This is the first part of my two-part blog about my conversation with Steve Forbes, chairman and CEO of Forbes Media, speaking about free markets, bold innovations and how he embraces change.

Steve Forbes is a friend who helped me launch my book, Abundance, holding my first-ever launch party at the Forbes headquarters in New York. He’s a man whose mindset and brand shouts abundance.

One of my objectives in this BOLD blog is to interview some of today’s most successful CEOs and billionaires, and to share with you how they think and how they make critical decisions. This is one of those interviews with the man who knows more successful CEOs and billionaires than almost anyone else, and he shared with me some of what he learned in his encounters with them. The “Forbes List of Billionaires” is most definitely the who’s-who of today’s most successful entrepreneurs.

During our conversation, I asked Steve to share his thoughts on entrepreneurship, the future of large corporations and his own experience with transforming Forbes.

1. Steve on the “explosion of an entrepreneurial class around the world”: “I think characteristics among entrepreneurs around the world are pretty much the same. You have the vision, you have the drive and the desire and obliviousness to the clock, you work till you get it done. That doesn’t change. What has changed is that, thanks to the fall of the Berlin Wall, thanks to the success of the U.S. coming out of the malaise in the 1980s, suddenly, what you might call the entrepreneurial class has exploded around the world — India, China, central and eastern Europe, the Baltic States.”

“I mean, who ever thought Skype would be developed in Estonia? So, it’s not so much the characteristics of entrepreneurship as much as the opportunity to practice entrepreneurship that has grown exponentially,” Steve added.

2. Steve on the “bloated large-size corporations”: “It is human nature that organizations inevitably become inward-looking,” Steve said. “You lose sight of the reason the organization was created, and you become all about the organization. British historian C. Northcote Parkinson did a history of the British navy, and wrote about this phenomenon. After World War I, when Britain won the war, it didn’t need a big navy anymore, so it sharply downsized the number of ships, sailors, dockworkers and the like during the 1920s. Even though the Navy was drastically shrinking in the ’20s, the bureaucracy called the Admiralty, which ran the Navy, actually was getting bigger. Parkinson observed that the amount of work or size of an organization has nothing to do with the work really at hand.”

“Every organization eventually becomes inward looking, bloated and loses sight and becomes pretty much useless,” Steve explained. “The virtue of free markets is if you do that, you get tossed aside. One of the dangers in free markets is if you focus on trying to do what you’re doing better, sometimes that may be obsolete. IBM got into personal computers but still had the mainframe mindset, so even though it started to make drastic changes in the 80s, by the early 90s it nearly went down for the count. You saw it in the steel industry, too. The idea of making steel out of scrap was something that traditional steel mills said no to. So they all fell by the wayside or drastically shrank, while new companies like Nucor came in and for a while did very well,” he said.

“This gets us to our business today: media. We have the mindset of 150 years ago,” Steve said. “You create content, you hope to attract an audience with that content, and then you deliver that audience to an advertiser. That’s the mindset you see today — one based mostly on advertising revenue.”

“We have to find new sources of revenue,” he explained. “The web is knocking out what we call middlemen. What this means for journalists is that you don’t make your living as a pure journalist anymore. You have to have a portfolio of jobs as a consultant doing a variety of things. But trying to get traditional media people to wrap their minds around this change is very, very tough.”

“So, when you focus on being the best at what you have traditionally done, you might lose sight of the fact that what you still doing may not be in demand in the marketplace anymore,” he said. “That’s what is so humbling. You’re trying to do your best and the market may just pass you by. What you’re doing just isn’t needed anymore.”

3. Steve on “transforming Forbes.com”: “You may do something right but it doesn’t mean it’s always going to be the right thing to do,” Steve said, speaking about his business. “In the mid-’90s, like everyone else we went into the electronic world. We started Forbes.com. Most publishers made the mistake of thinking that if you took the printed page and threw it on the screen, voila! You’re in a brand-new world, sort of the equivalent of when Edison and others invented movies over 120 years ago. Initially,” he explained, “it was thought that feature films would be like filming a stage play. But no: It’s an entirely different medium, film.”

