INTRODUCTION
The New Way to Grow a Business

Reciprocity and advantage are two words that are rarely used together. Advantage is basic to business. Reciprocity is basic to life.

In the present, most people think of reciprocity or advantage. In the future, this magical juxtaposition—reciprocity and advantage—will spark new business models for innovation and growth.

Reciprocity is the practice of exchanging with others for mutual benefit. Reciprocity is a very old idea in a very new context: the shift from today’s Internet to tomorrow’s cloud-served supercomputing ecosystem. The cloud will make it possible to create more businesses with more partners globally connected. The cloud will become the world’s biggest amplifier, as we discuss in Chapter 8. The currency of the cloud will be reciprocity.

Reciprocity lives in the space between transactions (buying and selling) and philanthropy (giving for good causes).

Advantage lives in a world where businesses seek a superior position that leads to profit and growth. Advantage means achieving a winning position, but it doesn’t necessarily mean that others must lose in order for you to win.

Reciprocity advantage will be a new type of competitive advantage.

· It will be grounded in a right-of-way that you already own.

· It will require that you give away some of your assets inintelligent ways now in order to make money and grow your business over time. (Think: give to grow.)

· It can happen only when a company is able to both practice reciprocity and make money. (Reciprocity is the action; advantage is a gain that is earned by the action.)

· It must be designed to be massively scalable. Certainly, reciprocity can be practiced on a small scale, but this book focuses on creating large-scale growth through reciprocity.

This is a book that shows “what’s next?” and shares what we believe will become the biggest innovation opportunity in history. Society is just entering a unique period when doing good and doing well will have to be combined in ways that have never before been imagined.

To ground the concept of reciprocity advantage in a current example, consider the evolution of TED over the last 30 years. Karl has participated in many TED conferences over the years and has followed its progress up close.

The visionary architect Richard Wurman foresaw the convergence of Technology, Entertainment, and Design (TED) and created a forum for innovators in these fields to discuss what he called “ideas worth spreading.” He launched the first TED conference in 1984, before the virtual world we know today existed, back when Tim Berners-Lee was still writing a research proposal for what would become the World Wide Web, and almost ten years before we had browsers.

Wurman’s vision was to create the world’s most elite conference. The original TED conferences were expensive invitation-only events that took place in Monterey, California—a comfortable middle ground between Silicon Valley and Hollywood. A TED conference ticket was a hot commodity.

In 2001 Wurman sold TED to Chris Anderson’s Sapling Foundation. Anderson pledged to keep the spirit of TED alive, but the great expansion of the Internet called for a new business model. The organizers realized that producing a great conference was no longer enough—people wanted to co-create with TED, not just sit back and listen. These “TED Talks” became available free to anyone in theworld. By embracing social and technological change, TED prototyped its way into the future.

TEDx is the grassroots version of TED that has caught on around the world. Wherever people have “ideas worth spreading,” a TEDx conference is likely to pop up. When the Sapling Foundation allowed anyone to run a TEDx conference, it created a huge new reciprocity advantage that builds on its past success. TED moved from a highly exclusive model to a radically democratic one. Meanwhile, the conference in its original format has continued to grow dramatically. By becoming more open and giving away assets associated with the TED brand, TED has become even more elite.

TEDx is a real-world example of reciprocity advantage. Value is exchanged for mutual benefit over time. The Sapling Foundation recognized that it owned assets it could share, and it partnered with others to augment its current business in a way that it could not do alone. TEDx has created new growth and also strengthened the core business. Others try to compete, but TED clearly has the advantage of increased global brand power, and it was accomplished by giving up control in ways that many traditional businesses would find unimaginable.

TEDx is not without its critics. In April 2013 the Harvard Business Review published an article pointing out the impacts that poorly researched TEDx talks could have on the TED brand. Certainly the move to TEDx was risky and TED must be vigilant in how they manage all facets of their brand. However, the world has changed, and TEDx leverages those changes. TEDx is clearly differentiated from TED. TEDx is experimental and grassroots. TED is elite and controlled.

