CHAPTER 2
Partnering to Do What You Can’t Do Alone
Microsoft Kinect was introduced in December of 2010. Within days of its release, it was hacked. Even worse for Microsoft, a new website came alive that solicited and shared illegal Kinect hacks globally.
Stunned Microsoft lawyers let these intellectual property violations happen for a few days and then announced that they would sue anyone who hacked the Kinect platform. In defiance of Microsoft’s legal threat, a prize was offered for the best hack of the Kinect platform.
Two months later, Microsoft opened the Kinect platform with an act of involuntary reciprocity that was truly remarkable and even inspiring. Microsoft discovered its reciprocity advantage after its right-of-way was exposed and forced open. A bunch of hackers discovered Microsoft’s underutilized right-of-way for them. The Kinect was not just a new gaming platform. The Microsoft right-of-way embedded in Kinect was much broader: 3D motion-sensing hardware and software—a new way to interact with computers. The Microsoft Kinect right-of-way now reaches far beyond video gaming. Kinect was the first general-purpose, low-cost gestural interface for computers. Microsoft showed great agility in response to this attack on its intellectual property by flipping the negatives into positives. Microsoft eventually embraced the hackers and uncovered a wider right-of-way that was not visible until the hackers broke into it.
It was reasonable to try to protect the Kinect IP because to Microsoft at the time, Kinect was perceived only as a gaming platform. After realizing that it was impossible to protect its IP, Microsoft quickly pivoted toward finding partners to bring the Kinect platform into other sectors, beyond gaming. It was smart to try to protect its intellectual property, but it was brilliant to realize that opening the platform would yield much more value. Besides, it could not be protected anyway. Microsoft turned a big problem into an even bigger opportunity.
Microsoft Kinect is a wonderful gestural interface device originally created for the Xbox 360. Kinect allows people to interact with computers simply by moving their bodies and speaking. It is a very sophisticated 3D rendering and yet very easy to use. When it was first introduced, it was positioned as a gaming platform that allowed people to play games with their bodies, like the Wii but without having to hold a wand as you play.
MICROSOFT KINECT’S RECIPROCITY ADVANTAGE IN SUMMARY
What right-of-way was Microsoft Kinect forced to share with others? The Kinect platform with its 3D motion-sensing hardware and software.
Who are Kinect’s partners? The people who at first tried to hack them and who Microsoft at first tried to sue, as well as others who Microsoft has now attracted intentionally.
How did Kinect experiment to learn? It learned from hackers who experimented with Kinect, some in the early days without Microsoft’s permission. Microsoft was smart enough to learn from this experience, accept that it could not control Kinect, open the Kinect platform, and encourage much wider experimentation to create new gestural computing applications and businesses. Even though Microsoft lost control, it gained power in the marketplace.
What assets does Kinect give away in order to learn? Users and entrepreneurs are given the right to use the Kinect platform and create new applications or to start new businesses.
How did Microsoft Kinect scale? It supports Kinecthack.com and other hacker sites that curate new ideas, share hacks, and spread the use of Kinect. This puts Microsoft on the exploding leading edge of gestural computing. One day we expect to see Microsoft acquire some of these entrepreneurial businesses as the new field matures. But for now, it must keep enabling the growth that was originally discouraged.
What is Microsoft Kinect’s reciprocity advantage? Kinect is a foundation of and tool for gestural computing businesses.
So What?
Microsoft is not just making money from selling Kinect boxes. It now has a new profitable business growth engine that extends way beyond gaming. Microsoft Kinect is embracing the opportunity to lead the way in gestural interfaces of any kind, not just for gaming. Microsoft reports that the Kinect for Windows software development kit (SDK) has been downloaded more than half a million times, and Kinect for Windows sensors are available in 39 markets around the world. Here’s how Microsoft expresses this commitment now: “With Kinect for Windows, businesses and developers can create a new class of touchfree applications that give people the ability to interact naturally with computers by simply gesturing and speaking. What can a computer do if you give it eyes, ears, and the capacity to use them?”11
By developing its reciprocity advantage—even if involuntarily—Microsoft is now learning new ways to make money from Kinect across a wide range of industries. By giving up control, Microsoft broadened the Kinect brand and the Microsoft brand. Microsoft is now challenging businesses and developers to create a new genre of gestural applications. Businesses from startups to Fortune 500 companies are using Kinect to develop immersive experiences of widely varied sorts. The Kinect software developer kit has been downloaded millions of times in many countries. Microsoft is working with the hackers and others in very creative ways to create new businesses.
One of the major disruptions in the future will be the increasing difficulty of protecting intellectual property. For some, they will uncover their own reciprocity advantage only after more protective strategies fail. Even if you want to protect your intellectual property—to protect your right-of-way—you may be forced to open up anyway. Reciprocity may not come naturally. Even companies who try to protect their intellectual property may be forced to partner and forced into finding a new reciprocity advantage. Now in Silicon Valley, most conversations about intellectual property have at least one lawyer asking if there could be more business value in giving it away in smart ways, rather than trying to lock it up.
