Firm Strategies for Open Standards,Open Source, and Open Innovation

Joel Westwww.JoelWest.org/openblog

Designing Cyberinfrastructure for Collaboration and InnovationNational Academies, Washington, DC, January 29, 2007

Lens: A Firm’s Business Model

Firms need a business model to support innovation:

Value creation

Value capture

Value network

Openness is a tension of value capture vs. value creation across value network

Component

Complements

Systems AdoptionTechnology

Integrator Users

Complement Provider

Innovator

Component

Component Rival

Typical IT Value Networkaka “business ecosystem”

Contrasting 3 “Open” Strategies

Open standards

Open source

Open innovation

When firms are involved, these are neither fully open nor fully proprietary

Open Standards

Two ways to measure openness

Process opennessOpen meetings, transparent voting …

But firms steer standards to overlap IP

Market outcomesBuyers want multivendor competition

Hope for lower prices, avoid lock-in rents

Standards Rarely 100% Open

Standardization must be paid forSubsidy by SSO or by participants

Various ways to capture value

Increasing conflict over IPR & standardsFirms jointly maximize creating vs. capturing value (Simcoe 2006)

Policies starting to fail (e.g. RAND)

Open Source

Unpack “open source” to 3 dimensions:

Intellectual property policy

Virtual distributed collaboration

Community governanceConsiderable variance: community, consortia, sponsored; also gated

Role of Firms in Open Source

Firm resources majority of key projectsSome sponsor & control OSS, using it as price discrimination

Others contributed to produce shared goods, capturing value in other ways

Transparency is easy

Surrendering control is hard

What’s “Open” About OI?

Innovation spanning firm boundaries

Not about shared public goodsValue capture motive is explicit

Share value creation within value network

Provides for new forms of shared R&D

Open Innovation: antonym see vertical integration

What Do These “Open” Share?

Collaboration in providing shared outputMay be a complex system sold a la carte

Often firms “competing on a common platform” (O’Mahony 2005)

Not necessarily a public good

Openness aligns firm interestsProvides external check on opportunism?

Openness Attracts Participation

Brings in potential contributors

Adopters/users

Complementors & rest of network

OSS licenses are existence proofIP license provides a credible commitment

“Open” Infrastructure

Open is best choice for commodity, non-appropriable technologies

Shared implementations reduce redundant investment

How do you partition it?One firm’s infrastructure is another’s core business

Let’s Not Ignore the “P” Word

Open is not just about public goodsProfit is without honor (except to owners)

Open parts allow selling closed partsSometimes cross-subsidies less obvious

IBM Global Services welcomes complexity

Participation is market signal

Firm Strategies for Open Standards,Open Source, and Open Innovation

Joel Westwww.JoelWest.org/openblog

Designing Cyberinfrastructure for Collaboration and InnovationNational Academies, Washington, DC, January 29, 2007