throw a wrench into its plans. So, when AT&T’s cable television business was auctioned in late 2001, Microsoft was desperate for it not to fall into the hands of its arch-rival AOL Time Warner, as it would have doubled the firm’s broadband reach to 26 million subscribers. Accordingly, Microsoft chose to bankroll Comcast’s bid for the cable networks, thus averting the powerful hold its competitor may have gained on customers’ access to digital broadband services.

In 1421 the government of Florence awarded the world’s first patent to Filippo Brunelleschi for a means of bringing goods up the usually unnavigable river Arno to the city. He demanded and was duly awarded legal protection for his invention, being given the right for three years to burn any competitor’s ship that incorporated his design.

Fast forward almost six centuries, and the global economy is dominated by intellectual property, and the flow of information and ideas. This “property” exists in the space of our minds rather than under our feet, yet it is by far the most valuable economic resource that exists today.

The US Constitution gives Congress the power “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive right to their respective Writings and Discoveries.” There are two key points here. Intellectual property gives innovators the right to benefit from their works. However the primary intent is to promote progress and the public good, thus giving legal protection for only a limited period, and also making inventions publicly available as a basis for further innovation.

Not all information and ideas are legally protected. The term “intellectual assets” is used to describe all valuable information and ideas. “Intellectual property” is the subset of information and ideas that can be and are protected by law. Every one of us has information or ideas that are intellectual assets. But they are only intellectual property if you can successfully sue someone for copying or using them without your permission.

There are four types of intellectual property, each with their own characteristics, and each of which is affected differently by the advent of the living networks. Copyright represents the world of information. Anything that can be digitally represented, including words, images, sounds, and software, can be copyrighted. Patents cover the universe of ideas. If an idea is novel, useful, and non-obvious, it can be patented. Trademarks are words and images that are associated with particular companies, and are protected as part of that firm’s unique identity. Trade secrets, as the name implies, are protected by non-disclosure, and fall under a different section of the law to other intellectual property. To complement these core types of intellectual property, contract law is often useful for protecting the value of ideas when other legal remedies do not apply. In this chapter we will mainly look at the world of copyright and patents, as they are the most affected by issues of distributed innovation and collaboration.

Go to the Living Networks download page to read the rest of Chapter 5 on Distributed Innovation or any other chapters from the book.

The first thing I have to say is that the film is absolutely fantastic. It nails how we as humans live an intensely interdependent world, and how our recognition of and response to that will determine our future. I think the more people that see it the better, so I dearly hope it will get a healthy – or even massive – audience.

I have to say I am not an independent reviewer, and that in itself is a highly relevant story.

When I wrote the book Living Networks, I was determined to show people that ‘living networks’ was not just a metaphor, but a real phenomenon. I wrote an extensive introduction showing how the networks were literally coming to life. The editor my publisher had put in place to guide me told me in no uncertain terms – and quite rightly – that this was not the best way to start a business book. I dropped it and started the book very differently.

I remembered all this last year and dug up the introduction to put up as a blog post titled Autopoiesis and how hyper-connectivity is literally bringing the networks to life. The post got considerable attention, Tiffany saw it, and since our outlooks are so aligned she sent me an email. We had a couple of video conversations, and Tiffany sent me an early version of the film for my thoughts. I was delighted to see what she was doing.

So when I had a look at this year’s AMPLIFY festival organized by my friend the amazing Annalie Killian, and saw that the festival theme was ‘Everything Connected’ it seemed entirely obvious to connect Tiffany and Annalie, which I did by a tweet:

@maverickwoman given the theme of #Amplify you should invite @tiffanyshlain – her new film Connected out soon

Annalie duly connected with Tiffany, and while it unfortunately didn’t work out to get Tiffany to come speak at the AMPLIFY festival, Annalie got the film to show at an Australian special viewing last night.

Annalie made the event into a fund-raiser for One Laptop per Child. Annalie grew up South Africa, and has seen first hand the wealth divide. One of the reasons she is so inspiring is that she really seeks to make a difference in what she does.

Today Annalie is running “the world’s first smartphone famine” fundraiser, with the intention of buying a laptop for every child in the Acacia primary school in Northern Territory. What an awesome cause.

So connections, blog posts, and tweets end up helping to give children in far flung places access to the wonders and opportunities of the digital world.

Tiffany’s aim is to start a conversation about interdependence and connectedness in their own lives. 

Go to the Connected film website, see what she is doing, and engage in the conversation.