“So, we did that,” said Steve. “We went through the horrors of the early part of the last decade when everyone was telling us we’re pouring tens of millions of dollars in information on the website, we’re idiots. The bubble burst all of that kind of thing, and then it all came together. And from 2002 to about 2006 or 2007, by golly, our website was booming.”

“What we didn’t notice was that even though we caught the first wave right, the Web was relentlessly commoditizing marketing. So the market no longer took for granted that because you had a great audience and a great brand name you should be paid a premium for reaching that audience. Ultimately we ended up having to do a mad scramble and make drastic changes,” he said.

“I think we did it well,” said Steve. “Today we get over 30 million unique visitors a month to our website and it’s been doubling over the last year or so. That doesn’t mean we’re going to be doing that tomorrow. Again, the Web is drastically changing things, and even if you get one part of it right, our traditional competition is no longer the same, it’s a whole new world. So, while we got the first wave of change right, we didn’t see the other wave as quickly. No one did, but we should have and didn’t.”

In my next blog, Steve Forbes will share his top 10 recommendations for success. Great stuff.

NOTE: Over the next year, I’m embarking on a BOLD mission — to speak to top CEOs and entrepreneurs to find out their secrets to success. My last book Abundance, which hit No. 1 on Amazon, No. 2 on the New York Times and was at the top of Bill Gates’ personal reading list, shows us the technologies that empower us to create a world of Abundance over the next 20 to 30 years. BOLD, my next book, will provide you with tools you can use to make your dreams come true and help you solve the world’s grand challenges to create a world of Abundance. I’m going to write this book and share it with you every week through a series of blog posts. Each step of the way, I’ll ask for your input and feedback. Top contributors will be credited within the book as a special “thank you,” and all contributors will be recognized on the forthcoming BOLD book website. To ensure you never miss a message, sign up for my newsletter here.

This week at XPRIZE’s Visioneering 2013, 120 of the world’s visionary thinkers will gather for three days to discuss the world’s grand challenges, and how we might solve them using incentive competitions. The event itself is extremely inspiring and a lot of fun, attracting an incredible ‘who’s who’ from the philanthropic, corporate and entrepreneurial world. Past attendees range from Larry Page and Sir Richard Branson to James Cameron, Quincy Jones, and Paul Allen.

Visioneering is a standard format. We typically pick five to ten “themed grand challenge areas,” and our group of attending philanthropists, CEOs and government leaders focus on discussing the associated problems and market failures and then design Prizes to try and address them. Over the three-day Visioneering weekend the participants will develop dozens of Prize concepts, and then in a competitive head-to-head showdown that resembles a cross between TED and American Idol, the prize concepts are winnowed down to five finalists. In 2012, these are the five ideas that made it to the finals:

Empowering the Unpowered (affordable, on-demand rural energy)
Sydney By Lunch (high-speed, low-carbon travel from New York to Sydney in less than two hours)
Brain Dashboard (non-invasive, affordable brain health monitor)
Ed-U-Phone (achieving literacy on a mass scale, sustainably, by tapping into the universal desire for mobile technology)
Motion of the Ocean (portable, affordable desalination device powered by wave and tidal energy)

Eric Hirshberg, CEO of Activision, and his team received the top honors for “Ed-U-Phone.” That prize idea ultimately led to the creation of the Global Literacy XPRIZE, which is currently in development, and which we hope will revolutionize global literacy and change what people think is possible regarding the means and methods used to learn.

A number of today’s funded and launched XPRIZEs were born from past Visioneering sessions. Two concepts, AI Physician and Lab-on-a-Chip, conceived during a session in 2010, led to the funding and launch of the $10 million Qualcomm Tricorder XPRIZE.

For Visioneering 2013 we have chosen eight topics that go beyond the XPRIZE’s established interests in space, oceans and health. The critically-important new subjects we will tackle are:

Aging: How do we prepare for an expanding older population?
Behavior: How can we incentivize people to stop doing things that are bad for them or for society?
Happiness: How can we live happier, safer lives?
Infrastructure: How can we rebuild strong, innovative, resilient public and private infrastructure, physical and virtual?
Learning: How can we educate and train students of all ages to prepare them for 21st century jobs?
Mobility: How will we move ourselves and our information in the future?
Security: How can we protect our communities, our businesses, and our nations?
Women: How do we engage the power of women and girls in communities around the world?

