During a recent presentation I gave to one of our alliance partners, an interesting question came up during the discussion – How can a commercial software company build a business based on open source software? After the question was asked, I saw many heads nodding in agreement. On the surface, this question may appear to be difficult to answer.

An excellent way to answer this pressing question can be found in a very intriguing book called Wikinomics. There is a story in the opening chapter about GoldCorp, a gold mining company. The story of the GoldCorp Challenge highlights the power of working with a very diverse group of people to take innovation and creativity to new heights. Rob McEwen of GoldCorp used that innovation and creativity to build a very successful business.

Read this short excerpt from the opening chapter - 

It was late in the afternoon, on a typically harsh Canadian winter day, as Rob McEwen, the CEO of Goldcorp Inc., stood at the head of the boardroom table confronting a room full of senior geologists. The news he was about to deliver was not good. In fact it was disastrous, and McEwen was having a hard time shielding his frustration.

The small Toronto-based gold-mining firm was struggling, besieged by strikes, lingering debts, and an exceedingly high cost of production, which had caused them to cease mining operations. Conditions in the marketplace were hardly favorable. The gold market was contracting, and most analysts assumed that the company’s fifty-year-old mine in Red Lake, Ontario, was dying. Without evidence of substantial new gold deposits, the mine seemed destined for closure, and Goldcorp was likely to go down with it. Tensions were running at fever pitch. McEwen had no real experience in the extractive industries, let alone in gold mining. Nevertheless, as an adventurous young mutual fund manager he had gotten involved in a takeover battle and emerged as Goldcorp, Inc.’s majority owner. Few people in the room had much confidence that McEwen was the right person to rescue the company. But McEwen just shrugged off his critics.

He turned to his geologists and said, “We’re going to find more gold on this property, and we won’t leave this room tonight until we have a plan to find it.” At the conclusion of the meeting he handed his geologists $10 million for further exploration and sent them packing for Northern Ontario. Most of his staff thought he was crazy but they carried out his instructions, drilling in the deepest and most remote parts of the mine. Amazingly, 2 few weeks later they arrived back at Goldcorp headquarters beaming with pride and bearing a remarkable discovery: Test drilling suggested rich deposits of new gold, as much as thirty times the amount Goldcorp was currently mining!

The discovery was surprising, and could hardly have been better timed. But after years of further exploration, and to McEwen’s deep frustration, the company’s geologists struggled to provide an accurate estimate of the gold’s value and exact location. He desperately needed to inject the urgency of the market into the glacial processes of an old-economy industry.

In 1999, with the future still uncertain, McEwen took some time out for personal development. He wound up at an MIT conference for young presidents when coincidentally the subject of Linux came up. Perched in the lecture hall, McEwen listened intently to the remarkable story of how Linus Torvalds and a loose volunteer brigade of software developers had assembled the world-class computer operating system over the Internet. The lecturer explained how Torvalds revealed his code to the world, allowing thousands of anonymous programmers to vet it and make contributions of their own.

McEwen had an epiphany and sat back in his chair to contemplate. If Goldcorp employees couldn’t find the Red Lake gold, maybe someone else could. And maybe the key to finding those people was to open up the exploration process in the same way Torvalds “open sourced” Linux.

McEwen raced back to Toronto to present the idea to his head geologist. “I’d like to take all of our geology, all the data we have that goes back to 1948, and put it into a file and share it with the world,” he said. “Then we’ll ask the world to tell us where we’re going to find the next six million ounces of gold.” McEwen saw this as an opportunity to harness some of the best minds in the industry. Perhaps understandably, the in-house geologists were just a little skeptical.

Mining is an intensely secretive industry, and apart from the minerals themselves, geological data is the most precious and carefully guarded resource. It’s like the Cadbury secret-it’s just not something companies go around sharing. Goldcorp employees wondered whether the global community of geologists would respond to Goldcorp’s call in the same way that software developers rallied around Linus Torvalds. Moreover, they worried about how the contest would reflect on them and their inability to find the illusive gold deposits.

McEwen acknowledges in retrospect that the strategy was controversial and risky. “We were attacking a fundamental assumption; you simply don’t give away proprietary data,” he said. “It’s so fundamental,” he adds, “that no one had ever questioned it.” Once again, McEwen was determined to soldier on.

In March 2000, the “Goldcorp Challenge” was launched with a total of $575,000 in prize money available to participants with the best methods and estimates. Every scrap of information (some four hundred megabytes worth) about the 55,000-acre property was revealed on Goldcorp’s Web site. News of the contest spread quickly around the Internet, as more than one thousand virtual prospectors from fifty countries got busy crunching the data.

Within weeks, submissions from around the world came flooding in to Goldcorp headquarters. As expected, geologists got involved. But entries came from surprising sources, including graduate students, consultants, mathematicians, and military officers, all seeking a piece of the action. “We had applied math, advanced physics, intelligent systems, computer graphics, and organic solutions to inorganic problems. There were capabilities I had never seen before in the industry,” says McEwen. “When I saw the computer graphics I almost fell out of my chair.” The contestants had identified 110 targets on the Red Lake property, 50 percent of which had not been previously identified by the company. Over 80 percent of the new targets yielded substantial quantities of gold. In fact, since the challenge was initiated an astounding eight million ounces of gold have been found. McEwen estimates the collaborative process shaved two to three years off their exploration time.

Today Goldcorp is reaping the fruits of its open source approach to exploration. Not only did the contest yield copious quantities of gold, it catapulted his under-performing $ 100 million company into a $9 billion juggernaut while transforming a backward mining site in Northern Ontario into one of the most innovative and profitable properties in the industry. Needless to say McEwen is one happy camper. As are his shareholders. One hundred dollars invested in the company in 1993 is worth over $3,000 today.

Perhaps the most lasting legacy of the Goldcorp Challenge is the validation of an ingenious approach to exploration in what remains a conservative and highly secretive industry. Rob McEwen bucked an industry trend by sharing the company’s proprietary data and simultaneously transformed 2 lumbering exploration process into a modem distributed gold discovery engine that harnessed some of the most talented minds in the field.

McEwen saw things differently. He realized that the uniquely qualified minds to make new discoveries were probably outside the boundaries of his organization, and by sharing some intellectual property he could harness the power of collective genius and capability. In doing so he stumbled successfully into the future of innovation, business, and how wealth and just about everything else will be created. Welcome to the new world of wikinomics where collaboration on a mass scale is set to change every institution in society.

Don Tapscott, one of the authors of Wikinomics, gave a presentation to Google on his book. You can see the video of that presentation below –


As I posted earlier, the Xen Project is benefiting a great deal from the mass collaboration of developers from Intel, AMD, IBM, HP, Sun and Oracle working on this second generation hypervisor. We are able to build on top of this creativity and innovation in much the same way GoldCorp did.

Open source, wikis, blogging and other new forms of mass collaboration like MIT OpenCourseWare, Innocentive, NineSigma, and YourEncore are discussed in depth in Wikinomics. Reading this book gave me a much firmer grasp on the real power of building a business by massively collaborating with others to mine for the golden nuggets of innovation and creativity .

Add this blog to Technorati Favorites