Judge Alex Kozinski of the Ninth Circuit Court of Appeals in California commented, “Intellectual property rights are like children: cling to them too closely and you may lose them forever.”12
Ideas are also like children: cling to them too closely and you will lose them forever. Nevertheless, reaching out to others—potential partners and potential customers—will become increasingly possible and increasingly necessary.
Partnering to Reduce Food Safety Risk
The Global Food Safety Initiative (GFSI) is an example of global partnering with an extremely wide reach across companies. GFSI began as a response to a series of food safety crises around the year 2000. Here is the way that the GFSI describes the environment that created this need:
Back in 2000, food safety was a top of mind issue for companies due to several high-profile recalls, quarantines and negative publicity about the food industry. There was also extensive audit fatigue through the industry, as retailers performed inspections or audits themselves or asked a third party to do this on their behalf. These were often carried out against food safety schemes that lacked international certification and accreditation, resulting in incomparable auditing results.13
Up to that point, players up and down the food chain had their own approach to food safety. Some players were better at food safety than others, but the food supply chain is interlinking, so food safety mistakes can multiply rapidly. Also, the consumers of food often blame food safety mistakes on companies that had nothing to do with the problem. A bird flu scare in China can cause a consumer in Illinois to eat something other than chicken—even if there is no rational argument for doing that.
McDonald’s, one of GFSI’s early board members, has found that partnering was a way to engage positively with the growing numbers of people who are concerned about food safety. In the minds of many people, McDonald’s has a right-of-way with regard to food safety and health. McDonald’s restaurants are very clean and known for high food safety standards. In emerging markets where food safety is more of a concern, the McDonald’s brand is perceived as a safe place to eat. Yet, food safety is a problem that McDonald’s cannot deal with alone. If a food scare happens around chicken, for example, many people will stop eating McDonald’s Chicken McNuggets—even if McDonald’s is not at fault and even if the scare has nothing to do with them.
In February of 2008, Walmart announced that all of its private (store) brand suppliers and some of their national brand suppliers would be required to become certified based on one of the GFSI standards. An independent study published in the Journal of Food Protection in 2012 found that adoption of GFSI standards resulted in fewer safety audits—on the average one less per year, at considerable cost savings. Another positive outcome from GFSI was an increase in employee food safety training.14
GFSI is a nonprofit business that allows all competitors in the food industry to compete at a higher level. More important, GFSI reduces the risks of food safety scares for consumers and for suppliers up and down the food chain.
GFSI’S RECIPROCITY ADVANTAGE IN SUMMARY
What right-of-way has the GFSI created to share with others? Each company shares its science, standards, and practices in food safety.
Who are GFSI’s partners? Anyone involved at any stage in the food supply cycle.
How did GFSI experiment to learn? It tried many different approaches in its early days and has now evolved to be a global brand—expanding up and down the food chain. They began with benchmarking on a global scale to look for opportunities that would add new value by working together to improve food safety as well as opportunities to create new business value.
What assets do member companies and GFSI give away? Food safety standards, science, and techniques, plus their time to create the standards.
How did GFSI scale? GFSI now sponsors a wide range of events for food safety professionals internationally in programs and standards—as well as ways of responding quickly to food safety crises.
What is GFSI’s reciprocity advantage? As the founders say, “Food safety is not a competitive advantage.” GFSI allows its members to achieve their own competitive advantage in areas other than food safety. A strong, consistent approach to food safety assurance creates a low-cost solution that allows everyone to focus on higher order benefits.
So What?
GFSI recently commissioned the first study by an independent research group to help assess the initiative to date. The researchers concluded that GFSI has contributed significantly with the following benefits:
A more effective food safety system and enhanced ability to produce safe food
Enhanced compliance with regulators, with a reduction in the number of notifications and product recalls
Improvements in the culture of food safety and the human behaviors that are required15
GFSI is a better way to deliver food safety. GFSI lowers the cost of food safety while also allowing members to focus on delighting their customers and competing at a higher level.
GFSI encourages companies of all sizes anywhere in the world to partner for overall food safety. GFSI is a nonprofit reciprocity-advantage business that increases the profit for each member company by lowering the risk of costly safety and health mistakes. Lowering this risk allows companies to focus on creating better products and more successful businesses.
GFSI is massive reciprocity on a global scale. Companies are giving away their expertise in food safety in order to compete at a higher level on the assumption that all the food will be safe. Today’s Internet and tomorrow’s cloud will make it possible for ever-larger numbers of partners to participate in GFSI. When a food safety crisis breaks out, as it certainly will, this global connectivity brings together the resources to respond much more quickly and effectively. The GFSI partners assert, “Food safety is not a competitive advantage.” GFSI offers a reciprocity advantage to its member companies. By sharing its food safety expertise, it lowers its overall risks in the face of food safety scares.
