Thursday, June 30, 2005

Principles of the Commons

Garrett Hardin’s 1968 essay, The Tragedy of the Commons, led many people to think that all commons are self-destructive. But Hardin’s essay was misleading.

Hardin assumed there’s only one kind of commons, the unfenced pasture or waste dump with no management system. In such a situation, overuse can lead to destruction.

What Hardin overlooked is that there are many kinds of commons and many ways to run them. For example, you can have a fenced commons with a gate-keeper, or fishing limits with licenses, or a cultural commons with infinite possibilities. There’s no tragedy inherent in these and many other commons. (See Working Models for a sampling of successful American commons.)

Still, the proper way to manage a commons isn’t always obvious. So let’s explore some basic principles, beginning with a look at standard business management.

There are two sets of rules for managing private assets. One applies to corporations, the other to trusts such as pension funds, charitable foundations and family estates.

The goal of corporate rules is to maximize short-term return to capital. The goal of trust rules is to preserve assets for the long term and assure that beneficiaries receive their due. It’s these latter rules that merit attention here.

Over centuries, several principles of trust management have evolved. These include:
  • Managers have a fiduciary responsibility to beneficiaries. If a manager fails this obligation, s/he can be removed and penalized.
  • Managers must preserve the principal. It’s okay to spend income, but don’t invade the corpus.
  • Managers must assure transparency. Information about money flows should be readily available to beneficiaries.

As with private trusts, the goal of commons management is to preserve assets and share benefits. Hence, the basic principles of commons management are similar to those of private trusts.

Commons managers must, first and foremost, protect shared assets for the long term. They must also assure that the benefits flowing from the assets are widely shared.

Beyond these basic principles, specific rules for commons management vary from one commons to another. Broadly speaking, they depend on the level of use society wishes to allow or encourage.

If a commons needs to be off limits to all but the most non-invasive use — a wilderness area, for example — the guiding rule is, ‘No trespassing.’

If a commons has no inherent limits on use — like the Internet or the cultural commons — the guiding rule is, ‘The more the merrier.’ Use should be as free as possible, and management’s main job should be to minimize private toll booths.

If a commons can be used up to, but not beyond, some physical threshold — fisheries, aquifers and the atmosphere are examples — management’s job is to set and enforce sustainable use limits. In economic terms, its challenge is to live off income without diminishing capital.

In managing physically limited commons, it’s often desirable to cap total use and charge users a fee. Such caps and prices assure preservation, let markets sort out competing uses, and generate revenue for social and environmental needs.

Setting a total usage cap can be controversial. If the physical threshold is uncertain, a critical question is, "Which side should we err on?" Under the precautionary principle, if the potential harm from overuse is substantial (e.g. the polar ice caps could melt), the cap should be set with safety as the guide.

The process of protecting and sustaining a commons involves several steps. The asset must first be identified and given a legal and/or institutional structure. In some cases, usage caps and new kinds of property rights may be necessary. It may also be necessary to appoint trustees and acquire pre-existing property rights.

Once a commons is protected and given a proper management regime, markets can come into play.

Source: Friends of the Commons


In England and Wales, a common is a piece of land over which other people -- often neighbouring landowners -- could exercise one of a number of traditional rights, such as allowing their cattle to graze upon it. The older texts use the word common to denote any such right, but more modern usage is to refer to particular rights of common, and to reserve the word "common" for the land over which the rights are exercised.

The fact that land is common land does not mean it has no owner -- all land in England and Wales is owned by someone. Those who have a right to exercise a right of common are known as 'commoners. Historically most rights of common were "appurtenant" to particular plots of land. So the commoner would be the person who, for the time being, was the owner of the land. Some rights of common were said to be "in gross" in that they were unconnected with ownership or tenure of land. This was more common in regions where commons were more extensive, such as in Northern England or in the Fens.

Example rights of common are:

common pasture (right to pasture cattle, horses, sheep or other animals on the

common land)common piscary (the right to fish

common turbary (the right to take sods of turf)

estovers (the right to take sufficient wood for the commoner's house or agriculture)

Rights of common grazing might also be held over privately owned arable strips in some open field manors; this right was excercised either after the harvest or during a fallow year. Rights of grazing in the open fields was most valuable in manors with relatively little other grazing.

It is often thought that a common is somehow owned by everyone, or at least by "the community" in some sense. While that may have been true more than a thousand years ago, when waste would be used for grazing by the local community and over which there would not be, nor would there need to be, any particular limit or control of usage; since at least late Anglo-Saxon times, the right to exercise a right of common has been restricted to a commoner. Since the right of common would have some natural limitations itself, commons never suffered from the tragedy of the commons.

