This article is an excerpt of the book Open models published in French in 2014 and translated in 2016.
They are everywhere. Open models are spreading
Some of the most stimulating innovations have emerged from or spread through the use of open business models – the web, Wikipedia and more recently the open source vehicle Tabby.
The web operates by means of free software developed by communities. Open and collaborative initiatives are sometimes more effective and challenge the status held by traditional players in some markets. The French president himself emphasized the importance of open productions in an official declaration on 24 June 2014:
Social innovation is unique in that it is innovation without patents. There are no patents, no intellectual property, the ideas are copyright free, they circulate. Therefore it is up to us to ensure that no initiative is hindered!
Open, free, open source…these terms were until recently only used in the world of IT development and quite often to refer to the most technical software which is also the least visible to the general public. As a result there were very few people who were familiar with these models, and even fewer who mastered their subtleties and nuances.
Nowadays, these terms are used in industry (open manufacturing, open hardware), in art (creative commons), in science (open science, open access), in data (open data), and even in governance (open government).
These models are no longer only familiar to specialists, but they are now influencing all economic players:
- Individuals who benefit from open resources and some who contribute to their creation.
- Communities that work together to create a common resource (for example, the collaborative map OpenStreetMap).
- Companies which use some open resources, implement open strategies and again for some, contribute to the creation of an open resource.
- Government and state agencies who, via open data, make a resource available that will generate externalities.
How does an organization ensure its continuity if doesn’t monetize its production and if it authorizes others to use it?
Open models are spreading to multiple sectors and impacting numerous organizations. But what are they exactly? What is an open model?
The term was initially used to denote realities that were undoubtedly different, but that could be grouped together in a simple idea, that of opposition to the dominant model in the software industry, the proprietary model. The proprietary model is characterized by restricted user access for use or modification, either for financial (cost of the software), technical or legal (rights to access the program) reasons. On the contrary, free or open software is characterized by greater access to the software (little or no economic barriers), whether to use, copy or modify it.
An open model is therefore a real or virtual product created wholly or in part by individuals who are free to use (sometimes under certain conditions), modify or distribute it. This goes to the heart of the business model question – how does an organization ensure its continuity if doesn’t monetize its production and if it authorizes others to use it?
Open models’ uncharted territory
In June 2014, Tesla, a company that designs, develops and produces high-performing electric cars, announced its decision to give any company or individual the option of freely using its intellectual property. An astonishing decision from a listed company that has massively invested in research and development.
In 1998, Mozilla launched Firefox and opened the source code of the web browser.
In 2010, with a team of amateur volunteers and in just a few weeks, Joe Justice designed a higher performing car in terms of energy consumption than the market standard. The designs are available and workshops enable to freely assemble the the parts designed by the team.
For 15 years now, Wikipedia has offered an online encyclopedia, controlled and updated by volunteers.
In 2014 French sporting retailer Décathlon, launched an open innovation platform which allows its clients and partners to suggest new products and be involved in their creation and development.
These five examples illustrate the diversity of open models and show that a binary vision (open vs. closed) is misleading. The reality is that initiatives are situated on a continuum going from open to closed.
The purpose of this book is to bring together contributions which represent this diversity. There is no single way of thinking and acting in open models, everything is a question of gradation. This diversity is advantageous and the rhetoric that pits open and closed directly against each other, the activist and the entrepreneur, is misleading. Just like geopolitics, the economy has become multipolar!
Encouraging diversity, nurturing this disruption rather than seeking at all costs to make the whole coherent, seems like a productive path to me.
Is referring to a business model when we are talking about free software heretical?
The term “business model” has been commonly used since the start of the 2000s. But it was the book Business Model Generation (Pearson, 2010), which most contributed to its widespread use. A business model describes the way in which an organization creates value, transfers it to recipients and captures part of it to maintain its operation.
A business model is thus a whole made up of interacting elements (an offer, resources, a mechanism for income generation). What makes it successful is coherence and proper synchronization of these elements, more than the strength of any single one of them.
Take Wikipedia for example, an organization of unpaid volunteers who make an encyclopedia freely available and who receive donations to finance the technical costs of hosting the site. It is indeed the coherence between the type of revenue (donations), the structure (volunteers) and the value proposition (free encyclopedia) which is effective. Changing one of these parts would fundamentally call the model into question. The site’s audience (500 million unique visitors per month) would certainly allow it to generate adequate advertising revenue. But it is highly likely that using advertising to generate revenue would greatly reduce the engagement of contributors to write articles for free, and the entire model would falter.
The most “free” models free themselves from monetary questions, they establish themselves on the voluntary and non-remunerated contribution of individuals. The monetization of the whole or part of the product is often perceived as contradictory, even harmful, to the logic behind the construction of open resources.
In this context we sometimes have a tendency to reject the use of “business model” as a relevant term to describe these more open models. All organizations however, even those which base themselves on the creation of social more than economic value (for example NGOs that operate with volunteers) have a business model. A business model describes the way an organization builds and captures value, and not just monetary value. This value can be social, or found in the communication of an image, brand or externality. It is created by resources (material and human) that can be free or voluntary. The value that is built is then transferred to recipients who pay for it or receive it free of charge.
The business man and the activist
All organizations may have a business model but not all business models are equal. In the open models case, two types of business models are emerging – the contributory and the market models.
Organizations that choose a contributory model are mainly driven by an activist and sometimes ideological motivation of free access to knowledge. In actual fact, making an open asset built by volunteers available to everyone enables knowledge or technology to become widely accessible and makes individuals and organizations freer and better equipped to deal with institutions (government or business). Wikipedia and free software are examples of this contributory type. In these models, the knowledge produced is made freely available to the public and is created by individual contributions that are voluntary and non-remunerated.
Organizations that adopt a market type model are first and foremost seeking to meet an entrepreneurial objective (which doesn’t prevent some from having activist motivations) such as creating a profitable activity, entering a market, defending a competitive position, improving efficiency or productivity. In these models, the resources necessary to create an open asset are partly financed by the sale of products or services. Open source software models that offer integration services are examples. Similarly, organizations that develop open strategies, but for which the core activity is not to build an open asset, are examples of the market type open model – such as Tesla Motors referred to earlier.
Opening is also a way of accelerating the transformation of an organization. Opening helps develop the ability to explore and lead the organization to create new partnerships or to engage in other ecosystems. Open approaches also quite often mobilize methods that have the power to transform an organization including modular developments, short cycles, etc.
It is in this way that open models create values of a different nature. The value in use is very high for all individuals who use or consume open resources. Direct and transactional values are accessible to companies that use an open resource, which is often less costly. Value can also be strategic for companies that put in place open innovation and platform approaches. They position themselves very favorably within an ecosystem and structure it to their advantage. For governments or societies, open approaches often generate externalities which although difficult to measure, are very real (for example, Wikipedia’s impact on the level of training).
Translation by Nicola Savage