What idea will win this year? Be sure to follow the action on Twitter at #Visioneering starting around April 25 on through the weekend, and visit xprize.org/visioneering to learn the results of the competition. Together with a clear vision of the future, we can solve the world’s grand challenges and create a world of abundance.

Visit XPRIZE at xprize.org, follow us on Facebook, Twitter and Google+, and get our Newsletter to stay informed.

In this blog, I’m continuing my conversation with Jay Rogers, CEO and co-founder of Local Motors, the open-source automotive design company. Here, Jay shares how he builds and engages his 30,000-person crowd.

As I’ve conducted my interviews with crowdsourcing entrepreneurs and experts, it’s constantly hit me that your ability to do something big and bold is really a function of the size and quality of your crowd. The questions I’m always fascinated to ask successful crowd-related CEOs are: “How did you do it? How did you recruit, build and engage your crowd?”

In this blog I’ll share five specific ways that Local Motors CEO Jay Rogers found to build and engage his crowd of innovative automotive designers.

To recap, Local Motors is a crowdsourced car-design platform that also allows the micro-manufacturing of cars by its members. Local Motors built a community of people who are versed in every critical aspect of engineering: the interior design, the exterior design, the suspension system, and so on. Here are the five ways in which Jay Rogers and his team built their online community.

Create a bold dream that allows for creativity, with a measure of supervision: “Management of open source is definitely a guided endeavor,” Jay said. In its early days, Local Motors very closely managed its forum of roughly 1,000 people who were contributing designs.
“Basically, whatever was being discussed on our forums was being communicated to the entire membership,” Jay said. “However, for it to work, we had to run it as a benevolent tyranny, or benign dictatorship. The reason I say that is that we ultimately had to make a decision about which car we were going to design and produce,” he said. Ultimately Jay couldn’t allow the discussion to go on forever or diverge in a multitude of directions. As the benign dictator he had to step in and “make the decision that we would take the most-liked designs from the community and produce that car.”
Embrace failure. Use it to improve your process: According to Jay, “Failure is as important, or perhaps even more important, than success. Small-scale manufacturing means fail early, fail often. Crowdsourcing means fail early, fail often,” he continued. “The important thing is to get something created, see where it breaks, and then fix it. I tell people to build it for manufacture, see if people like it and then if they don’t, we can change it.”
“We’ve even had failure in how we created our competitions,” Jay reflected. “At first Local Motors thought it would attract its teams by approaching design schools. It failed miserably. We had a lot of legal wrangling over design ownership and licensing. So we backed off from that, and found another way.”
Use evangelism to create interest in the site. Evangelism is creating enthusiasm among your crowd so that they are eager not only to work with you, but also to tell others about what you do to help build your community. To help create early interest in its platform, Local Motors staff visited sites frequented by designers. “We’d simply say, ‘We’re going to make a car that you guys design. What do you think?’ The important thing is to plant the flag,” Jay said, “and tell people what you’re going to do. Give a vision and say, ‘You’re going to make a vehicle on Local Motors and it’s going to be awesome, you’re going to love it and we’re going to be honored to make it.’ That was the first community evangelism that we did.”
Move people through passion: Passion gets an entrepreneur through the startup days and the enormous efforts it takes to build a business. “If you start with passion, all of the hard days are easier to deal with,” Jay said. “You don’t know if your idea is going to work, but you just have to stay true to what you wanted to do at the beginning. Getting through the hard times is what you need the passion for and organizing your community is what you need passion for. You have to foster and develop the community and you need passion in order to be able to do that,” he said.
Leadership, Organization, Respect and Engagement — the 4 Key Parameters: Jay told me, “When I’m building a community, I focus on four key organizing principles: Leadership, Organization, Respect and Engagement or LORE.” He outlined them:

