Saturday, April 12, 2008

Open source as an innovation strategy

Innovations are the first-ish attempt to put an idea into practice. They require deviation from the normal way of doing something and hence someone to go against the current school of thinking. Sometimes they succeed but mostly they fail.

Every now and then, I come across an idea that seems so wrong that it leaves me pondering whether I am missing the point. One such idea is that of open source as an innovation strategy. To explain why I think this is so wrong, let's first explore what we know about open source and innovation:-

  1. Open source allows for the rapid diffusion of an innovation by removing barriers to adoption of any particularly technology.
  2. The diffusion of an innovation leads to its commoditisation and the emergence of standard services or components.
  3. Components and standard services allow for more rapid adaptation and evolution (Theory of hierarchy)

So we can logically argue that open source accelerates commoditisation of a technology and hence accelerates the process of innovation in a society by providing stable components or services on which new innovations can be built. You can call this the "building on the shoulders of giants" hypothesis.

We also know that:

  1. As any innovation proves useful, competitors will attempt to copy it.
  2. The competitive advantage of any innovation depends upon its scarcity, hence as it spreads its strategic value diminishes.
  3. There is a cost associated with maintaining a home grown system vs a growing industry standard.

So, open source can be used as a tactical play. For example, one might exploit a technological distinction until competitors start to use equivalent systems and then subsequently open source one's technology in order to become the industry standard and avoid the dreaded "cost of migration". This is a "maximising competitive advantage through open source" tactic.

We also know that:-

  1. Open source allows for the rapid diffusion of an innovation by removing barriers to adoption of any particularly technology.
  2. The diffusion of an innovation leads to its commoditisation and the emergence of standard services or components.

Hence you can use open source as a disruptive tactic to create a standard in an already emerging market.

We also know that:-

  1. The competitive advantage of any innovation depends upon its scarcity, hence as it spreads its strategic value diminishes.
  2. Open source allows for the rapid diffusion of an innovation by removing barriers to adoption of any particularly technology.
  3. The diffusion of an innovation leads to its commoditisation and the emergence of standard services or components.
  4. A competitive market for a service oriented technology is only achievable through multiple providers complying with emergent standards and ensuring that there is portability between providers.
  5. Open sourced standards provide a means of achieving this without providers handing over strategic control of their businesses to a third party.

Open source is an essential element for any future competitive utility computing world.

Of course, none of this is new. Open source has long been used as a hunting ground for exceptional technology talent, a means of collaborating with other groups and as a powerful tactical weapon.

Along with public speaking on these matters, I've purposefully used such tactics in the past and I know that most of my compatriots do as well. These tactics are common knowledge for most CIO / COO / CEO in small European technology companies exposed to the open source world, and it has been so for many years.

Open source :-

It is therefore likely that more and more companies will learn how to truly use open source; not just as technology but also in the tactical battlefield with others.

Open source is more likely to become the norm.

However, innovation is deviation from the normal way of doing something. It is the first-ish attempt to do something new. A strategy for innovation needs to be based upon influencing such behaviour, it is not about whether some practice or thing is itself new or not.

At the level of society, open source is an accelerator for innovation, and hence the conflict with patents (a system which in many industries has already served its purpose and needs to be removed). At the level of a company, open source is no more of a strategy for company innovation than closed source. It is instead a powerful tactical weapon. Whilst I would agree with Mike Milinkovich that companies should band together to develop common open-source solutions to standard or commodity-like activities, as I've said before, knowing the stage of an activities lifecycle is paramount to tactics and management. I've covered this in more detail in the following video.

Managing a complex world (45 mins)

Open source is a critical business issue, a powerful and positive force for innovation in society and an essential tactical weapon for any corporate. Management however is not about simple linear methods, and if you're thinking that your new innovation strategy should be "open source", then I'm afraid you're missing the point.

I'll talk more about this at XTech.

P.S. This is not the same as open innovation markets, which are a completely different discussion.

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