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

2. 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

3. Typical IT Value Network aka “business ecosystem” Innovator Integrator Users Component Systems Adoption Technology Complements Component Component Rival Complement Provider

4. 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

6. 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

8. 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

9. What’s “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 R&D

10. 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” (O’Mahony 2005) • Not necessarily a public good • Openness aligns firm interests • Provides external check on opportunism?

11. 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 firm’s infrastructure is another’s core business

13. Let’s 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