Consider Apps for Democracy, which yielded 47 iPhone, Facebook and Web apps in 30 days – a $2.3 million value that only cost the city $50,000. It’s hard to dismiss an estimated 4,000 percent return on investment in one month’s time. The contest’s success, powered by iStrategyLabs, spurred Apps for Democracy “Community Edition” and spinoffs in other cities.

This approach of utilizing the ROI framework to defend 2.0-strategies, however, has several flaws, (a) it might have been a lucky shot, (b) it might not be sustainable, (c) contests might not focus on what citizens need (d) any impact below a certain threshold, let’s say $ 1 billion does not carry weight in big governmental or corporate organizations, but (e) most importantly, ROI is the wrong tool to evaluate success of enterprise/government 2.0 projects, because most of the value is accrued with the consumer not the producer of the value.

If we look at the most successful 2.0 projects of the last years, we see a pattern, where the ROI is not a relevant indicator to evaluate the project. One of the first big 2.0 projects, Wikipedia, destroyed the encyclopedia industry, but is not generating major revenues.  Couchsurfing and sites like http://airbnb.com/ or http://www.crashpadder.com/ are taking big bites out of the Hotel industry without generating equivalent returns. Open Street Map is having a huge impact on the mapping industry, one of the most profitable industries of the last years. Dynamic ridesharing is creating a secondary mobility infrastructure in most countries, basically competing with our complex integrated public transport systems such as the German Railway, with revenues of more than 10 billion euro in passenger transport per year or shorthaul flights. The combined revenues of the 5 major German ride sharing companies is way less than $ 10 million, but the impact on the lifeworld of their users is dramatic.

There are three lessons to be gleamed from this:

• the impact of 2.0 project are not to be evaluated in ROI, but in consumer-focused metrics (shadow prices, counterfactuals, reduction in average cost, rate of demonetarization, etc.). Ideally, not in monetary terms, because 2.0-strategies aim to de-monetarize.
• for corporations, 2.0 strategies go way beyond “normal” cannibalization strategies. They focus on the de-monetarization of industries. Therefore, as strategists, we need to ask, how can we generate a revenue flow that does not inhibit adoption, but sustains the effort.There is no choice, either we do it, or someone else will do it.
• For public value strategists that are not entrenched in existing practices this is a dream-come-true. You can now recreate a multi-billion-dollar infrastructure (the German railway system) with a web-page.

If this does not sound like a fun scenario from the perspective of an existing organization (be that governmental or private), be assured that there is nothing you can do against it. The two mega-trends driving the development are the dematerialization of the economy which has been going on for over one hundred years (the weight of the US economy per dollar of GDP has been decreasing more than 100-fold in the last century) and the implosion of transaction costs of organization through digitization and the rise of n-to-n (peer-to-peer) media are leading to new forms of organization (open value chains) and new products and services that can be digitally provided at basically zero marginal costs.

An analogy of what is happening today can be seen, when we look at the historical institution of medieval knighthood, probably the most expensive and sophisticated approach to individualized fighting and organization of social and cultural life in the history of humanity. In 1386, at the battle of Sempach, a “web-startup” consisting of Swiss peasants defeated the Austrian knights, by pushing them down from their high horses by using long poles. Not very sophisticated, but sufficient to get the job done. Expect more of that today.

When in Berlin, I also had breakfast with Peter Scheufen, the CEO of Skobbler, a smartphone navigation company that was globally the first to utilize Open Street Map in its core navigation product and that is making the navigation industry very nervous.  Peter sees his role as a negotiator between the world of the voluntary mappers, software developers that might want to build applications on top of his server offering, and consumers that expect a working navigation product for as close to free as possible, and believes he can build a business model where he can generate a non-intrusive revenue stream for his company. Navigating these waters is not easy, but it can be very rewarding for all of us, who believe we can have a positive impact on this planet and generate revenues, by figuring out how to generate revenue streams that do not disturb the value chain. So, ignore the ROI-issue and focus on the big picture of (public) value creation!

I took up that thread and connected it to the idea of statecraft, a concept you can only talk about with a straight face, when speaking in the halls where Metternich, von Stein, Kelsen, and co. voiced their ideas and created the modern state. In this situation, we were able to start an important conversation on how the idea of collaboration in open value chains and social media technologies are transforming public value production.

It was amazing to learn from the top German government officials concerning the topic. There is clearly a very sophisticated, but distributed community out there in government that is starting to make change happen. Expect great changes in the next year.

Anyway, if you want to read the talk, I posted it here. I would love to get your feedback on the text and continue the conversation.
(in German)

In my chapter (p. 275-282), Open Value Creation as a Strategic Management Approach, I argue that

[...] The 
idea 
of 
government
 (or 
business)
 as 
a 
platform
 necessitates 
an
 open
 value
 creation
 process. 
Open 
Value 
Creation 
consists 
of 
Open
 Policy Making 
(participation) 

and 
an 
Open
 Value 
Chain (collaboration). 
The
 distinction
 is 
slightly 
arbitrary
 but 
useful. 
It 
allows
 us 
to differentiate
 between
 coming
 up
 with
 a
 value
 generating
 process
 (policy) 
and
 repeatedly
 creating 
the value 
(value
chain).