Leadership. This is a bold vision for the community. “Creating a vision is a form of leadership,” Jay said. “To lead means to have a vision,” which can encompass everything from what your cars should look like to the way the factories are going to be run.
Organizing. This means creating a very defined, constrained box within which the community can operate and design. “Most people create better in a box,” Jay said. “We had to set the box for the right conditions for successful micro-manufacturing.” The Local Motors team learned the importance of creating parameters for engineers and designers. Early on, Jay remembered, “We learned two things: First, every engineer we interviewed said, ‘Tell me the parameters of what I’m designing.’ Second, everybody in a design school never asked those questions, but said, ‘I’ve some great ideas.’ They were more free-flowing with their great ideas and willing to share them under the right conditions.”
Respect. Respect is about managing that community and keeping people’s name on their ideas and on what they create. “You’re respecting their work,” Jay said. “Your ability to be able to post your work and keep it as your own is critical to the fostering of such a community. Respect is also managing that community actively through the process.”
Engagement. This is about speaking honestly and openly to the community. “We don’t pay money to make people come to do what we do,” Jay recounted. “Yes, we need money, such as competition prizes, in order to be able to make them do things. But the most important thing is to actually talk with them. That’s what engagement means: Instead of paying you, I’m going to pay you with my time and I’m going to pay you with my building of what you design.”

In my next blog, I’m going to continue my conversation with Jay Rogers, and how he manages the competition and design initiatives at Local Motors, plus what’s ahead for the site.

NOTE: Over the next year, I’m embarking on a BOLD mission — to speak to top CEOs and entrepreneurs to find out their secrets to success. My last book Abundance, which hit No. 1 on Amazon, No. 2 on the New York Times and was at the top of Bill Gates’ personal reading list, shows us the technologies that empower us to create a world of Abundance over the next 20 to 30 years. BOLD, my next book, will provide you with tools you can use to make your dreams come true and help you solve the world’s grand challenges to create a world of Abundance. I’m going to write this book and share it with you every week through a series of blog posts. Each step of the way, I’ll ask for your input and feedback. Top contributors will be credited within the book as a special “thank you,” and all contributors will be recognized on the forthcoming BOLD book website. To ensure you never miss a message, sign up for my newsletter here.

In this blog, I’m introducing you to Jay Rogers, CEO and co-founder of Local Motors, an open-source automotive design company that uses the power of the crowd to innovate a 100-year-old industry.

My personal fascination with the power of the crowd has been growing: Exactly what can a “crowd” accomplish? We know crowds can raise billions of dollars, create Wikipedia, and even design and build small autonomous drones. But how about something large and complex like designing a new car, and maybe someday even a spaceship?

You can imagine my enthusiasm when I met and interviewed Local Motors CEO Jay Rogers at Singularity University, where he filled me in on the remarkable ability of the crowd to reinvent the design and manufacture of cars.

Local Motors currently engages a crowd of more than 30,000 members who are passionate, knowledgeable and capable of automotive design. This could not have existed before the exponential tools and technologies that allow virtual communities to come together to share, manipulate and visualize large data files. Local Motors takes something traditional — old-fashioned craftsmanship — and brings it into the new millennium.

In Local Motors, Jay Rogers has drawn on the creative power of a global community of car lovers, designers and innovators to revolutionize automotive design (and product design in general). The company co-creates autos, as well as automotive parts and other products such as sneakers. It is best known for its Rally Fighter off-road race vehicle, which also happens to be street legal.

Jay has a fascinating and rich background. He served for six years in the United States Marine Corps, where he was an Infantry Company Commander. Next he worked as a consultant for McKinsey & Co., then at a startup medical device company in the People’s Republic of China. He is a graduate of Princeton University’s Woodrow Wilson School of Public and International Affairs, and holds an MBA from Harvard Business School.

