In recent years Internet firms like YouTube, eBay and MySpace have discovered that the most creative, hardest-working teams are often users themselves. That’s how eBay became one of Wal-Mart’s strongest contenders, Wikipedia moved in on Encyclopedia Britannica’s turf and computer games like Sim City and Second Life began attracting as many eyeballs as Hollywood blockbusters. Now corporate managers are hoping to profit from a bit of the same magic, by exploiting the intellectual potential of their employees.

Online virtual-reality worlds allow companies to host vast brainstorming sessions. Presentations to global work forces can be made using interactive game-show-style webcasts, which let employees ask questions and share opinions in real time. The days when corporate strategies were hatched in boardrooms and sent down a one-way pipeline to workers may be ending. Because these technologies allow everyone from the computer technician in Bangalore to the customer in Boston to the CEO in Beirut to collaborate effectively, they’re changing the way corporations are managed. “We’re moving from a command and control model to one of collaboration and teamwork,” says Cisco CEO John Chambers.

This past summer IBM hosted a pair of corporation-wide, egalitarian brainstorming sessions called “innovation jams,” that were big enough to go down in the record books. The massive company was able to invite all its 300,000-plus employees, their families, and top clients by holding the jam sessions virtually—inside a specially designed section of the immensely popular online virtual-reality game Second Life. During the jams, each employee appeared as an animated avatar, and was invited to dream up futuristic inventions around any of four main themes: transportation, staying healthy, better planet and commerce. In total, more than 37,000 ideas were floated during the two 72-hour sessions.

Another widely discussed concept was the “digital scrapbook”, a pocketbook-sized device that could hold voice, video, still pictures and handwritten notes. “This is not just a cool brainstorm,” says Dick Anderson, head of IBM corporate media. “We’re coming up with real solutions and real products.” Last month, IBM employees voted on which ideas had the most potential, and senior management is now choosing the best from this short list. CEO Sam Palmisano has vowed to invest $100 million in developing the most promising ideas for production.

By providing a mechanism to sift through thousands of ideas, web technologies are greatly expanding the talent pool that companies can draw from. Executives can monitor how many people are paying attention to video webcasts, for instance, and identify those ideas that touch a nerve. “It’s like having your own Nielsen ratings,” says Greg Pulier, CEO of Interactive Video Technologies (IVT), a new-media company based in California. Whirlpool has adopted a technology developed by IVT that enables employees to create interactive webcasts as easily as they design PowerPoint presentations. When Whirlpool engineers realize a product has a flaw, they create a visual, interactive tutorial on how to fix it, which is immediately available to Whirlpool’s 80,000 employees in 170 countries.

The new tools are also enabling companies to look outside their own ranks for new ideas. Several years ago, Eli Lilly created InnoCentive, a virtual research and development lab, so that clients like Procter & Gamble and Boeing could post the thorny problems they couldn’t solve internally—like how to get toothpaste ingredients into the tube more efficiently. Thanks to a big deal this summer with six Chinese universities, more than 100,000 students, retired scientists and serious hobbyists are now members of the site’s problem-solving army. Whoever comes up with a solution gets a cash reward of up to $100,000. As a result of this network, a third of P&G’s new products now have elements that originated outside the company.

This technique, called “crowd-sourcing,” is also used to give customers more say in new product design. Online clubs have helped LEGO Group design toy kits, which ensures they sell out quickly with almost no marketing.

—Newsweek / EMILY FLYNN VENCAT