On Open Business @ EDUfashion conference - Ljubljana 02/06/2011
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(1) Open business models exist for open source software, open hardware, DIY crafts, and fab labs, but being open is not enough - the market must also be considered. (2) Current open business models include services, custom manufacturing, dual-licensing, and crowdfunding. The long-tail approach seems most sustainable. (3) As design, manufacturing, hardware, and software become commodities, future value may lie in creativity, attention, and collaboration from users. Open money and processes could support a more sustainable open, DIY, and peer-to-peer economy.
![Look for what is becoming a commodity
A commodity is a good for which there is demand, but which
is supplied without qualitative differentiation across a market.
[...] the market treats it as equivalent or nearly so no matter
who produces it.
Source: http://en.wikipedia.org/wiki/Commodity
Commoditization (also called commodification) occurs as a
goods or services market loses differentiation across its supply
base, often by the diffusion of the intellectual capital
necessary to acquire or produce it efficiently. […] a unique,
branded product into a market based or undifferentiated
products.
Source: http://en.wikipedia.org/wiki/Commoditization](https://image.slidesharecdn.com/massimo-menichinelliedufashion020611-110607074159-phpapp02/85/On-Open-Business-EDUfashion-conference-Ljubljana-02-06-2011-23-320.jpg)
On Open Business @ EDUfashion conference - Ljubljana 02/06/2011
- 1. On Open Business Models Markets and business models for Open and DIY projects Massimo Menichinelli --------------------------------------------------------------------------- Ljubljana (Slovenia): June 2nd 2011 EDUfashion Conference - Refashioning fashion: new scenarios of clothing http://www.edufashion.org/ Presentation available on: http://www.slideshare.net/openp2pdesign
- 2. 01. Why should a designer be concerned about business? I'm a designer, after all!
- 3. (Open) Design + Business ? a designer / researcher studying how to co-design Open Processes with communities --> and trying to make his design / research activity a sustainable business + a report on business models of: * Open Hardware --> * Fab Labs * DIY Craft http://www.youcoop.org/ http://www.platoniq.net/ http://www.goteo.org/
- 4. From a paper project to a real project Designers start thinking about the business Source: http://www.kickstarter.com/projects/danprovost/glif-iphone-4-tripod-mount-and-stand
- 5. From a paper project to a real project Now on Apple Store! Source: http://www.kickstarter.com/projects/1104350651/tiktok-lunatik-multi-touch-watch-kits
- 6. Just being “Open” is not enough .. but what about the market? Source: http://www.kickstarter.com/projects/1833785894/100k-stray-toasthed-pull-toys
- 7. 02. Open and DIY Business (as they are now)
- 8. Business models of Open Source (software) Non-monetary incentives: * problem solving * ethical questions * education + learning * reputation --> social interactions + jobs --> it's not just about money! Also a gift economy
- 9. Business models of Open Source (software) Monetary incentives: * selling software (as open or even with dual licensing) * offering services (customisation, support, ...) * paid developer work * donation * software as service (freemium, ...) * embedding software into hardware --> … it's not just about volunteer work! Also a market economy
- 10. Business models of Open Source (software) Red Hat first open source company expected to break through the $1bn mark in 2011. Source: http://www.channelregister.co.uk/2011/03/24/redhat_q4_f2011_numbers/ Cost of developing Linux The Linux Foundation (LF): $10.8 billion to build the Linux community distribution Fedora 9 in today’s dollars with today’s software development costs. $1.4 billion to develop the Linux kernel alone. Source: http://www.linuxfoundation.org/sites/main/files/publications/estimatinglinux.html
- 11. Please note: Open Business is not completely open Projects may be open but: * identity (brand) is fixed and is warranty certificate * existing business ecosystems may not be open * knowledge, expertise, tools, resources are not always “open” Source: http://www.blender.org/blenderorg/blender-foundation/logo/ Source: http://www.arduino.cc
- 12. The levels of openness in Open Hardware Patrick McNamara defined 4 possible levels of Openness in Open Hardware projects: 1. Closed: any hardware for which the creator of the hardware will not release any information. 2. Open Interface: all the documentation on how to make a piece of hardware perform the function for which it is designed is available (minimum level of openness). 3. Open Design: in which enough detailed documentation is provided that a functionally compatible device could be created by a third party. 4. Open Implementation: the complete bill of materials necessary to construct the device is available. Source: http://www.osbr.ca/ojs/index.php/osbr/article/view/379/340
- 13. The business models of Open Hardware (01/02) * Services and expertise (customization, consulting) * Manufacturing of owned or third party Open Hardware * Manufacturing of proprietary hardware based on Open Hardware * Dual-licensing * Proprietary hardware designs based on Open Hardware * Proprietary hardware tools for Open Hardware (Sparklelabs) * Proprietary software tools for developing Open Hardware Source: http://www.openp2pdesign.org/2011/open-design/business-models-for-open-hardware/
- 14. The business models of Open Hardware (02/02) * Free services for a greater user base (Adafruit Jobs Board) * Partnership between Open and Fabbing companies (Ponoko + Sparkfun) * Funding Open Hardware projects in exchange for documentation (Bildr) * Renting spaces for co-working (Hackerspaces) * Brick and mortar store (Makerbot - Botcave) * Piracy as a learning and market building strategy (Shanzai) * Microcredit / peer-to-peer lending / crowdfunding (Open Hardware Bank) --> Long-tail seems the best strategy Source: http://www.openp2pdesign.org/2011/open-design/business-models-for-open-hardware/
