Many smart companies are now coming round to the point of view that the internet and open source isn’t a threat to their business model but, if utilised correctly a huge asset. The internet opens up vast new markets and opportunities to interact with some of the smartest knowledge workers in the world on a level playing field. The traditional hierarchical structure of organisations is being broken down and “profound changes in the nature of technology, demographics and the global economy are giving rise to powerful new models of production based on community, collaboration and self-organisation rather than hierarchy and control” .

The best, (and most famous thanks to the excellent ‘Wikinomics’ book) example of ‘crowd sourcing’ and of utilising the vast resources of the web is the case of GoldCorp Inc. In 1999 the stock price hovered at around $2.8 per share. As of 14th March 2010 the stock closed at $39.30. This is a remarkable turnaround for a company which was overrun with debt and who’s only asset was a 50 year old apparently exhausted mine. In March 2000 the company CEO ‘McEwen’ announced the so called ‘GoldCorp Challenge’. The company put up $575,000 in prize money and, in a highly controversial move; published every page on information on the exhausted mine that the company had collected over its 50 year history to the internet. News spread fast and over 1,200 people from 50 countries set about virtually prospecting for new sources of gold.The results were astounding. 8 million new ounces of gold were found and the company valuation shot from $100m to $9 billion.

The incentive for volunteers of the above programme is clear, however there are hundreds of examples where people have contributed with little or no obvious desire for any reward. Wikipedia serves as the best example of a self-regulating system where millions of people contribute simply because they believe in the project or because they want to demonstrate their knowledge on a particular subject. According to the ‘Sloan management review’ “In ‘reputation cultures’ such as academia and the open-source world, reputation serves as a coin of the realm in its own right”. Although doubts are often expressed about the accuracy of the information in the online encyclopaedia a study in 2005 produced by the British journal ‘Nature’ found that the online resource “is about as accurate on science as the Encyclopaedia Britannica”. Indeed, when experts were asked to review the information provided by both sources “reviewers… found many factual errors, omissions or misleading statements: 162 and 123 in Wikipedia and Britannica, respectively” .

It is time that traditional companies got a hold of the open source movement and utilised the general public. ‘Social Media’ is currently the hottest space for businesses who believe that twitter and the like helps them sell, but rather than looking at the web as a great platform to market wares why not align social media strategies with a grander aim to harness the power of the masses and increase brand engagement by getting individuals involved. In short, don’t work for the web make the web work for you.

[1] Tapscott, Don and Anthony D Williams. Wikinomics – How mass collaboration changes everything. London: Atlantic Books, 2008.

[2] Lynne, Markus M, Brook Manville and Carole E Agres. “What makes a virtual organisation work.” Sloan Management Review (2000): 18.

[3] BBC. Wikipedia survives research test. 15 Dec 2005. 14 Mar 2010 .

After the 115 heads of state and world leaders who met in Copenhagen in 2009 failed to come to a binding resolution for action to combat climate change, many thought that hope of ever coming to a global agreement on the climate was lost. The seeming unwillingness of nations, both developing and developed to bind their economies to carbon emissions left many feeling that no great benefit came out of Copenhagen and some feeling that it was “a step back from the Kyoto protocol”.

Developing countries are facing a quandary of sorts, continue to feed their unprecedented growth by relying on dirty power and manufacturing and ignore any consequences of global climate change, or put regulation in place which limits emissions and risks slowing down the very growth which, in some countries is the only thing sustaining corrupt and autocratic governments. Many developing countries are seeing this as their time to shine, industrialisation has finally arrived and with it has come cars, electricity and consumer goods for all. And who can blame them for emitting copious amounts of CO2, after all developed countries such as Britain has been pumping out carbon for over 150 years? Developed countries would point out that environmental issues have only come to forefront in the last 20 years and that the world simply can’t sustain the same level of pollution that the west produces on a global scale. “If China’s carbon usage keeps pace with its economic growth, the country’s carbon dioxide emissions will reach 8 gigatons a year by 2030, which is equal to the entire world’s CO2 production today.”

