Direct Economy

Could "direct democracy" provide a proper metaphor to describe the current economic transformation?

Are we heading towards a "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.

On this premise Xavier Comtesse, who heads the Geneva branch of think-tank Avenir Suisse, is writing a book on the idea of "direct economy". "We're exiting an economic system based on the producer's know-how and heading towards one centered on the customer's know-how", he writes (original French version: "On quitte une économie fondée sur les savoirs du producteur pour une économie des savoirs du client").

Before you discard this as just another label used to describe something that we already know ("customer made", "open source", "disintermediation", etc), consider a couple of major subtexts in Xavier's argument.

First of all, his operational word is "know-how". Most of the discussions about the growing role of consumers in the creative and commercial process have focused on the shifting value chain: people book their own flight tickets (EasyJet), assemble furniture (Ikea), customize the computer they want to buy (Dell), trade shares online (Swissquote), submit product ideas (P&G and Muji and Nespresso), write articles (OhMyNews and Wikipedia) or book reviews (Amazon), track their own packages (Fedex), market/negotiate/sell/ship (eBay), and so on. These are different degrees of interactivity and participation. But Xavier correctly points out that there is another, crucial - and often neglected - dimension to this: in order to interact and participate and co-create, people need to develop or acquire specific know-how.

Assembling a bookshelf may require a relatively limited know-how (although for some people it may be overwhelming), but booking a flight ticket online or creating a blog are tasks of a higher complexity, and customizing a laptop is more complex still. Some of this knowledge is purely practical, other is highly conceptual, but in order to benefit from these products or services the customers have to acquire it.

How do people acquire this know-how? Mostly by what Xavier calls "transfer", which can be implicit or explicit. Implicit: "When Dell offers me a way to customize a laptop, they also encourage - or force - me to acquire new knowledge: in a way they operate a transfer of know-how to me", he writes in the draft of his book.  Explicit: online forums and websites, eBay's University, Swissquote's 'trading seminars', communities or practice, etc.

Secondly, Xavier points out that often many of these developments (most notably in the airline business, but also elsewhere) are labeled as "low cost", but that's the wrong label, he contends, and the wrong way to look at it: they should be called "high productivity" - because that's the impact of the active role of the customers: productivity gains. Lower prices in the production process are the result, but the systemic change, he says, is mostly about raising productivity by involving the customers.

On this basis, Xavier is developing a "Customer productivity transfer matrix" that he will detail in his book, when it is published (in French first) in October or November (Xavier says that it will be freely available under a Creative Commons license).

Thirdly, this should be purposefully encouraged. High and higher productivity "is the only way for developed countries to avert the collapse of welfare and social insurance systems due to the aging of their populations". The real productivity gains, says Xavier, won't come from digitizing processes, although that's an essential enabler, but "from the new relation between producers and customers, from the consumer's deeper integration into the value chain, from the amateurs' growing role in the creative process", and from "the transfer of know-how", implicit or explicit, prompted by all this.

Your opinion?

UPDATE 1 Sept 06 - Philippe Mottaz has some interesting thoughs about the direct economy and the transfer of know-how (his post is in French). Particularly, he suggests that two other dimensions should be considered: the diminishing costs and the increasing speed of acquiring that know-how in a networked world.

UPDATE 13 Oct 06 - The full text (in French) of Xavier's essay is available in PDF (328 KB)

UPDATE January 07 - An English summary is also available in PDF (80 KB).

Comments

[anom]

how come most if not all the stuff you write is about large corporations / organizations that are able to reap huge profits from customer-economy (or is it the exploitation of the unwitting?)

where are all the jobless people in europe and the poor people benefitting from productivity gains

or are you just trying to optimize the perennial "how to get rich quick"

tricking people in handing over those goods whose value they do not understand is not a new idea

it's called colonial exploitation and was invented by Columbus and his peers

[Philippe Mottaz]

Just going back briefly to the "direct economy" metaphor: I am entirely in agreement with the proposition. This being said, I am afraid that we have not yet witnessed a true shit in the power structure. It is clear, however, that we are witnessing vast changes in the way growth might be generated.
Direct democracy: California has it, New Hampshire too and Switzerland is leading the way: it's call the right of initiative, (proposition in the US) where a small number of concerned citizens can put a item up to a popular vote. This is an extremely sophisticated and modern form of demcoracy. I could call it "wikipolitics", or rather "wikicracy". Use it once, you'll love it!

[Nicolas Arauz]

The economic model that mirrors this concept has been active for years. People vote with their dollars or euros in real-time, and these tiny incremental votes are the primary influencer on policy and leadership in public and private companies.

[David Phillips]

The interesting thing is the extent to which the corporate asset migrates from the organisation to the hands of the constituent.

I discuss this at my netpr blog.

I believe the whole process goes deeper.