Open Business Models
Different people will use the concept in different ways.
For us at the P2P Foundation it means business models that do not restrict the results of the innovation to the rest of humanity, i.e open business models cannot be based on restrictive forms of intellectual property.
- 1 Definition
- 2 Description
- 3 Typology
- 4 Case Studies and Examples
- 5 Surveys
- 6 Podcasts
- 7 More Information
See also the entry on Open Business
From the dedicated wiki of Sam Rose:
(go here for the CamelCase references in the quote: http://socialsynergyweb.net/cgi-bin/wiki/OpenBusinessModel)
"An Open Business Model is:
- transparent for business exchanges and production of products or services, making transparent some or all of it’s processes
- majority-oriented as a commitment for the majority of involved people
- sustainable by caring for a sustainable local and global system
- wellbeing-oriented, giving the health and wellbeing of people the highest preference
- flexible, opening up space for people to grow, communicate, build trust and relationships
- flat, taking measures to DevolvePower over decision making in different ways
- wealth-sharing, offering ShareRevenue
- location-independent, encouraging DistributiveProduction
An OpenBusinessModel tends to create some degree of an OpenValueNetwork of exchanges among the users and producers. Knowledge and information exchanges are curated and grown in a KnowledgeCommons. ValueExchanges are transparent when possible. IntellectualProperty is by default not hoarded, nor made scarce, but released under a license that allows for different types of re-use. The goal is to generate “positive externalities”
The OpenBusinessModel is an acknowledgement that money is not the only exchange that takes place in business. It’s employment is also a recognition in practice that money, value, compensation and control need not flow in a one-way direction from user (“customer”) to producer.
OpenBusinessModels give people foundations for becoming SelfSufficient?, by employing BuildingBlocksForIndependents. These are tools, concepts, ideas that are open, and commons-based.
The OpenBusinessModel can be for-profit or not-for-profit. It can be Cooperative -or Corporation-Based. The legal organization is not as important as the opening of all channels of communication, the affordance of authorship, and the sharing and of information and know-how in a KnowledgeCommons." (http://socialsynergyweb.net/cgi-bin/wiki/OpenBusinessModel)
From the Wikipedia :
"Open business is in general the concept of doing business in a transparent way by intimately integrating an ecosystem of stake holders and abiding by a model of transparency. Often, small minorities harness the business benefits away at the cost of other stakeholders and `the market´. Open Business structures seek to rectify this. They activate personal productivity like no other organization can by simply redirecting the returns to those that produced them, and by their nature, the individuals themselves play a central role.
A more strict definition is inspired by free software movement, open standards, open source and open content, which implies that an open business, is a business whose business model is run on open standards, "free software"and "open source" software and open content principles, and focuses on creating `open´ products and services. This approach would guarantee that the business is run for the benefit of all, and not just for one group or stakeholders, whether shareheolders, personnel, government etc. Also the strict application of open principles will guarantee that bankruptcy of a specific open business, will not result in the loss of the fruits of its knowledge." (http://en.wikipedia.org/wiki/Open_business)
by Dana Blankenhorn & Paula Rooney:
"1. Support Ware — Pay us money and we’ll support the software. We’ll answer your questions. Or we’ll try to. Over the phone, on the Web, whatever. Pay us enough and we’ll come over. Red Hat likes this business model.
2. Product Ware – The software is free, you just buy the box it runs in. Android phones use this. So do some network routers. It’s number two, but with a bullet.
3. Cloud Ware — Our software is in the clouds now. Pay us for what it does. The money goes into the cloud. Later it will rain on us. SugarCRM likes this business model.
4. Project Ware — Need something done? We’ll do it with open source. Pay us for our work, and pay us for the project. IBM makes a ton on this business model.
5. SaaS Ware — Our software is SaaSy. You can rent it, by the hour, by the month, by the user. This is wildly popular. Zoho uses it. So do many other companies.
6. Ad Ware — This is a free version of SaaS Ware. You don’t pay anything, the advertiser pays instead. Heard of The Google? This is their primary business model. ZDNet also uses this business model.
7. Sugar Daddy Ware — Our software has a sugar daddy. Firefox has Google. Eclipse has IBM. Open Office has Sun, or it did. So just use the stuff. Daddy will provide. We believe in daddy.
8. Foundation Ware — Our software has a foundation. It has lots of sugar daddies. Want to be one? Linux runs this way. So does Apache. Not to mention Wikipedia.
9. Beg Ware — Please give us money. We know you don’t have to. But give us money anyway. Lots of little projects use this business model. Or pretend to.