It may not be fair to look down on poorer countries, which developed economies have actually been encouraging for over 60 years to ‘work their way out of poverty’ and inform them that they ‘simply must cut back’. But if we don’t it’s not the just west that will suffer from climate change but the globe. Indeed, a report commissioned by the UK government said that “if we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more” .
By now most people have come to terms with the fact that the climate is changing and that CO2 emissions are the cause, however coming to a rational agreement – one which does not just pray on one area of the globe but affects every country evenly – is something which eludes us. So what can be done? Although there have been talks of a global carbon credits scheme this requires agreement on a global level to cap and allow trading of emissions. Currently there is a scheme such as this operating in Europe however many countries refuse to consider it. Another is to bring capitalism in to play to force countries who want to compete to adopt carbon cutback schemes. This would most likely feature a tariff on goods and services coming from the most polluting countries and being sold to non-polluting markets. For example Europe, which has so far been a forerunner in combating global climate change, would place a tariff on goods and services originating from countries which are polluting at more than a percentage of their 1990 emission levels (the internationally recognised standard for countries who signed the Kyoto protocol), after 2 years this tariff would increase thereby both encouraging countries who want to continue to sell to developed markets to cut back on emissions and also readdressing the trade deficit which has plagued most of Europe for the past 30 years. As more countries agree to the deal they would be included in the tariff, leaving countries unwilling to reduce emissions unable to compete.

The carrot and the stick approach is one which developed countries have been employing on LEDC’s for century’s and is one which no doubt will be employed in the future. Most of the global population by now agree that something has to be done. It is up to world leaders to listen to the public and come to a rational agreement even if it sacrifices economic growth in the short term. Even in the last few years we have seen the result of our actions, Hurricane Katrina, the Tsunami which hit Asia and continuous melting of glaciers throwing both floods and starvation at some of the worlds’ most poverty stricken inhabitants have all been stark warnings of what is to come unless nations act.

References

[1] International Institute for Sustainable Development. (2009). A brief analysis of the Copenhagen Climate Change Conference. Earth Negotiations Bulletin .

[2] Madrigal, A. (2008, February 8). China’s 2030 CO2 Emissions Could Equal the Entire World’s Today. Retrieved April 19, 2010, from Wired: http://www.wired.com/wiredscience/2008/02/chinas-2030-co2/

[3] (2006). STERN REVIEW: The Economics of Climate Change. London: Cambridge University Press .

Related articles

• Rich nations urged to develop climate aid plan for Cancún (guardian.co.uk)

On January 12, 2010, Google announced that a major attack launched against its network from hackers inside China (aimed at exposing the Gmail accounts of Chinese human rights activists) had prompted it to consider abandoning its Chinese operations and reconsider its 2006 agreement with the Chinese government to censor search results in the country.

“Google is failing in its mission to make the world’s information accessible and useful to Chinese Internet users”₁ was a line used by the Vice President for Global Communications and Public Affairs in 2006. Less than four years later in January of 2010 Google announced that due to “a highly sophisticated and targeted attack on [their] corporate infrastructure originating from China… [Google is] no longer willing to continue censoring [their] results on Google.cn”₂ . Since then things have progressed. China has completely denied any involvement in the so-called cyber crimes ₃ and Google CEO Eric Schmidt, speaking at the World Economic Forum in Davos, Switzerland has said that he hopes “to apply some negotiation or pressure to make things better for the Chinese people.” ₄

So is this Google finally living up to its corporate mantra “Don’t Be Evil” or is it simply corporate positioning of a multinational corporation? The fact that Google entered the Chinese market in 2006 and agreed to censor their results demonstrates the willingness of the company to comply with the law in the countries in which it operates and simultaneously demonstrates its lack of concern for local politics, no matter how controversial. Could the so-called cyber attacks which Google claim were the final straw merely be an ideal opportunity to exit a poorly performing market?

“This wasn’t in my opinion ground-breaking as an attack. We see this fairly regularly,”₅ was a statement by Mikko Hypponen, of security firm F-Secure.  ”This goes on all the time. Of the Fortune 100 companies, all 100 are under some sort of attack all the time”. In fact evidence has recently surfaced that Google actively assists governments in democratic societies with access to its properties including Gmail (it’s online email client). Bruce Schneier, a security technologist and renowned technology author recently announced that “In order to comply with government search warrants on user data, Google created a backdoor access system into Gmail accounts. This feature is what the Chinese hackers exploited to gain access.”₆ “Democratic governments around the world — in Sweden, Canada and the UK, for example — are rushing to pass laws giving their police new powers of Internet surveillance, in many cases requiring communications system providers to redesign products and services they sell.” So we must now question why did Google decide this particular attack was newsworthy and why take such a monumental step of pulling out of one of the largest potential markets in the world?

