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

1
Firm Strategies for Open Standards,Open Source,
and Open Innovation

• Joel West
• www.JoelWest.org/openblog
• Designing Cyberinfrastructure for Collaboration
  and InnovationNational Academies, Washington,
  DC, January 29, 2007

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Lens A Firms 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

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Typical IT Value Network
aka business ecosystem
Integrator
Users
Innovator
Component
Systems
Adoption
Technology
Complements
Component
Complement Provider
Component Rival
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Contrasting 3 Open Strategies

• Open standards
• Open source
• Open innovation
• When firms are involved, these are neither fully
  open nor fully proprietary

5
Open Standards

• Two ways to measure openness
• Process openness
• Open meetings, transparent voting
• But firms steer standards to overlap IP
• Market outcomes
• Buyers want multivendor competition
• Hope for lower prices, avoid lock-in rents

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Standards Rarely 100 Open

• Standardization must be paid for
• Subsidy by SSO or by participants
• Various ways to capture value
• Increasing conflict over IPR standards
• Firms jointly maximize creating vs. capturing
  value (Simcoe 2006)
• Policies starting to fail (e.g. RAND)

7
Open Source

• Unpack open source to 3 dimensions
• Intellectual property policy
• Virtual distributed collaboration
• Community governance
• Considerable variance community, consortia,
  sponsored also gated

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Role of Firms in Open Source

• Firm resources majority of key projects
• Some 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

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Whats Open About OI?
Open Innovation antonym see vertical integration

• Innovation spanning firm boundaries
• Not about shared public goods
• Value capture motive is explicit
• Share value creation within value network
• Provides for new forms of shared RD

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What Do These Open Share?

• Collaboration in providing shared output
• May be a complex system sold a la carte
• Often firms competing on a common platform
  (OMahony 2005)
• Not necessarily a public good
• Openness aligns firm interests
• Provides external check on opportunism?

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Openness Attracts Participation

• Brings in potential contributors
• Adopters/users
• Complementors rest of network
• OSS licenses are existence proof
• IP license provides a credible commitment

12
Open Infrastructure

• Open is best choice for commodity,
  non-appropriable technologies
• Shared implementations reduce redundant
  investment
• How do you partition it?
• One firms infrastructure is anothers core
  business

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Lets Not Ignore the P Word

• Open is not just about public goods
• Profit is without honor (except to owners)
• Open parts allow selling closed parts
• Sometimes cross-subsidies less obvious
• IBM Global Services welcomes complexity
• Participation is market signal

14
Firm Strategies for Open Standards,Open Source,
and Open Innovation

• Joel West
• www.JoelWest.org/openblog
• Designing Cyberinfrastructure for Collaboration
  and InnovationNational Academies, Washington,
  DC, January 29, 2007