Wikinomics, or the economics of mass collaboration, is at the heart of the second generation Internet, creating new opportunities for enterprises to reinvent their businesses yet again. This white paper explains the forces that
give rise to new opportunities for Cisco partners and change the way we work
together—the “Collaborative Channel.” At the highest level, we redefine “channel” to
denote an ecosystem of collaborative relationships, rather than just a one-way pipeline
for products or services. These relationships tie Cisco to its many partners, and partners
to end-customers; but they also tie partners and customers to each other. Together, we
are in a unique position to catalyze this change, and benefit from it. Get ready to change
the world once more—by learning, testing, and partnering to expand your capabilites in
new areas.
Success in the Second Waveof the Internet:How Wikinomics CreatesOpportunities for Cisco Partners
Wikinomics, or the economics of mass collaboration, is at the heart of the second generation Internetchanging everything from software, to motorcycle manufacturing,
to politics. For Cisco and our partners, this means a great opportunity to help our customers reinvent their businesses yet againwhile growing our own revenue
and influence in the process. To fully capture this opportunity, we must not only capitalize on our current strengths, but also change the way in which we work
together. Through our vision of the “Collaborative Channel,” Cisco sees a new platform for our channel partners to grow and become even more indispensable in
the lives of their end customers.1
This white paper explains some of the trends and forces at work behind our Collaborative Channel efforts. At the highest level, we are redefining “channel” to denote an
ecosystem of collaborative relationships, rather than just a one-way pipeline for products or services from Cisco to its end customers. These relationships link Cisco to its
many partners and their end customers as well as to each other, while enabling other types of partnerships and access to untapped opportunities.
This new model is depicted below using a social wheel
or social graph. The social graph is an apt metaphor because it illustrates the multiple and multidirectional relationships that are now possible between and among
manufacturers, channel partners of different types, Figure 1: The New Channel Relationship
“Web 2.0 is fundamentally changing how corporations build relationships and interact with other entities. It's the biggest change in a century in the way that companies create value, and arguably, in the nature of the corporation itself.”
— Don Tapscott, chairman and founder, New Paradigm
“I believe the second phase of the Internet offers Cisco and our partners even greater opportunities for growth, differentiation and productivity than the first. We are in a unique position to lead this market transition, as we help our customers benefit from it.”
— Keith Goodwin, senior vice president, Worldwide Channels, Cisco Systems
vs.
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
customers, and the broader network. These interactions extend well beyond those made possible within business
webswhere the enterprise is still the hub of each relationship. As you can see, the enterprise is now just one of many nodes within a much more expansive
universe of business relationships.
Five disruptive forces are driving this new collaborative opportunity:
1. The Global Net Generation: The biggest and first truly global generation expects to be treated
differently as an employee and a customer.
2. Global Hothouse Innovators: Innovation is being driven by new business models that originated under
tough, “hothouse” competitive conditionsoften in rising economies.
3. Peer Production: The social revolution is sparking
a business revolution whereby companies work together to develop shared product and service offerings.
4. Platform Companies: Successful enterprises offer customers not just a product or service, but a platform capability, upon which customers can build
their own value propositions.
5. The Wiki Workplace: New collaborative technologies are changing the nature of work for
partners and their customers. Wikis, blogs, unified communications, video, telepresence, predictive markets, and social networking applications are
redefining the business landscape. With our partners, we are increasingly well-positioned to guide our customers into this world.
This white paper explores each of the driving forces and
provides specific insights for leveraging their power as you reinvent your business and help customers to do the same. Once again, we are in the unique (and enviable)
position of growing our business by helping our customers exploit this emerging business revolution.
In the budget
Companies will spend more on information
communications technology (ICT) in the
next 10 years than they did in the last 40
years.
THE GLOBAL NET GENERATION
The Net Generation (N-Gen) is the cohort of individuals born worldwide between 1977 and 1997. It is the first
generation to be “bathed in bits” so it has a much different attitude towards technology, product marketing and relationships with companies than its predecessors.
It is also the largest generation in history: equal to the West’s Baby Boom population and between one-and-a-half to two times the size of the Baby Boom cohort
across the rest of the world.
Interestingly, the N-Gen is the first generation to be an authority on something truly important: technology. N-Geners influence technology decisions and behaviors,
both in their homes and increasingly, in the workforce. Marketers and employers that learn to recognize and embrace this unique and demanding global demographic
cohort’s norms (see Figure 2) will automatically generate success with older generations as well.