TEDx is a curated business, but it is not controlled. TED embraced the energy of the global community, and the result is that TEDx conferences have been held in more than 130 countries. TED provides advice to organizers of TEDx ahead of time, but TEDx events are done independently by the local organizers. The parent TED organization monitors outcomes and can promote good talks or effectively demote poor talks by not giving them a broader audience. TED andTEDx coexist, but they are very different. By giving up control in TEDx, the TED brand gains new power through the grassroots reach. In fact, giving up control is necessary to gain this added power.

The Harvard Business Review article is aptly titled “When TED Lost Control of Its Crowd,” but it misses the point—losing control is exactly what TED must do. Giving up control is often required in order to make money in new ways and start new businesses—to innovate in this emerging world. Curating is possible, but control is not. Lack of control certainly has risks (there will be bad TEDx talks), but the benefits far outweigh the risks. TED gave up considerable control, which has resulted in some criticism of quality, but the overall impact has been gigantic.

Here is Chris Anderson’s own explanation of how TEDx works:

TED staff do not co-organise. We don’t pre-screen speakers. That would defeat the purpose. This is a ground-up effort. It’s only by genuinely granting power to local organizers that TEDx could have achieved its current scale. We have been astonished how good most of these events are….

Like Wikipedia, it shouldn’t work but it does. And also like Wikipedia, occasionally mistakes creep in. Out of the 40,000 TEDx talk videos now online, about a dozen have been truly embarrassing, featuring pseudoscience or other absurdities.

But the system self-corrects over time. Organisers learn from each other, and we are committed to empowering them with tools and advice that will allow each year’s events to be a little better than the year before.

TED under Chris Anderson is focused on experimenting to learn, with as little direction as possible up front. Because TEDx experiments are everywhere, TED is a new model of inclusivity—even though the TED conference itself is still very exclusive. In this way, TED itself is both remarkably open and remarkably elite.

There will still be work ahead to ensure clarity on the differences between the TED brand and the sub-brand of TEDx. But this work will be agile curating—not traditional control of brands.

The journey came full circle in 2013 in Long Beach, where many of the TED Talks featured people who were identified via TEDx.Brilliant innovation can come from anywhere, and now TED has the network to find it.

TED’S RECIPROCITY ADVANTAGE IN SUMMARY

What right-of-way does TED share with TEDx organizers? The TED organization has packaged its right-of-way as “TEDx-in-a-Box” and it includes

· the TED brand;

· the TED stage set and logo;

· the TED eighteen-minute high-production-values talk format.

Who are TED’s partners? Passionate “TEDsters” around the world.

How did TED experiment to learn? TEDx began as an experiment in 2007. They used rapid prototypes to perfect their recipe for what to give away, what to control, and what to curate.

What assets does TED give away in order to learn?

· TED Talks from main TED event posted on the TED.com website.

· Recipes for organizing TEDx conferences.

How did TED scale? Volunteers organize TEDx events locally. Of course, not every TEDx is a success, so TED curates the results. Organizers of a good conference can give another TEDx; poor conferences aren’t repeated. Only the very best talks are distributed through the cloud, growing their brand globally.

What is TED’s reciprocity advantage? TEDx—the local version of TED staged anywhere—which complements and provides huge growth to the core TED brand and ideas worth spreading.

So What?

In five years TEDx has grown its grassroots effort to change the world with 30,000 “ideas worth spreading” presented in 133 countries. Just about every day, a TEDx event happens somewhere in the world.

Along the way, TEDx has also solved a problem for the main conference in today’s world of instant news. In 2013, Chris Anderson usedTEDx and the local organizations as a talent search to find the very best people to bring to the main stage at the annual conference. This is an example of an advantage that TED gained from its reciprocity in allowing TEDx conferences to occur.

