The Era of Collective Wisdom

These are changing times. When you see the same theme gaining predominance in many different areas, then pay attention because you are at a turning point in history.

I believe that we are entering into such a time. I call it the celebration of the collective.

This is most obvious in the political arena. Almost completely gone is the Republican mandated rhetoric of trickle down where big government is supposed to serve by abdicating it responsibilities as public servant. Even the most die hard GOP faithful advocate government bailout now. Years earlier, that would have been considered as either heresy or treason by those same people.

President Obama speaks often about how the major players are now the masses. Not only are the people who the government must serve but it is also up to the people to do the hard work of solving our current economic problems.

Crowd-sourcing (sometimes called collective intelligence, sometimes called community sourcing) is the online equivalent of this trend for celebrating the collective. In crowd-sourcing, the choices of the masses are cleverly aggregated to form recommendations to solving complex problems. This is a logical, evolutionary progression to the wikinomic movement where prosumers provide both the attention and the content.

Many companies have started to embrace the collective intelligence approach to solving their problems. Starbucks has launched their own site where you share your product or marketing suggestions for them. Dell has launched their own variation on this theme. Even old school media companies such as NBC and NPR are climbing on board this train.

If your company doesn't have the economic commitment to develop their own from scratch, then there is also a bundle of pure players in this field whose offerings you can leverage. You can either submit your challenges to be solved in their online site or license their software for a white label version of a site that is your own property. Innocentive is perhaps the original pure player in this space. Cogenuity takes the lessons learned from Innocentive and improves on it with a deeper integration of crowd-sourcing with social networking. There are also less corporate focused offerings such as the Why Not? Idea Exchange.

Sometimes it's not so obvious when you are participating in the wisdom of the collective. Every time you link to a another site from your site, you are contributing to Google's prediction market based collective intelligence product known as Pagerank. Netflix and Amazon do something similar with their recommendation engines.

We have entered the era of collective wisdom. Let us hope that the power of the people can prevail where the idolized individual heroes of the past have feared to tread.

Growing Your Business With The Freemium Revenue Model

The Wall Street Journal published an interesting article today on The Economics of Giving It Away. The article describes how, in the past, web startups would use an advertising based revenue model and give away their product/service increasing the size of their audience until they were acquired by a bricks and mortar company willing to pay out the cash for mind-share at a premium. The global recession has changed the efficacy of that game where VC, advertising, and acquisition money has pretty much dried up.

Since the classic exit strategy is no longer available, new ventures need to generate revenue in other ways. It's not as simple as charge for the service for two reasons; the culture of the web now has a tradition of free services so people are hesitant to pay there and people have less discretionary money to spend.

So, what's an entrepreneur to do? The author suggests going the so-called freemium route where you build your network with a free service but allow users to upgrade to a premium service which gives them access to more features. First time and casual users are not likely to pay for your service but passionate users are. You continue to build social capital with the free version but also build economic capital with the premium version.