The N-Gen employee
By all indications, the competition for talent will become even fiercer in the years ahead. The void created by Baby Boomer retirements in the West is expected to
coincide with the unmet demand created by the world’s fastest-growing economiesresulting in a monumental global talent crunch. By 2010, the number of jobs in the
U.S. is expected to exceed the number of workers by 10 million;2 while in India, the technology sector alone will see a shortage of 500,000 professional employees. China
also faces a skills shortage: the Chinese workforce is expected to grow by less than 5% from now until 2015, by which time one-third of the population will be over
the age of 50.3
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
Although N-Geners everywhere share many attributes that make them the world’s largest and best-qualified
employees, it is important to understand the distinctions between the various labor markets; each has its strengths and weaknesses. The four main rising economy regions
are India, China, Latin America, and Eastern Europe. India and China are particularly important since the N-Gen demographic in these areas combined is almost 10-
times larger than the entire N-Gen population of North America.4
India
Despite its high potential as a source of talent, India faces recruitment and retention challenges. Moreover, a huge knowledge gap exists between its best and worst
trained graduates. Three out of four of its 400,000 engineering graduates per year lack required technical skills, English language fluency, the ability to work in
teams, and/or basic presentation skills.5 Although aggressive training can ameliorate these issues, it can also exacerbate the turnover problem. Often, the best
talent sources are top schools in second- and third-tier
cities, where it’s still possible to find educated students.
Women are a neglected opportunity, especially mothers of young childrento tap this high-skill workforce, consider offering flexible hours and telecommuting
options.
Meeting expectations
N-Gen employees expect the companies they
go to work for to have the collaborative
tools and processes in place that they have
grown accustomed to in their personal lives.
As an example, 28% of N-Geners dislike
email as a communications technology
because it is too slow.6
N-Gen Norm As employees N-Geners want As partners/customers N-Geners want
1. Freedom the freedom to choose where and when to
work.
the freedom to choose what, where and how
to buy.
2. Customization to tailor roles and have a voice re: their
responsibilities.
the ability to change or modify products and
processes creatively.
3. Scrutiny to thoroughly research employers prior to
accepting positions.
to investigate products/services prior to
purchase.
4. Integrity companies to follow through on promises. companies to follow through on promises.
5. Collaboration to work in teams. (They are already
comfortable collaboratingespecially online.)
to take advantage of the opportunity to work
with others to make product/service
adjustments.
6. Entertainment work and fun to be the same thing. to have fun with products/services.
7. Speed to move faster than other generations but are
willing to take the time to get something done
right.
something of value and are willing to wait for
it.
8. Innovation new and better ways to do their jobs and will
identify these improvements.
to co-create new product and service
offerings.
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
Of this country’s 3.1 million university graduates per year, less than 10% are suitable for employment in a multinational company due to poor English language
skills.7 Nevertheless, the Chinese government still hopes to match or surpass India as a supplier of knowledge workers. Successful strategies for recruiting Chinese N-
Geners include accentuating the prospective employer’s international brands to build prestige, identifying opportunities for candidates from second- and third-tier
programs, and selecting one strong English speaker as a potential spokesperson for teams of 10 to 20 workers.
Russia and Eastern Europe
Despite their history as a shrinking economy and less than favorable public perception in the West, Russia and Eastern Europe are a good short-term source of
candidates. N-Geners here want domestic opportunities and possess comprehensive knowledge of IT and engineering, accompanied by outstanding technical
skills. By global standards, Russian technical universities produce extremely strong science and engineering graduates. Be advised though that demand
for technical personnel is tightening: salaries can rival or exceed U.S. and Western European levels.
Latin America
At least for the short-term, Latin America seems to have the lowest potential for satisfying global hiring needs among the four main rising economy regions.
Government bureaucracy, coupled with the region’s inadequate education system, provide little incentive for global companies to hire from this talent pool. Although
the demographics are favorable, the structural politics and economics of the region are likely to keep N-Geners here underproductive for the foreseeable future. But just
like their North American counterparts, Latin American N-Geners want a say in their job responsibilities. The norm “Customization” was ranked number one by N-
Geners surveyed in Brazil and Mexico.8
Stages of talent relationship management
With a significant global talent shortage in the offing,
employers that hope to attract and retain N-Gen employees will require a comprehensive talent relationship management strategy based on three stages.
� Stage 1Initiate: Use Web 2.09 tools to initiate a
relationship with prospects and new hires; use N-Gen recruiters or N-Gen “ambassadors” from existing personnel to employ relationship-based
recruiting practices; and create tailored and creative on-boarding programs for new N-Gen employees.
� Stage 2Engage: Engage N-Gen employees
throughout their careers by addressing their norms. Satisfy the specific learning needs that are particular to these young people: basic knowledge of the
corporate environment, communication skills, dealing with feedback, understanding career progression, and building cross-generational
relationships.
� Stage 3Evolve: To help N-Gen employees evolve fully and creatively into their roles, look beyond
their contracts and tap into their use of social networks. As an example, L’Oreal uses its MySpace pages to invite alumni to comment on the company’s
new advertising campaigns and product ideas, and to refer friends for employment opportunities.
