Other People's Knowledge
by Joel Orr

I think it was around 1984. I was to share the platform at the MicroCADD Forum in Fort Collins, Colorado, with legendary e-pioneer Nolan Bushnell - best known, perhaps, for founding the Atari game company and propagating Pong (and most disliked by parents of moppets for founding and propagating the Chuck E. Cheese chain of kids' restaurants). We were in a "green room" together, preparatory to going on-stage, and were talking about our lives as knowledge entrepreneurs. I was fairly well-known, but had not "struck it rich"; Nolan - five years older than I - was well-known and well-off.

"What's your secret?" I asked, half jokingly. He smiled and said, "There is a secret: It's OPM - other people's money." He explained that he invested his energies in taking great ideas, and conceptualizing great companies around them - then getting other people to fund them. "Even after I had plenty of my own, I still felt it was somehow cheating to fund things myself - that part of the validation was to be able to convince someone else to put their money into my company."

There is no doubt that OPM has been a major force in business. And of course, through the stock market, everyone can participate - not just "high rollers." To be sure, failure is more common than success. But OPM makes it possible for people with great ideas and great abilities to do things they otherwise could not.

The principle of OPM is simple: If you have most of the components for a business, but lack money, you can trade a stake in the possibility of success for money now.

Capital is no longer the main constraint on business growth; today's challenge is the acceleration of changes in knowledge. Business today moves at a faster pace than ever before, because of communications and computers. Competition is much stronger for all businesses, because things that were hitherto barriers - trade secrets, special ways of doing things - are known very quickly to others.

And with overnight shipping and low-cost trucking, your competitors are not just your neighbors - they might be on the other side of the world, paying much less for labor than you do.

The only general answer to that problem is constant innovation: the creation or acquisition, and exploitation, of new knowledge. Arie de Geus, the pioneering Royal Dutch Shell corporate planner, put it this way: "The only long-term sustainable competitive advantage is to be able to learn faster than your competition."

In "Good to Great," Stanford professor Jim Collins says that businesses that are serious about success should focus only on things at which they can be best in the world; for which they have a real passion; and which are highly profitable. If you want your business to succeed, and keep succeeding, you must therefore pour your energies into innovating within your core competencies.

If you design and manufacture kitchen utensils, for example, you should talk, breathe, eat, and sleep kitchen utensils. Your hiring should focus on finding the very best kitchen utensil designers and makers. Your R&D should seek ways to plug into the kitchens of the world, to learn what hurts those who spend time there, and what would help them.

Of course, you have to have an accounting department. Someone has to do the books, pay the bills, manage payroll, take care of retirement funds, and so on.

But why does the accounting department have to be part of your company? Why can't it be an "outsourced" service, with which you share information over the Web? Well, today there are many such services - for the separate pieces of accounting, as well as for general integrated accounting help. And believe it or not, there are people whose passion is for accounting, for making it simple, cheap, accessible, and useful. And they probably do not work for engineering companies.

It's easy for engineers to see why someone else should be entrusted with the accounting. But what about something closer to home, like CADD system management? Or even product design?

Turns out that outsourcing - using Other People's Knowledge - works very well for these things, too. Much of the recent success of such efforts is due to the availability of portals and extranets - Web-based collaborative systems that eliminate most of the problems of having work done by people who are elsewhere.

OPK lets you pay for results instead of time. It lets you use a lot of resources when you need them, without making you pay a penalty when they are idle. And if you don't like anything about the arrangement, it's probably going to be much easier - and less expensive - to end it, than to fire a bunch of your own employees.

There is almost no limit to how far you can go with using OPK. Consider Visa International, arguably the largest business enterprise in the world - an organization that processes transactions valued in over a trillion dollars per year. Founded by Dee Hock, it is based on a form of organization he terms, "chaordic" - from "chaotic order." Visa is not a public company; its staff consists a few dozen people. Yet it is wildly successful, and one of the best-known brands in the world. How is this possible?

Visa has done it by focusing strictly on its added value: The idea and the brand. A very thin booklet defines the requirements for an institution to participate. They must respect the logo, and must process fund requests within 24 hours. There are few other demands placed on them; beyond those restrictions, they can compete in the market in any way they choose. (Read more about chaords at http://www.chaordic.org.)

John D. Rockefeller, the world's first billionaire, once said, "I'd rather have 1 percent of the effort of each of a hundred people, than 100 percent of my own." The reason: You don't have to stop at a hundred; you can have a thousand or a million. But if you rely on your own effort, 100 percent is all you get.

By enlisting more than 22,000 institutions, Visa International takes advantage of the innovation and creativity of far more people than it could hire. And since they are from many different corporate cultures, they will not be constrained by the bounds of "belonging" to a single company.

What is your firm's added value? What is it that you do better than anyone else, for which you have a passion, and that makes you profitable? Determine to focus only on that - start to outsource everything else. And begin to learn and think about the ultimate use of OPK - going chaordic.

For more information, feel free to contact Joel Orr at http://www.joelorr.com.