10. Tchotchke Ware — Wanna buy a t-shirt? How about a bumper sticker? A pen?
11. Let’s Make a Deal Ware — The programmers who wrote the software support it out of their own pockets until they can figure out something. Wordpress started this way. So did Drupal. Go by Sourceforge and you’ll find tons of folks still using this business model." (http://blogs.zdnet.com/open-source/)
Four Necessary Aspects
Abhijit A Prabhudan:
"Open business formats in any legal form have to focus on four aspects as identified for them to exist. The four broad aspects being purpose, ownership, governance and transactions exchange. Absence of focus on any of these will make the organized activity not different from existing firms or top down bureaucracies.
Why the business venture exists? Clearly defined and evolving . As opposed to traditional firms or bureaucracies, open business formats will have purpose of commons based peer production, economic provision of needs, research, innovation diffusion, product development, meaningful productive occupation for members as Mark Bonchek conceptualized job entrepreneurship, user value creation by imputed production, not for profit benefit generation. Individual motivation depends on how participants relate to evolving purpose apart from other factors such as rewards and recognition.
Ownership or stakeholding pattern
Has to be generative stewardship, multi-stakeholding with adequate role for individuals and institutional forms such as community land trusts, also following peer property principles. Cooperatives, collectives, coworking spaces and neoguilds should evolve in direction of open cooperativism.
Involves both higher strategy making and regular coordinating for operations. Practicing self management without corresponding stakeholding pattern is moot. Workplace democracy without workers ownership is sham. But media is obsessed with Zappos, Github, Buffer, Valve among others which are shareholder owned for-profit corporations.
Open business formats can adapt methodologies such as self management institute’s colleague letter of understanding, cocoonpro’s liquido, open allocation, worker’s councils, direct and liquid democracy tools, useful methods from sociocracy and holacracy for strategy making, collaboration, coordination, decision making and all kinds of regular operations. Self management practiced will be differ in case of shared work spaces compared to geographically dispersed work spaces.
Open business formats will also apply and utilize modern tools and techniques such as service design, standard operating procedures, quality assurance, design and innovation frameworks for their operations.
Exchanges for internal and external transactions
Not just monetary transactions for marketplace but polyeconomy as envisioned by Elf Pavlik.
Open Value Network, Network Resource Planning points to better way to measure economic activities. Modern technology enables granular accounting using blockchain, smart contracts, and cryptocurrencies. Open business formats as organized economic nodes should focus on not for profit generation of user value. Reciprocal licensing is a key leverage to extract resources from old economy for building the new economy." (https:[email protected][email protected]ent-structure-of-economy-the-d886e6c98eb6#.i3nhi6cie)
Case Studies and Examples
From the Open Business Guide at http://wiki.icommons.org/index.php/The_OpenBusiness_Guide
"HSRC Press primarily publishes the output of the Human Sciences Research Council. It has adopted an open access publishing model. HSRC adopted the model because the primary goal in publishing the research materials as opposed to seeking financial reward through the turnover from book sales.
Instead, the goal of HSRC to attract further research funding and contracts, and crucial avenues of dissemination, which can increase the overall size and influence of the HSRC organisation.
Printed books are offered via the website, and can be read on-screen, downloaded for printing or ordered on the website as a POD publication through an e-commerce engine (and supplied on a cost-recovery basis). Having adopted this model revenue has increased by 300%!
Mute is an example of participatory publishing and a networked economic model. It has a number of interesting new services, including print on demand (POD) and Networked Distribution, developed on top of the Open Source web tools Drupal CMS and CiviCRM (constituent relationship management). The Mute site has been designed to address the difficulties facing a small publishing cultural group, the most persistent of which remain reaching your audience and covering your production costs; a problem which Mute addresses using POD. POD is a high quality, low cost form of digital book printing, through which one or 1000s of copies can be printed. In conjunction with a network of self-selecting agents, the NGO web campaigning tool CiviCRM will be used to manage all aspects of distribution (including orders, deliveries and payments) over the net.
Here's an extensive list of companies giving away their IP in the context of a business model, at http://www.openrightsgroup.org/creativebusiness/index.php/Research_Areas
Linup Front uses POD to ensure that only the most recent training materials reach their audience. Once purchased in POD form or as a PDF the files are free for distribution. This free distribution is used as advertising for Linup Front, who users can turn to when their copy becomes out of date.
Magnatune has significantly helped in the sale and distribution of hundreds of artists, whose music would otherwise be heard and purchased with far less frequency, by providing free sampling methods and genre specificity options. Added music consumption in this fashion, in conjunction with low distribution costs, allows for found sales and an effective revenue sharing regime between Magnatune and artists.
