05 September, 2007

Web 2.0, Corporations, Wikis, Socialists, Blogs, and Bicycle Design



Yesterday's Guardian has an article entitled The Wiki Way. It's about Don Tapscott and his book, Wikinomics, which I happen to be reading. The interesting thing is that it describes what we, that is the author and commenter on the VO blog, are doing.

Don and his coauthor, Anthony D. Williams, postulate that the effects of the internet have only begun to change business and society. This is due to the continued development of mass collaboration. From the article:

"Ronald Coase had noticed something odd about capitalism. The received wisdom, among western economists, was that individuals should compete in a free market: planned economies, such as Stalin's, were doomed. But in that case, why did huge companies exist, with centralised operations and planning? The Ford Motor Company was hailed as a paragon of American business, but wasn't the Soviet Union just an attempt to run a country like a big company? If capitalist theory was correct, why didn't Americans, or British people, just do business with each other as individual buyers and sellers in the open market, instead of organizing themselves into firms?

The answer - which won Coase a Nobel prize - is that making things requires collaboration, and finding and linking up all the people who need to collaborate costs money. Companies emerge when it becomes cheaper to gather people, tools and material under one roof, rather than to go out looking for the best deal every time you need a few hours' labour, or a part for a car. But the internet, Tapscott argues, is radically lowering the cost of collaborating. Companies - certainly big companies - are losing their raison d'etre. Individuals, and tiny companies, can collaborate without corporate behemoths to organise them."

Tapscott goes on to explain that while it is not unusual for companies to have input from customers "Collaboration can occur on an astronomical scale, so if you can create an encyclopedia with a bunch of people, could you create a mutual fund? A motorcycle?" Or a bicycle perhaps?

He uses the Chinese motorcycle industry as an example. This is an industry that produces 15 million motorcycles yet is not dominated by large companies such as Honda or Yamaha, but rather it is made up of hundreds of small companies: "Their representatives meet in tea-houses, or collaborate online, each sharing knowledge, and contributing the parts or services they do best. The companies that assemble the finished products don't hire the other companies; assembling the finished product is just another service. A "self-organised system of design and production" has emerged..."


There are some elements of this in the Taiwanese bicycle industry, and here at Velo Orange. Of course our example is not quite as developed, but by cooperating with Johnny Coast, Ahren Rogers, Mr. Yoshikawa (of Nitto) and many of our customers who post here or send me lengthy e-mails describing products they would like to see, we are creating a sort of Wiki. The new porteur rack, for example, is based on plans sent by a customer. I wonder how we can further develop this concept?


The photos are of the Ostrich panniers; a few folks wanted to see more detail.

23 comments:

Annette said...

Pre-2nd-espresso impressions:

Exciting. I like the idea of clients creating the product rather than the other way around (my pet peeve is marketing to kids, dictating their tastes....)

However, in the end, someone has to make the final decision (like the look of this blog, for example ;-D). There is some truth to the old adage "Too many cooks spoil the soup." What a balancing act! one I have no stomach for and leave happily to you. I'll just pack the orders. Somewhere in all my personnel files, I'm sure there's are notations, "doesn't work well with others".

BTW, I never understood that whole thing about Landis's "Wiki defense".

AN

Chris Kulczycki said...

Before someone asks, "What the hell are you trying to say?", I should explain that I left out a paragraph this morning making this post even more nonsensical than most. It's fixed now.

Tim said...

Chris -- nice post...I've been watching VO from afar. I think you are doing great stuff.

The whole user created content (UCC) is really the heart of the online video game market (and ultimately the open source movement if you squint at it just right). But until Chris brought it up, I had been focusing on electronic, virtual creation and not the actual creation of products. I love the rack example.

I agree with Annette that you need a final decision maker, but that's OK. Chris seems to be doing pretty well on that front.

Oh, and the Landis Wiki defense... I don't think there was anything wiki about it. It was a popular term and they (or the media) probably just slapped it on. Nice marketing, really. I can't imagine "Landis Powerpoint Defense" getting any press!

neil berg said...