Open
 policy
 making aims
 to
 open
 all
 aspects
 of
 the
 policy process
 (initiation,
 formulation,
 implementation,
 evaluation)
to
outside
inputs
and
scrutiny.
It
assumes
 that
 this 
allows
 better
 informed
 policy
making
 that 
is 
more 
legitimate and 
less 
costly.

The
 open
 value
 chain opens
 the
 implementation
 process
 (inputs, 
process,
 outputs, 
impact, 
outcome) 
to 
outside 
contributions
 under
 the
 assumption
 that
 a
 co‐produced
 public
 value
 is 
less
 costly
and 
more
 effective. [...]

Enjoy the book and let us start the discussion!

“In the Obama campaign, there was no internet strategy, there was strategy that used internet tools.”

Not everything government does can be addressed by these new mechanisms, but with technologically mediated open value creation we have been handed a powerful tool to make the world a better place. O’Reilly asks the pertinent questions in Forbes:

How does government itself become an open platform that allows people inside and outside government to innovate? How do you design a system in which all of the outcomes aren’t specified beforehand, but instead evolve through interactions between the technology provider and its user community?

The idea of government as a platform necessitates an open value creation process.

Open Value Creation consists of Open Policy Making and an Open Value Chain.

The distinction is slightly arbitrary but useful. It allows us to differentiate between coming up with a value generating process (policy) and repeatedly creating the value (value chain).

• Open policy making aims to open all aspects of the policy process (initiation, formulation, implementation, evaluation) to outside inputs and scrutiny. It assumes that this allows better informed policy making that is more legitimate and less costly.

• The open value chain opens the implementation process (inputs, process, outputs, impact, outcome) to outside contributions under the assumption that a co-produced public value is less costly and more effective.

Open value creation can be achieved if it is applied in all phases of the policy cycle and the value chain. At the Erfurt School of Public Policy we refer to the IDCA framework (ideation, deliberation // collaboration, accountability) for this purpose:

1. Ideation (policy)

Ideation is the process of collectively coming up with ideas and developing them. What is need is a platform that allows participants to post ideas, to comment, and to weed out the bad apples.

2. Deliberation (policy)

We understand deliberation best, because it has its analog in the offline world and there is sufficient text about it. The idea is to create a space in which the better argument and not the structurally advantaged position wins. What is needed is a platform to present ideas, discuss them both syn- and diachronically, and to weigh them in concordance with the underlying governance principle (think Digg-style, Reddit-style, or IMDB-style).

3. Collaboration (value chain)

We have most difficulties with collaboration, because it is new. Collaboration allows access to the work-flow by self-selected outsiders. The idea is to make the work flow modular, granular, and redundant, so that very different contributions can be integrated without endangering the quality of the output. A collaboration platform must be governed by a combination of self-enforcing code, simple but strong core principles, and an inclusive culture (think Canonical’s Launchpad or Wikipedia).

4. Accountability (value chain)

Accountability is often not well understood. We see it as a danger and not a strategic asset. By accounting to our stakeholders we decrease our error rates by adding free expertise and increase legitimacy, and public pride and ownership.

Core Technologies of Open Value Creation

Open value creation is possible because of new technologies that allow us to structure idea generation and information aggregation in digital form.

The core technologies of open value creation are the wiki (principle-based, user-generated platforms, with flexible moderation capacity), the forum (question driven user-generated knowledge platform), blogging (core message with feedback/discourse loop), and work flow management and visualization tools (Government resource planning, government process mapping tools, think SAP, Oracle, SugarCRM, etc.). Together they allow us to structure policy and administrative public value creation processes, by enhancing ideation (idea-generation), deliberation (commenting and discussion), collaboration (generating public values), and accountability (parsing data to hold government accountable).

How to implement such projects?

By combining these modular core technologies into custom-tailored open policy and value creation platforms organizations can address the challenges they are facing and capture the hearts and minds of local, national, and international stakeholders.

• Agree on set of principles for all policy and adminstrative processes according to the framework.
• Provide a set of (open source) tools to all parts of government responsible for implementation.
• Put together an inter-functional consulting group that helps cross-functional implementation.

At the moment we are working on several such projects with municipal (participatory budgeting, crowdsourcing security), state level (knowledge management, cross-border collaboration), and federal level stakeholders (legal ramifications of new forms of collaboration, strategy development) worldwide. So if you have an interesting project, please comment about your experience or send us an email!

Sometimes very simple ideas are counter-intuitive. Radical transparency clearly is one of them. Let me define the concept, ask why one would want (not) to go “radically transparent,” and how to implement the strategy.

