What is at the heart of open source?

Firstly, if you have not the foggiest idea what on earth I mean by the Open Source Movement, then I suggest you check out a previous post on the topic that provides a brief primer.

That said, here is the post….

There has been much talk around the camp-fire recently about the Open Source Movement and its implications for marketers and corporations. Mark Beeching first got me excited about it when he introduced me to the Wikipedia.

In thinking about this, it did occur to me that people with more conservative inclinations may be skeptical about this movement and of the reach of its implications. I have witnessed such skepticism at first hand. At the risk of playing the “Brit card”, I think it feels a bit “socialist” to many Americans, who are used to the notion of people performing quite specific tasks (usually more or less what you are told to do!) in return for a paycheck. Open Source notions like the idea that nobody is really in charge or that there is no formal system for rewarding specific achievements seem at best like something from the lunatic fringe and at worst, un-American behavior!

In this post I want to debunk the myth that Open Source is some pie-in-the-sky socialist model that competes with free-market liberalism. Secondly, I want to address the question “why on earth would people ever want do this?”, enlisting the support of that most capitalist of organizations, the Harvard Business Review. Finally, I will also touch very briefly on a third question: “why on earth should organizations (that means us and our clients) embrace this?”

To begin by de-bunking the socialist myth, I would refer the avid reader to James Surowicki’s excellent book, The Wisdom of Crowds. In essence, what Surowicki argues (backed up by numerous case studies and examples) is that markets are typically better at making decisions than individuals, even when those individuals are ‘experts’. If you are wondering what this has to do with Open Source, then consider this: for Surowicki, it is ‘open-ness’ that is a defining characteristic of markets and the locus of their effectiveness.  Rather than have a few individuals narrowly plugging away at a task, it is better to get as many perspectives as possible and aggregate those opinions, without prejudice or interference, in order to get the best answer. Bubbles notwithstanding, it is the ability to efficiently aggregate diverse perspectives that explains why markets usually do such a great job of valuing investment opportunities.

Viewed through this lens, the power of Open Source starts to make sense. By allowing a wide and diverse group the opportunity to weigh in on a given topic, one ensures a great diversity of inputs, and more satisfying resultant outputs. In other words, Open Source can be seen as the spontaneous eruption of markets (typically markets of ideas) as problem-solving tools.

But what of the second question, why do people do this? I had not found an adequate answer for this question, until I opened the July-August 2005 HBR, an issue devoted to the “high performance organization”. HBR leveraged case studies from both Linux and, more corporately, the Toyota Production System, in order to look at Open Source and its implications for organizations and how they manage themselves.

In looking at what motivates people to spontaneously collaborate without formal instruction or direction, the HBR team discovered a wealth of literature in psychology which demonstrates that monetary ‘carrots’ and accountability ‘sticks’ were very good at getting people to perform narrow, specific tasks. However, when it comes to going ‘above and beyond’ to achieve an important breakthrough, admiration and applause are far more important motivators.

This is a critical finding. In a knowledge economy, completing narrow, specific tasks is not the source of greatest value-add for corporations or individuals. It is the breakthrough ‘above and beyond’ ideas which contribute the greatest value. And yet, paradoxically, the primary motivations people have for that kind of achievement are intangible things like fame and reputation.

In the case of Linux, the personal reputation of every programmer is on the line with each new release. Linus Tovalds himself explained it to a journalist in 1998:

If you are making something to give away to the world, something that represents to millions of users your philosophy of computing, you will always make it the very best product you can.

Better, in fact, than the work these programmers do during their “day jobs”?

Bear in mind, also, that in the world of Linux, nobody is told to be responsible for anything, it all just happens organically. The line between user (customer) and developer is also blurry at best: some would say it is nonexistent.

Toyota Production System [hereafter TPS], represents a more conventional environment. The many suppliers who, combined with Toyota, make up TPS are not working for free. Suppliers within the system are compensation in a traditional way for their ‘run of the mill’ production.

However, if you look beyond the day to day, and the similarities with Linux are striking. When a specific problem arises, the entire network immediately springs into action to collaborate towards a solution. This typically happens immediately, spontaneously and with no implicit or explicit promise of compensation. This is what happened when fire broke out at a Japanese plant producing 99% of a critical type of valve to the Toyota line. Working with many other suppliers, a tier 2 supplier, Kyoritsu Sangyo, was credited with producing the first batch of emergency replacement valves to the line. The direct financial reward for this was hardly worth the bother: they did it for reasons of professional and corporate pride.

This brings me on to my third question. Why on earth should a company bother with this? Actually, I think there are two reasons: one is a moral argument and the other is an argument of economic self-interest (I love it when these two are bedfellows!!).