In 2005 Google’s market share was 33.3%1 The announcement to censor results in China published in February of 2006 was intended to slow the nose diving market share if not aimed to increase it. However according to Jennifer Li, Baidu‘s chief financial officer, “Baidu’s market share for search in China was about 77% in the third quarter [of 2009], up from 75.6% in the second quarter [of the same year]. Google [she says], lost share in China, dropping to 17% in the third quarter, from about 19% in the second quarter.”₇

In summary I believe that Google’s response to China had little to do with their moral stance which has apparently changed significantly since 2006 when they entered the market and which the company seem to forgo in order to continue to operate in democratic countries and more to do with an excellent public relations strategy which took the focus from the company and raised a contentious issue before a public with growing anti-Chinese sentiment.

Related articles

• Schmidt Hopes ‘Some Pressure’ Will Make China See Things Google’s Way (wired.com)
• Google Vs. China: A Bluffing War Begins (slog.thestranger.com)

References

[1] Schrage, E. (2006, 2 15). Testimony: The Internet in China. Retrieved 2 2, 2009, from The Official Google Blog: googleblog.blogspot.com

[2] Drummond, D. (2010, 1 12). A new approach to China. Retrieved 2 2, 2010, from Official Google Blog: http://googleblog.blogspot.com/2010/01/new-approach-to-china.html

[3] Hornby, C. B. (2010, 1 14). China defends censorship after Google threat. Retrieved 2 2, 2010, from Reuters.com: http://www.reuters.com/article/idUSTRE60C1TR20100114

[4] Fraher, J. (2010, 1 29). Google’s Schmidt Hopes ‘Pressure’ Will Help Chinese People. Retrieved 2 2, 2010, from Bloomberg.com: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6.eNsTFNWSc

[5] Shiels, M. (2010, 1 14). Security experts say Google cyber-attack was routine. Retrieved 2 2, 2010, from BBC News: http://news.bbc.co.uk/2/hi/8458150.stm

[6] Schneier, B. (2010, 1 23). U.S. enables Chinese hacking of Google. Retrieved 2 2, 2010, from CNN.com: http://edition.cnn.com/2010/OPINION/01/23/schneier.google.hacking/

[7] Mehta, S. N. (2009, 12 28). Google v. Baidu: Which company will win China? Retrieved 2 2, 2010, from CNNMoney.com: http://brainstormtech.blogs.fortune.cnn.com/2009/12/28/google-v-baidu-which-company-will-win-china/

I would like to start with my apologies for not writing to this blog for the past month or so. I have been busy with exams and the last few weeks of university fun. As I write I am sat in a bar in Spain piggybacking off the free Wi-Fi and sipping San Miguel.

I am posting a rare personal message today. In the past I have used this blog merely as an outlet for my musings on the financial, business and online world however I have big news which may affect my future perspective and so I thought it relevant. I would like to start writing more personal entries anyway and so I am breaking the ground so-to-speak with this.

My biggest news is that I have been accepted to spend a year at City University in Hong Kong for which I applied several months ago. I embark on the 20th of August and plan to continue with my management course which I started at Lancaster. I applied to study in the Far East because of the paradigm shift we have seen over the past few decades which has seen China, once a country which chose to isolate itself from the world seek the industrialisation similar to what we in Britain experienced in the 1800’s. 1.2 billion people now seek the same level of wealth and status as we in the west have enjoyed for centuries. In 1950 the average Chinese person earned $454 per capita (calculated at 1985 values) at sharp contrast to Western Europeans who were earning $4,902. Since the cultural revolution and Mao’s death however China has been on an unprecedented mission to catch up and has hurtled forward at breakneck speed causing many economists to predict that by 2040 China will surpass the US as the world’s largest economy. Experiencing business in an economy growing so quickly (even in the current climate) will undoubtedly be an invaluable experience.

The more historically or globally aware amongst you may observe that Hong Kong is in fact not a Chinese state. After the British surrendered the colony as recently as 1997 it became a ‘special administration district’ of China and as a result holds a unique position as an anchor between east and west making Hong Kong  – I hope – an ideal place to study Chinese culture without being uncomfortably detached from my own. English is also the second most spoken language (behind Chinese Mandarin).

I plan to continue with all my current obligations (such as the podcast – despite the time difference) and write more on this website perhaps about Hong Kong itself as well as my web-related interests and business observations.

