Lessons for Prospering When the Economy Isn’t

LESSON #1: Open source problem solving

In Firms of Endearment we cite a number of companies that have embraced one of the most valuable decision resources ever accessed by a company: the wisdom of crowds.

New Yorker staff writer James Surowiecki surfaced the concept in a business context in his 2004 book, The Wisdom of Crowds. His book demonstrates with pristine clarity “why the many are smarter than the few and how collective wisdom shapes business, economies, societies and nations.” 

More recently, Fast Company cofounder William C. Taylor and FC senior editor Polly La Barre referred to the wisdom of crowds an “open source” opportunity for problem solving in their book Mavericks at Work. They see the growing use of an open source strategy for solving problems as a huge development in business management. They write that “the outside-in (open source) logic of transparent, decentralized, grassroots creativity is poised to reshape strategy and executive leadership as dramatically as it’s reshaping science and the arts.” 

Google, Whole Foods, Southwest Airlines and others cited in Firms of Endearment as “firms of endearment” – companies that strive to endear themselves to all their stakeholders, not just stockholders – eschew traditional ideas about who is best situated to size up and solve problems. They consider the idea that the quality of thinking declines the further down the corporate hierarchy it takes place to be to be counterproductive at best. Belief in that notion has led to the end of many a company. 

Taylor and La Barre offer a number of fascinating stories of companies making landmark breakthroughs via an open source approach to solving a problem. One story is about how Rob McEwen, CEO of Goldcorp, Inc. solved a major set of problems for his gold mining company using an open source approach. 

McEwen’s geologists had determined that gold lay below the surface somewhere in Goldcorp’s 55,000-acre holdings, but where? And how much gold? And could it be economically mined? 

Plagued by these and other questions regarding a holding that had a history of low productivity, McEwen took off for MIT for a weeklong exploration of trends in information technology organized for presidents and CEOs from around the world. Part of the program focused on Linux and other open source software. It was from those sessions that McEwen gained the inspiration for solving his problems back at his gold fields. 

He devised a program designed to attract the input of geologists, engineers and others from around the world. Because this meant opening up Goldcorp’s data to the world, McEwen’s executives and scientists were horrified at his proposal. Nevertheless, he went forward and received submissions from 51 nations, among which were the answers he sought. 

One of the characteristics of FoEs that my co-author of Firms of Endearment and I noted early on was the eagerness of senior executives for input from employees at all levels. Not only that, FoEs went well beyond traditional limits placed on decisions in the lower echelons of a company. 

Whole Foods teams hire their own teammates – not some remote HR department. Moreover, teams at the local store decide what stock they put on the shelves in their departments. Whole Foods co-founder John Mackey has an unshakeable trust in people doing the right thing most of the time if you empower them to bring to their work passion and creativity. The team structure ensures of virtues like honesty and diligence. 

Hierarchically configured operating models are outdated. The pace and nature of change in today’s world is too rapid and complex for the bureaucracies that build around hierarchical organizations to deal with effectively. Companies the have the best chances of surviving and thriving will increasingly be companies that decentralize much of a company’s decision making to give employees at all levels greater opportunity to express their creativity and have more say in carrying out their jobs. 

Beyond that, companies that learn how to tap the wisdom of the crowds on a broader basis will more and more be leaders in their categories. This includes companies of all description from ad agencies like Weiden + Kennedy, longtime agency of record for Nike to the maverick of maverick companies Google who reengineered the search engine business to become by far the most valuable Internet property in the world.