Category: leadership

The generosity strategy

I’ve wondered for a long time why WordPress doesn’t get the dotcom homage some of the other perhaps less interesting organizations are showered with.

There are many reasons to pay attention to them, but there’s one primary aspect of what they do that’s worth spending some time thinking about – what they give to the market in order to fuel a network that they benefit from in the end.

As Andy Weissman wrote about TED, sometimes giving away the core assets of your business is exactly what will create success for you.

“With the content, processes and brand more freely available, the community and the set of values can instead drive the business. And those are not as easily replicable.”

This attitude is what won them the war with their first rival in the blogging world, Movable Type.  It turns out that generosity is a very competitive strategy in a globally connected world.

Except it’s not my impression that was what they were intending the strategy to be used for. I think they used that strategy because it resonated with what type of company they wanted to have first and foremost.

It’s also true that ‘free’ can destroy established markets in order to create advantage for alternative models.  Bill Gurley has written before about how Google is intentionally using a scorched earth policy with Android, in particular, in order to build an unapproachable moat around their core business.

The WordPress approach has similar effects in the content management market, but they’ve built the core business itself on the open strategy.  They have made themselves dependent on the success of their customers.

I had the good fortune of inteviewing Matt Mullenweg on stage at The Guardian’s Activate Summit event last week where we spent most of our time talking about how the WordPress team operates. This is not a man chasing wealth for the sake of wealth, though wealth may in fact be chasing him. This is a person who understands the DNA of the Internet and knows intuitively how to craft a movement optimized to use the most powerful aspects of the network.

In case you’re unaware, WordPress is a publishing platform. They sell access to the WordPress tools, and they also give away the software.  The whole thing. They put it out there to download for free with an open license. They even make it super easy to install. No tricks. It’s genuine. They want you to use their software even if they don’t see a shred of direct value coming back to them as a result.

Their software is their core asset. Without it they have nothing. Why would they give it away?

What they are building is not your traditional enterprise software business. What they are building is at the very least a partner network if not something even bigger, something that looks more like a movement.

Looking at their business through the enterprise sofware lens is easy to do and certainly worth more consideration. They are leaving a lot of money on the table. They know this, and they’ve made impressive progress recapturing that lost opportunity with their VIP business.

But the founder’s philosophies lead the commercial strategy, not the other way around. WordPress wants to be a platform for free speech. Everything else comes after that.

As Matt said at Activate, “We are a neutral force. We participated in the SOPA blackout because we felt it posed a threat to our ability to stay that way.”

Operating the business strategy at that level creates a framework for all their decision-making.

They can open source their core assets because it strengthens the collective power of the WordPress toolset as a platform for free speech. In addition, it gives them a sensible model for working with developers who want to contribute code to the platform. They can operate with a small staff, prioritize product over profit, and play fast-follower to the break-neck pace of innovation that most of the rest of the top players in the business may be forced to play.

What’s the result of the generous nature of their business?

75M blogs, about half of which are hosted by them, and many of those pay them a monthly hosting fee. 341M monthly users across the network. 20,000 software plugins built by a huge network of developers working on the platform…many of whom make money being professional service providers and premium template designers for WordPress.

Now, they have a lot of powerful forces challenging their existence. Not least of which is the atomization of everything and challenges to the idea of blogs and even articles.

But by embracing a strategy of giving and a deep-seated commitment to enabling others to speak their minds on the global stage, WordPress has something more valuable than robust revenue streams. They have a network of customers who need them to succeed in the world.

That network of people is more valuable than any software or hardware distribution platform.

Top 5 new business ideas

The month of lists has begun, so I decided to rank the business ideas from the last year that could or should be a big deal in the next year. Most of these ideas and companies have actually been around longer than 12 months, but they either reached a certain critical mass or captured my imagination in a new way recently.

1) Scrobbling
All my listening behavior are belong to Last.fm. They figured out how to not only capture what I listen to but also to incentivize me to keep my behavior data with them. Since my listening data is open for other services to use, I am willingly giving Last.fm the power to broker that data with other providers on behalf. That’s a very strong position to be in.

2) Meta ad networks
Feedburner and Right Media figured out that ad networks can be networked into meta networks. Right Media went the extra step and opened up their APIs so that someone can build a white label ad exchange of their own using the Right Media tools. All you need are advertisers and publishers, and you’ve suddenly got a media market of your own. I can’t help but wonder if these guys have stepped into the big leagues with the next really important revenue model.

3) Pay-as-you-go storage, computing, whatever
Amazon impresses me on so many levels even if they don’t know exactly what they’re doing. They are making it happen just by doing smart things with the resources already in their arsenal. Similarly, Flickr understands that the APIs you use to build your web site are the same APIs you want to open up as a service, and it’s paying off handsomely for them. The formula here is one part optimizing resources and two parts confidence that your business won’t crash if you share your core assets with other people. Stir constantly.

4) People-powered knowledge
I really like the Yahoo! Answers experience. I also really like the concept behind MechanicalTurk where knowledge can be distributed as a service. Machines are at their best, in my opinion, when they make humans capable of doing things they couldn’t otherwise do, not least of which is making the universe of human knowledge more accessible.

5) Widget-mania
It wasn’t until I heard about the big revenues GlitterMaker was earning that I realized just how powerful this idea has become the last year or so. Beck’s customizable CD cover reinforced the idea that everything is a tattoo or a tattooable thing if you look at it that way…and many people do. If only I could run AdSense on my forehead.

What makes a good leader of a participatory community

I’m very interested in what leadership lessons we can learn from the people who drive the successful peer production models on the Internet. What is it about Craig Newmark, Jimmy Wales, Rob Malda, Stewart Butterfield and the other pioneers of participatory media that make the brands that they’ve created so powerful?