The N-Gen customer and partner
New Paradigm’s research suggests that success will accrue to those companies that engage this generation in
co-creating their brands, products, and services. Since there is a good chance that your contacts within partner and customer organizations will increasingly be N-
Geners, marketing to this group, and helping your customers work with it, is essential.
This generation is very willing to spread positive and negative experiences through word of mouth, especially
online via their social networks. While social networks present a powerful opportunity to market products and services on an unprecedented scale, N-Geners are savvy
customers who don’t appreciate most online advertisingin spite of doing much of their purchasing on the Web.
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
Therefore, consider incorporating the following N-Gen norms into your current marketing strategies:
� Customization: N-Geners aren’t interested in
cookie-cutter experiences; they want the ability to change or modify products and processes creatively.
Recommendation: Offer customers a chance to tailor
their online experience with you by providing adjustable dashboards and/or user interfaces.
� Scrutiny: Web 2.0 has changed marketing winning new customers with traditional marketing
techniques is becoming less effective. N-Geners use technology to scrutinize and research products and companies before making purchasing decisions.
Over 80% of N-Gen customers today want to find their vendors, not be found by them.10
Recommendation: Be visible in the places your
potential N-Gen customers are researching solutions, and make sure that when they research you in the wiki world they like what they read.
� Innovation: N-Geners want and expect the
advertising directed at them, the goods and services they purchase, and their workplace to be innovative and creative. They also want access to the “latest and
greatest” of everything. Half of those surveyed worldwide by New Paradigm indicated that they want companies to pre-release products so that they
(N-Geners) can “help test them out.”11 Moreover, 20% said that they would help companies design products in which they were interested, even if they
were not paid to do so.12
Recommendation: Explore and identify areas where your customers can help you design and improve
your value proposition.
When creating messages for N-Geners, regional differences should be noted. For example, in North America, social networking is in wider use than in other
regions; while blogging is very big in China and Japan. To attract and engage the desired N-Gen audience, be sure to select the preferred regional approach.
GLOBAL HOTHOUSE INNOVATORS
New global enterprises in Asia, South America, and Eastern Europe are being built under “hothouse” conditions: a vast pool of low-cost, and increasingly
high-skilled labor; a rapidly expanding home base of new, wage-earning, “naïve” customers without pre-existing expectations; active government involvement in
the private sector; and greenfield IT infrastructures that lack legacy complexities. By exploiting these conditions, global hothouse innovators are developing business
models that are fundamentally changing industry dynamics. As they move up the value chain and begin to compete with firms in mature markets, these global
revolutionaries will threaten the profit structure of incumbents in almost every industry.
Global revolutionaries
Hon Hai/Foxconn
Today, once lowly parts manufacturers are challenging
the traditional value chain model by designing and assembling entire productsoften leveraging their own innovations and intellectual property to achieve this. The
widespread availability of information technology (IT) to support manufacturing has created the opportunity for this type of manufacturer to move up the food chain to
compete with electronics manufacturing services (EMS) firms on process efficiency. Taiwan’s Hon Hai (also called Foxconn) is at the forefront of this trend.
Patented for success
Hon Hai’s success was bolstered by a
record high 81,820 patent applications in
2007; 49,007 of which were granted.13 By
comparison, IBM—the leader in U.S. patent
applications—currently holds approximately
40,000 active patents worldwide (out of over
2 million granted since 1974).14
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
Hon Hai has discovered that delivering on innovative industrial design is the source of added value in the
electronics manufacturing industry. A company that can design, engineer, and manufacture to high standards—with flair, quality and price—can treat the traditional
domain of EMS (stuffing parts into boxes) as an add-on to its core offering. Hon Hai’s value-add combines industrial design (aesthetics), materials engineering
(performance), and design-for-manufacturability to create electronics product packaging that both enhances the end customer experience and is cost-effective to
build. In 2007, Hon Hai earned $2.6 billion on $38 billion of revenue; its top five competitors combined lost $1.6 billion on sales of $57 billion.15
ICICI Bank
Incredibly, India’s ICICI Bank drives over 70% of its transaction volume through electronic channels in a
country where Internet and mobile phone penetration are below 5%. It achieves this via e-lobbies and unstaffed branches where customers help themselves. In addition
to its self-service proposition and low-cost labor, ICICI benefits from applying innovative technology to its greenfield business. The company’s IT systems—which
are generally based on servers instead of mainframes—are free from complex legacy issues and cost less than one-tenth of developed-country benchmarks. ICICI is
also an example of the new entrepreneurial firms that are bursting out of India’s fertile competitive marketplace. Its leaders look to global manufacturers and technology
startups for their role models, as much as banks.