Wow. This one really begs for a few slow hours over food and drink, rather than a cold, distant internet discussion. But first, the orange header on the cover page looks too red. ;-)

I guess I'm a social/economic agnostic or maybe just I'm just bi-polar. I find myself swinging from Democratic Socialist to Laissez Faire Cowboy. I suspect Chris may be dealing with some of those same issues - well maybe not "Cowboy". All an all I'm going to let An speak for me, as she seems to be the more rational party.

Phillip Franklin said...

Interesting comments no doubt. If one studied the old classical theory of modern economics one would understand that truly free markets require something called "perfect knowledge". Thus in order for a market to truly be "free" all of the participants must have access to the same knowledge of those factors that effect the market including supply, demand and all other factors that would constitute a given market.

One might argue eBay was a real step in that direction and maybe thats one of the reasons for its overwhelming success. I know my personal bicycle material needs are at times totally dependent on the parts I find on eBay. And I believe that reflects the Internet and new cottage bicycle industry as a whole.

As we watched people bid up the price of the cool old classic items from the glorious days of many independent high quality manufacturers of the 1960's & 1970's we realize there is a high demand for that type of quality and the cyclist who appreciates that type of bicycling experience. Therefore we have a Chris Kulczycki and a Velo Orange. I doubt this could exist with out the Internet. Thus I believe those observations are a proven fact.

Without this electronic medium our bicycle choices might be that of a new Canondale, Specialized or Giant bicycle. Imagine how awful that fate would be!

Phillip Franklin said...

Annette - In a truly free market it is the consumer who makes those final decisions. In markets that are not free, the opposite results. As bigger and bigger companies started taking over the manufacture and production of bicycles in the the 1980's and old names like Schwinn could no longer survive ... and look at what happened.

Maybe because I only represent a minority in the global market for bicycles my needs and wants were not being met by the manufacturers that started emerging after the mid 1980's.

Entrepreneurs can only make decisions that please the market in which they seek to serve. Big companies only seek the largest share of the market. And that of course creates huge compromises. And unfortunately for me that is not what meets my cycling needs.

In this electronic market entrepreneurs not only know many consumers such as I exist ... they can directly market to consumer with my same needs. And thus we see a much better market system. And you see in a more perfect market it is the consumer who makes that decision.

franklyn said...

Interesting post. I work for a think tank specialized in corporate planning and we monitor large number of trends in society, mostly related to technology, but also in consumer behavior, market, etc. We have been looking at this trend that we called "customer co-creation" or "crowd-sourcing" for a while. One reason that this type of product development is becoming more important has to do with the fragmentation and commoditization of of our society. This is a result of capitalism-driven globalization. Under this scenario, people begin to take identity in objects, instead of the traditional categories such as race, gender, and age, etc. Rather people derive identity in what one buys, where one live, what one drives. Because of this, the market place becomes very fragmented.

whether "crowd-sourcing" can become part of a successful business model is yet to be seen

David from DC [SIC] said...

Well, lets see...
If my name included "Shimano," and if there weren't millions of bass fishermen, I'd be worried.

Seriously, is this anaysis accurate?
"The ubiquity of the groupo concept has faded as second tier folks like sram, tektro, fsa, etc. come on strong. Shimano has had a good run, and they're not going away, but their monopoly is over. OEM manufacturers started branding themselves when they realized that market research, product design, and access to customers has gotten dramatically less expensive.

Chris Kulczycki said...

Franklyn, I am very interested in the sort of thinking your tank does. Can you recommend any blogs, books, sites that discuss these trends. Want to trade jobs for a week ;<)

David, I'd agree with your analysis.

franklyn said...

Chris,

We have collected events and news stories in a database and chart the development in this regard. Unfortunately, I can't relay those content because they are mostly contracted by our clients. However, wikipedia has an entry on "crowdsourcing" which has lots of good information.

the more prominent examples have been in the areas of software and communication platforms, but also some odd service sector ones. The advent of marketplace such as eBay and Craiglist also encourages this type of activities.