Thus the word is now used in the sense of any sets of resources that a community recognizes as being accessible to any member of that community. The nature of commons is different in different communities, but they often include cultural resources and natural resources.

While commons are generally seen as a system opposed to private property, they have been combined in the idea of "common property", which are resources "owned" equally by every member of the community, even though the community recognises that only a limited number of members may use the resource at any given time.

The act of transferring resources from the commons to individual ownership is known as "inclosure."

Commons are a subset of public goods; specifically meaning a public good which is not infinite. Commons can therefore be land, rivers and, arguably, money. "The Commons" is most often a finite but replenishable resource, which requires responsible use in order to remain available. A subset of this is a commons which requires not only responsible use but also active contribution from its users, such as a school or church funded by local donations.

In order to ensure responsibility of the users, there must be a system of management. Such models include the Hobbesian "Leviathan" model, where there is a central authority that monitors the behaviour of the users and can sanction abusers. There are also many other models, some of which can require no maintenance -- for instance, if it is known that the collective consists mostly of contingent cooperators, then once responsible behaviour has been established, it will most likely continue without management. Another model is reputation management.

"Commons", Wikipedia,

Tuesday, June 7, 2005

The Highest Goal

Fast Company magazine has dubbed Michael Ray "the most creative man in Silicon Valley", and I wouldn't question that appellation for a moment.

You may have already sampled Michael's incredible talent for truth in his Creativity in Business, which sold more than 100,000 copies and was selected as one of the nine "Greatest Business Books Ever Written".

For more than twenty-five years he taught the famed Personal Creativity in Business course at Stanford University. To many people's utter amazement Ray began his classes with meditation.

In suggesting that you become acquainted with The Highest Goal, I don't urge
that you merely read this easy-to-hold volume. In fact I beg you not to
devour this trenchant tome in "one fell swoop". Keep it near you. Take
your time with it. Fold its promptings into your contemplative and creative
life! Let it help you truly define and eventually reach .. with triumph .. YOUR

THE HIGHEST GOAL: The Secret That Sustains You in Every Moment Michael Ray Foreword by Jim Collins, author of Good to Great Berrett-Koehler Publishers, Inc., San Francisco (Hard Back - 2004)

Monday, June 6, 2005


I suspect if you have already read Bang! You are in one of two camps. Either you loved it, because it addresses some of the important issues and innovations of modern advertising, or you hated it because it had nothing that you could hang your hat on.

Thaler and Koval the CEO and vice-president respectively of the Kaplan Thaler Group advertising agency (KTG) produce a chatty and somewhat breezy memoir of life on the edge in the high stress, high stakes world of large corporate advertising. They were hugely successful after all, they are the creators of many memorable advertisements, including the AFLAC duck you still see during any evening spent in front of the TV. No doubt, in advertising a large amount of creativity is a must or your agency is dust. And these two high energy, highly creative people found a way to keep the critical juices flowing. But just in time creation of advertising concepts is not new. I can remember back in my day…..but that is another story.

The authors present a virtual armamentarium of ideas and tips on how they came to their big bang ideas and how if you followed them, you would too. The book is entertaining to a point, but it is not in fact a realistic account of how much real creative and innovative work gets done anywhere else, except in advertising. Most of us usually never have enough time anyway to meet our project requirements. The idea of having too much time made me laugh. And the concept of living in a small cramped space, well, they obviously never did rat experiments in school!

It is useful if you have never been inside an U.S. East Coast Ad agency to read this book, and then appreciate your own circumstance. True, many of us in entrepreneurial environments do spend a lot of time really close to our co-workers and it is creative and somewhat fun, but most of us will have to admit that after a few years of it, what you want is a place where you can have a private thought. Some real innovations are created by people who have the opportunity to process and think quietly and without the press of a deadline hanging over them. Most of us understand that not all of us are lazy in our project/time management, and not all of us do our best at the last minute.

Innovation and creativity come in many dimensions, one size does not fit all. Bang! Describes a narrow type of creativity applied to a particular type of innovation creation. Read the book with that in mind and you may actually enjoy and learn something from it.