Like Toyota in the 1960s and Samsung in the 1990s, ICICI is building a profitable business in an emerging market hothouse until it becomes strong enough to take
on established competitors around the world. In less than 10 years and from a standing start, Mumbai-based ICICI has become India’s second largest retail bank, leading in
every retail product market that it targets. Now, it has begun knocking on the doors of global banks’ home markets, with new subsidiaries in Canada and the U.K.
each growing by over $1 million in assets every day.
Fast movers
ICICI’s agile business model allows it to
launch a new product 90 days after
conceiving it; it launched its U.K. subsidiary
in just 65 days.
Bringing hothouse capability to customers
Some of Cisco’s partners, such as Infosys and Wipro, are hothouse success stories themselves, so you may already be leveraging some of their techniques in your
business. Going forward with our partners, we will increasingly bring global capability to customers by taking advantage of our global reach.
The first step in this process is for you to employ global
capabilities in your business. Most Cisco partners are actively seeking growth and are always aggressively searching for opportunities that drive success. Successful
enterprises look to other parts of the world to find functions or skills that could improve their business models. As a departure point, consider outsourcing help
desk or call center functions, as well as software development and modification.
The second step is to bring global capabilities to your customers through partnerships with other Cisco
partners, and/or new kinds of partners such as independent software vendors (ISVs), managed service providers, or outsourcers. By collaborating with
companies you might traditionally have ignored or even considered competitive, you may be able to leverage your existing strong customer relationships into much
broader sales and service offeringsthereby growing your top-line, and reinforcing your contribution to your customers’ business success.
Above and beyond these strategies, there is a particular
lesson to be gleaned from the performance of hothouse companies that deserves special mention. Enterprises with the greatest growth find they can afford to let go of
“legacy” infrastructure and services in favor of what
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
works better today simply because their growth is a much bigger portion of their “ongoing concern.” For
more “stable” or stagnating competitors, the legacy portion of the business often represents 80% or more of their future so they can find it difficult to adjust old
technology or business models. For a fast-growth company, the revenue from the next three years is often bigger than that which was generated during the past
decade so it’s easy to force a migration from old systems or business models to enable the future. Simply put, sometimes a willingness to change and upgrade is the
catalyst that makes the faster companies grow.
PEER PRODUCTION
When hundreds or thousands of customers create
something together that far exceeds the value of a traditional solution, we call it “peer production.” Think of Linux or Wikipedia. The concept is largely driven by
a social revolution and gives rise to prosumers: a new breed of value chain partner that is, at once, consumer and producer. The same Web 2.0 tools are being
deployed in business-to-business situations to allow enterprises to take advantage of mass collaboration.
Prosumers: The driving force behind peer production
In the past, firms could safely ignore or even resist
customer innovations that didn’t fit their internal processes and business modelscalling them unauthorized “hacks.” However, today a new generation
of prosumers treats the world as a place for creation, as well as consumption. Prosumerism is based largely on interest-based communities working together to solve a
problem or improve a product or service. Mass collaboration and communications technologies, such as blogs, wikis, and social networks, allow those groups to
function and flourish.
For consumer-facing enterprises, this creates a direct opportunity to engage and co-create with customers and innovate with fewer resources than traditional “plan and
push” businesses. For others in the channel, it provides an example of the types of peer production models that will eventually make their way to the channel value
chain.
Dell’s IdeaStorm
One baby step example of prosumerism is Dell’s IdeaStorm—a simple but brave way to get honest and specific feedback from customers. When Michael Dell
returned as CEO of Dell Computers in 2006, he created IdeaStorm to pinpoint the problem behind the company’s languishing sales.16 Customers post ideas,
build and vote on other contributors’ interesting suggestions, and talk with each other and Dell representatives. As of late-February 2008, IdeaStorm
participants had posted 8,646 ideas and 64,314 comments, and had cast 600,657 votes.17 What’s more, Dell is very transparent about how customer ideas are
creating value for the company. Of the ideas submitted, 15 are “coming soon,” 56 have been implemented, and another 52 have been “partially implemented,” proving
that Dell isn’t only “talking the talk.” It is actually integrating user feedback into new products and services.
Listening to and collaborating with customers is good;
acting on their advice is better; and showing them exactly how you are paying attention is best. New technology makes it easy to do the first part, but
strategic and cultural shifts are required to actually make prosumer platforms work. Nevertheless, we refer to IdeaStorm as a baby step because true collaboration can
yield so much more.
Have you read/written a blog today?
Blogs give companies and customers a
voice. The blogosphere doubles
approximately every six months. In 2006,
1.5 new blogs were created every second, or
approximately 120,000 new blogs (and 1.5
million posts) per day worldwide.18
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
Peer production in a B2B context: Increasing partner relevance
In a business-to-business environment, the principles of
peer production can be used to engage and collaborate in a non-hierarchical, self-organizing manner. The focus here is on improved customer service, brand loyalty, and
enhanced innovation throughout the product or service lifecycle. No single organization can, on its own, provide the entire value proposition that customers seek.
