Wednesday, 10 September 2008

The Open Business - An Oxymoron or The Future?

I routinely hear that businesses are not open enough. Even companies that were once renowned for their openness, say, Google, bump up to accusations of intransparency eventually. Then again, in a world where the openness poster child named Wikipedia is accused of being run by a secretive elite, who can be safe?

I happen to believe that these accusations have merit. Google is not as open as it should be. It withholds its search algorithm and its advertising revenue distribution formula. Is this for a good reason? Perhaps. But if you were to grade google on openness, these would be black marks on the score chart. How about Wikipedia? Well, its secret discussions in unofficial IRC rooms and mailing lists are no longer rumours. They are real. Are they serving a real survival purpose? Who knows. That is the problem with intransparency. Nobody knows what happens behind closed doors.

There are many voices that claim openness is a solution to many of the world's problems. The claim is that by increasing openness, all kinds of creativity are released and 'the community' provides solutions. On the other hand, attempts to build businesses on top of open foundations invariably bump up against a trade off. How much openness can we sacrifice without losing the community? How much do we need to sacrifice in order to become profitable? It seems the trade-off is exchanging profit for openness.

So my question is the following: Can there really be a completely open/transparent business or is this a contradiction in terms?

In order to answer this question, we need to answer some more elementary questions. What does an open business look like? Let's take things to extremes. Let's say all conversations between founders are publicly available. Let's say that all company e-mails are also available to the public, along with all chat logs etc. All employees are encouraged to have a blog and of course have no restrictions on what they can say. All code is of course open-source. (AGPL v3 or BSD?) Essentially everything the business does and thinks is out in the open. Anything anyone could imagine to ask about the company is already available. Every involved party of the business has active conversation with the community. It feels a bit like a reality show, but this is how a business designed with transparency as the #1 goal would look like. Nothing more for anyone to ask. Of course, while the past and present are open for anyone to see, future actions are still the monopoly of the owners. We are not discussing a democratic or crowd-sourced business. The public can communicate with the owners and contribute in ideas and code, but ultimately the leverage of initiative belongs to the owners. This of course is just my idea of an open business and not something complete or final. Let's consider it a working hypothesis.

The next questions are: What are the pluses and what are the minuses of a business like this? This is a much larger discussion. I would assume community input and support as well as trust would be much greater. Assuming the employees and owners are competent, this would be obvious to everyone who follows the dealings. The drawbacks are also many: Inability to surprise the competition, a lot of pressure by the community at all stages of development of an idea, difficulty in communication when everyone feels watched, etc etc.

However the killer question is this: Is there even one, small, tiny, extremely slim niche that a business like this could be successful and even advantageous? Remember, this is a for-profit business so profitability is still the goal. The open business just tries to accomplish this without maintaining the secrecy requirements. If a single idea, with a single business model can be found, where an open business could be successful, then the open business concept has a lot to teach us.

The concept is still in its infancy, it has just been expressed for the first time, so it will probably go through a lot of evolution. I am eager to hear your feedback. What is your definition of an open business? Would you become its customer? Do you believe it could ever be profitable?


Anonymous said...


the people who whine about businesses (like google) not being "open" are the ones who are too lazy or stupid to invent the novel things that make these businesses successful - so they whine about it instead as if the fruits of other people's labor belong to them

Alexandros said...

Hello anonymous,

The question is not whether to whine about a business or not but what business practices can be considdered open (google themselves want to be considdered quite open actually). It is about using 'open' as a guiding light can be a way to build a sustainable business or not. If not, we must conclude that business is based on deception and/or the withholding of information. If yes, then we must ask ourselves what that open business looks like.

As an anecdote, Heron of Alexandria discovered the steam engine about two millenia before the industrial revolution. The reason people saw no use? It was too easy to exploit slave labour than mess around with machines. Only when using people began to be seen as unethical and therefore unsustainable that we invested the effort in automation and were able to acheive much more than we would be able to via slave labour. A higher ethical standard can lead to insights that are hidden from those that want to 'just get things done'.

This article was written from the perspective of someone who wants to build a business but at the same time does not want to base that business on security by obscurity, government assistance and other shady practices. I wonder what insights lay ahead for a fundamentally different business. I suspect trust and consistency are a large factor.