To begin our interview, I asked Jay about the origin of Local Motors. “I always thought I would be building cars,” he said. “But unfortunately I found that there was no place in the traditional university system for building cars and my dream, early on, never materialized. Then, while I was at Harvard for business school I met two professors who opened my eyes to what was possible: Karim Lakhani and Eric Von Hippel.” Lakhami taught Jay about open-source innovation and Von Hippel taught him about the democratization of innovation. Von Hippel taught Jay that end-users, rather than manufacturers, drive innovation. Jay became fascinated with the notion of taking consumer-derived ideas and putting those things forward as future products.

The next pivotal moment in Jay’s road to Local Motors was the day that he was introduced to the Threadless co-founders. “When I met Jake Nickell and Jacob DeHart, their model of creating an online community to design and market T-shirts completely inspired me,” he said. “These guys set out with the goal of figuring out a better way to make people want to buy an individual shirt. They figured out that if the shirt is attractive enough, it’s not about how little it costs, it’s more about how unique it is, and can I own a part of that scarcity.”

Effectively, Threadless is a site for crowdsourcing the design, marketing, production and purchase of T-shirts. “Modeled much on Threadless, Local Motors is a marriage of two concepts. It’s about the personalized, crowd-powered design of automotive ideas, as well as the local, small-scale manufacturing of those unique concepts,” Jay continued.

When I asked Jay what made Local Motors succeed, he provide three key touchstones that have driven him:

1. Don’t be hampered by antiquated production models: “It’s incredible,” began Jay, “how hampered the traditional auto manufacturers are by antiquated approaches. Many of America’s most advanced plants still using approaches that would be familiar to Henry Ford. For example, I went on tour of a Dearborn truck plant, part of a new Ford complex. It was completely empty. I asked, ‘What’s going on?’ It turned out to be the year-end changeover,” which can last between a day and a month — during which time the union workers cannot do anything. By contrast, the electronics and the software in cars can be changed in a day.” Jay lamented how certain union regulations and physical production cycles can cause such inefficiencies.
2. Learn how to be profitable even for small-production runs of unique “kit cars”: “One of the keys to Local Motors’ success was figuring out how make things at a low tooling cost, and making money even for low production runs. I was first inspired by this approach when I visited Factory Five Racing, an automobile company that designs and manufactures assembly kits for cars,” remembered Jay. “Factory Five had sold 2,000 cars a year and was profitable even with small-batch, homemade cars.”
3. Help people live their dream: More than 80 percent of the people who study automotive design do not work in the field. “The administrator of a famous design school astonished me with the stats,” said Jay. “The dirty secret is that only 17 percent of the design students who dream about designing cars will get a job in the automotive industry. My favorite story involves a graduate from one of the better design schools in France who was unable to find work with a car company and ended up playing Santa Claus at a mall in France, and then got a job at a slaughterhouse. This man kept in touch with automotive design through the Local Motors site, and eventually, a Local Motors community evangelist got in touch with him and offered him the opportunity to design a car. We help people live their dreams.”

Local Motors, through its online global network, represents the chance of fulfilled dreams for designers who would otherwise not have this opportunity. “My message has always been that if you think you can build a complex cyber-mechanical system, you can probably do it better with a large group of people who you plant a flag, give them a vision, organize them, respect them and engage them and then together you’ll chase your dreams. That’s what we do.”

In my next blog, I’m going to look at how Jay was able to build this remarkable community at Local Motors, the crowd’s involvement in design, and the use of competitions to drive innovation and foster fellowship.

NOTE: Over the next year, I’m embarking on a BOLD mission — to speak to top CEOs and entrepreneurs to find out their secrets to success. My last book Abundance, which hit No. 1 on Amazon, No. 2 on the New York Times and was at the top of Bill Gates’ personal reading list, shows us the technologies that empower us to create a world of Abundance over the next 20 to 30 years. BOLD, my next book, will provide you with tools you can use to make your dreams come true and help you solve the world’s grand challenges to create a world of Abundance. I’m going to write this book and share it with you every week through a series of blog posts. Each step of the way, I’ll ask for your input and feedback. Top contributors will be credited within the book as a special “thank you,” and all contributors will be recognized on the forthcoming BOLD book website. To ensure you never miss a message, sign up for my newsletter here.