The economic model has changed. Rather than relying
solely on in-house resources to develop new products and services, leading enterprises are harnessing external ideas, resources, and capabilities; especially those of
their channel partners and customers. Today, companies in nearly every sector of the economy, from software (Linux and open source), to consumer products (Procter
& Gamble), and manufacturing (Chinese motorcycle industry) are embracing these new models of collaborative innovation.
Chinese motorcycle industry
The Chinese motorcycle industry has grown rapidly over the past decade and now dominates the Asian market. In
fact, China now makes half the world’s motorcycles.19 Part of this success is due to state-run operations with foreign partnerships (i.e. China South’s Jialing and
Jianshe); however, many of the most impressive innovations are coming from private sector upstarts Zongshen and Longxin that use mass collaboration to
create competitive advantage. These Chinese climbers owe their success to such techniques as modularity, a highly iterative process, and localized manufacturing
concentration. High-level designs are set out in rough blueprints that enable collaborative suppliers to make changes to components without modifying the overall
architecture.20 Manufacturers try new designs in rapid succession with suppliers, rather than the assembly company, and assume responsibility for ensuring
component compatibility in design and manufacturing.
The localized modularization approach can enable higher levels of self-organizing behavior among industry participants, improve speed and agility for final
assemblers, and increase suppliers’ value. The model is not unique to Chinese motorcycles either. Increasingly, producers in a wide variety of industries are only
responsible for final product assembly and marketing.
They rely on peer production to tap into dozens, or even, hundreds of firms to help design and build finished
products. Overall, this collaborative approach enables risk sharing and allows the network to tap into diverse skills and resources.
Open innovation
Procter & Gamble (P&G) has learned how
to harnesses both internal and external
resources to drive innovation and growth on
an unprecedented scale. Nearly 50% of the
most innovative ideas at P&G come from
outside the company through its Connect +
Develop program. Insiders say this model
has increased innovation productivity by
60% and saved over $1 billion in R&D
costs.21
Peer production in the collaborative channel
Together with our partners, we at Cisco have a great opportunity to bring peer production to our customers in
a number of ways. While we have only just begun, we are committed to developing the peer production concept further in the months and years ahead.
� Engage customers for input: At Cisco, we recently
launched a collaborative initiative in which we asked customers (and anyone else) for ideas to launch our next billion dollar business, and in return for which
we offered a reward called the “i-Prize.” Although the Cisco i-Prize project has closed to new submissions, we will be providing an increasing
number of opportunities for customers to propose new products, services and improvements. To that end, we will be looking for your input as partners,
and ask you to encourage customer input so as to keep our offerings at the top of your customers’ priority lists.
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
� Experiment with ideagoras: Peer production means making corporate boundaries more porous.
To find new sources of bright ideas and expertise, companies must look outside the enterprise to individual inventors, entrepreneurs, small- and large-
sized companies, and even, competitors. One of the ways in which to do this is by leveraging marketplaces for ideas, or “ideagoras,” such as
InnoCentive, NineSigma, YourEncore, or Elance. These intermediaries act as brokers for expertise and innovation and help connect companies with new
business partners outside their traditional networks. Enterprises whose internal teams lack the expertise to commercialize a particular idea can now tap the
talent of a broad range of professionals with the requisite skills and expertise. Companies can also acquire input for more advanced ideas or early stage
products which can be developed and brought to market through expert networks. Focusing on commercialization of proven concepts, rather than
idea generation and testing, can help Cisco partners yield a higher return on project spending.
� Peer produce with Cisco partners: Our most
successful partners are transitioning from “box installers” and even, “system implementers,” to “solution providers,” thereby bringing an integrated
set of hardware, software, consulting, and service capabilities to their customers. No one company can offer such a powerful proposition by itself. We are
counting on our partners to increasingly collaborate with each other, and with new kinds of partnersapplication providers, independent
software vendors and othersto create this new value proposition.
A great example of peer production by Cisco partners is
the 1nService alliance in North America (1nservice.com). An alliance of 28 companies in 54 locations across the continent, 1nService utilizes the
combined strength of its partners to offer a complete set of solutions to its customers. By employing the partner network, regional technology integrators are able to
capitalize on business opportunities that fall outside their individual geographies and areas of expertise. 1nService helps partners’ competitive positioning by building
incremental revenue streams for the “collaborative commons,” while solidifying relationships with customers, and acting as a barrier to entry for rival
solution providers. Together, 1nService partners now serve over 30,000 customers in North America, and the
collaborative community is on its way to expanding beyond its home continent to accept partners from
around the world.
Another example is our Industry Solutions Partner Network (ISPN), which enables our partners to offer deeper, more comprehensive value to their customers by
focusing on specific vertical markets (financial services, health care, government, etc.). By adding capabilities beyond our direct products and services, and reaching
out beyond our traditional partners, ISPN allows the Cisco ecosystem to compete on a broader scale and offer a solution that’s value is greater than the sum of its parts.
