Firm Strategies for Open Standards, Open Source, and Open Innovation Joel West Designing Cyberinfrastructure for Collaboration and Innovation National Academies, Washington, DC, January 29, 2007

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

Component Complements SystemsAdoption Technology IntegratorUsers Complement Provider Innovator Component Component Rival Typical IT Value Network aka “business ecosystem”

Contrasting 3 “Open” Strategies Open standards Open source Open innovation When firms are involved, these are neither fully open nor fully proprietary

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

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)

Open Source Unpack “open source” to 3 dimensions: Intellectual property policy Virtual distributed collaboration Community governance Considerable variance: community, consortia, sponsored; also gated

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

What’s “Open” About OI? 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 Open Innovation: antonym see vertical integration

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?

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

“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

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

Firm Strategies for Open Standards, Open Source, and Open Innovation Joel West Designing Cyberinfrastructure for Collaboration and Innovation National Academies, Washington, DC, January 29, 2007