Thus far in our miniseries on the emergence of the virtual corporation, we've discussed how the growth of the Internet has resulted in an increase in the quantity and complexity of ecosystems on the web -- which in turn is causing web site production to be "unbundled"; firms are pushing specialization outside of the organization (i.e. open source/API development communities), and are looking to orchestrate specialists across ecosystems.

The result of this is a new system of management.

It's about creating a governance system that enables quality peer-production.

The key competence needed to build a governance system is standard-making: the ability to create new standards, often by turning something else into a standard.

Standards are simply agreed upon terms that enable communication and collaboration. Languages are a prime example; computer programming languages allow individuals to collaborate on software endeavors.

But it extends beyond programming; in reality, anything can be transformed into a symbol that facilitates communication and collaboration.

For instance, a system of governance that could enable the peer production of web sites (in other words, getting designers, programmers, bloggers, SEOs, etc. to collaborate on web sites) could rely on the following as standards that faciliate virtual collaboration and communication towards a single goal that increases profits for all:

1. Rules for profit-sharing -- enables different disciplines (design, search marketing, engineering) to collaborate on a venture
2. Mission statement -- creates psychological unity and communication (aka "team spirit")
3. Content management system -- enables developers and designers to collaborate
4. Information architecture -- enables developers and designers to collaborate

Who's Can Create This Web Government?

By now we know what the virtual corporation that produces web sites looks like: a network of specialists governed not by upper management, but rather by standards and trust in the company/organization/process that establishes standards.

But who's going to make this a reality?

I think there are a lot of approaches that can be taken to introducing and successfully executing this model of production. My two favorites:

1. Community Building. Community building is a key competence needed for any organization dedicated to pushing specialization to the edge; after all, if there is no community, there is no edge to push specialization to. :) When Steve Ballmer goes into a sweaty rant about the importance of developer communities, he's not just giving us laughs -- he's also telling the truth.

2. Venture Capital. An increasingly popular model of venture capital for web sites/services is the "lots of small bets" approach, whereby the fund makes many small investments. YCombinator is perhaps the leading example of this. I believe in this model, and I think we will see new systems of management and finance emerge out of it. The simple idea here is that private equity investment funds can fund ventures that agree to a certain set of standards (i.e. content management systems, programming languages, profit sharing terms, etc). This facilitates collaboration withing their community of entrepreneurs, and also enables costs to be pushed down via group buying. It allows for investors to reap a sort of "network effects" from their investments -- something that may be particularly appealing to an investment firm that uses the "lots of small bets" investment approach. This is the beginning of investors investing not so much in businesses, but rather in individuals that can not only build their own business but help others build their businesses as well. It also marks a way in which investment funds, particularly angel and venture capitalists, can begin to harness and leverage their social capital as the value of their investment capital declines. Lastly, note that this concept is closely related to the aforementioned notion of community building; in fact, it is community building, just with a bit of finance tossed in as well.

This concludes our mini-series on the emergence of the virtual corporation. Check out the links below for the other posts in this series.

The Emergence of the Virtual Corporation
What the Information Explosions Means for Your Business
The Rise of Network Management in Web Site Production