The moral argument is that this is what consumers and employees crave: we are entering the era of personal authenticity, where people want to feel not just compensated, but truly connected to what they do and what they buy. Leveraging Open Source means giving people more free rein to problem-solve creatively, according to their passions and interests.

The economic self-interest argument mirrors this. Unlock the enthusiasm of your employees and your customers and they will reward you with a high degree of emotional support and commitment. The truth of this is evident in both the Linux and TPS examples, where problems are frequently fixed at speeds which baffle competitors. The economic benefits do not end there: communities of trust, where reputation is the currency, are capable of drastically lowering transaction costs and opening up new markets (just ask any Ebay trader!).

So how should you apply this in your life? I can’t tell you, you’re in charge of that; I guess you’ll have to figure out for yourselves how you want to participate! All I can do is get you a reprint of the HBR Article if you email me.

Comments

[Greg Johnson]

I very much agree with your general direction on the open-source movement and its corporate adoption, but the argument of economic self-interest doesn't quite seem complete. In fact, I think that employee empowerment and alignment of motivations is only one of three different and quite complementary dimensions to the reasoning behind corporate support of open source. Let's also consider two other frameworks--network economics and process-based sustainable competitive advantages--to make the argument even more robust and strategically sound.

The second framework that complements your first relates to network economic theory and its application on technical systems. This is not necessarily hardware/middleware/software, but certainly includes those. Corporations have wasted billions of dollars, yen, yuan (pick a currency any currency) on technology. But technology is a MEANS, not an END. Network economics theory tells us that value lies in how little friction exists in interconnected systems, and let's be honest with ourselves and admit that technology has created a hell of a lot of friction. So what's happened is that substantial value has been destroyed through a process we'd like to think is fundamentally grounded in capitalism. The value chain for the average major corporation is actually not as valuable as it could be if there were standards. But mandated standards are perceived as "bad." Broad open source adoption gives us something that is fundamentally different from forced standardization, but achieves precisely the same outcome: seamless, transparent interconnectivity.

The third framework to introduce relates to the current source of sustainable competitive advantage. Our knowledge economy is inherently about what companies DO, not what they MAKE...which implies that higher-order systems are the source of value. The Toyota Production System is a classic example of industry superiority through process engineering, which itself is a higher-order system layered above the organization's composition, tools and goals. Couple this with the concepts of multidimensional value chains and coopetition theory and we start to unveil an inherent truth of today's enterprise: a greatly run organization is merely a parity play, and a significant proportion of a firm's value does or will exist exogenously from the firm (or even the simple view of that firm's industry).

Now put these three frameworks together and we have a very simple answer as to why most or all companies should get behind the open source movement as quickly as possible: today's technology is consuming its own value. Put another way, firms that gain value by implementing the product of another firm cannot sustain that value through their own operations.

Left to Adam Smith, technology will be always fluid as competitors try to continuously improve their offerings to capture incremental share; moreover, the more fluid the systems are the less able they are to provide supporting infrastructure for high-order systems. Conversely, those offerings that are both robust and free (as in beer) create a single base platform from which many new systems can grow. Current releases of ERPs and SCMs are just some of the many examples of disparate, duelling platforms that look more like US wireless carriers than the plain old telephone system. Let's get our collective infrastructure in order and get on with business.

I certainly don't want to put the kebash on the employee hero and self-valuation thing; in fact, I just heard that we're all HUMAN resources so definitely rah-rah and schedule a group hug and all that :) The truth is that the value that technology is currently consuming is as much in human capital as it is in financial investment and the value of opportunities lost. Open source adoption and participation is a robust, value-creating proposition...and one that Wall Street would be wise to watch.

Okay, so my comment thread was (yawn) really academic this time. I'll try to be more fun next go 'round. Keep up the good work!

[Christine Beardsell]

Here's an interesting site:

The Business Experiment

The Mission: "to explore three concepts:  wisdom of crowds, open-source business, and the distributed nature of work".

A very timely experiment. I think I'll register and see what happens...

[Jeff Flemings]

I agree that admiration and applause are critical motivators - for employees as well as people in general. Speaking for myself, I definitely feel motivated when I get admiration and applause. It's not just me either - remember how many people pick fame over fortune when asked to select between the 2.

In my experience it's very difficult for the companies to adopt this way of working; the old command and control model feels comfortable to them and they're afraid to fix what ain't broken (as the expression goes).

Perhaps more importantly, this new way of working involves a profound shift in power - specifically, who can become powerful. In this new system, power is gained by those who produce - who enable productive collaboration and help the group achieve its collective best result. Power is lost by the hangers on who don't add value.

This is a good thing if you're productive - enabling collaboration, etc., but a bad thing if you're a hanger who's not adding any value.

Personally I hope the world gets on this bandwagon fast; the world's problems are increasing in complexity at an almost exponential rate and we don't have the luxury of waiting around.