In the old world businesses would make it as difficult as humanly possible for consumers to move from their service to a competitors. This makes economic sense, after all… people are less likely to want to move if it involves effort, if they don’t get the equivalent service elsewhere or if something (such as a blog entry) is lost. So why, in the last few years have we seen a sudden move towards ‘openness’ and transparency. Everything from social networks such as Facebook and MySpace to new blogging platforms such as ‘SquareSpace’ now preach that the users own their data… not the companies.

The answer is simple, it’s what the customer demands. Free and easy movement of information is a fundamental principle of the web and we are now in a position both technically and socially where we as consumers can demand this from our applications. However if indeed sites suddenly become democratised we appear to start on a slippery slope. Where does consumer input stop and the needs of the business start?

Facebook recently asked its users to help rewrite their ‘terms of service‘ after a controversy that hit the web hard. The legal agreement proclaimed:

Although the founder of Facebook responded to the event and said it was simply to cover the company legally, users were quite rightly outraged and Facebook was forced to change the agreement.

This flip-flopping not only demonstrates how passionate users feel about the sites they use but the power they wield over website owners. This therefore leads me to ask at what point sites can act autonomously and wonder whether this continued democratisation spawned by the wiki way back in 2001 will result in a much more open web and a changing model of business for companies now entering the internet arena.

One thing Facebook has learnt in the last few days is the importance of incremental updates rather than one large revolution in design. In a recent survey 94% of Facebook users said they disliked the new site design and Facebook for the first time ever announced that they were listening to users and are going to change the site based on feedback. So what can we learn from this experience?

Most people don’t like change. Generally change is confusing, it’s scary and makes users feel stupid when they can’t find the things they’re used to. Small changes people can cope with. Users won’t like them but if everything else looks the same they can quickly figure out what they want to do.

Warning that changes are coming is a good step for getting your users prepared as well, providing a preview or telling people what will change reduces alarm and thus keeps people happy. Although Facebook probably wont have lost any users from its recent changes it loses goodwill and this is something difficult to regain.

Affluence.org has been proclaimed ‘Facebook for rich people’. Every niche demographic seem to have their own social network and Affluence.org has been designed for rich people who like to talk to rich people… exclusively. It aims to bring ‘the members-only country club‘ mentality to the web but whilst this may sound like a good business model (think how much you could charge for ads that exclusively target rich people) I struggle to understand what these so called ‘socially elite’ gain in return. Not making $300,000 a year or having a net worth exceeding $3 million I am (unfortunately) unable to join the site, and so this is a rather unbalanced review however I am interested in what we can learn from the business model.

Scarcity has always been a valued commodity and Affluence.org sells exclusivity.  No social network works if you’re on your own and the site is reportedly gaining about 400 to 500 new members each day. Although this is nothing  in comparison to Facebook’s 700,000 new users each day (as of Dec 2008) it is a fair rate of growth for such a site. From an advertisers point of view every member of Affluence.org  is worth far more than an ordinary user whose average salary (in the US) is $21,350 each year (a minimum of 14 times more in fact).

The site promises free access to a dedicated concierge, ‘invites to the most exclusive events and parties in the world’ and ‘priority access to the world’s most exclusive nightclubs, hotels, and restaurants’ as well as the usual social networking features. However many of these individuals will already have access to many of the above services.

The site really plays on a persons vanity. Everyone likes to feel like they belong to an exclusive club and this is what Affluence provides.This sort of scarcity creates the real value in a site and was something Google utilised in the growth of its GMail service, every member had to be invited and each of those members had 5 (and only 5) invites to pass on. Recipients of invites felt honoured and understood the scarcity which created a demand. The last thing the world needed was another webmail service but Google Mail utilised the value of scarcity to gain huge growth – and we can see this process being emulated by Affluence.org.

Remember FriendsReunited? Back in 2000 the UK spin-off of ‘Classmates.com’  in many ways laid the foundation of today’s biggest sites. It had a business model, a growth rate to rival that of Twitter and even made a profit of £22 million in 2007 – something Facebook and MySpace are still struggling to do.  So what went wrong and what can be learnt from failures of the past?

Cast your mind back to the year 2000. The millennium bug roams the streets, the Internet was at a lightning fast 56k per second for most and we all enjoyed the modem dial sound before being redirected to the Lycos homepage. The Internet was a void filled with Geocities websites, javascript hit counters and Google before it started selling adverts. Images took an average of 2 seconds to load and a full site could take more than 25 seconds.

