The Voice of Practice: How Technology is Challenging the Conventional Wisdom of Ownership

A GUEST COMMENTARY BY ERIK CHAN, TECH ENTREPRENEUR & CO-FOUNDER OF ROCKETCLUB.CO

So here it comes, the first The Voice of Practice contribution. What follows is a guest commentary by tech entrepreneur Erik Chan. Erik is the co-founder of RocketClub (www.rocketclub.co), an online platform that empowers people to earn shares of new business ideas by promoting and adopting them from the start. In his commentary he talks about how technology has changed the way ownership is viewed and what this means for the tech industry. Before we let Erik speak, however, let us from The Science of Ownership give you a small scientific bracket to the topic:

Sophisticated online social technologies have substantially altered the way consumers and companies interact and create value (Bernoff & Li 2008; Prahalad & Ramaswamy 2004). Traditionally, the former were simply listening to what the latter had to say and offer. Now, consumers are invited to actively participate in a variety of business-related decisions on social media and the likes (Berthon et al. 2008, Hautz et al. 2014). This power shift from the firm to the consumer has paved the way for novel concepts and business models like crowdfunding (Ordanini et al. 2011, Thürridl & Kamleitner 2016).

It has changed how new ideas, products and even firms are created. This, in turn, is challenging our conventional understanding of ownership – the line between what (is perceived to) belongs to the company and what to the consumers is becoming increasingly blurred. From literature we know that there are three major routes to ownership: control, intimate knowledge, and investment of the self (Pierce et al. 2001, 2003). When individuals co-create with companies or contribute their personal resources, all three routes may actually be activated. Consumers are able to a) control the outcome of the final product, service, or venture, b) acquire knowledge over time, and c) invest their own resources, ideas, values and identity into the process. In turn, they may start to feel that the respective product, idea, or venture is also “theirs”.

So much for the theory, let’s hear what Erik has to say about it:

In the technology startup industry, the idea of ownership holds much significance. We have seen controversies over who owned the idea behind successful companies of today; who owned the trademarks, who owned the code, and of course, who owned the equity. Each and every input in a company can have contributed to its success. While many controversies focus on the legal (and financial) components of successful companies, there is also a factor of pride. For cofounders, early employees, investors, it’s the opportunity to proclaim “I did this. I saw the potential in it. I made it happen. I was part of it.” Often, founders end up suing the company they founded for more than a share in the financial rewards, it’s also because they want to be recognized as an ‘owner’ or ‘contributor’.  

Recently, we have seen a lot of emphasis on a startup company’s initial users or customers. Ycombinator, the prominent startup accelerator who incubated successful companies including Reddit, Airbnb, and Dropbox, evangelizes the idea of acquiring 100 customers who love what your company offers than 10,000 who just care (see http://blogs.wsj.com/accelerators/2014/06/03/jessica-livingston-why-startups-need-to-focus-on-sales-not-marketing/). The idea is to acquire 100 customers who love your product so much they are willing to use it even when no one else is using it, bare through multiple product iterations, and deal with product bugs because they see and believe in the potential. These early customers believe that one day, just like the founder, they will be able to say “I was part of it.” Not surprisingly, the involvement of these customers also make them feel as if they ‘own’ the idea as well.

Although largely unscientific, tech startups do many things to try increase their users’ feeling of ownership’. Traditionally, these include awarding users with digital points and badges, offering physical articles like t-shirts and stickers, early access to new features, throwing events, and other exclusive priorities. Success examples include early Reddit users receiving t-shirts and handwritten christmas cards, the first AirBnb hosts welcoming the founders to sleep at their apartments, Facebook users staking their personal profile URLs and many more. 

Due to high startup company valuations today (cash rich startups offering an assortment of perks and freebies to their customers), many companies starting out face the challenge of whether a t-shirt is enough for its early users to feel a sense of ownership. Having struggled with rewarding early adopters for their involvement at my previous companies, I decided to build a platform called RocketClub to help companies distribute a real stake in the company to these early customers and supporters. The idea is that it is only a matter of time until early customers, critical to a company’s success, will transition from ‘psychological owners’ to also become real, legal owners. Consequently, we learned through numerous discussions with both company founders and our community of users that the feeling of ownership in a startup is not determined solely by equity ownership. And since, RocketClub has expanded to offering other means of facilitating this ownership through examples such as access to the founders, a say in the development of the product and features, as well as access to ongoing developments at the company, and many others.

Given the dizzying array of products new and old in the market today, entrepreneurs and managers are turning to incentivizing early users and customers to become part of the process/experience. The majority of startup companies fail today because they lack adoption from early stakeholder customers. Imparting ownership onto your early customers is one of few ways to help companies build a bridge between them. No company succeeds without a following behind it and early adoption goes hand in hand with imparting the psychological feeling of ownership.

What is your take? Do you agree with Erik or do you have contrary beliefs? Please use the comment section to share your thoughts with us and our readers.

About Erik:

A serial entrepreneur and technologist, Erik Chan is founder CEO of RocketClub. Previously, he cofounded MicroPay Technology, a game payments company, and social and online game companies 28wins and Bottomless Pit Games. Prior to Erik becoming an entrepreneur, he spent time at Activision Blizzard and Midway Games first as a system engineer and then as a producer. 

Erik holds a MSc in Management from Massachusetts Institute of Technology, a MBA from Tsinghua University, and a BSc in Biomedical engineering with computer science from Johns Hopkins University. Erik Chan also spent time doing research at the Center of Bits and Atoms and the Software Agents group at the MIT Media lab.

Editor’s note:

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