Bang! Getting Your Message Heard in a Noisy World
By Linda Kaplan Thaler, Robin Koval, with Delia Marshall

Leading the Revolution

If you haven’t already read this book, you should read it now. It’s one of the best books on innovation I’ve read and innovation is the twelfth word in the long title. It’s also a book about strategy, that forgotten and banned word from business books. And, it’s courageous, full of things I wish I had written like, “…how many times have you heard a CEO or divisional vice president say, ’Our real problem is execution’? Or worse, tell people that ‘strategy is the easy part, implementation is the hard part.’ What rubbish! These worthless aphorisms are favored by executives afraid to admit that their strategies are seriously out of date, executive’s who’d prefer their people stop asking awkward questions and get back to work. Strategy is easy if you’re content to have a strategy that is a derivative of someone else’s strategy. Strategy is anything but easy if your goal is to be the author of industry transformation – again and again.”

The book is well written and full of gems of wisdom like:

"In a nonlinear world, only nonlinear ideas will create new wealth."

"By the time an organization has wrung the last 5 percent efficiency out of the how, someone else will have invented a new what."

"Somewhere out there there’s a bullet with your company’s name on it."

"The gap between what can be imagined and what can be accomplished has never been smaller."

We are limited not by our tools, but by our imagination.

"First the revolutionaries will take your markets and your customers Next they’ll take your best employees. Finally, they’ll take your assets."

"In the new industrial order, the battle is not democracy versus totalitarism or globalism versus tribalism, it is innovation versus precedent."

It is a call to “conscious” people in organizations to lead a revolution. The title says so in bold print on the cover. (I was walking through a hotel lobby with the book in my hand with the title clearly visible, a person that could have been someone attached to security stared at the book as I walked past.) He points out that for a company to embrace revolutionary change requires bottoms-up revolutionary thought and someone at the top supporting the change. The middle are almost always slaves to precedent. But, this is not a book aimed at executives, it is aimed at workers.

“Most of us pour more of our life into the vessel of work than into family, faith or community. Yet more often than not the return on emotional equity derived from work is meager. The nomadic Israelites were commanded by God to rest one day in seven – but he didn’t decree that the other six had to be empty of meaning. By what law must competitiveness come at the expense of hope?”

The opening paragraphs of the book encapsulate his view of the world of business:

“The age of progress is over. It was born in the Renaissance, achieved its exuberant adolescence during Enlightenment, reached a robust maturity in the industrial age, and died with the dawn of the twenty-first century. For countless millennia there was no progress, only cycles. Seasons turned. Generations came and went. Life didn’t get any better; it simply repeated itself in an endlessly familiar pattern. There was no future, for the future was indistinguishable from the past.

Then came the unshakeable belief that progress was not only possible, it was inevitable. Life spans would increase. Material comforts would multiply. Knowledge would grow. There was nothing that could not be improved upon. The discipline of reason and the deductive routines of science could be applied to every problem, from designing a more perfect union to produce semiconductors of mind boggling complexity and unerring quality.”

He continues, “We are now standing on the threshold of a new age – an age of revolution. Change has changed. No longer is it additive. No longer does it move in a straight line. In the twenty-first century, change is discontinuous, abrupt, seditious.”

And later, “It’s not that things didn’t change back there in the age of progress; they did” he continues, “But to use a metaphor from the theory of biological evolution, it was a world of punctuated equilibrium, where change was episodic. Today, we live in a world that is all punctuation and no equilibrium. To thrive in this new age, every company and every individual will have to become as nimble as change itself.”

He asks the question, “Who will create new wealth and who will squander the old?”

“Companies today are rightly obsessed with satisfying stockholders. Spin-offs, de-mergers, share buybacks, tracking stocks, value-based management programs – all these things release wealth, but they don’t create wealth. Neither do mega-mergers. These strategies don’t create new wealth because they don’t create new business models, new markets, new sources of competitive advantage or new customers. So while they may deliver onetime gains to shareholders, they don’t fundamentally change a company’s long-term earning potential. Industry revolutionaries are in the business of creating new wealth. You won’t find them playing shell games with shareholders. Any company that wants to thrive in the age of revolution is going to have to do more than wring a bit of wealth out of yesterday’s strategies. Revolutionaries don’t release wealth, they create it. They do more than conserve, they build.”

He continues, “In truth, CFOs and CEOs have been mistaken the scoreboard for the game. They have spent too much time trying to manipulate quarterly earnings and the share price, and too little time trying to build their company’s capacity for radical innovation. Shareholder wealth may be the scoreboard, but the game is radical innovation.”

