Monday, February 18, 2013

Openness, Innovation and Maps.

In an examination of the 500 most active open-source projects, Krzysztof Klincewicz calculated that 99 percent of them focused on an existing technology or modification for a new market whilst only 1 percent represented the creation of a genuinely new idea i.e. the rates of genesis are little or no different to proprietary approaches.

BUT, since evolution results in the development of new low-cost building blocks (components), it does increase the genesis of higher-order systems as a secondary effect, and open technologies are seen to substantially increase “innovation” overall by providing platforms on which the novel and new is created. 

An example would be the Apache Web Server that has, by providing a low-cost building block (component) for web serving, accelerated the genesis of higher-order systems such as web sites. In effect, Apache has provided a ‘platform
 for web innovation’. 

However, there is little difference between open vs proprietary approaches on those higher order systems that are created with this component and many “innovative” web sites are proprietary despite consuming underlying open components. Naturally, the use of an ‘open’ approach will drive the new higher order system rapidly to a more evolved state.

Hence an ‘open’ approach is not associated with increased rates of genesis for an activity but instead rapid evolution including feature completeness (through collaboration), market adoption (through reduced barriers to adoption) and genesis of higher order systems (a ‘platform for innovation’).

The problem with the term ‘innovation’ is that it is used to mean all of these things. An open approach enables some forms of 'innovation' (product, market and genesis of higher order systems through a platform) but does not make any significant impact on other forms of 'innovation' (i.e. the genesis of an activity).

If we look at our map, the effect of open can be more clearly seen and how driving an activity to a more evolved state along with efficiency can result in rapid generation of higher order systems (see figure 41)

Figure 41 Mapping view of Open’s impact


However, there is more to open technology than just this. Open technology approaches can be used to solve semantic interoperability issues by creating a standard and in turn can enable competitive markets of suppliers, associated exchanges and assurance industries. By driving evolution it can also be used to undermine a competitors barrier to entry or remove a differential a competitor may have. ‘Open’ can be used as a powerful recruitment tool, a negotiation tool or to circumnavigate an existing obstacle such as purchasing procedures. It can even be used to protect an existing value chain. 

Google’s core business is based upon its data value chain. It accesses data from many sources and then uses it to more accurately sell advertising space associated with specific words and actions. The company seeks to expand
into just about any market where data can be modeled to its advantage. Dominating the data value chain, the algorithms to model the data and the systems needed to run the algorithms are all critical to Google’s success and highly proprietary. While Google has been heavily involved in open technology and enabled ecosystems to flourish on its APIs, Google’s core systems and algorithms are guarded secrets. In general, Google uses open approaches when they help keep the data flowing.

The rapid growth of smart phones posed a threat to Google’s business. The iPhone’s dominance meant that a significant part of the data value chain
was being locked away in a ‘walled garden’. But by not open-sourcing iOS, Apple exposed itself to a counter-play around a common mobile OS and an ecosystem of hardware manufacturers. This is what Google’s Android has achieved, gaining the majority of the global unit market share, although Apple still makes the great bulk of the profits.

As with other ecosystems, this market benefits from higher rates of “innovation” over a single supplier. Apple, a company that once could have been thought of as leading the pack, today increasingly looks like a fast follower.

Whilst Android can be seen as a highly successful counter through open technology, it’s governed and developed through a company-controlled process. Google uses its Compatibility Test Suite (CTS) to ensure interoperability of devices and limit a collective prisoner’s dilemma scenario, where members of the Open Handset Alliance (OHA) all differentiate and thus weaken the core. CTS is behind the current Acer vs. Google row in China over Acer’s plans to offer a ‘forked’ version of the Android platform for the Chinese market. However success in limiting one threat to Google’s data value chain has also created a new and probably unanticipated threat as Amazon has taken Android and used it to create another ‘walled garden’ based on tablets: the Kindle Fire.

At the same time as this one battle is occurring, Facebook’s open technology project on building large data centres (known as open compute) can be simultaneously seen as driving efficiency, a tool for negotiation with its own suppliers and a means of weakening any company that depends upon highly efficient data centres as a barrier to entry into its own business. One such company is Google (see figure 42).

Figure 42 Playing the Game with Open Technology


The point to note is that open technology approaches can be used for more than just building a platform or encouraging efficiency. One question we should be asking is who actually thinks in these terms?


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Post 18 of 200 on the Management and Strategy series.

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Beginning of the Management and Strategy series ... There must be some way out of here


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