Finally make sure you watch the film and get others to watch it. Tiffany was brave and ambitious in interweaving her family’s personal story with the overarching messages about the role of connectedness and interdependence in humanity’s past and future, and she succeeded admirably. In fact it was critical to ground the concepts of a connected world in a real story of love and the deep emotional bonds that define us.

I feel privileged to have watched it.

Trust is a business perennial—from the days when chickens were traded for cowrie shells until we start trading with extraterrestrial races, trust has been and always will be the central factor in business relationships. However in the networked world there are three vital shifts in the nature and role of trust.

1. Trustworthiness is swiftly becoming more transparent. We are now all naked—there is no hiding in the network economy. Your reputation will increasingly precede you as the flow of information through the networks rapidly increases. In the old days someone might have made a few phone calls to try to sound out others’ experience with a potential supplier or partner. Now consumers and businesspeople can quickly and easily gather a broad spectrum of experiences and impressions about almost any company in the world.

3. It has become a key competitive factor to be fast and effective at developing trust with partners. As the technology landscape becomes more of a level playing field, trust becomes the key differentiating factor. Your products and services can be outstanding, and your processes for sharing information with partners excellent, but unless you can command a high level of trust, you are unlikely to be successful. In the network economy relationships are formed ever-faster, and unless you can build a high level of trust quickly, you will never be considered a top-tier supplier or partner.

Here is a section towards the end of the chapter which provides 5 recommendations on managing innovation in a networked world. While some of the tools have changed since this was written, the principles haven’t.

IMPLEMENTED DISTRIBUTED INNOVATION AND SHARED VALUE

At a scientific convention in Hawaii in 1972, Stanley Cohen from Stanford University and Herbert Boyer of the University of California met for the first time in what proved to be the beginning of a long friendship and collaborative partnership. Their joint work on a process for cloning genes in microorganisms resulted in three patents that formed the foundation of the nascent biotechnology industry. Stanford University ended up as the sole owner of the patents, reaping over $150 million in royalties as a result.

The real reason for distributed innovation is simply that you can no longer be self-sufficient. You must bring together more and better resources than you can hope to have inside a single organization. This means that distributed innovation models must address how you attract the best people to collaborate with you in your projects. In order to attract this elite to participate in creating intellectual property, it is essential to offer them an appropriate share of the value created. Those that can best implement new models and approaches—both to organize work effectively, and share in the value created—will be the most successful in the network economy. There are five key action steps companies and individuals must take to implement distributed innovation, as shown in Table 5-1. We will examine these issues from the perspective of the individual in more depth in Chapter 10.

IMPLEMENTING DISTRIBUTED INNOVATION
1. Design processes to match the type of innovation required
2. Create structures to access and coordinate top global talent
3. Provide a share in the value created
4. Negotiate based on differing objectives, risk appetite, and power
5. Be open throughout the process
Table 5-1: Action steps to implementing distributed innovation

1. Design processes to match the type of innovation required

What are you trying to do? Do you need to come up with startlingly new and different ideas, or do you have to develop the seed of an idea into something useful and workable? Clearly both phases are necessary elements of innovation, but it is important to understand what you want to achieve, and then apply the appropriate approaches.

As you have seen, the collaborative structure of the open source model can be perfect for developing robust and refined products, but only once the initial core has been defined. MIT’s ThinkCycle begins by establishing clearly formulated problems. Every open source project starts with an idea, an intention, and some code. Once a basic idea is in place, distributed development processes can bring a wide range of expertise to bear.

Idea generation is by its nature more unstructured, but systems and processes can help to create better results. British telecom firm BT implemented “BT Ideas” in 1996, providing a process and online forum for staff to submit ideas. This is being used in many ways, including focused idea generation campaigns around specific needs. When the CEO and directors spoke at one internal event, all were asked to end with a request for ideas on their chosen issue. The CEO received 100 sorted responses to his request within a few hours. BT now intends to get participation in the system from its partners and suppliers.

2. Create structures to access and coordinate top global talent

Pharmaceutical giant Eli Lilly established InnoCentive LLP in order to tap outside talent in its research and development initiatives. InnoCentive takes research tasks that have been clearly defined by its “seeker” companies, which include Eli Lilly and other large firms, and posts them to a global community of thousands of scientists. Each problem has a specific reward attached. One graduate student at the University of Georgia won $30,000 for synthesizing an amino acid, while an Indian scientist earned $75,000 for his solution to another synthesis problem. Problem solvers must sign a confidentiality agreement, which gives them access to complete data and specifications on the problem, and hand over all intellectual property rights to the solution. The seeker companies can access global talent to address specific research problems, match the reward to how much a solution is worth to them, and only pay if they get precisely what they need.