Hamel makes the point convincingly that we are at the top of an economic s-curve. We’ve squeezed all incremental and imaginary costs out of present business strategy and it’s time for radical innovation, what he calls strategy decay. He also attacks the sameness of business strategies. Through the process of best practices, industries have reached centrality. All the businesses are all so close to each other strategically because they have for years determined best practices and adopted those in their own organization. Revolutionaries can break out of the pack and establish the new rules of competition.

“In the age of revolution, every company must become an opportunity seeking missile – where the guidance system homes in on what is possible, not on what has already been accomplished. A brutal honesty about strategy decay and a commitment to creating new wealth are foundations for strategy innovation. But you can’t be an industry revolutionary unless you’ve learned to see the unconventional. You won’t have the courage to abandon, even partially, what is familiar unless you feel in viscera the promise of the unconventional.”

Hamel doesn’t specifically define business concept innovation, but he does give us some of its characteristics. “The goal of business concept innovation is to introduce more strategic variety into an industry or competitive domain. When this happens, and when customers value that variety, the distribution of wealth-creating often shifts dramatically in favor of the innovator.” Later he writes, “Business concept innovation is meta-innovation, in that it changes the very basis for competition within an industry or domain.” Still later, “Business concept innovation starts from the premise that the only way to escape the squeeze of hyper competition, even temporarily is to build a business model so unlike what has come before that traditional competitors are left scrambling.”

To me a business concept innovation is a collection of product, process and procedure innovations with the right mix of incremental, distinctive and breakthrough change. If it is the right mix, i.e. the mix creates unusual value for the customer, then a shift of wealth occurs.

Hamel identifies four components of a business model – core strategy, strategic resources, customer interface and value network. He then unpacks his concept of a business model. He identifies four factors that determine a business model’s profitability (and its potential for wealth) – efficiency, uniqueness, fit and profit boosters. Along the way, he gives examples of radical innovation driven business models.

The book then turns and focuses on the individual, the revolutionary. He spends three chapters on advice to revolutionaries in Be Your Own Seer, Corporate Rebels and Go Ahead! Revolt! These chapters provide some really useful information for people who sense that revolutionary change is required, but aren’t sure what they can do about it.

He then turns his attention to revolution within old hierarchies in Gray-Haired Revolutionaries. He makes the point that an organization is never too old to change if they establish the right climate for change and provide the support and encouragement for rebels within the organization.

The book closes with Design Rules for Innovation and The New Innovation Solution. Hamel’s design rules for innovation are:

- Unreasonable expectations
- Elastic business definition
- A cause, not a business
- New voices
- A market for innovation
- Low risk experimentation
- Cellular division
- Connectivity

“Most companies use a decidedly unbalanced scorecard – one that is heavily weighted toward optimization rather than innovation. Measures like RONA, ROCE, EDVA and ROI often encourage managers to beat a dead horse ever harder.” These and other metrics are not pro-innovation. “Without strong pro-innovation metrics, the default setting in most organizations is ‘more of the same’” He continues, “Traditional metrics do not force a company to consider how it is performing against new and unorthodox competitors in the quest for wealth creation.”

Hamel’s suggestion for a radical business concept innovation metric is a Wealth Creation Index (WCI). “The WCI lets a company determine how it has performed against a relevant set of ‘competitors’ in creating new wealth. The process of determining your company’s WCI involves two steps: defining the domain and calculating changes in the market value of your company versus the value of the entire domain.”

This is a good start but I don’t believe it’s sufficient to guide a revolution. WCI is a measure of the consequences of previous actions. The examples he gives are over a ten year period. In my experience what is also needed are predictive and present metrics – people, processes, outcomes and consequences.

Hamel ends with a real call to revolutionaries, “Do you care enough about the future to argue with precedent and stick a thumb in the eye of tradition?” He continues with other exhortations ending with, “Do you care enough to lead the revolution?”

This is a powerful book crammed full of ideas. It’s a fun book to read, but a real bear to really understand and implement. My suggestion, if you think you want to be a revolutionary, find a group like your self, read this book and create a study group or discussion group.

The book has nine chapters divided into four sections:

Facing Up to the Revolution
1. The End of Progress
2. Facing Up to Strategy Decay

Finding the Revolution
3. Business Concept Innovation
4. Be Your Own Seer

Igniting the Revolution
5. Corporate Rebels
6. Go Ahead! Revolt!

Sustaining the Revolution
7. Gray-Haired Revolutionaries
8. Design Rules for Innovation
9. The New Innovation Solution

Leading the Revolution: How to thrive in Turbulent Times by Making Innovation a Way of Life, Gary Hamel, Plume Book, 2002, Paperback, 337 pages