Crowdsourcing

Chapter 5: The Rise and Fall of the Firm: Turning Community Into Commerce

For anyone who hasn't been following the blog these past few months, I've been posting excerpts of the book in order to elicit critical comments, or supplementary material I might have overlooked. These will be published as an appendix in the hardcover version of Crowdsourcing, and may even make it into the margins of later editions. Full credit given, naturally, to the commenter. Here is the beginning of Chapter 5:

If the means of production and distribution are now within the grasp of the individual, if the line between producers and consumers is blurring, where does that leave the “firm,” the organizational structure that has governed how people make and deliver goods and services. What constitutes an “employee” or a “manager” or “president” in a crowdsourcing environment? Of course, corporations aren’t candidates for the endangered species list quite yet. But it’s useful to recall that the firm, that most conspicuous icon of the industrial era, is hardly immutable, and even of fairly recent vintage.

We’re not accustomed to thinking of communities in economic terms. But this wasn’t always the case. Originally humans gathered into communities for reasons of survival. Larger groups made for better hunting and provided greater security against rivals. The industrial revolution changed all that. The company organized labor into a paid workforce, and the community became the social space in which we rested from work—a respite from economic production and competition, engaging instead in religious, philanthropic or purely social activities. Now the Internet has started to turn this paradigm on its head. The company clearly offers advantages when productivity is weighed by the pound—You’ll always need a factory to produce steel. But in the realm of information production, the community is beginning to rival the corporation for primacy.

Four developments created a fertile ground in which crowdsourcing could emerge. The rise of an amateur class was accompanied by the emergence of a mode of production—open source software—that provided inspiration and practical direction. The proliferation of the Internet and cheap tools gave consumers a power once restricted to companies endowed with vast capital resources. But it was the evolution of online communities—with their ability to efficiently organize people into economically productive units—that transformed the first three phenomena into an irrevocable force. 

The End of Chapter 4: Faster, Cheaper, Smarter, Easier

For anyone just tuning in, I've been publishing select excerpts from my upcoming book, Crowdsourcing: How the Power of Crowds is Driving the Future of Business. The published book will include the most trenchant comments in an appendix. Here's the final bit from Chapter 4:

The New Distribution Network

The members of Hawthorne Heights have no business being rock stars. They play a strain of punk that has consigned innumerable bands to the obscurity of dive bars and pirate radio. For the past three decades, a devotion to this stripped-down, anti-commercial music has meant never quitting your day job. And yet here they were on a dusty summer day in Pomona, California, playing for thousands of adoring fans. The kids in the audience - a multiracial mix of teens from across the SoCal region – were in a transcendent state, crashing against each other like pin balls and screaming each lyric with red-faced intensity. They’d memorized the entire set.

In the summer of 2005 I followed Hawthorne Heights to concerts in Pomona and Cleveland. The band was a big draw for that year’s Warped Tour, in which more than 300 bands play some 48 concerts at venues across America. I flew coach, but the members of Hawthorne Heights toured the country in a plush tour bus. The quintet’s debut album, The Silence in Black and White, had already sold 500,000 copies, a healthy performance for a down market. The group had recently appeared on “Jimmy Kimmel Live” and MTV. These five young men from Dayton, Ohio had achieved the rock’n’roll dream, but like M dot Strange they had taken an unorthodox route to success. The band achieved its popularity without significant radio or TV airplay, a feat unheard-of a few years earlier. They weren’t signed to a major label and they didn’t have an industrial-strength, multi-platform marketing campaigns. Further, they didn’t have fleets of trucks delivering CDs to Wal-Marts across the country.  “A major label can be thought of as a bank with trucks,” says longtime industry veteran Jim Griffin. “The bank loans the money to the band to make and promote the album, and the trucks carry the product to the stores.” Distribution used to be the point in the supply chain at which big companies could control the market. If smaller players couldn’t get their product to retailers, they couldn’t compete. The Internet turned this upside down by making the distribution of anything capable of being digitized as easy as hitting send on an email. Hawthorne Heights didn’t need the bank or the trucks. Instead it had the crowd. 

Chapter 4: Faster, Cheaper, Smarter, Easier, continued ...

Thanks for all your comments. My intention has generally been to encapsulate the best of them into an appendix that will be included in the book, but sometimes they're so astute (or even obvious) that my only recourse is to change the text accordingly. To wit: I agree that it's a reach to say the "consumer" will become antiquated. At any rate, here's the next selection from Chapter 4:

A Template for Revolutions to Come

The 2005 Christmas season marked an important milestone, though few recognized it. For the first time a six megapixel camera fell below $300, considered to be a magic price point—the amount a middle class family will spend on a point-and-click camera. This might seem like a fairly mundane event, of interest only to the dedicated shutterbug, but the impact of this development touches us all. A professional photographer could now perform his or her job with a point-and-click camera. Or more to the point, the barrier to entry for an amateur dropped below the price of a cross-continental airline ticket.

Chapter 4—Faster, Cheaper, Smarter, Easier: Democratizing the Means of Production

Valued readers old and new: Thanks for your patience. I've recently wrapped up another all-consuming round of edits on the book, confirming—for the thousandth time—the truth in the adage that writing is easy, it's re-writing that's hard. At any rate, I'm jumping in right where we left off on our "Crowdsourcing the Crowdsourcing Book" experiment. For anyone just tuning in, Crown Business and Random House UK will be including an appendix containing the most trenchant comments and criticisms elicted by the pre-publication excerpts posted on my blog. I won't always agree with all of you, but  that's all the more reason to include you in the book. And now onto the book. Here's Chapter 4:

The “consumer” may one day be an antiquated concept. The term implies passivity in a process that is in fact becoming more collaborative every day. If the rise of the amateur provided the crowdsourcing engine with fuel, and the open source software movement provided it with a highly adaptable design, it is the wide availability to the means of production that is blurring the boundary between creators and consumers. Thanks largely to the Internet and the rapidly falling cost of the silicon chip, the ability for the people formerly known as consumers to play a meaningful role in the marketplace—of ideas, as well as more tangible goods—has reached unprecedented levels.

Media—publishing, filmmaking, photography and music—comprise the vanguard in this movement—suddenly given access to cheap equipment, user-friendly software and cost-free distribution, an entire generation of aspiring musicians, filmmakers, writers and other creatives are choosing to bypass the way “product” has traditionally been generated, marketed and sold. And these same dynamics are beginning to affect other fields as well, whether that involves high school students participating in astronomy projects, audiophiles building their own electronic gadgets or craftspeople using the Internet to sell their own handmade goods. So far we’ve looked primarily at the companies doing the crowdsourcing. Here we’ll look instead at the people who make up the crowd, and what—given the means—they’re choosing to produce. People who have eschewed every traditional route to making it in their respective industries. People who are creating new business models simply by virtue of following their instincts and their hearts. People like Mike Belmont.