We find TED and TEDx fascinating, since they created a global brand based on reciprocity. As the World Wide Web took shape, TED embraced the turbulence and transformed itself from a company that put on elite conferences into a kind of organization that had never existed before. TEDx is a prototype for new business reciprocity-advantage models yet to be created. TED is just one example—there are many more.

The Basics of Reciprocity Advantage

Consider these basic definitions as we open the black box of reciprocity advantage.

trans·ac·tion (noun) tran-’zak-shən: the instance of buying or selling something

Transactions are at the core of business today. In traditional business transactions, money is given for products received. You give me money; I give you goods in return. If you like the goods, you come back and give me more money for more goods. Both the buyer and the seller must see more value in giving up what they have (money or product).

Future forces will disrupt traditional transactional models, and margins will shrink. Transactions will continue to exist but will become increasingly commoditized. It will be increasingly difficult to run profitable businesses on this model alone. However, a transactional product may very well open the door to businesses with higher margins and higher values.

At the other extreme, consider

phi·lan·thro·py (noun) fə-’lan(t)-thrə-pē: the desire to promote the welfare of others, expressed especially by generous donations to good causes

Philanthropy is motivated by altruism and the basic human instinct to give to others.

While business is stuck in the old world of transactions, philanthropy is stuck in the old world of grant giving—and often the accompanying burdensome bureaucracies. The big challenge for philanthropy is scaling: how to maximize the impact of good ideas that work locally. The same forces that are going to disrupt traditional transactional models will also disrupt philanthropy, albeit from different angles.

Philanthropy can be wonderful, but philanthropy is not what this book is about.

Reciprocity differs from transactions and philanthropy but has elements of both.

rec·i·proc·i·ty (noun) re-sə-’prä-s(ə-)tē: the practice of exchanging with others for mutual benefit

In a reciprocity-based business model, I give you something, and at some later point in time, I trust that I will learn how to get even more value back in return. While transactions are the currency of today’s Internet, reciprocity will be the currency in tomorrow’s world of cloud-served supercomputing. The cloud will allow individual companies to look out for the interests of their partners—and themselves—on an unprecedented scale.

A reciprocity advantage begins with smart giving, which is distinctly different from philanthropy or altruism. The reason for giving assets away isn’t just about doing good—it’s an important part of an ongoing value exchange spread over time where partners commit to looking out for each other as part of a shared vision.

Reciprocity advantage will live in the space between transactions and philanthropy—between list price and free. Businesses will be able to create new growth that would not have been possible to do on their own. And they will share some of that new value with others.

Harvard professor and expert on competitive strategy Michael Porter has studied this concept of “shared value.” His notion is that societal costs and benefits ought to be more integrated with businesses. He sees greater need for collaboration across these diverse organizationsto identify societal needs and respond to them. Indeed, those who are closest to the problems are the best people to address them. In many cases, those are smaller businesses, governments, nonprofits, foundations, and even end users themselves. Large businesses have valuable assets, infrastructure, and know-how that make it easier and more efficient to scale solutions to these societal issues. In this way, business/community partnerships can spur innovation and growth that are profitable to the business and also benefit the community. Companies who find their own reciprocity advantage will be better partners in shared value initiatives.

We know from our discussions with others, however, that reciprocity advantage is an oxymoron for some people. It doesn’t make sense to them because they define reciprocity as each party getting similar benefits—hence, no advantage. Current times urge some reflection on this assumption. Consider that disruptive innovation often occurs when two opposing concepts are put together and result in a new idea that shatters former assumptions. Sunny and rainy is a forecast for rainbows.

The ancient wisdom of reciprocity will be reborn in a digitally enhanced world of And. Transactions are choices made by businesses, usually in the interest of the intended customer. But transactions force the customer to choose among a small set of options offered to them. This is a world of Or: you can buy this or that. The future will be shaped by a wild array of external forces that will conspire to commoditize the world of Or in increasingly more extreme ways. Knock-off products will be created overnight—even faster than they are today—and competition over price alone will get fierce. Growth and ultimately success will depend on harnessing these forces and creating businesses together. The barriers to collaboration are falling just as pressures on price are increasing.