Magnatune’s revenue sources are music (both for personal and commercial uses), music licencing, and artist merchandise. Magnatune employs a Creative Commons licencing regime that allows for online distribution of music. It bypasses traditional distribution chains, avoiding expensive costs. This allows for music revenues to be shared evenly by Magnatune and artists.
Jamendo is "a new model for artists to promote, publish, and be paid for their music. On Jamendo, the artists distribute their music under Creative Commons licences. In a nutshell, they allow you to download, remix and share their music freely. It’s a “Some rights reserved” agreement, perfectly suited for the new century. These new rules make jamendo able to use the new powerful means of digital distribution like Peer-to-Peer networks such as BitTorrent or eMule to legally distribute albums at near-zero cost."
Jamendo users can discover and share albums, but also review them or start a discussion on the forums. Albums are rated based on the visitors’ reviews. If they like an artist they can support him by making a donation.
Neuros Technology applies an Open Source approach to hardware and software development. “As engineers, most of us spent our academic careers in an environment where open peer review was just taken for granted as the most sensible way to advance science and technology. Once we transitioned to the business world, we were conditioned to accept that secrecy was a necessary evil,” says Neuros CEO Joe Born. “In fact, experience is showing us that peer review works great in the business world as well. The more information we release to the public, the more our community helps provide us with the ultimate strategic business advantage: better products”.
By releasing proposed specs and involving users in development of a product, Neuros gets feedback from the community’s most involved users and in exchange those users get visibility and an opportunity to influence the product’s development from the very beginning.
Steven Soderbergh has been an astonishing film director for years. Now he is innovating the way movies are made and distributed. His new movie ‘Bubble’ will be in the theatres, on DVD and going to the networks at the same time. And it has been produced entirely with unknown actors and entirely digital. The coolest idea is that he does not mind filesharing since production costs are so much lower - just 1.6 million US $ - and people will still bug the DVDs and go to movies as it is still, as he says, the No1 dating location. So making a profit is much easier, if you haven’t invested hundreds of millions. Well done. Seems like that the movie business is finally starting to change the way the do business - at least some of them.
While it is true that Cory Doctorow himself is not a business, he does have an innovative approach to selling hardcopies of his books and creating revenue for himself as an artist, so I think he is certainly worth mentioning here.
Doctorow releases his novels on a Creative Commons Licence on the internet for free download, sharing, and even remixing. This open approach has produced a whirlpool of activity around his name, making him a renowned science fiction writer with a huge following. His revenue comes from selling hardcopies of his books (nobody wants to read an entire novel from a computer screen) and speaking at conferences, debates and other events."
From Box UK:
“a survey of business models used by the top Web apps, most of them variations of ad-supported Free and Freemium. In the chart below, the largest segment (ITA) is ad-supported, the second largest (ISV) is Freemium. After that is referral (ITR) and then the sale of virtual goods (IPV), such as the gifts in Facebook.
“We spent a few hours going through the Webware 100 Top Web Apps for 2008, analysing the business model(s) used by each. The chart below shows the results of this survey: 34% use Advertising, 12% a Variable Subscription model, and 8% each for Virtual Products (typically digital downloads), Related Products (typically a large software company offering a free product to attract you to their platform) and Pay-Per-Use.” (http://www.boxuk.com/blog/monetizing-your-web-app-business-models)
Open Congress on Creativity and the Public Domain
"The extraordinary development of Free and Open Source Software – software that anyone is free to use, modify and redistribute – has revitalized wider interest in collaborative creativity, the public domain and the ‘openness’ of public institutions.
Structured around three ecologies: Governance, Creativity and Knowledge, this innovative Congress explored, through its structure and content, how Open Source inspired methods may transform art and its institutions – by challenging conventional practices of authorship, ownership and distribution.
Due to many simultaneous sessions and a range of presentation contexts, Online Events were unable to stream all of the contributions live. A selection of presentations, workshops and discussions have been post-produced and are available as archives below. The level and quality of audio does vary between sessions, due to acoustics, amplification and electronic interference. Friday."
Christian Ahlert Open Business (Foyer - Governance) 50min Open business models and free content
- For further examples of open business models visit http://www.openbusiness.cc/category/models.
- For analysis, interviews and discussion of these models please go to http://www.openbusiness.cc/category/discussion.
- Open Rights Group course on Creative Business in the Digital Era, research section, has a long list of examples of companies giving away IP, at http://www.openrightsgroup.org/creativebusiness/index.php/Research_Areas