Individual companies—like McDonald’s, Cargill, Tesco, and many others—were able to team with other food companies to strengthen the Global Food Safety Initiative—an excellent example of reciprocity advantage that leverages right-of-way through partnering. By combining with other companies, a shared network of trust and right-of-way around global food safety was created. GFSI, however, can help individual members widen their right-of-way and lower their risks.
New Ways to Partner on a Global Scale
In the past, it was just easier to partner with those who were close to you geographically. And besides, partnerships were—in most industries—quite limited and viewed skeptically. There were many suppliers and vendors in transactional relationships, but few true partners for most corporations. Transactions still dominate and they will continue to be important. Now, however, transactions are skewing toward commoditization and competition based on price. So much of today’s Internet is focused on finding the lowest price for something.
Connectivity has grown dramatically, and potential partners can come from anywhere. In a VUCA World, partnerships will be hedges against risk, but they will also be more attractive ways to innovate and grow scale. Innovation in the cloud will focus on value, not just price. The greatest value and the largest margins will come from services and experiences that link to products, not just on selling for the lowest price. Price-based competition will be cutthroat and unattractive. Value-based partnerships will be the key to growth, scalability, and profitability. Larger social value, beyond just transactional value, will become possible on a much grander scale.
When TED decided to allow anyone to organize a TEDx conference, it took a risk, reaching out to a wide range of potential partners around the world. TED was fishing for partners with very attractive bait: “Ideas Worth Spreading.” It was a risk worth taking when TEDx spread around the world and went viral. TEDx also helped identify and evaluate potential partners for growing the TED brand.
What if the railroads had viewed the telegraph companies as potential partners to explore the emerging communications space, instead of seeing their proposal as a narrow business transaction? Of course, the times were different, and those who created the railroad industry had their own interests that blinded them to the virtues of partnerships in the ways we can imagine them now.
As Internet connectivity expands, new potential partners become available who were simply not reachable before. The biggest change will happen in the developing world, as access opens for many who have been previously excluded. Marginalized communities in all countries of the globe will be able to take advantage of connectivity in ways that have never before been possible. Many new potential partners will become available.
In the future, it will be easier to bring partners together to create new economic value. Partners, of course, must demonstrate their worth to each other and in the marketplace over time. The best partners will demonstrate their worth by looking out for one another. By looking out for one another, they will also be protecting themselves over time. Mandatory transparency will change the rules for engagement.
New partnerships will become possible through the cloud. The medium of the cloud is opening to many more potential partners. Internet domains, for example, are already emerging to support more local languages.
At the network level, the body responsible for overseeing the architecture of the web, ICANN, has led this development with the approval for the creation of top-level domains in local languages. This means that as country-level markets evolve, the domain registration patterns will likely tend to shift toward these and away from the dotcom top-level domain that is most common today. The main reason for this is that the web has already become a major advertising and sales platform for businesses, and much of their commerce is local. Because localized top-level domains are by nature self-identifying, their business is linked with the country. Western preferences will no longer be the default standard.
Partnerships are basic to creating your reciprocity advantage, and partnerships will be possible on a scale never before imaginable. Asymmetrical partnering, where one partner is much larger than the other, will become increasingly possible because anyone can link to anyone else through the cloud. Non-obvious partners will become more common. Partnerships will not be predetermined. Everyone will need to learn how to fish for partners efficiently and effectively. It will be easier to find partners, however, within established networks of trust.
Companies Want Good Partners—for Good Reasons
Already, companies are seeing the need to re-think partnering. General Electric and Strategy One did a recent survey of over 3,000 executives from 25 countries that found that the great majority of executives believe they could innovate better by partnering than by working on their own.16 Even more impressive, most have actually partnered already. Large company executives see small businesses and individuals as the best potential partners. These asymmetrical partnerships seem most promising—and the means for identifying and drawing connections are improving dramatically in the world of hyper-connectivity.
Of course, good companies develop strong relationships with those who supply the essential goods and services along the entire value chain. But these “partnerships” are often transactional and inherently one-sided. We’re talking about partnering in a much more profound sense, to create something new that you could not do alone. Your partner will bring skills and resources to take your new business into places where you could not go alone.
Equal partnership in the reciprocity advantage is critical to creating the new business. This all-in collaboration is what we have always heard of in the founding of great companies. Hewlett needed Packard. Procter needed Gamble. Jobs needed Wozniak. You will need your complementary partner or partners. You don’t have to like these partners, but you do need to trust them.
In the future, some of the most interesting partnerships will be asymmetrical: very big companies partnering with very small companies—or even with individuals. Your partner might be a single inventor, or it might be lead users from around the world.
What would your company love to do, but could not do without a good partner that is unlike you? What does your right-of-way give you permission to do with others, but that you are not yet doing and could not do alone?
You will have to experiment to learn how to answer these questions and to create your reciprocity advantage.