Friday, 29 August 2014

Open source business model 2/5 – What is it?

This second post explains the model.  What it can be used for is in the first, why it works in the thrrd, the fourth suggest when it can be used and the last explains how to use it.

What is it?

A form of crowdsourcing, the open source model is applicable for niche crowds, like a community of graphic designers.  I prefer the term peer crowd because they are peers and needs to be treated as such.  The aim is engagement so they’ll do something for you, directly or indirectly, and for themselves.  And through it all, you accomplish a few things.

1.  It is a production method that relies on self-organising peer groups that come together voluntarily to produce a shared outcome. It taps collective expertise.  The software industry and a conference organiser have used this for branding but this works only for the best initiatives.

2.  Because it creates an attentive crowd (and passionate), you now have a platform for outreach.  Marketers love such a crowd but they better understand how this new socio-environment works.  Too direct a message would clear the crowd faster than a rat can.

3.  By tapping into their conversation, you can mine their likes, dislikes, keep track of trends and more.

4.  By having a targeted conversation, you have a group to gauge your ideas and to discuss them.  Market research, surveys?

However the deliverables are in the public domain, useable by you or anyone else.  Because of this, this model can’t be applied wholesale to a business operation.  But for tasks that are suitable, it is a powerful method, low cost and impactful.  On a specific task it has to be evaluated on its suitability (5th post).

How does it work?

At its most basic, this is how it works - develop a rudimentary form (idea, product, design, concept, software, template, data sets, etc) now termed ‘minimum viable product’, then release it to the public.  If it is any good and this is vital, it has to be useful or interesting, others will continue to develop it.  Iterations, in effect improvements through new ideas, feedback, experimentation and testing enhance the original form and moves it forward.  At each stage results are consolidated and another version released.  In this way, your team in a step-by-step process works with the peer crowd, lead by you.  A caveat with the open source model is that you don’t have full control.  Even if you want to end it, say, someone else may pick it up and continue.  Called forking, with or without your consent, a version is forked based on the original.

At its core, the open source model works through crowdsourcing and the value-of-free (in this case, volunteer manpower, see below).   The latter is the reason it is powerful as anything free is.  But nothing is really free, they are paid, just that it is not the conventional way with money but with social currency.  The model also depends on another, the 0.001% law, the law of large numbers to create the initial peer group to kickstart the project.  Peer ranking (ideas are ranked) is then used within the group to make selections.

Crowdsourcing & the consumer economy
Factories gave rise to modern consumerism.  We consume.  Now it’s the turn of the consumers!  We produce. Crowdsourcing is a method that engages mainly the public to contribute resources, mostly effort, voluntarily in the production process.

Social capital, social currency and why they volunteer?
“If I participate in a non-paid activity that raises my reputation I’ll do it.”  Social capital are things of value to consumers sans money.  This behaviour seems illogical in conventional terms when rewards can’t always be measured by the dollar.  It’s about personal benefit, mostly indirectly.  It is about career development.  When a contributor of an open source software project downloads its code to check for errors and scrutinise its performance, he is actually making himself a better programmer.  Partly it is his interactions with the other volunteers.  Because by nature only the passionate will ‘waste’ such time, it normally attracts higher performers.  Merit begets merit which increases his career worth and thus salary.  Many get job offers.  It is also about personal development, When you are participating (which comes with volunteering, sharing experiences or expertise), you are self-developing.  It is also about personal satisfaction treating it as a hobby, ego even.  For some, it’s just passion.  Values created through social behaviour have been around ever since the hunter gatherers but over the internet, it has taken a worth of its own.

And like everything else, the idea is everything and it must be able to benefit both parties.  The challenge then is to devise projects that would appeal to the market participants of your industry.  And if you can create social currency, you will have your ‘workforce’.

Now to most managers, the open source model is odd because you give away a part of the firm’s property (intellectual property, a design, etc) but it is actually this process of ‘giving it away’ that value is generated for the firm, more than the value ‘given away’.  The next post – why it works.

Because there is no copyright, you must be confident there is little impact with this.  Many apply it to areas they know is mostly of little use to competitors like Goldcorp did when issuing one to locate mining deposits.  They own the mines!