Together, we can win customers and achieve growth rates that were previously out of our range. Analysis shows that partners that bring a solution to a customer in
this manner have a 35% higher services mix, 20% higher gross margins, larger transactions, and a 3% higher net profitability than the average partner.
PLATFORMS
The natural evolution of the peer production concept is for some successful enterprises to become “platforms”
upon which hundreds or thousands of partners and customers build their businesses. Think of eBay or Amazon, where providing a fundamental capability (e-
commerce) allows thousands of merchants to set up shop much more quickly, and with much more innovative value propositions than they could provide by
themselves. Just as a solid foundation allows the rest of the house to be firmly constructed, a platform enables additional growth and innovation by providing third
parties with the tools required to build complementary applications and businesses.
The value proposition along all points of the value chain is clear. The company hosting the platform gets access to
a large number of applications and users, while harnessing innovation from a much larger talent pool than it could marshal internally. Companies that
integrate their offerings into the system gain access to a larger customer base and are able to diversify their business risk. Network effects begin to apply and the
complementary assets of the ecosystem make it very difficult for others to penetrate. In other words, successful platforms erect high barriers to entry for
potential competitors.
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
To date, the world’s most successful platform companies are in the digital realmAmazon, Google, SAP, and Facebook have all made the strategic business decision
to leverage outside creativity by allowing third parties to enhance the speed, scope, and ultimately, the success of innovation on their platforms. Not only do these
organizations enable third party access to their platforms, they also aggressively court other businesses to choose their platforms over those of their competitors.
Finally, the open platform model has enabled smaller players to achieve mass adoption in record time.
Amazon’s Open APIs
The Amazon application programming interface (API) is one of the oldest Web-based open platform solutions. Starting with the founding of the company in 1994,
Amazon often worked with selected third parties, such as HMV, Target, and the NBA. In 1996, Amazon launched the first online affiliate program, “Amazon
Associates,” which enabled third parties to link to the Amazon site and receive a commission when referred customers made a purchase. This was followed by the
“Amazon Marketplace,” where third parties can sell their own items on Amazon, and then, ultimately, the “E-Commerce Services” (ECS) program to enable the
exchange of information such as pricing, product descriptions, and images.
By the summer of 2006, over 200,000 members of the ECS program were spending millions of their own
dollars to find innovative new ways to leverage the Amazon database.22 This success was a revelation to Amazon and those that followed its lead as it allowed
them to explore ideas that would often not be funded through traditional R&D models. This strategy is working exceptionally well for Amazon. In 2007, the
company posted a gross profit of USD $3.35 billion on revenues of USD $14.8 billion, with year-over-year quarterly revenue growth of 42%.
Facebook platform
Facebook’s API has allowed thousands of third parties to develop applications that run on top of Facebook. In
December 2007, the company announced its willingness to license its API to other social networks: “We also
want to share the benefits of our work by enabling other social sites to use our platform architecture as a model.
In fact, we’ll even license the Facebook Platform methods and tags to other platforms.”23 Companies like RockYou and Slide have made these applications into
big business. While most of these applications are for entertainment and social use, it’s particularly interesting that some companies, like Salesforce.com, have also
launched enterprise applications for Facebook. This first generation of applications is just the tip of the iceberg.
If you open it, they will come
Amazon Web Services has over 330,000
outside developers contributing to its
platform.
Salesforce.com meets Facebook in the
enterprise
Faceforce is the type of next-generation application that
brings enterprise functionality to a consumer-focused platform like Facebook. Created using Facebook’s open API, Faceforce integrates Web-based customer
relationship management (CRM) software from Salesforce.com with Facebook to empower enterprise users to build deeper relationships with customers and
prospects. Faceforce opens a new world of opportunity by bringing the power of relationships to contact management and call center employees. Today, users of
both platforms can access rich data that connects relationships on Facebook to potential business contacts and leads from Salesforce.com. The custom application
also gives companies an opportunity to harness typical Facebook features, such as messaging, viewing others’ profiles, sharing images, and creating online groups and
events.
Cisco is a platform
The Internet is the ultimate platform: a global foundation
for business relationships that enables computation, communication, commerce, and innovation. In concert with our partners, we are in a unique position to provide
an enabling platform upon which our customers can build their businesses.
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
Leveraging an existing platform can provide significant advantages to both small and large companies; including rapid growth, established infrastructure, and access to
new markets. Platforms also provide a shared “space” that permits innovation and experimentation with new products and services. The result is a highly synergistic
ecosystem that is designed to promote mutual success.