The heart of open source is bringing together vast global expertise in focused projects. Companies are now trying to implement similar approaches in their commercial research and development, and coming across the same challenges as open source. You need to attract the best participants. SourceForge, the largest site for open source software development, lists over 40,000 current projects. There is immense competition to get top developers to work on your project. In a commercial environment, getting the best people involved should be centered on financial rewards. However other issues can be highlighted, such as the opportunity to work with the best people on the most exciting projects, and personal career development. Innovation exchanges like InnoCentive will develop further, so it often makes most sense to access the largest pools of innovators rather than trying to create your own.

In addition you need to create structures that allow diverse groups to collaborate on projects. Fixing software bugs is eminently suited to distributed projects. In order to apply similar approaches in other domains, you need to be able to break down a project into clear and distinct tasks. For example, drug synthesis is usually a multi-stage process, so Eli Lilly and its peers in InnoCentive can isolate specific issues within the overall drug development process, and get outsiders to participate in these.

Leadership is critical both in establishing the structures for the innovation process, and often in running projects. Linux and every other successful open source project has had a combination of a good leader or leadership team, and straightforward processes. The less that a distributed innovation team depends on an individual—usually working largely by force of personality—the more that clear structures and processes are required. CollabNet, mentioned earlier in this chapter, does very well by performing exactly that role for hire in software development.

3. Provide a share in the value created

There are basically two ways of getting rewarded for work. You can get paid for your input, for example by a salary, hourly rate, or fee for service. Or you can be rewarded for the value of the final output, such as a commission, profit share, or success fee. Things are relatively straightforward if you pay contributors to intellectual property by their input. Most R&D employees must sign over to their employers the rights to everything they create, and in return get paid a salary with probably a bonus if their efforts result in the company hitting the jackpot. Magazine journalists get paid salaries, or if they’re freelance, by the word. However for distributed innovation, you are specifically trying to get the best to participate. They may want payment for their time and effort, but if they believe in their ability to create value, they will also demand a share in that to get their participation. Be prepared to offer specific reward models.

In the dot-com heyday, everyone wanted stock options. That was the way to get rich. But this is a very indirect way to profit from your contribution to intellectual property. As many discovered, it depends not only on the vagaries of the stockmarket, but also on the ability of the management team to run the company. Increasingly, top innovators are asking for a stake in the intellectual property itself. This means that if the company goes down the gurgler through no fault of their own, they still own a potentially valuable asset.

4. Negotiate based on differing objectives, risk appetite, and power

Money isn’t always everything. Actor Keanu Reeves chose to forgo part of his profit-share in The Devil’s Advocate in order to get the chance to work with Al Pacino. Negotiation is based on the fact that different people and organizations have disparate motivations. This is what allows you to find win-win solutions. The greater your flexibility in creating value sharing agreements, and the more you recognize the different situations of the parties involved, the greater your ability to attract the best players to participate in your ventures.

The reality is that in any negotiation, the primary variable is relative power, which is basically how much one party needs the other. Today, many government organizations that issue tenders for consulting work specify that any intellectual property generated in the engagement is owned by the client. Take it or leave it. If you’re a run-of-the-mill actor, musician, consultant, or programmer, you need the gig more than the project director needs you. However if you’re a star in any of those fields, you can pick and choose between offers according to how much it pays and how well it progresses your career.

Any endeavor is risky. But when more than one player is involved, each has something different at stake, varied perceptions of how risky the venture is, and unequal appetite for that risk. Balancing participants’ different attitudes to risk can allow the creation of innovative value sharing models.

5. Be open throughout the process

Humorist Art Buchwald sold the idea for the film Coming to America to Paramount Pictures in 1983. The agreement gave Buchwald a share of the film’s net profits, as defined in the contract. Since the film grossed $350 million, but booked an official loss of $18 million, Buchwald felt he hadn’t received his share of the rewards, and took Paramount to court. He lost the case, but the judge found the contract to be “unconscionable” in not representing the true profitability of the film. The studio’s costs had been defined in the contract, and it was impossible to know its true financial situation.

One of the most dramatic trends in a connected economy is towards transparency. Information always escapes, and attitudes around the world are rapidly shifting towards expecting and demanding transparency in all things. In the case of distributed innovation, it is essential to provide transparency in order to get the best people to participate. Trust is invaluable, but transparency can be almost as good. For example, the SKA Global consulting network, discussed in detail in Chapter 9, provides full disclosure of all accounts to its members. Patent pools are completely transparent to their members. Agreements must be unambiguous at the outset, so all participants are fully clear on what their responsibilities and potential rewards are. The more precise the contracts, the easier it will be to attract the best people to participate. Over time, it will become standard to have complete accounting transparency in any collaborative project.

