Opening Up to Collaboration

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Using the popular flickr API, for example, users have added applications for doing things like plotting the locations where photos were taken on a map to displaying flickr pictures through your TiVo.

"It comes down to a question of limited time and, frankly, limited creativity," says Technorati's Celik. "No matter how smart you are and no matter how hard you work, three or four people in a startup—or even small companies with 30 people—can only come up with so many great ideas."

By opening up their APIs, companies create an environment for low-risk experimentation in which anybody who wants to develop on top of their platforms can do so. "No need to send you a formal request," says Celik. "They can just take those APIs and innovate. Then, if someone builds a great new service or capability, we will work out a commercial licensing agreement so that everyone makes money."

Even relatively mature companies are getting involved. For example, Microsoft (MSFT) is turning its Xbox 360 home-entertainment console into a platform for amateur game developers. The company recently released a free game development kit (called the XNA Game Studio) to encourage avid game consumers to become game developers and market their own titles through the Xbox Live marketplace.

Opening the Borders

The strategy addresses a number of challenges facing the company, including a shortage of top programming and design talent, escalating development costs, and a paucity of games for its new console. Chris Satchell, general manager of the Xbox game development group, says "We're equipping the growing legion of hobbyists, students, and bedroom developers with the tools required to develop compelling content. We're saying you no longer have to have a big budget and the backing of a big studio to turn your great idea into a great game." Satchell reports that the development kit has been downloaded more than 200,000 times.

Giving away the keys to your most prized assets isn't a step a company should take lightly. "It's almost like you're taking down your borders and opening up for no tariffs, no tax competition," says SAP's Agassi. "You need to know that your core assets and your skill sets allow you to continue to innovate fast enough as a corporation."

SAP (SAP) recently opened up 30,000 APIs to its market-leading enterprise-software platforms—a fairly radical move within the traditionally secretive world of enterprise software. In opening up and adopting new standards, SAP aims to enable customers and partners to build new features, and, when necessary or advantageous, to allow third parties to seamlessly integrate. Customers that once had to live with monolithic one-size-fits-all software now get access to the inner workings, so they can mix and match enterprise services like Lego blocks to create new composite applications.

Leveraging Outside Intelligence

The plummeting costs of collaboration and the advantages of harnessing a larger talent pool are causing many to rethink their assumptions about innovation. "Do you take your core assets and processes and keep them to yourself," asks Agassi, "or do you expose them to every software company on the planet and entice them to come in and help develop those assets?"

For Agassi, it comes down to a basic principle of our networked world: There are always more smart people outside your enterprise boundaries than there are inside. "A large pool of innovative software companies can now provide customers with additional solutions with integration by design, not integration as an afterthought," he says. So far, SAP's platform for innovation includes more than half a million developers.

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

Behind the Steering Wheel

The most important lesson to take away is that self-organizing phenomena tend to win in the marketplace. Tens of thousands of interoperating agents converged on a shared platform can marshal more bandwidth, more raw intelligence, and more requisite variety than the largest organization.

The business challenge is to foster symbiotic relationships within the ecosystem, since the fundamental nature of self-organization is such that it cannot be easily controlled. But it can be steered. And smart companies are thinking carefully about how to navigate the field of open vs. proprietary technology, and how to leverage the self-organizing power of suppliers, employees, and customers. This is particularly important in areas like innovation and knowledge management, but it applies widely across most business functions.

Tapscott is chief executive of New Paradigm, a technology and business think tank, and the author of 11 books about information technology in business and society, including Paradigm Shift, The Digital Economy, and Growing Up Digital. His recent book Wikinomics: How Mass Collaboration Changes Everything is a New York Times best seller. Anthony D. Williams is an author, researcher and former lecturer at the London School of Economics. He is vice-president and executive editor at New Paradigm and co-author of Wikinomics.