In the bike industry, I don't think we have seen too much in the realm of components, but there are seemingly more framemakers out there today, and people making accessories such as bike bags (type in Acorn under "cycling" category in eBay, and you will find this husband and wife team making bike bags a few at a time). I agree with someone's analysis that "crowd-sourcing" will take longer to get into areas where a standard is required (such as components).

neil berg said...

dc David - If Shimano and the group approach fade it'll be more like it was when I started riding. Manufactures made cranksets or brakes or whatever and made them the best they could. When the people I knew built up a bike it usually wasn't all one manufacturer. We tried to pick the best of each group. Much more satisfying than selecting either Campy or Shimano and then simply buying the level you can afford.

Robert Hudson said...

This is a fascinating and provocative topic.

The exciting part is the notion of small businesses collaborating with their customer base to develop product and small businesses collaborating with each other to develop product.
The frightening part is a point passed over too lightly by Burkeman in his article: no such thing as intellectual property rights in China, and therefore no such thing as a brand as we know it.

The Chinese motorcycle parts vendors are stealing intellectual property from the Japanese makers- property that cost someone a bundle to develop.
Suppose that you and I are both small motorcycle companies in China. I could source the same pile of parts from your vendors (including a box of your decals from your printer) and copy your product right down to the labeling. With no promise of quality associated with a brand, we compete on speed and price. The end game is looking more and more like the end of every Ponzi scheme- a few make off with a crap-load of cash, and the hapless end up holding the check.

Check out what has become of G.H. Bass & Co., once a stalwart American manufacturer:
www.bassshoes.com

I should mention here that one of my main clients is a California-based product development company with a wholly owned manufacturing plant in Shanghai.

The exciting part of Tapscott’s premise reminds me of the Cluetrain Manifesto:
www.cluetrain.com
This blog is one of the best examples of a small company getting real traction by being in conversation with its customer base. Your customers benefit from contributing to the conversation by getting access to those choice bits of neo-retro gear that would be too expensive and time consuming to develop as one-offs. The contributions in many cases are donations of professional expertise- consulting, product design, &etc. I wish that I could have that conversation with every company that I want to buy product from.

The idea of small businesses collaborating with each other to develop product in a way that is mutually profitable is a shakier concept. I wonder, for example, how Johnny Coast and Ahren Rogers will profit from the time and effort that they have invested in the development of V.O. framesets made in Japan and Taiwan, or what stake Mr.Yoshikawa has in the new V.O. fenders sourced in Taiwan.

I want to believe that the internet is subversive technology that will liberate us all from the grip of the big corporation, but I alternate between the warm-and-fuzzies and a cold sweat.
In any case, the rules of the game have changed, and there’s no going back.

Chris Kulczycki said...

Robert, I don't know that Chinese motorcycle companies are using other's intellectual property. But this sort of copying is common in developing industrial countries; it happened in Japan, Taiwan, Singapore, places that are now developing their own new technology. The interesting thing is how they are sharing intellectual property in the motorcycle industry.

As for cooperation among small companies, Johnny, Ahren, and I learn from each other. They use my designs, but add their own refinements. It creates frames that are better than we could have created alone.

In Johnny's case he was paid to consult on the Toyo project. The waiting list for his own track and road bikes has doubled since we started working together; I like to think that's partially because he is better known due to his work with us. The arrangement with Ahren is similar.

In the case of Nitto, they have nothing to do with fenders, but they have worked with us on racks and most recently decaleurs. I think the products sold under both brands will benefit. If nothing else, they have lot of new work due to our orders.

In the case of the fender manufacturer, they went from making mostly low-end fenders to high quality fenders which are now selling very well. Their expertise in manufacturing combined with our ideas on length, hardware, and finish benefits us both.

K Matthias said...

The Wiki is an expression of the Open Source development model. In the world of manufacturing you are talking about applying the same values of Open Source to physical products. The main emphasis is that no one owns the intellectual property. It is co-generated, co-implemented, and co-consumed.

