A little while back I posted about a new online, open source collaborative business startup called The Business Experiment (TBE).
To be totally honest, I am guilty of not really participating actively in the growth of the project so far (I did register early on in the startup process so theoretically should be contributing), having been busy trying to make a living out of cyberspace. I do receive periodic correspondence from the management team and try to interact wherever possible, but the truth is it’s hard to find time to commit to a peripheral idea like this one, regardless of how exciting or progressive it is. Real life gets in the way.
Check out the recent email I received from Rob, TBE’s founder. Clearly, he has concerns…

Hi Everyone,
There seems to be a problem at TBE. We put something up for a vote, and we get emails and forum posts about how we aren’t ready to vote on that issue yet. Nothing is getting done. The business plan has been “open” for weeks and it is going nowhere. This wisdom of crowds process for creating a business simply does not work. There is no accountability. We are experiencing the classic free rider problem where each individual lets everyone else do the work, and hopes that the crowd does good work and they get their cut of the next big thing.

As a result, nothing gets done. Yet the moment I talk about moving away from giving out equity to everybody, I get a bunch of complaints about how then there will be no incentive to participate. Let’s face it. Participate in what? As of now there is no business.
Think about this for a second. In this era of WEB2.0 hype (read more about Web 2.0 at the TomorrowConnecting blog Web 2.0 series), we have the only company attempting to bring users together to create a real business or businesses. We have a talented and creative user base that is interested in these ideas. And we are getting ready to get a lot of attention as a major business periodical will publish a story about us late next month. Don’t give up just yet.
The major change at TBE is this – we are going to create an “upcoming vote” blog and “upcoming vote” forum. The blog will list polls opening in the next few days. The forum is where you can discuss options that should be in the polls. When the polling day comes, the poll is posted. If you didn’t get a chance to contribute your opinion, it’s too late. Options will be pulled out the forums and posted so that you can vote. If no options are posted, Sean, or the teams, can make the decision without input from the crowd. We can’t wait on every one of you to give us your opinion because this has to get done someday.
Finally, the equity issue is becoming a very big problem for us. Seriously, there may be no way around it without spending a whole bunch of money. Even if we give options or warrants or promises or anything like that, if there is a chance you end up with equity, the SEC requires us to go through an expensive disclosure process. However, if groups stay small, that is irrelevant. If you want to use TBE to find 5 people to start a company with and split the equity in that yourself, it is fine because that is a small number of people. So, next week there will be a vote on how TBE will solve this problem. If you have a proposed solution, post it in the forum and we will put it up for a vote.
There is one new open poll, about whether TBE should pursue other businesses right now or just focus on WOU. Many users seem not to like WOU, so perhaps those of you that don’t would rather work on something else.
This has been an experiment, and round #1 has failed. Help us define the next direction for the site. Somewhere in all of this, there is a new way of doing business. Yes I know, you don’t want to share it with the crowd because you want compensation for your idea. Didn’t we cover the value of ideas already? Log in. Make TBE what you want it to be, but let’s make it something other than a freerider’s utopia.

A couple of observations from the email:
This wisdom of crowds process for creating a business simply does not work. There is no accountability – could this be true? We say that the key elements to successful leadership in the new Connection Economy can be summarised by the words “Invite and Participate” (correct me if I’m wrong, Keith). TBE started off on this premise, and is now feeling the necessity to shift toward the “Command and Conquer” style of leadership.
We are experiencing the classic free rider problem where each individual lets everyone else do the work – Sheesh, welcome to the real world guys. As Rob has pointed out, this is not a unique struggle for TBE. Companies, businesses and organisations all over the world suffer for employees and members that do as little as possible just to stay employed or look busy. You know who they are, your employees know who they are. Heck, they know who they are, and like it. Some people will just never, ever go the extra mile. They’ll never try harder for a customer. They’ll never use their initiative. Am I telling you something new? NO! So why are they still working for you!!! Can them! Boot them! Find some bright young talent and freshen up your image! Rob had the problem in that he was never able to screen his business partners. You have that advantage. Use it.
If no options are posted, Sean, or the teams, can make the decision without input from the crowd – a shift toward autonomy. Is it possible that a “flat management structure”, “open source business”, whatever you want to call it, is just not conceivably sustainable without some autonomous element? Is it necessary to strike a balance? Is a balance the only answer?
Rob reckons TBE has failed in it’s first attempt at success. My comments: these things take time. It can’t happen overnight. If you keep pushing, the slackers will leave, and you’ll be left with quality – don’t be afraid to push. No failure can’t be learned from. This is not a failure – it is an opportunity to learn a few good lessons and give it horns in round 2.