Photo: heather

Yochai Benkler breaks down the incentives for participation in peer production models in a very sensible and fascinating paper called Coases’ Penguin and discusses the economics of collaboration in his PopTech talk now available on ITConversations. But there’s a missing thread in his analysis that I think is crucially important.

The creators of the platforms on which peer production unfolds must have some common characteristics that enable these reputation models to reflect back on the people who invest in the platform instead of the company, brand or leader of that vehicle.

No doubt the participants are what make the products sing. But there’s something in common about the way these shepherds have approached their products and their customers that create an environment of trust, utility, gratification, expression, community, etc.

I don’t think any of them one day woke up and said I want to build a massive community of people posting content. Rather they probably stumbled onto ideas that started in one direction and ended up a little different than what they intended. I wonder what it is about the way they approach problems and lead teams that made them capable of identifying where the sweet spot would be for their idea.

I suspect that all of them share a handful of key qualities that make them unusual leaders including things like…

  • Total dedication, focus and passion for the service the community is providing to itself
  • A laissez faire attitude toward conflict but quick to identify resolutions
  • Motivated by a desire to do something important, not by money. They want to be part of something bigger than themselves.
  • A very creative mind that thrives on solving problems though not necessarily skilled in traditional artistic disciplines
  • Collaborative leadership styles, the extreme opposite of authoritarian, mandate-driven leadership

I don’t think they are attention seekers. I don’t think they are self righteous. They probably were mischief makers as kids and grew up to be anti-authoritarian. I’m guessing they were heavy video game users at one point if not still and love to compete.

I’m sure all of them also understand the decentralized and collaborative mentality, not as a translation from another model but rather baked into the way they think about what they are building.

I don’t know any of these guys personally, so this is perhaps wasteful conjecture. But I’m very curious about how the mainstream media business is going to approach the idea of participatory and social media given the cultural chasm and even conflicting styles of the leaders in the two categories. So far, it seems, people like Rupert Murdoch (and Terry Semel) have been smart enough to let these companies run and let these leaders lead.

It won’t be long before mainstream media companies start rolling out their own concepts for participatory media models, and I suspect those ideas will often fall flat…and it won’t be because the idea is bad but rather a lack of the key qualities required to shepherd a community.

Leadership lessons from China

There are some interesting leadership and management lessons from some of the Chinese manufacturing systems that can be applied at all levels of an organization to make it more innovation-friendly. The contrast between leading and managing may be subtle to some, but it’s hugely important in making a company capable of competing in the fast-paced Internet economy.

Not knowing the path to a particular outcome can be excruciating to someone who knows what they want. Managers find it much easier to make lists of things that add up to the sum of the final goal, and they like to put checkmarks next to all the items in the list as they are completed. This system never scales no matter how talented the manager is because that system is totally dependent on the manager.


Photo: Hocchuan

John Seely Brown and John Hagel examine how a network of motorcycle parts assemblers in China break traditional centralized management tactics to optimize for innovation in a paper called “Innovation blowback: Disruptive management practices from Asia.” In the Chinese city Chongquing a supplier-driven network of parts developers work together under the loose guidance of their customers rather than under the orders of assemply-line management:

“In contrast to more traditional, top-down approaches, the assemblers succeed not by preparing detailed design drawings of components and subsystems for their suppliers but by defining only a product’s key modules in rough design blueprints and specifying broad performance parameters, such as weight and size. The suppliers take collective responsibility for the detailed design of components and subsystems. Since they are free to iomprovise within broad limits, they have rapidly cut their costs and improved the quality of their products.”

As a manager, when you define what is to be done and how it is to be done, then you are setting the exact expectation of what is to be delivered. There is no room for exceeding expectations, only for failing to meet expectations. Your best-case scenario is that you will get what you asked for.

As a leader, on the other hand, when you set parameters for success, you let the contributors in the system share ownership of the outcome. This is participatory production which includes an important incentive for each individual contributor: pride. The outcome becomes a somewhat personal reflection of each contributor’s capabilities as a person.

There’s another interesting paper on the concept of peer production called Coases’ Penguin written by Yochai Benkler in 2002 that talks about the incentives that drive users of online media to contribute content to a web site such as Slashdot or Wikipedia. One of the interesting conclusions is that financial reward can sometimes have a negative effect on participation and collaboration:

“An act of love drastically changes meaning when one person offers the other money at its end, and a dinner party guest who will take out a checkbook at the end of dinner instead of bringing flowers or a bottle of wine at the beginning will likely never be invited again.”

John Battelle similarly points out that Google’s latest attempt to monetize peer production in online media may actually have the effect of degrading the overall quality of their ad network. As they provide ways for user-generated content (UGC) sites to kick earnings from AdSense back to content creators on those sites, they are inviting spam and click fraud at pennies in earnings per user at the expense of quality contributions.

“I’ve never seen UGC sites as the least bit driven by money. They are driven by pride, the desire to be first, reputation, whuffie. But dollars? That often screws it all up.”

Of course, pride won’t replace the need for salaries, but it can certainly make up for the margin pressure these particpatory production systems are putting on themselves. When the production process reduces waste, that savings will get passed on to the buyer before the profits get passed back to the creators. That’s how this Chinese network has stolen marketshare from the big motorcycle manufacturers like Honda and Yamaha.

“The average export price of Chinese models has dropped from $700 in the late 1990’s to under $200 in 2002. The impact on rivals has been brutal: Honda’s share of Vietnam’s motorcycle market, for instance, dropped from nearly 90 percent in 1997 to 30 percent in 2002.”

Of course, everyone in the Internet business would rather be in a position of growth than one of decline regardless of the profit margins. The way to put your company on the growth track and to stay competitive through innovation is likely based on these types of leadership principles rather than micromanaging your staff through every step of an unpredictable journey.