In this blog, I’m continuing my conversation with TopCoder founder Jack Hughes, who gives us the steps that TopCoder took to build its community.

In my previous two posts about the open-innovation platform TopCoder, I introduced you to its methods. Now I want to explore how TopCoder engages with its vast network across the globe.

“It’s phenomenal what you get out of the community: how smart they are, how dedicated they are, how interested they are in either a client success or TopCoder success or each other’s success,” founder Jack Hughes told me. “They will be competing one minute and sharing notes about who won, then what’s the next step. It’s and incredible environment.”

To recap briefly, TopCoder is the world’s largest platform for digital open innovation, whose 445,000-plus members around the world compete to develop lines of code in return for prizes and recognition, resulting in great efficiencies of time and cost.

“Competition just happens to be the thing that first engaged our community,” Jack said. “There are many other aspects to TopCoder in terms of collaboration, in terms of how we go about business models, in terms of what our future is and what we think is many social aspects to TopCoder. TopCoder is a big deal with our community not because of the money in it or even because of the sponsors that are out there, or the fact that they can find a job out of it. But because they want to get together, because of the physical place where they can get together,” he said.

“The primary reason people hire us is not so much the money-saving, although it’s important,” Jack said. “What they’re trying to do is shorten that cycle to get innovative processes done.”

For TopCoder’s community, the project is the attractive thing: solving something people can be proud of before their peers. “TopCoder takes a big thing, breaks into many pieces and then aligns all of the aspects that have to be designed – construction, analytics, quality assurance, review. That all happens through the community,” Jack said.

“Some folks are really good at finding bugs and they’ll come in and they’ll just do that. Some folks are really good at fixing bugs; they’ll come in and just do that. Some people are really good at software design and will do that. Some people want to learn how to do software design, so they’ll come in. They might have been fixing bugs yesterday and today they want to learn software design, so they’ll come in and start competing in that. Not so much for the money – they don’t think they can win at first – but what they’re going to get is tremendous amount of feedback about how well they do it,” he said.

“Most of TopCoder’s productive capability is not from people doing it full-time,” Jack said, although a small segment works that way. “There is always a large segment that does it part-time. They’re entrepreneurs in their own way. They’re creating things for other people. They have a huge affinity for helping a startup or helping small business that are trying to figure out a way to connect better with customers and bring some ability to it. And now, they can do it at a price point that’s reachable.”

Jack outlined five steps that TopCoder used to build and engage its community:

Actively design and build the community, and start small. “The advice I would give,” Jack said, “is that anyone who thinks that community is just going to find them and come to them is just wrong. You have to find and engage them.”
2. Go out to universities and spread the word. “In the beginning we were literally stuffing posters into round tubes, mailing them to schools and saying that we were running competitions,” Jack said. “Those went to MIT, Stanford, Carnegie Mellon, all the usual. We then followed that up with actual visits to schools, where we would go into the school and hold the competition. The prizes would be beer and pizza. Doing that brought together cores of people who said, ‘This is really cool and I want to keep doing it.’ Then it went very viral, very quickly. We found that the university system was where people were most likely to talk about new things, new ideas, try new things, new ideas and it certainly worked in our case.”
3. Work with a partner to broaden your reach. Sun Microsystems sponsored TopCoder at one point and helped promote it. “Sun was looking at how we were attracting the community, and these were very highly skilled developers, the sort of everybody was looking for,” Jack said. “Sun showed a way to get its product line into these folks’ heads very early in their careers, whether they were going to go into a bank and do the analytics work or they were going to go and work for NASA and do engineering, whatever. Sun wanted to have that exposure to that group of people, even though it was relatively smaller at that time. I give Sun a lot of credit for doing that, for sort of going after that community as we had started the format.”
4. Encourage sharing, references and further participation. TopCoder created a member referral program, especially in large tournaments. “We would deviate the prize money so that if you referred a member who won, then you would get some sort of a tip for referring that member,” Jack said. “For a time we had incentives, and TopCoder is all about incentive systems and motivation systems. But the referral system was one of the ones to make it even more viral then already it was.”
5. Be authentic to your vision, and always involve the community. “Communities are good in everything,” Jack said. “They’re good at solving a particular problem. They’re also really good at sniffing out authenticity. So if you’re unauthentic, you figure that out fast. Authenticity was one of the first things that we put up when we started the community. We set out saying that we intend to make money. We found just by saying that rather than being sly about it made a huge difference,” Jack said.