Reciprocity Will Scale Big

TEDx demonstrates the potential for scalable reciprocity to grow a good business and good will in ways that have never before beenpossible. In this book, we will show how companies such as IBM, Microsoft, Google, Apple, and Amazon are creating a new type of advantage. Reciprocity advantage must be done on a large scale to make a significant difference. We focus our examples on the point of view of the large company that already has scale but needs new growth, but small entrepreneurs are the likely partners. So, the roles may differ, but reciprocity advantage applies regardless of your size.

The world of the next ten years will best be characterized as volatile, uncertain, complex, and ambiguous (VUCA), which we talk about more in Part Two. But in spite of all the threats, it will also provide a window of opportunity—if we are smart enough to act now.注 The VUCA World will demand reciprocity.

注 VUCA World was coined, as best we can tell, at the U.S. Army War College in Carlisle, Pennsylvania. For more background, see Bob Johansen’s Leaders Make the Future: Ten New Leadership Skills for an Uncertain World (San Francisco: Berrett-Koehler Publishers, 2012). In this book, Bob describes how, by looking ten years ahead, you can flip the threats of the VUCA World into opportunities. Part Two of this book describes those elements of the VUCA World that will shape scalable reciprocity.

We have organized the book into three parts:

PART ONE
WHAT IS A RECIPROCITY ADVANTAGE?

· What is it?

· Understanding our model.

PART TWO
FUTURE FORCES THAT WILL DEMAND RECIPROCITY

· Why will it be important?

· Understanding that the future will be very different from the present—and how finding a reciprocity advantage can help you take advantage of the disruptions.

PART THREE
HOW TO DEVELOP YOUR OWN RECIPROCITY ADVANTAGE

· How can you do it?

· Finding new opportunities for growth.

This book introduces a reciprocity-based business model for creating growth that capitalizes on the future disruptions that are coming. We will challenge you to create your own reciprocity advantage.

Figure 2 introduces the model we have created for this book, a cycle from uncovering your Right-of-Way to Partnering to Experiment toLearn and finally, when you are ready, to Scale It. This is an ongoing cycle, however, and it is unlikely to be a neat process. Certainly, it won’t be linear.

Figure 2: Steps to Scalable Reciprocity.

Foresight, insight, and action will all play a role. Uncovering your right-of-way will involve rethinking your past with an eye toward your future.

All four steps summarized in Figure 2 must be mastered to create a reciprocity advantage. We start with right-of-way because the best reciprocity advantage will be grounded in a strong core business. However, we acknowledge that you may well run a lot of experiments and learn that you have an even better right-of-way to develop or that you have chosen the wrong partners. This is a cycle of learning, so expect to cycle round multiple times in order to develop your own reciprocity advantage. And to learn your way to the future will require partners.

Reciprocity-based business models will create new opportunitiesfor high-margin businesses that can be much more profitable than traditional transactional businesses. The world of And can make the world a better place and make money. A reciprocity advantage is a chance to do good while also doing very well.

A reciprocity advantage is delicate to achieve and maintain. Go too wide, and you’re a philanthropist. Go too narrow, and you’ll be back doing transactions. Reciprocity is more than giving to get. Reciprocity is partnering for greater value for more players.

If you don’t look out for your partners or if you don’t have authenticity in your new business model, you’ll just be doing clever marketing—not reciprocity.

Over the next decade, reciprocity advantage will become increasingly profitable and scalable in ways that are just becoming imaginable today. Future forces will disrupt your business, and that evidence is already visible. By providing many examples of companies that are already embracing the disruptions and by showing you the advantage of getting there early, this book will help you get started in creating your own reciprocity advantage.