What kind of economy are we moving to? 2. Overview of the main business models

1. The three business models

In P2P theory, I distinguish at least 3 business models that are emerging through peer production.

One is precisely that: there is now a sharing economy, where people share value, but mostly from motivations of individual expression and recognition, for which they need platforms, which are proprietary, and fund themselves precisely through such an attention economy.

The other format is commons-oriented peer production, where it is communities that create value, and because they are cooperating, they have stronger links, and have their own platforms, usually managed by for-benefit institutions such as the Mozilla Foundation, and around them, evolve a number of businesses.

In Crowdsourcing, companies integrate distributed production in their value chain, without giving up control.

Alternatively, platforms may be create as a vehicle for direct user production to occur. This is also the domain of Desktop Manufacturing and the ecology of companies gravitating around minipreneurs and Networked Micro Agencies . Note that in terms of the hierarchy of engagement between companies and peer communities, both models are quite different.

Of such a model, David Bollier writes:

One of the best ways to stimulate competition, innovation and lower prices is for participants in a market to honor the commons (a shared pool of resources, a minimal set of safety or performance standards) and then to compete “on top” of the commons. Instead of being able to reap easy profits from monopoly control over something everyone needs — say, a computer operating system like Windows — a company must work harder to “add value” in more specialized ways.”

2. The Direct Economy model led by User Innovation

So, what we have now is a polarity between communities (commons-based or sharing-based) and institutions such as for-profit companies.

This is why Xavier Comtesse coined the term of the Direct Economy:

“In a system of direct democracy, sovereignty is lodged with the citizens – or at least, with those among them that choose to actively participate in the system. They can not only pick among prepackaged options (vote) or candidates (election) but they also can deeply co-shape the policy process. Switzerland is probably the strongest case: here new laws can be put forth, and even the Constitution modified, by citizens’ initiative.

Translate that into business terms and we have a description of a system where consumers have a direct influence on what companies develop and produce for them. The more informed, opinionated and wired (socially connected) they are, the more they are likely to make use of this influence and to try to organize it – exactly as in a direct democracy system. “

The direct economy’s conclusions are beyond doubt:

1) Users are becoming a dominant factor

2) Corporations need to adopt new practices to involve the users.

The Law of Asymmetric Competition , which posits that companies that use open/free, participatory, and commons-oriented tactics and strategies will function better.

For this to work, companies will have to adopt Edge Competencies (on how to deal with their edge, i.e. surrounding customers and communities) as well as Open Innovation , not just internally, but to be able to co-evolve with diffuse innovation processes, driven by Lead User communities. However, please note that the Open Innovation concept is often used in a much too limited way, as opening up innovation between companies only.

There is now an increasingly important field of study, which had been pioneered by Erik von Hippel’s the Democratization of Innovation, which is centered on such User-centered Innovation and it is developing User Innovation Theory in order to understand the User-Generated Ecosystem, and its important expressions such as the explosion in User-Generated Content.

To be continued!