What is radical transparency?

Radical transparency is a management approach in which all decision making is carried out publicly and the work flow has open application interfaces. It is a radical departure from existing processes, where  (a) decision making was never fully open, to ensure security and the discretion of the decision makers and (b) the work flow was a black box, where outside intervention would be looked upon as outside meddling.

What is the value added of the approach?

It is important to realize that radical transparency is not a requirement put upon a process from outside stakeholders, but an actively chosen strategy. So why go transparent? Radical transparency impacts value identification, capacity, and legitimacy of any project.

When to apply it?

As with any management strategy, radical transparency is not a panacea. So the question is what types of problems are amenable to the approach and what types of problems are better left in the dark.

When to not apply it?

There are other issues, where it is best not to pursue a radical transparent approach:

How to design radically transparent procedures (a rough guide to implementation)?

If we drill down to the unquestionable, why do we actually participate?, we find metaphors mapping the logic of one domain onto another: our society on a body, where everybody has their role; our society onto an original contract; or our society described as a network of inclusive, some-how like-minded, outcome-oriented, collaborators, guided by rough consensus and running code.

PS: To read the testimony of Vivek Kundra at the Subcommittee Hearing on: “The State of Federal Information Security”

I recently wrote a critical comment on Philipp’s blog entry on a note by Ed Felten. Click here to read the original blog post. It dealt with the understanding of open government and transparency, and how outreach is only one side of the 2.0 coin. On the thought of politics and the web 2.0 “bandwagon” – as I called it – I wrote:

“The danger within politics jumping on the web 2.0 bandwagon is clearly that governments and politicians will use these tools to keep the citizens at bay. While we are busy watching Merkel’s video blog and reading Guembel’s tweets, we don’t ask questions at the same time. Very convenient for the politicians and we’ll see more of that. Bread and games 2.0”

Here is why I am so skeptical about the way governments and politicians are employing the tools of the world wide web. In many cases, the effects are rather negligible. Clearly, what Felten calls “outreach” is a marked improvement in how citizens are being informed about politics. Yet the real decisions are still made behind closed curtains, and no matter how much citizens know about what politicians seem to be doing, as long as they do not get a say in it, what is the point? Transparency does not solely come from knowledge, it comes from empowerment. Only when the public is in a position to use the information gained towards political ends, does it server a real democratic purpose. All too often it appears to me that politicians’ blogs, twitter messages and Facebook profiles are nothing more than entertainment, to keep us busy and occupied, so we forget what is really at stake. Like the games in ancient Rome. Bread and games for the masses. Laugh, applaud, cheer, but don’t question. Public actors need to step out of the shadow of bread and games 2.0 and start employing these tools to real purposes. Barack Obama’s new open government directives sound fantastic, but will U.S. citizens get real change, or just twice the amount of PDF files and blog posts? Time to rethink the client (more on that right here).

Sebastian Haselbeck is a graduate student at the Erfurt School of Public Policy and webmaster of the Center for Public Management and Governance.

MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES

SUBJECT:      Transparency and Open Government

My Administration is committed to creating an unprecedented level of openness in Government.  We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration. Openness will strengthen our democracy and promote efficiency and effectiveness in Government.

Government should be transparent.  Transparency promotes accountability and provides information for citizens about what their Government is doing.  Information maintained by the Federal Government is a national asset. My Administration will take appropriate action, consistent with law and policy, to disclose information rapidly in forms that the public can readily find and use. Executive departments and agencies should harness new technologies to put information about their operations and decisions online and readily available to the public. Executive departments and agencies should also solicit public feedback to identify information of greatest use to the public.

Government should be participatory. Public engagement enhances the Government’s effectiveness and improves the quality of its decisions. Knowledge is widely dispersed in society, and public officials benefit from having access to that dispersed knowledge. Executive departments and agencies should offer Americans increased opportunities to participate in policymaking and to provide their Government with the benefits of their collective expertise and information. Executive departments and agencies should also solicit public input on how we can increase and improve opportunities for public participation in Government.

Government should be collaborative.  Collaboration actively engages Americans in the work of their Government. Executive departments and agencies should use innovative tools, methods, and systems to cooperate among themselves, across all levels of Government, and with nonprofit organizations, businesses, and individuals in the private sector.  Executive departments and agencies should solicit public feedback to assess and improve their level of collaboration and to identify new opportunities for cooperation.

I direct the Chief Technology Officer, in coordination with the Director of the Office of Management and Budget (OMB) and the Administrator of General Services, to coordinate the development by appropriate executive departments and agencies, within 120 days, of recommendations for an Open Government Directive, to be issued by the Director of OMB, that instructs executive departments and agencies to take specific actions implementing the principles set forth in this memorandum. The independent agencies should comply with the Open Government Directive.

This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by a party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

This memorandum shall be published in the Federal Register.

BARACK OBAMA