“We’re moving much more to a knowledge-based economy globally. We’re moving to where the value content of the product or service is in its innovation capabilities, in its ability to help make its customer more competitive, faster, more efficient,” Jack said. “That takes knowledge and knowledge is never going to be owned by anybody. You build knowledge not by direct financial capital as you did in appointment. It’s by education, it’s by teaching, it’s by learning, it’s by constantly moving yourself forward. Because of the Internet, people have access to those resources much more quickly. It starts to shift the weight back to individuals.”

In my next blog, I’m going to continue exploring how Local Motors has revolutionized automotive design, through relying on the inspiration of the crowd.

NOTE: Over the next year, I’m embarking on a BOLD mission — to speak to top CEOs and entrepreneurs to find out their secrets to success. My last book Abundance, which hit No. 1 on Amazon, No. 2 on the New York Times and was at the top of Bill Gates’ personal reading list, shows us the technologies that empower us to create a world of Abundance over the next 20 to 30 years. BOLD, my next book, will provide you with tools you can use to make your dreams come true and help you solve the world’s grand challenges to create a world of Abundance. I’m going to write this book and share it with you every week through a series of blog posts. Each step of the way, I’ll ask for your input and feedback. Top contributors will be credited within the book as a special “thank you,” and all contributors will be recognized on the forthcoming BOLD book website. To ensure you never miss a message, sign up for my newsletter here.

In this blog, I’m talking with entrepreneur Jack Hughes, founder of the open-innovation platform TopCoder, which brings together specialists from around the world to work on projects that end up costing far less than if these projects were done in-house.

TopCoder is a remarkable platform that connects corporations, organizations and government agencies with a worldwide talent pool to create digital products. It hosts online contests to design, and even to build, these solutions. I and my colleagues at X PRIZE Foundation have used TopCoder, and have found, like everyone else, that TopCoder’s global community of more than 450,000 technology and design specialists can find solutions to a wide range of problems at a fraction of the cost and time.

TopCoder is basically the world’s biggest talent pool. It breaks projects down into atomized pieces of work, each of which is turned into a competition. Specialists within the TopCoder community deliver solutions for each piece. In effect, people who individually excel in everything from concepts to data analysis, design work on aspects of a bigger project. It’s a great crowdsourcing model.

I spoke with founder Jack Hughes, who filled me in on TopCoder’s humble beginnings at a picnic table, and the way the company approaches its innovative contest-driven, gamified, crowdsourcing solutions.

The impetus behind TopCoder was, as often is the case with drivers of innovation, Jack and his colleagues’ inability to hire qualified people. “A great developer, a great creative person is a difficult thing to find,” he said. “So we were sort of just iterating through different ideas on how to make the reach better in terms of identifying folks, and one of the concepts we came up with was if we start, we were doing a lot of ad hoc contests internally, because great developers love to compete.”

This was back in 2000. Having sold their software development company, Jack and his partners, who included his brother Rob Hughes, “started to think about what to do next,” he explained. “We started to think about building a community of developers online. That was the inception.”

The early contests the team created offered a little bit of money, “just to make it interesting,” Jack said, “but mostly they were for pride. Developers are very closely related to other intellectual disciplines, such as chess. So we fashioned a rating system around developers and to measure skill in a particular discipline. That drove a lot of the interest — being able to get rated.” This branded rating actually drove the community to TopCoder.

At first, these were predominantly problems created for non-commercial purposes. “We want whoever can optimize and schedule an algorithm, network an algorithm to pick up notes and pick up the fastest path, in a particular network of notes, edges, so things that would be applied to graphics would be applied to anything that’s a complex math problem.