For starters, Cisco’s own offering is increasingly a software and service platform, like those described earlier (especially Faceforce.com). In fact, Cisco has
over 40 initiatives around developing APIs for everything from phones to collaborative software to IT security applications like firewalls and VPN networks.
For example, the WebEx team has announced a set of APIs that will allow third party developers to create software for the WebEx platform. WebEx Connect gives
partners the opportunity to build and share applications that can reach 3.5 million WebEx users, as well as extend their productivity by creating customized WebEx
spaces for collaboration.
Cisco’s Unified Application Engine (CUAE) platform for unified communications, the Cisco Compatible Extension (CCX) program for mobile and wireless
devices, and AXP, a new Linux-based development platform for integrated services routers, are some other examples of open platforms. These initiatives allow
partners to join a technology development program of over 400 developers and co-innovate new applications and new offerings on top of Cisco products.
In the Cisco ecosystem, partners can provide
significantly more value than simply reselling Cisco products. For example, partners may deliver network platforms for data centers or unified communications in
the form of an end-to-end managed solution that incorporates components from various manufacturers, providers, ISVs, VARs, and other channel partners.
Partners can integrate hardware and software from any number of vendors and wrap their own services around them to improve the customer value proposition. Cisco
expects an increasing share of partner revenues to come from such integrated solutions.
Extending this idea even further, our partners and we can “raise our sights” to provide a platform for customer
innovation. The second generation Internet presents a
huge opportunity for all our customers to achieve higher revenue growth, stronger productivity, and faster
innovation. To put it mildly, we and our partners are in a unique position to apply Web 2.0 know-how and technology to expedite our customers’ business model
reinvention and expansion ahead of their competitors. More details of this will follow in the “Wiki Workplace” section.
THE WIKI WORKPLACE
To enable wikinomics in the enterprise, across the channel, and in customer organizations, Cisco and its
partners must master the wiki workplace. Applications that form the basis for collaboration in the workplace include: blogs, wikis, unified communications,
telepresence, video and social networking applications, as well as connective technologies, such as Web feeds (RSS), search, social bookmarking, and tagging. Many
companies are starting to experiment with wiki workplace tools as a way of unleashing employee talent. The most successful companies are finding that these
tools can truly “unleash” productivity and creativity within their walls, and in so doing, dramatically improve the value they offer customers. Here are a few examples:
Tools for work
Over 50% of large enterprises—and over 70%
of businesses with less than 500 employees—
are already beginning to implement some type
of wiki workplace technology.24
The BBC: Getting past the management trap
Led by a newly promoted head of knowledge management, the BBC moved to a more collaborative workplace, starting with a simple forum where users
could “Ask a question” or “Have a discussion.” Rather than mandate active participation, it started small and encouraged employees to interact with each other. The
focus was on increasing communication and information
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
sharing, not populating knowledge management repositories. The management function also
changedmanagers could no longer avoid difficult “people questions” and were forced to carve out roles where their practical expertise and individual
contributions were brought to the forefront, rather than their management skills. This produced the unexpected benefit of raising the quality of the overall management
team and contributed to the BBC’s capacity for renewal and growth.
When the company tried to implement a wiki workplace, it faced a few common challenges. A major point of
resistance was defining the line between collaboration and wasting time. The primary answer was education. The purpose of collaboration technologies is to make the
user’s jobs easier, with a secondary benefit that these tools allow information and knowledge to spread and collaboration to occur.
Novell: Making inroads with collaboration
tools drives engineering innovation
Product innovation is one of the easy entry points for collaboration and this was a driving force at Novell, where the company saw a need to incorporate a wide set
of tools into the development process. Novell also uses wikis to help provide internal IT support. Wikis act as a knowledge base and have enabled the Technical Services
group to easily find and contribute to IT solutions. The ultimate goal for the tool is to enable other employees to easily reference and identify solutions, and then solve
their own IT-related issuesthereby saving the department time and money.
Novell also sees corporate blogs as an effective means to involve a wider base of employees in marketing the
company and its products. Not only can corporate blogs allow Novell to highlight the cutting edge thinking that exists within the organization, these tools can also help
with employee retention. Allowing workers to be the voice of the company highlights the degree to which the organization trusts and values its employees. This could
prove to be a desirable key differentiator in an increasingly competitive war for talent.
Implementing a wiki workplace
The most successful approach to implementing a wiki workplace is the staged “plateau approach,” where leadership takes an active role in introducing,
facilitating, coordinating, and communicating the success of Web 2.0 pilots. This involves proactive management structures and enabling principles whereby
CIOs and business leaders find an appropriate balance of “doing it” and “formalizing it.” It is an iterative process that is neither “plan and push,” nor completely “hands
off.” The three basic plateaus are outlined below:
� Plateau 1Beachhead: During this plateau, organizations use strategic pilots to accomplish work more effectively. They employ disposable, easy to
use, inexpensive technologies that they can easily deploy and abandon. Given these traits, the technology and processes do not carry significant
risk or governance implications. Success at this first plateau requires the organization to identify the need and garner support for the next phase.