Every chapter of Living Networks is being released on this blog as a free download, together with commentary and updated perspectives since its original publication in 2002.

For the full Table of Contents and free chapter downloads see the Living Networks website or the Book Launch/ Preface to the Anniversary Edition.

Living Networks – Chapter 10: Liberating Individuals

Network Strategy for Free Agents

OVERVIEW:As the rise of the connected economy blurs organizational boundaries, the individual is increasingly becoming the center of value creation. Workers—whether they are employed or free agents—must develop and implement effective career strategies. They need to position themselves effectively in the evolving networks, and ensure they extract value from the intellectual property they create.

Chapter 10 of Living Networks – Commentary and updated perspectives

While most of Living Networks still seems to be almost as relevant as when the book was written, this chapter on the role of individuals in the network economy is particularly pertinent today.

The points that kick off the chapter are:

* Value is shifting to the knowledge worker
* Technology gives the means of production to creative and knowledge workers
* The role of the individual is far more fluid and flexible
* Work flows through connectivity and exchanges

These trends have gone considerably further since the book was written, and the final point has developed into crowdsourcing, that we explored in detail in our Future of Crowdsourcing Summit a few months ago.

What comes out of this are key recommendations of building a unique personal identity (now often referred to as personal branding), generating deep and broad networks, and adding value to the communities in which you participate. This is clearly manifest in the world of Facebook and Twitter of today.

Another aspect is managing intellectual property in a connected world. One of the most important facets is in carefully selecting between working with publishers, and publishing directly.

The core strategy I recommended, as illustrated below, was one of using open distribution to attract attention, using professional publishers to build on that through their power of distribution and promotion, and then monetizing directly after that.

I later wrote about the self-publishing strategy of David Maister, who featured in the original chapter. Seth Godin, whose approach was also described in the chapter, has since followed a similar path.

One change in my approach is that I now believe it is often better to use establishment publishers and direct distribution in parallel rather than sequentially. More on that in another post.

An important development over the last years is the explicit development of personal branding as a key theme. This is something I will be spending a lot more time looking at and writing about in the near future.

You can read or download the full chapter 10 from Living Networks below.

Living Networks – Chapter 10 –

Ideas don’t like being alone. In fact they like copulating promiscuously with any other idea in sight. There is no such thing as a virgin birth in the world of ideas. Ideas are always born from other ideas: interacting, mating, and procreating. This often orgiastic coupling takes place in the fertile substrate which is the human mind. Our minds are hotbeds of unspeakable activities—ideas have a life of their own, but they need somewhere to carry on their flirtations and breeding.

In her book The Meme Machine, Susan Blackmore suggested that humans are purely and simply carriers for memes, which means ideas or behaviors that can be passed on to others. Our species has evolved to become a more refined vehicle for propagating ideas. One result is the desire to produce and consume mass media that seems so intrinsic to our race. Another is our drive to implement communication technologies, to engage more richly with others, and to publish on the Internet.

Using these new technologies, the ideas in our minds can participate in online discussions, starting from the voyeurism of watching other ideas interacting and playing, to the flirtation of engaging with others, however still fairly safe in the limited self-exposure afforded by a text-only discussion. At the other end of the spectrum, when people get together with the explicit intention of creating intellectual property, ideas are essentially procreating. In the free-flowing sexual life of ideas, one of the key dangers is losing your seminal creativity, bearing offspring without sharing in the rewards. There is no child support due in the world of ideas; rather your children may support you. The most fecund propagators of ideas can choose to intermingle freely with others, or guard their worth carefully, like the expensive semen of a prize racehorse.

Idea-X is an online idea exchange established by consultancy Cap Gemini Ernst & Young. Participants can either propose ideas or ask for ideas to address a specific problem. A suite of tools allow people to see how other members rate each of the ideas and the people proposing them, and to keep track of the best ideas on the site. The problem with Idea-X and similar forums is that everyone can see the ideas and use them as they will. At the other end of the spectrum is PLX.com, an online market for intellectual property. Participants can buy and sell intellectual property they have generated, though in order to do so it must first be legally registered, for example by patent, copyright, or trademark.

Also here is the commencement address Tiffany gave at UC Berkeley, which tells her inspiring story, including the story of Connected, how we need to engage with our intensely interdependent world, and the how the global brain is coming to life (from around 13:45).