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The Economics of Open-ness

Big business has always come bundled with all kinds of implications: aloofness, standing solitary against competition and keeping a tight lid on its inner processes. While still the norm, the business climate is changing in ways that threaten companies that hang onto those assumptions.

Wikinomics, written by Don Tapscott, illuminates the future of business for the largest companies in the western world. The book does a very clever job of turning what may seem an outrageous notion — that businesses need to jetison their closed-door practices and share themselves to the public — into a common-sense solution. In fact, the book does an admirable job of pointing out why these trends are taking place now, and shows even small businesses how they can compete more effectively.

I spent a good part of this morning on the phone, with two companies: my local Toyota dealership, and Rogers, the giant national cable and telecom provider. I had fairly routine business to conduct with each, but both managed to make it a very painful process.

On Rogers’ part, one can assume that the company’s very size makes dealing with them more difficult. For customers, the only window we get into an organization like this is the phone call. And a company’s behaviour on the phone is very telling. Rogers has gone to some serious trouble to make this an impressionable experience: they’ve installed a voice recognition system, coupled with an automated attendant with more personality than we’re normally comfortable with.

Nonetheless, this system ends up frustrating more than the original. Aside from the errors that inevitably happen when you try to give a voice command (”customer service!” you shout, after a second prompt asking why you’re calling), it’s clear that the traditional method of pushing numbers is far faster. Take the need for the system to get your phone number. You can say it or simply type it in. I choose the latter. Then they say it back to me and I confirm by pushing pound, or saying “yes”.

Now here’s the best part: when you finally do get to a human, after waiting on hold for several minutes while an automated message apologizes for “this unusual delay” (please!), their first question is for your phone number!

The purpose of this rant is simply to point out an example of an old-school opaque organization. They hide behind layers of automated phone attendants and hard-to-reach customer service reps. You get to know nothing about Rogers except what the company lets you know, after a carefully-screened marketing process and thorough training of front-line staff. The net result is that we feel detached from the companies we do business with.

It’s a problem so endemic in society today that even small companies, whose primary advantage should be personal contact and service, instead choose to put up barriers between them and their customers. My Toyota dealership is a bustling business, but they are one location with a relatively flat management hierarchy. Still, it’s automated phone attendants and long periods on hold. They’re not as bad as Rogers, but give them time.

According to Wikinomics, change is (thankfully!) afoot. One of the book’s major proof points is research and development. Large companies like Proctor and Gamble have traditionally kept R&D in-house. But now that competition has increased, not only domestically, but from ever-more-capable companies abroad, they can no longer develop new products alone. New partnerships with competitors, and invitations to the public to help develop products are becoming more common. These practices are proving not only that massive numbers of people can solve difficult problems, but that by opening the company to external inspection, peoples’ trust of the company increases. And that’s great news for any business.

This book really got me thinking about open-ness. It didn’t hurt that Wired made it their April cover story, either. The companies that open themselves up to the world are going against the grain of common sense. But anecdotally, they are reaping rewards, no only in the help they receive by impassioned customers, but in the trust they engender in the example they set.

After all, how “bad” can a company be when they’re honest with customers? And by “bad”, I clearly mean that in the nasty-greedy-monopolist-multinational-with-plans-for-global-domination bad.

Here’s a thought experiment. How would you feel about Microsoft making a public announcement: we’re going to give away our source code! Anyone can modify it to suit their needs, and they can all help us make Windows more secure. (This is, incidentally, the practice of the Linux software community) I think that a lot of the enmity that is felt toward Microsoft would disappear quickly.

And yes, it would be fantastic for business, as the huge companies who rely on Windows and Office will continue to buy the official and supported version of those products, while the nerds can find new and intesting ways to use the software, which they themselves may be able to monetize in ways undreamt of in Redmond.

These are the kinds of practices that Wikinomics sees happening in the future. And it’s a big part of what I’m doing with Innoveghtive: while I may not have the following of a giant multinational, I can at least start by being transparent to my customers. And I’m betting that transparency is going to help me grow in the future.