Open-Source Thinking Taps a Rich Vein

I'm fascinated by the innovative ideas some companies come up with to expand their intellectual capital. One of the most inventive techniques I've seen was Goldcorp's approach of sharing its best thinking with the world and challenging all comers to show they could do better. It was a high-risk move that paid off generously.

Goldcorp is a gold mining company. In the mid-1990s, executives thought the firm's 50-year-old Red Lake mine in Ontario, Canada, was nearing the end of its life, but test drilling indicated that previously unknown deposits of gold might still exist on the 55,000-acre property. Unfortunately, conventional test methods made it difficult to estimate the value or precise location of the new deposits, and the company's geologists couldn't agree on how to move forward.

The eureka moment occurred for Goldcorp CEO Rob McEwen while attending an MIT course in 1999. As he explained it to me: "There was a discussion about the development of Linux, and I said to myself, 'There it is — that's the template I want to use.'"

McEwen presented the idea to his head geologist, saying: "I'd like to take all of our geology, all the data we have that goes back to 1948, and share it with the world. Then we'll give people an incentive to tell us where we're going to find the next 6 million ounces of gold."

McEwen launched the Goldcorp Challenge, a contest with $575,000 in prize money for the best suggestions as to where to find the richest veins of gold. The company posted on the Internet every scrap of information it knew about its Red Lake Mine property.

Just launching the contest was a major undertaking. Before the contest, reams of mining data were scattered throughout the company in different formats and databases. Goldcorp had to consolidate the data into one coherent, downloadable package.

The company's geologists initially balked at the contest idea, citing the sensitivity of the data, the doubt the contest would cast upon their skills, and questions about who would receive credit for new discoveries. McEwen wasn't deterred.

No company in the supersecretive mining industry had ever tried such an approach. "Who would ever go out and hire dozens of consultants at the same time to look at the same problem? You just wouldn't," says McEwen. "By 2002 there were more companies exploring in Red Lake ... than in any other place in the world."

Goldcorp received 52 submissions and a lot of fresh insight. A panel of judges then chose 25 semi-finalists on the basis of the soundness of their geological logic and degree of innovation. Each was awarded $10,000. The semi-finalists were then asked to elaborate on their submissions, and then the finalists were chosen. The top prize was $105,000.

Of the 110 potential deposits identified by the entrants, half were new to the company and 80 percent of those yielded gold. Potential sites previously identified by the company's own geologists were also suggested by contestants, which gave Goldcorp greater confidence in its own exploration plans.

Not shackled by Goldcorp's culture, many contestants tried unconventional approaches, such as new computer visualization techniques, that led to valuable new information. One contestant's suggestion led Goldcorp to change the way it drills, taking several cuts or wedges from the same main drill hole rather than just one sample. Another suggestion led Goldcorp. to use new analytic approaches. The company was so impressed by 10 of the contestants that it subsequently hired them.

Even though the contest was inspired by Linux, the resemblance goes only so far. The contest participants were competing against one another, not collaborating, and the insights gained became the company's property.

The payoff was dramatic. Today Goldcorp enjoys a market capitalization of more than $2.5 billion, having discovered an additional 8 million ounces of gold since the contest's launch. Shareholders have benefited handsomely: $100 of company stock purchased in 1993 is worth more than $2,500 today.

Don Tapscott is the author of 10 books about technology and society, including (with David Ticoll) The Naked Corporation: How the Age of Transparency Will Revolutionize Business (Free Press, 2003). You can reach him at www.AgeofTransparency.com.