- 15. 2009: The market of Open Hardware * 13 companies over $ 1 m. $11.000.000 * total: $ 50 m. $10.000.000 * $ 1 billion by 2015 $9.000.000 $8.000.000 $7.000.000 $6.000.000 Revenues $5.000.000 $4.000.000 $3.000.000 $2.000.000 $1.000.000 $0 s o d it are s i os y n t rb o La b e mb e uin rkfu fru ron rS h tud idw e Ada Ard Chu Bug Sp a Mak D e dS Liqu Mak DIY e See Source: http://blog.makezine.com/archive/2010/05/million-dollar-baby-businesses-de.html
- 16. The market of Open Hardware: SparkFun Nathan Seidle (founder): “In 2010, SparkFun had revenues of about $18.4MM. As of April of 2011, we have around 120 employees, up from 87 a year ago.” “We hope to grow by 50% this year (2011) to around $28MM in sales. We expect to be in the 30-50MM range in the next 3-5.” Source:http://www.sparkfun.com/news/599
- 17. Long Tail + DIY Craft market: Etsy Total Members: +8 million Total Active Shops: +800,000 Items Listed: 8.5 million $350.000.000 $300.000.000 $250.000.000 Total $ sold (Gross Merchandise Sales) $200.000.000 $150.000.000 $100.000.000 $50.000.000 $0 2005 2006 2007 2008 2009 2010 2011 (March) Source: http://www.etsy.com/press/kit/
- 18. ...another business model: Crowdsourcing (Threadless) Founded in 2000 with just $ 1,000, now it has a revenue of $ 17,000,000 in annual sales with a 35% profit margin Source: http://www.threadless.com/submit http://www.openp2pdesign.org/2011/open-design/business-models-for-diy-craft/
- 19. A place for Open / DIY projects: Fab Labs How to start it: * $50,000 (or open source low-cost version for $12,500 - $5000) * value proposal: facilities or innovation support * The Enabler business model: launch new Labs or support them * The Education business model: a global distributed model of education through Fab Labs (Fab Academy + P2P learning among users) * The Incubator business model: provide infrastructure for entrepreneurs to turn their Fab Lab creations into sustainable businesses. * The Replicated / Network business model: product / service that utilizes the infrastructure, staff and expertise of a many Fab Labs. + Hackerspaces, Sewing Cafes, Techshops, ... Source: http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/
- 20. A place for Open / DIY projects: Fab Labs * usually not so interested in becoming profitables (though they could) * attached to institutions... or to brands (Absolut Lab, Madrid) Source: http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/
- 21. Does the long tail help small DIY business? Etsy: * very few users can make a living on it * competition, but impossibility to increase volumes --> downward pressure on prices * rather an incubator for the most promising makers (so it's like a low-cost entry point into the market) None of the business examined tries to help its user to make a living on their project. At least Shapeways uses revenues to lower prices down. * generated 244,000 € in revenue over 2009, but at the same time it lost 1,400,000 € * received a $ 5,000,000 fund from VC in order to open offices in the USA Source: http://www.openp2pdesign.org/2011/open-design/business-models-for-diy-craft/ http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/
- 22. 03. The future of Open and DIY Business: where will be value created?
- 23. Look for what is becoming a commodity A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. [...] the market treats it as equivalent or nearly so no matter who produces it. Source: http://en.wikipedia.org/wiki/Commodity Commoditization (also called commodification) occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently. […] a unique, branded product into a market based or undifferentiated products. Source: http://en.wikipedia.org/wiki/Commoditization
- 24. Hardware and Software, becoming commodities * ('50s-'70s) Hardware is the product, software is for free: mainframes --> Hacker ethic of sharing information * ('80s-'90s) Hardware is commodity, software is the product and it's proprietary: personal computers --> Microsoft emerges * ('00s-...) Even software is a commodity, so let's sell services and get data from users: open source, web 2.0, services around software, software as service, the cloud --> web 2.0 emerges
- 25. Manufacturing and Design, becoming commodities * ('90s-'00s) Manufacturing becomes a commodity and slowly disappears in the West (thanks to China) * ('10s-...) Now it's even more a commodity (thanks to Fabbing) * ('00s-...) Professional design is slowly becoming a commodity (Fast Fashion, Ikea, design schools bubble, Shanzai) --> Where is value now, in Design and Manufacturing?
- 26. … so is still now value in creativity? Source: http://www.freedomofcreation.com/home/3d-systems-acquires-freedom-of-creation
- 27. … in attention, collaboration, creativity from “users”? “ We fnd this previously unmeasured type of household sector innovation to be quite large: 6.2% of UK consumers - 2.9 million individuals - have engaged in consumer product innovation during the prior 3 years. In aggregate, consumers’ annual product development expenditures are 2.3 times larger than the annual consumer product R&D expenditures of all frms in the UK combined. “ Eric A. Von Hippel, Jeroen De Jong, Steven Flowers Comparing Business and Household Sector Innovation in Consumer Products: Findings from a Representative Study in the UK Source: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1683503
- 28. Open and P2P Money, are they a solution? Does it address the current problems of money, or is just a way of making it “open” reinventing the wheel and avoiding the business models? Source: http://www.bitcoin.org/
- 29. When everything is peaking... Even renewable resources like wood are peaking.. What and how are we going to manufacture when everybody will be able to do it? Source: http://ecoalfabeta.blogosfere.it/2011/03/il-picco-del-legno.html
- 30. … reinventing an open wheel is not enough Will just making open an unstainable past be sustainable? Source: http://www.theoscarproject.org/
- 31. Building blocks of an Open, DIY and P2P Economy * open business for design, energy, materials, tools * open business that consider information as abundant but materials and energy as scarce resources * open money (but well designed and linked to energy and materials) * API between open businesses * Open processes (and this is my research about Open P2P Design)
- 32. Any question or comment?