The most successful Open Source projects have been those with a diverse pool of contributors and a strong leader. Generally things are done democratically but in the end someone has to make the call.

When enough people disagree with the calls being made the project splits and the competition usually results in one or both new projects becoming better.

This sounds exactly like what is happening in the Chinese motorcycle industry. It is also a very successful business model in Open Source software. If you are scared of opening your intellectual property, consider the large number of companies successfully building and selling products and more importantly _services_ on top of free intellectual property. If you can buy the same thing from anyone, you're going to buy it from the person who does the best job of selling it to you and supporting you after the sale.

The chief example in software of this business model succeeding is the Eclipse project (www.eclipse.org). It is a community of companies and individuals (150 companies and counting) co-building a hugely diverse range of products with shared components. Everyone's product is better in the end because everyone improves a part of the end product.

I don't think we'll see the break down of large companies for a long time, but this new model is certainly creating an environment in which the cottage industry can again flourish. And sometimes compete head on with the biggest of the "old" corporate juggernauts.

Anonymous said...

Seriously, is this anaysis accurate?
"The ubiquity of the groupo concept has faded as second tier folks like sram, tektro, fsa, etc. come on strong. Shimano has had a good run, and they're not going away, but their monopoly is over. OEM manufacturers started branding themselves when they realized that market research, product design, and access to customers has gotten dramatically less expensive.

no it is not very accurate. There have always been niche manufacturers; the French, for instance, had a large share in the 70's. Shimano is the leader, and their line is the best because their development is way out front. Everyone else is following. The cast will change, but no one is all that close to Shimano. --If you've with a current Shimano group for a while, and something else in the price range, I suspect you'll agree.

Anonymous said...

put it another way:

the only REAL competition Shimano has had since the early 80's was Suntour. Since then, many have come and gone.

Jim said...

Interesting comment about Suntour.
Their gruppos were made in cooperation between multiple manufacturers who branded uniformily.Each manufacturer did what they did best but SIS sank them as one manufacturer did not control every aspect of design as Shimano did. In so far as some unproven technology doesn't pop up
the "open source" model could work very well.

Anonymous said...

"Their gruppos were made in cooperation between multiple manufacturers who branded uniformily"

--this also describes Shimano-- though, I know, there are differences, but I'm just sayin.

I think the argument is simplistic.

mw

Anonymous said...

Google the Chinese 2007 CFMoto USA Freedom motorscooter, and then google Honda's 1989 US design patent D300013.

Sharing. Yeah.

Anonymous said...

Actually, I have used some recent Shimano road groups. They don't, imho, compare that well to the similarly priced Campagnolo groups. But then Campagnolo means you have to buy compatible hubs and cassettes, and Campagnolo is now in a race only mood. All they need do is make a cogset with a 32t and a 135mm hubset, and they would have the ultimate touring group :(
David

Chris Kulczycki said...

David, All you need to do is get Wheel Manufacturing spacers and substitute them for the spacers in any Shimano or Sram cassette. Then the cassette will work perfectly with a Campy drive train, and with Shimano hubs. Or just buy a WM cassette pre-built.

Simon said...

Chris

I read the comment trail with great interest. I also share an interest in the impact of web 2.0 and changing concepts of identity on society and thought I'd point you towards some interesting reading material. There are a couple of people in the UK doing some interesting work in this area Charles Leadbeater (www.charlesleadbeater.net) and Paul Miller (www.paulmiller.org). One article in particular may spark some interest. The article is called The Pro-am Revolution and was written for the Demos Think-Tank. I believe that is will be available from Charles' site. Charles also blogs on related subjects and writes under a creative commons licence. I'd be interested to hear what you think.

Simon

Anonymous said...

In reviewing several dozen Chinese motorcycles, I have been unable to find a single one which DOES NOT use a copied Honda, Yamaha or Suzuki engine and transmission. (The motor is the hard, expensive part of a _motor_cycle, and the part that has to meet the most international regulations and consumer expectations.)

So these wiki-cycles all have at their heart a core design that was created by the R&D teams at large, carefully staffed and well funded traditional corporations.