“It was basically a massive multiplayer game of coding. So they would all see the problem statement at the same time, they could open it, when they opened it a clock would start to ticking down, so they would get points associated with how quickly they submit it and then how accurate their code was.”

The initial community was a few hundred developers. Then Sun Microsystems came on as a sponsor in 2002-2003, and TopCoder got a big spike in membership from that and began to branch out into commercial work.

Here are three things TopCoder did to build its community:

1. Make it clear up front what the aim of the company is. Stay true to your authentic vision. “Whatever you’re doing it for and why you want a particular group or sets of groups of people around you, stay true to that and it will work out for you,” Jack said. “I wouldn’t say we had a formalized mission statement at the beginning of TopCoder, but we did have a founder’s letter that every member saw. To this day I think we adhere to it and we’ve since expanded the definition of it,” he said. “We felt that developers, people who create, are the center of everything. So how we connect those folks, how we facilitate their creativity, is what the business is always about,” Jack said.

“There are plenty of mistakes we made. But a mistake we haven’t made yet is to ignore the community. If you look at our early communications with community, they look very similar to today. Some of them literally say, ‘Without our community we don’t exist.’ [I deleted this last bit because it didn't feel essential to his message, and we restate it at the end]

“It is very difficult to live by that,” Jack explained. “It’s very easy to start thinking that there are other ways you can get things done, that there are mechanisms by which you sort of use the community. We would say that this isn’t about using the community. It’s about being part of one. If we lose that focus, I would say that’s when we lose it,” he said.

“I think communities may be harder to do now. We predated Facebook; we predated a lot of social networking, a lot of community-based business models. There’s money in it now. You’re going to have people chasing the money. I don’t think there is anything wrong with people making money. But at TopCoder we hold true to that and everything else will get sorted out. I think that’s little bit harder to do nowadays because building the community is going to be ramping it up to whatever size, doing whatever. The advice I would give is don’t do that.”

2. Competition drives commitment to the community — it’s competitive as well as collaborative. “Competition just happens to be the thing that first engaged our community,” Jack said. “There are many other aspects to TopCoder in terms of collaboration, in terms of how we go about business models, in terms of what our future is and what we think is many social aspects to TopCoder,” he added. “TopCoder opens the big deal with our community, not because of the money they win in it, or even because of the sponsors that are out there or the fact that they can find a job out of it. No, it’s because they want to get together, because of the physical place where they can get together.”

3. Validation points are important. Sun Microsystems came in as a sponsor that helped take TopCoder to the next level. “Sponsorship in our case was a validation point.” Jack said. “Making sure that you’re engaging the community and listening to the community and letting them help you form your business model is important. When we went to commercialize TopCoder, we didn’t do it for a number of years after we had started it. We started to think about very different models in different ways to do that. We could have done a matching service, we could have done a matching developer to a customer; we didn’t do that. We decided to use the competitive/collaborative regime to engage members in actually building the product,” he said.

“We felt that was the right thing for this particular community. At that point the community was probably 25,000 people. So there were a lot of people to be able to talk to. What we have found, and what we live by is this: We look at TopCoder as an inverted pyramid. The company exists to support the community. The community exists to support our customers and to support each other.”

In my next blog, I’m going to continue exploring the remarkable processes of TopCoder, how it works with its customers, how its process evolved and how it’s able to achieve such exponential economies of time and scale for its clients.

NOTE: Over the next year, I’m embarking on a BOLD mission — to speak to top CEOs and entrepreneurs to find out their secrets to success. My last book Abundance, which hit No. 1 on Amazon, No. 2 on the New York Times and was at the top of Bill Gates’ personal reading list, shows us the technologies that empower us to create a world of Abundance over the next 20 to 30 years. BOLD, my next book, will provide you with tools you can use to make your dreams come true and help you solve the world’s grand challenges to create a world of Abundance. I’m going to write this book and share it with you every week through a series of blog posts. Each step of the way, I’ll ask for your input and feedback. Top contributors will be credited within the book as a special “thank you,” and all contributors will be recognized on the forthcoming BOLD book website. To ensure you never miss a message, sign up for my newsletter here.