� Plateau 2Base Camp: The raison d’ être of this plateau is to prove the concept is scalable. Resources and management should be dedicated to formalizing
the framework for collaborative efforts, as well as communicating and promoting wiki workplace successes internally. The primary shift here is to
move from a “push” to a “pull” model where IT no longer has to push collaborative efforts. This phase is successful if the enterprise is actively pulling for
IT support and capabilities. The business groups see the value of wiki workplace efforts and are willing to allocate budget for further expansion and
enhancements.
� Plateau 3 and Beyond: Once an organization reaches this plateau, it focuses on continuous
improvement, as well as enhancing and extending its capabilities. A broad governance structure and architectural strategy are required to effectively
execute at the third plateau and beyond.
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
Making the wiki workplace happen for Cisco, partners, and customers
Using wiki workplace tools, partners can create a
collaborative environment that is capable of capturing and improving partner and customer experience, increasing employee productivity and innovation, and
advancing staff recruitment and development practices. Experimenting with these tools is the first step towards unleashing wikinomics business models.
However, the real opportunity lies in helping customers.
Cisco partners that learn to master collaborative tools and implementation best practices are in a unique and preferred position to offer the wiki workplace
technologies and services to end customers. As shown in Figure 3, Cisco partners can help leading companies identify their needs and provide the requisite
collaborative tools to address themthereby facilitating tangible business results for our customers.
* * *
Wikinomics and the second generation Internet promise to make an even bigger difference than the last
revolution in the day-to-day lives of our employees, customers and end customers. Together, we are in a unique position to catalyze this change. Get ready to
change the world once moreby learning, testing and partnering to expand your capabilities in these new areas. The upside is deeper, more unshakeable
relationships with key customersand a rapidly growing top-line.
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
1 Special thanks to Nauman Haque and Laura M. Carrillo for their contributions to this research paper. 2 Nancy R. Lockwood, “The Aging Workforce,” HR Magazine, December 2003. 3 Anita Hawser, “China Faces Growing Skills Shortage,” BNET Business Network, January 2008. 4 U.S. Census Bureau International Database, 2007. 5 Somini Sengupta, “Skills Gap Hurts Technology Boom in India,” The New York Times, October 17, 2006. 6 New Paradigm Global N-Gen Study, 2006 and 2007. 7 Diana Farrell and Andrew Grant, “Addressing China’s Looming Talent Shortage,” McKinsey Global Institute, October 2005. 8 New Paradigm Global N-Gen Study, 2006 and 2007. 9 Web 2.0 is defined as the collaborative Internet. Where Web 1.0 was characterized by static Web pages and one-way communication to the user, Web 2.0 is defined by dynamic, interactive Web applications and platforms and the relationships they foster. Common examples include blogs, wikis, social networks, RSS feeds, widgets, photo- and video-sharing sites, mashups, prediction markets, and other online communities. 10 Bill Gillies and Don Tapscott, “The 8 N-Gen Norms - Characteristics of a Generation,” New Paradigm, 2007. 11 Ibid. 12 New Paradigm Study of the N-Gen, n=1,750, 13-20 year olds in the U.S. and Canada, 2006 and 2007. 13 “Hon Hai remains largest local patent applicant, recipient,” The China Post, January 2008. 14 IBM company Web site: www.ibm.com/ibm/licensing/patents. 15 Yahoo Finance. 16 “Dell profit falls as sales weaken,” Associated Press, March 1, 2007, www.cbc.ca/money/story/2007/03/01/dell.html. 17 Stats are continually updated, and are readily available on the front page of www.ideastorm.com. 18 Technorati State of the Blogosphere, Q4 2006. 19 “Revving up,” The Economist, October 11, 2007. 20 High intercomponent modularity: When many of the components are integral and specialized, as in racecars, space shuttles, and some medical equipment, then possibilities for localized modularization are low. Modularity lowers the monitoring costs of finding out which components are causing problems in the development and testing process. Adjustment costs are higher in integrated products in which changes to one component, lead to great changes in related components. Under these conditions, centralized design and manufacturing often leads to lower costs and higher quality. 21 Interview with Larry Huston, former vice president of innovation at P&G, conducted by Don Tapscott and Anthony Williams, March 20, 2006. 22 Amazon.com, 2007. 23 Ami Vora, “Opening up Facebook Platform Architecture,” Facebook Developers blog, December 13, 2007, http://developers.facebook.com/news.php?blog=1&story=60. 24 www.awarenessnetworks.com/resources/download_report. asp?id=4.
SUCCESS IN THE SECOND WAVE OF THE INTERNET: HOW WIKINOMICS CREATES OPPORTUNITIES FOR CISCO PARTNERS
