Business Models of Fab Labs
= study results indicate "a distinction between Fab Labs that are focusing on supporting innovation, and those that primarily offer the lab as a production facility
- Paper: Commons-based Peer-Production of Physical Goods. Is there Room for a Hybrid Innovation Ecology? By Peter Troxler, Square One, Rotterdam, The Netherlands
"I first chose to analyse the business models of existing Fab Labs and to study to which extent they were being able to (economically) sustain themselves as institutions, given their practical and ideological premise of Fab Labs as prime locations for commons-based peer production. Parts of this study were carried out in collaboration with the University of Applied Sciences and Arts, Luzern.
In spring 2010, we studied business models of the Fab Labs around the world in a two-tiered approach. Firstly, a top-level description of the positioning of the Fab Labs was derived through document analysis. Secondly, we selected a subset of seventeen Fab Labs for the study. For the selection, the labs had to be publicly accessible and the main goal of the labs had to be manufacturing-oriented rather than communityoriented. Six labs did not respond, and one lab chose not to take part. The business models of the remaining ten Fab Labs were analyzed more deeply in expert interviews with the Fab Lab managers or, where applicable, with the business managers at their hosting organisations. The interview guideline addressed value proposition, revenue model, processes, resources, marketing, and innovation partnerships.
Second, to gain more insight into the operational business aspects of Fab Labs, I interviewed lab managers and lab assistants of existing and prospective Fab Labs about the ‘pain and pride’ of their respective labs. Third, I wanted to investigate if and how users would make use of the open source approach stipulated by the Fab Charter, particularly since literature is mainly focusing on the users of Fab Labs (e.g. Mikhak et al., 2002; Gershenfeld, 2005; Gjengedal, 2006; Pfeiffer, 2009) rather than the labs and their business environment. Therefore, I analysed four projects carried out at Fab Labs based on publicly available documentation. These projects had to show at least some traits of ‘openness’, such as designs, drawings or documentation made available under some ‘free’ or ‘copyleft’ license. Additionally, I report a case of ‘closed’ innovation where a Fab Lab helped a commercial company."
"Current revenue of the Fab Labs included in this study came mainly from public sources or from a hosting institution. Revenue from sponsoring or from users so far remained the exception. However, all labs indicated that they needed to become self sufficient within two to four years.
Regarding processes and resources, seven of the nine Fab Labs had their own employees, three were run by a faculty of their host university, and five were supported by volunteers. In terms of manufacturing technology, the labs typically adhered to the equipment proposed by MIT, sometimes excluding one single machine; eight labs offered their users extra equipment (such as 3-D-printers or embroidery machines).
In summary, the Fab Labs included in this study primarily offered infrastructures to students, and they were relatively passive in reaching out to potential other users. Their funding came from government or hosting institutions. They have so far created a limited innovation ecosystem. This ecosystem, however, gets used rather rarely.
Looking at single labs in the sample, there was a notable tendency that labs that engaged more actively in PR attracted also non-students as users. Also, labs that more explicitly saw themselves as providing access to the knowledge in the Fab Lab network tended to have more network partners in their innovation ecology and were more often asked by users to support their projects. This seems to indicate a distinction between Fab Labs that are focusing on supporting innovation, and those that primarily offer the lab as a production facility.
The study into the business models of Fab Labs finds that the funding for the Fab Labs included in the study came from government or hosting institutions. This is not surprising, given their relatively young age and their requirement to become self-sustaining within 3 to 4 years. The labs were primarily offering infrastructures to students, and they were relatively passive in reaching out to potential other users. They had so far created a limited innovation ecosystem, which got used rather rarely. This also suggests that there are two value propositions, namely labs providing facilities and labs providing innovation support.
Looking at single labs in the sample, there was a notable tendency that labs engaged more actively in public relations activities attracted also non-students as users. Also, labs that more explicitly saw themselves as providing access to the knowledge in the Fab Lab network tended to have more network partners in their innovation ecology and were more often asked by users to support their projects. This again indicates a distinction between Fab Labs that are focusing on supporting innovation, and those that primarily offer the lab as a production facility.
Both models, the innovation support model and the facility model, can be seen in the light of commons-based peer-production. Peer support in the innovation model would ideally form a complete ecosystem that could deliver the experience of effective and fast innovation to participating peers. It would certainly be in the spirit of Fab Labs that such an ecosystem would evolve around a hybrid, private-collective innovation model.
In the facility approach, which would support users primarily during their stay at the lab when using equipment and manufacturing process, the peer-production community would build around the experience of a well-run personal production process. Again, the spirit of Fab Labs would encourage a private-collective model of peer support.
The current business models of Fab Labs were built around external funding covering the (private) budget to create innovations. The challenge for these labs will be to achieve a level of funding—be it public or private—to sustain the hybrid, private-collective model of innovation. Similar to open source business models, the key probably would be to offer complementary services to generate revenue. For the two approaches making things still would remain the core function of the lab. For the Fab Lab as a facility, the complementary proposition would be to provide added value in terms of the digital production processes; for the innovation Fab Lab complementary services could be generated using a mix of ingredients determined by the facilities and (networked) competencies available." (http://wikis.fu-berlin.de/download/attachments/59080767/Troxler-Paper.pdf)