Users saw the Internet as a peripheral… not as a utility as it is viewed nowadays. FriendsReunited captured the imagination and turned the Internet into something useful. Never before had there been a directory where users could connect and find people they had virtually forgotten about. The genius that built FriendsReunited was sucking people in. Someone once said the art of good business is being a good middle man and boy was this site a good middle man. You could create a profile and search for free… but talking to the guy who used to sit next to you 10 years ago is going to cost you. And people paid (remember back in the day when people paid for the goods and services they received).  They paid in their masses and in December 2005, Friends Reunited had over fifteen million members (which is equivalent to approximatelya quarter of the population of the UK).

So what changed? Firstly competitors arrived on the scene. By 2005 MySpace emerged as the biggest social network of them all, with a staggering  48 million users. With MySpace, users could join for free, they could customise their profile and add music and videos to portray their personality. What is more, it brought social networking to everyone. FriendsReunited was fine for finding your classmates years later, but what if you were still in school, or just wanted to find out what your friends were doing without emailing them? The site fell behind with outdated technology and an unfeasible business model. People could now find their classmates on other social sites and they could do it without paying £5 a year for the luxury. One thing the growth of Facebook has proven is that if you want to make it big… start with the young market. Facebook brought ‘Apps’ to the equation, users could create groups and see what their friends were up to as soon as they wrote it, without the need to email and ask.

ITV, the British broadcaster paid £120m for the site in December 2005. In February this year the value was estimated at just £20 million. A sad demise for a company that just couldn’t keep up.

Related Articles

• Friends Reunited valued at fraction of £175m paid by ITV (telegraph.co.uk)

One conclusion can be drawn from the current economic crisis… no one has a clue what to do. From Keynesian ‘Fiscal Stimulation’ (Plowing money into the economy to sustain jobs and ride the way through the recession until things pick up again. The famous quote is ‘putting money in bottles and burying them underground’ to create jobs for the unemployed) to printing money, there are so many so-called solutions to the current global economic downturn that even seasoned economists are struggling to keep on top of it all.

The problem seems to lie in the fact that our economy is now so global that there is no way to factor in every exogenous variable. And economists know this. President Harry S. Truman once said ‘For pity’s sake, will someone find me a one handed economist!’ and this pretty much sums up the current problem;  No one man can come up with any model to factor in every circumstance and outcome of any one action. Economists can only make recommendations based on what they have examined in the past. Unfortunately this situation is unprecedented… in short we’re flying blind!

Although many parallels can be drawn between the current recession and the great ‘Wall Street Crash’ and the ensuing depression (such as widespread bank failures which make it harder to obtain finance for investment) this time is completely different. In the 1920′s politicians raised taxes and cut spending in order to attempt to combat the fall in GDP. In the post-Keynesian era governments are doing as much as possible to spend money. In the march 2008 the British fiscal deficit was estimated to be £43 billion which works out as 3% of the total GDP. In January this year (2009) net debt was £703.4 billion, equivalent to 47.8 per cent of gross domestic product. This sort of public spending in order to combat the downturn in private investment has never been seen before on this scale.

Although personally I agree with the economic stimulus my point is this. Even the brightest economic minds in the world cannot possibly estimate the full impact (or lack of) that this excessive spending will have on the economy as a whole. And if  the old adage still applies ‘A little knowledge is a dangerous thing’ then it has never been more important to look at both sides of the argument and take an even handed approach when pushing forward into the unknown.

About 12 months back I was signed up to a great little tool called DocSycner which found all the word/excel/powerpoint documents on your PC and simply uploaded them to Google Docs. It was quick and easy and I found it incredibly useful as it allowed me to forget about carrying a memory stick from home to work and not concern myself with expensive off-site backup solutions (for the really important stuff such as work anyway).

When I got my new laptop I didn’t bother installing it (as it was the holidays and I had no need for it) but now i’m at university I can really see a use for it. Unfortunatly the company went bust in June 2008. Since then I have been hunting around for a solution. Sure there are plenty of great backup solutions such as Mozy or Jungle Disk but none of them compare to the simplicity of Docsyncer.

It’s sad that there was no way to monetise this technology (i guess they simply couldn’t compete with more advanced solutions) and presumably their business plan was ‘Year 2… be bought by Google’ but this is a loss to the search giant too. I used Google Docs more than ever when my files  were simply ‘there’… it became a replacement for MS Office which is the ultimate intention of the Google Docs Suite. So come on Google… pull your finger out and whip up a solution… my docs wont upload themselves!

Related articles

• Do You Use Google Docs? (geeksugar.com)